The trouble with in-house legal teams is that too often they’re treated as peripheral ‘non-business people’ within the businesses they serve. The net result is that a big opportunity for lawyers to contribute to business value is wasted. In this article I explain how things can be different. By reconfiguring the legal department’s structural relationship with business operations, it’s possible to transform the legal department into a powerhouse resource for the whole enterprise.
Why do in-house legal departments operate at the margins of most businesses when they should be at the center? There may be historic and cultural reasons, but there are also structural ones. Almost invariably, legal departments are using the wrong systems for their needs. In addition, legal operations invariably operate in a silo away from business operations. Legal departments are more or less cut off, preventing them from making the full contribution they could to overall business success. If you resolve this structural anomaly, legal departments can become genuine and valuable strategic partners of the business. So, how can you make it happen?
The problems with current structures
To start with, there are some fundamental problems. There’s certainly an issue with perception. For instance, there’s the widely held belief that in-house lawyers are, broadly speaking, a bunch of risk-averse business-blockers who’re temperamentally non-entrepreneurial. Such misconceptions feed a general failure to credit sufficiently the role legal already plays in heading off problems and identifying opportunities that protect and enable future business prosperity. The overarching point is that negative perceptions can and do get in the way of embracing in-house legal teams as valuable business partners.
In addition – like exotic pets – legal departments can be perceived as extravagantly expensive to keep. One fallout from this ‘cost center’ mentality is that general managers are placing ever greater demands on their in-house lawyers to get the biggest possible bang for the business’s buck. Hence GCs everywhere are under duress to prioritize cost control and bring more work in-house and their teams are fighting the pressures of overextension. As a result, the Association of Corporate Counsel’s latest research showed that in-house lawyers are feeling more stressed than ever, with negative consequences for lawyers and for the whole business; LexisNexis has identified a burnout crisis in particular among in-house lawyers; while CLOC’s (the Corporate Legal Operations Consortium) recent State of the Industry report found that 83% of legal departments expect demand to increase. One result of these insistent calls to do more is that they inevitably erode the legal department’s capacity to deliver more strategic value to the business.
Then there are the system-based issues. Too many in-house legal departments suffer from corporate IT assigning them the same systems that the business is using, such as SharePoint, Google Drive and Dropbox. The drawback is that these generic applications don’t accommodate the workflow requirements of legal work very readily, impeding lawyers’ efficiency.
In addition, when lawyers work in law firms, it’s all about revenue. So, private practice lawyers are given systems designed to track cycle time and help with revenue capture. (It’s even possible that some in-house lawyers have left private practice to get away from these systems, which are not beloved.) Yet an incidental impact of such systems is that they nevertheless impose some discipline on the way lawyers work. Unhappily, in their absence, there’s a tendency for in-house law departments to flounder from a lack of process, breeding a degree of inefficiency that only exacerbates the pressure lawyers are already under.
The wrong systems also estrange legal departments from the commercial ebb and flow and the strategic imperatives that dominate thinking in the rest of the business. When the legal department is not privy to the bigger picture it makes it harder for legal to align its work product to business priorities.
All told, then, two very good opportunities are lost to businesses that insist on keeping their legal department at arm’s length:
1. In-house legal departments aren’t using the most appropriate tools for their unique needs. They aren’t optimizing their productivity and efficiency at a time when they’ve never needed it more.
2. An even more costly mistake – without the right toolset, the business is missing out on the very significant contribution that legal departments can make to business success.
At the heart of creating business value
But how can in-house lawyers contribute more to business operations? Simply by replacing existing underperforming systems with ones that exploit legal’s unique position at the center of the business. Or more specifically, at the center of the business’s four big value-generating relationships. Because that’s the thing about in-house lawyers – they’re always right there when business value is being created. The in-house legal department handles:
1. the matters and contracts that govern how the business interacts with suppliers to control cost;
2. the contracts with employees to generate HR value;
3. the interface with customers where revenue is produced; and
4. the interface with regulators where risk and compliance are controlled.
Across the board, the legal team has a uniquely complete view, therefore, of business value generation.
It follows that when you collate and surface the operational views that are available to the legal department, this data can be parsed into Operational Intelligence and actionable insights that can deliver value for the whole business.
Moreover, when data become Operational Intelligence, it enables lawyers to be much more business centric. For example, they’ll see matters and contracts in context rather than isolation, enabling them to draft not just a sound contract, but one that anticipates what the business needs to meet its targets and achieve its goals. Lawyers also gain a stronger understanding of current business priorities and can proactively organize work effort around overarching corporate strategic initiatives, instead of prioritizing work based on ‘who shouts loudest’.
As well, lawyers with a better grasp of the big operational picture are empowered to move work forward with less ‘back and forth’ between the legal department and the business, saving everyone’s time and moving deals along faster to get to revenue sooner. For instance, getting suppliers on board more quickly, which is especially important when it enables a strategic opportunity.
This Operational Intelligence can also increase the efficiency of the legal department itself by providing a real time overview of all work in progress, with dashboards that show the stage and status of current work. The GC can see the volume and type of work coming into the department to help with work allocation and load balancing. They’ll gain visibility of how work is flowing through the department, gaining the ability to identify bottlenecks and if necessary, reassign tasks. Legal work can be managed more slickly, lawyers become more organized, efficient and responsive to the business’s needs, and they’re able to do more in less time with less resource.
Finally, a system that surfaces Operational Intelligence should also, crucially, provide Contract Lifecycle Management (CLM), which is of huge value. For example, it can provide alerts when, for instance, a lease is due to end; or an automatic renewal is coming up; or a threshold is going to be triggered, preventing unnecessary spend. It can help ensure that revenue doesn’t leak from contracts because SLAs aren’t being monitored or invoices are being delayed. It can help ensure – particularly in heavily regulated sectors – that compliance is rigorously maintained and no fines are incurred. Active CLM saves money, reduces risk, makes the most of opportunities and helps keep customers happy.
The opportunity at hand
At the heart of every business with a legal department may lie a missed opportunity to integrate its work product into the business’s operational activities. Without the right systems, you’re missing out on the benefits that such an integration could bring, including more efficient, productive business-centric lawyers; better decision making, quicker routes to revenue; direct cost savings; and risk reduction.
It’s all about empowering the legal team to bring more value to the organization and become a true strategic partner by providing the right structures. Moreover, these systems don’t have to be limited only to the legal department. They can also improve the performance and contribution of other corporate service functions such as Risk, Compliance and HR. A change of system is the way to deliver radically enhanced strategic value.