How Legal Departments Can Best Contribute to a Company's Performance

How Legal Departments Can Best Contribute to a Company's Performance

Published on : 05/11/2020 05 November Nov 11 2020

Legal departments are responsible for ensuring a company’s actions are legal and compliant. Opinions are more divided, however, when it comes to assessing their contribution to a company’s performance. Lawyers are still seen as fussy people, a potential hindrance to business. This caricatural and subjective vision is the result of several factors, and it is by changing these factors that perceptions can evolve.
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A legal department’s function within the corporate power spectrum

In some organizations, a well-structured legal department with a director who sits on the executive committee does not have the same influence as a department attached to the CFO or HRD. There are internal perceptions from peers and management that make those in the legal department feel like they are not contributing but rather, getting in the way of closing business deals. 

However, these internal attitudes can change through applying strategic management and offering meaningful support services that benefit the organization. 

Senior management can affect internal perceptions by positioning the legal department favorably and highlighting the contributions they bring to the company.

 

The legal department becomes a true business partner with proactive collaboration.

The more proactive a legal department is, the better it can provide operational staff with effective solutions for risk control. 

Lawyers who play an active role and work closely together with colleagues as business partners rather than reactively waiting on input from others will be perceived by everyone involved as providing greater value. They can therefore earn more respect when negotiating contracts or dealing directly with clients

The level of involvement improves when automation takes on the mundane tasks that are keeping the department overworked and frees them to provide better service for other departments. For example,  Contract management tools make it easier to quickly create documents and accelerate the contract life-cycle. 

 

Position Legal departments as a profit center

A tarnished image and unfavorable rulings may mean paying millions or even billions of dollars in settlements. All are consequences of poor risk management and can adversely affect a company’s reputation when dragged into a public trial.

In contractual matters alone, it is estimated that good management has a direct impact on turnover and expenses in the order of: 
 
  • 1 to 2% increase in revenues
  • 2 to 7% cost reduction
  • 30% reduction in administrative costs
 Source Aberdeen Study on the Benefits of Contract Management

The trend for legal directors is to position the legal department as a profit center.

They set up indicators or KPIs to measure the gains linked to optimized litigation management: the difference between the opposing party's claims and payments to be made in the end or, conversely, the difference between sums recovered and initial claims.

 

Legal teams are more successful when they understand operational issues

To contribute to a company’s overall performance, legal teams must have a detailed understanding of the company's strategic and operational issues.

For companies that manage large IT or industrial projects, contract managers will collaborate with project managers. Working together, they can identify legal risks and negotiations for various contracts to help optimize and reduce risks to the company. 

In commercial matters, the legal team is at the forefront of preparing well-crafted contracts that anticipate negotiation difficulties and facilitate the work of sales staff to finalize the signing of a deal. It is important for legal teams to have the technology tools to expedite the processes so as not to be perceived as obstructing sales. 

For litigation management, legal teams communicate closely with financial management to provide for disbursements that can directly impact a company's financial results.

 

Awareness of how much risk your company can tolerate 

As a lawyer, you may be in the habit of attempting to mitigate all risks. In contrast, your job in the Legal Department is to advise of risk and understand how much risk the business can accept to keep things moving forward.  

Manage risk, don't run from it. Law firms are about reducing risks, but companies are about maximizing profit. Figure out a way to say "Yes," not to say "No." (unless it’s illegal). When "No" is the right answer, present alternatives that accomplish the business goal.

 

Define and communicate legal department KPIs

Valuing a legal team’s contribution also means measuring and communicating it internally.

It is the head of a legal department’s role to set up performance indicators: quantitative elements on case management, budget for purchasing legal services, etc., and to communicate them internally.

In the end, it is the curiosity and willingness of lawyers to leave their legal comfort zone and move into "business", a less controlled and therefore riskier field, that will make it possible to change perceptions and have their contribution to a company's performance appreciated at its true value.

 

Earning your colleagues’ trust, respect, and gaining investment in technology for the legal department. 

Earn trust by expediting agreements. Don't be a perfectionist. Let your colleagues know you are on their side. As you deliver more value, you can prove to management that the legal department is worth investing in state-of-the-art automation so you can contribute more to the company. 

The legal department doesn't have the luxury of providing advice and walking away as outside lawyers do. As an integral part of the business, In-House Counsel will be around to see results and own their decisions, whether good or bad. 

In conclusion, legal departments who connect with the team, demonstrate knowledge of the business, and jump into the company's culture and priorities can become valuable contributors and flourish. 
 

Get your free white paper « The benefits of automation » for Lawyers, In-House Counsel and Law Firms
 

 

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