We’re all familiar with the pervasive stereotypes that have dogged corporate legal departments over the past few decades—an impediment to closing deals, a center of obstinacy, a bottleneck, the “department of no.”
But legal doesn’t have to be relegated to a stereotype, merely “protecting” and “supporting” the corporation. Instead, it can aspire to be a vibrant center of innovation and set a new paradigm for the department.
It can embrace a much more active role in the organization, shaping strategy, accelerating change and leading a positive transformation of the business. In today’s complex business environment, legal can become invested in the success of other business units and engage in activities that reduce costs, generate revenue, add value and create meaningful, measurable business impacts.
If this is going happen on a broad scale, however, there will have to be a profound change in the way general counsel think of their role in the organization, and that probably means GCs will have to spend at least as much time making business judgements as they do making legal judgements.
If you are a GC and want to avoid the stereotypes and the “cost center” trap, you will likely need to retrain your own thinking.
Ask yourself these questions: Do you have a clear sense of your company’s strategic vision for the next five years? How can you add value to the company, the company’s business units and create value for shareholders? How can the legal department help shape and contribute to that vision and make it a reality? Do you have a clear sense of how your organization and its competitors are actually making money? What exactly are your company’s customers looking for? How can you simplify all legal processes that touch both customers and suppliers to ensure that the business runs more efficiently? How does what you’re doing positively impact revenue?
While all of these questions represent a pretty radical new way of thinking for legal executives, they represent a necessary and long-overdue response to the new fast-paced, data-driven, hypercompetitive landscape that most corporations, and their legal departments, now occupy.
As you transform the legal department from a cost center to a valuable contributor to the strategic and financial goals of your organization, consider these key principles to help you gain greater business impact within your organization.
Proactively provide insight and strategic direction for your organization on all major corporate event-driven activities.
Whether your organization is considering expanding its reach into foreign countries, planning for a major technology investment, looking for weaknesses in its cyber security defenses or issuing new stock—activities that, for the most part, fall under the purview of other departments—legal can play an important role to help leadership understand and evaluate the legal landscape, potential ramifications and business risks of such decisions.
To do so means building and fostering more positive day-to-day working relationships with other senior executives and being more aware of and involved in their day-to-day business operations. By having more insight into the workings of business dealings early, legal can maximize its business value. If legal is only being called upon at the 11th hour to handle contracts, send C&D letters or litigate, the opportunity to have any strategic input has long passed. The department will have been relegated to service-oriented support tasks and its inherent value marginalized.
Be proactive in your relationship with regulators.
It’s not just a matter of playing defense or “staying out of jail” any more. Instead, think about how you can shape the regulatory environment in your organization and in your industry. Consider that you have an opportunity to work with regulators and help shape their thinking.
Ask yourself, “How can I make this work for our business? How can we make this industry different and better?” One not-so-obvious answer is to view the regulation challenge through a customer-focused lens. If you are persistently proactive and committed to creating a positive regulatory environment in your industry, and if you make sure that regulators understand that the interests of your customers are a top priority, the result will be fewer fines and fewer admonitions—which is good for your company’s bottom line.
Help your organization accelerate the speed of business and speed to market.
How long does it take your company to complete a deal—from conception to closure to revenue? How can the legal department streamline its own processes to speed things up? Speed-to-market is not a business metric to which law departments typically pay much attention.
They should. Can your team respond more quickly to contract negotiations? How many back-and-forth cycles do you engage in when negotiating contracts with customers and vendors? If the answer is in the range of eight or ten cycles, you’re not really contributing to the creation of value.
Instead, you’re reinforcing the perception of legal as the “department of no.” When you start to think in terms of business objectives and the speed at which your organization is able to move from a specific objective to the generation of actual revenue, things look very different. There are metrics for that: Look at a number of cycles over a period of time, quantify your speed and efficiency, identify bottlenecks in the workflow, and then see if you can improve your performance.
Constantly analyze and simplify processes to promote efficiency and reduce costs, both in your relationships with other businesses and within your own department.
Ensuring that you have budget management discipline is crucial. Hidden costs often lurk in poorly conceived templates such as sales, manufacturing and supply chain contracts. That’s something you can investigate and fix. You can also optimize your relationship with outside counsel, establishing metrics to evaluate their effectiveness, performing routine accuracy checks on billing and pushing for value-based billing arrangements.
Within the legal department, GCs can create a business and finance culture by committing to greater transparency and predictability in their litigation budgets. They can also do a better job of managing demand for legal services within the organization. One approach to that problem might be training in-house attorneys to respond more firmly to recurring requests with a “Here’s a link to follow to find that answer.”
Progressive GCs in a variety of industries are embracing a new paradigm in which they are true business leaders who make crucial contributions to their organization’s strategic vision and financial goals. They are cultivating meaningful and ongoing relationships with CFOs and CIOs, and many are now an integral part of the executive leadership team.
They are continuously monitoring and measuring processes and workflows in their own department to increase efficiency and cost-effectiveness—as well as those in other departments. Most importantly, they have rejected the defensive posture implicit in the “cost center” label and have turned their attention—without apology—to the aggressive pursuit of the organization’s business objectives.