Alignment for Effectiveness
Author: Richard G. Stock, March 2003 issue of Lexpert
Law departments are being transformed almost - but not quite - as fast as the companies and government organizations in which they are found. Their challenges are at least as significant as those facing other shared-services departments like Human Resources, Finance and IT. Ongoing demands for service rarely abate, and additional resources are often too little, too late. Fatigued and frustrated counsel have learned that being responsive to every request made of the law department is not practical. Basic choices must be made as each year begins so that service translates into a strategic, value-added contribution by the department. The secret is to be properly aligned with corporate goals and objectives to achieve this greater effectiveness.
Living within budget and managing the costs of outside counsel are part of the basics. Getting a great satisfaction rating from internal clients should be a given. But general counsel still have to answer the question, "Is my department doing the right stuff, the right way, at the right time?" These are the ingredients for moving from efficiency to effectiveness. It can't be done without alignment. There are four types of strategic alignment targets for today's law department.
Alignment with the corporation's / organization's 4 to 5 strategic business priorities for a given year,
Alignment with 3 to 5 of the CEO's objectives for the year,
Alignment with the priorities of the key business units in the company, and
Alignment with the priorities of the company's client or strategic business partners.
Service, results and cost initiatives have to be measured against one or more of the four types of strategic alignment targets and they must also pass the SMART ( Specific, Measurable, Achievable, Results-oriented, and Time-based ) test.
Corporate business plans usually address:
new products or services, or, in the case of governmental organizations, legislative, policy or regulatory initiatives;
clients of the company, and how to satisfy them, acquire them or otherwise conduct business with them;
employees and suppliers of the company and how to recruit/retain them; and
financial goals and how to improve the bottom line in a measurable fashion.
Traditionally, "support" departments, like the law department, would leave it to other parts of the company to develop and produce all goods and services. There would be little contact with external clients, except perhaps with their lawyers. Moreover, tracing the legal contribution to the company's revenue stream was not expected. Most law departments were thought of as essential overhead, part of the cost of doing business, and expected to control the costs of outside counsel.
For some general counsel and their departments, all this has changed. General counsel who report to the CEO and who are accountable for other portfolios, such as business development, human resources, public affairs, government relations, or corporate governance, are intimately involved in setting corporate goals. They do not stand by waiting to have files or projects handed to them once the fiscal year is under way. And they ensure the priorities of each member of their department fit (SMART) with one or more corporate business priorities. They even align the use of outside counsel by the company along these lines. General counsel manage to do this by spending time with each vice-president in the organization and getting involved in business planning before the year begins.
The CEO's Priorities
Surveys indicate that CEOs believe law departments, and the general counsel in particular, are there to advise the CEO first, the business units second, and then the Board. CEOs have projects, annual performance targets, and special initiatives. The law department should know what these are, and should ensure that it can offer timely advice and support in achieving the objectives. For well-run corporations, the CEO's and the corporation's priorities are closely aligned. Good examples of priorities set by the CEO in which the general counsel and the legal team play a prominent role include:
a review of corporate governance practices and structures;
the introduction or revision of the Code of Corporate Behavior/Ethics;
leading negotiations to merge or acquire a company;
structuring joint ventures on a tax-effective basis; and
mounting effective risk management programs and reducing the costs of litigation.
The objectives can be developmental, financial, market-focused or team-building in nature. Again, success depends on early involvement and early face time. There are significant implications for re-directing workflow, for specialization within the department and for outside counsel.
Key Business Units
Each company has dominant groups that make or break the business: they can be research and development, sales, manufacturing/service delivery, or even IT. The best companies align their structures, resources and annual priorities right across the board. Even when 2 to 3 departments will carry the business, many other demands for legal services continue. Sometimes, they escalate in terms of greatest change.
Law departments that are perceived as enablers rather than inhibitors to business are usually inundated with demands for services. Early involvement of the law department by the business units and a good appreciation of what the legal team can offer will result when the law department is able to market and promote its successes. This is difficult to do if the department is clearly overworked and sometimes too late with some projects. Further alignment helps when each member of the department is evaluated on the success of their assigned business units. Performance management systems for law departments achieved this degree of sophistication several years ago.
Client and Partners
Companies and government organizations that subscribe to alignment as part of their business planning will invariably be client-focused. This requires a focus on service delivery and customer satisfaction. In many instances, the chosen objectives are far-reaching because products are developed with specific clients in mind or joint ventures emerge to share markets, financing or other interests. Sometimes regulatory requirements call on industry players to collaborate because they have a common interest.
The law department can be an active participant, usually in collaboration with one of the company's divisions. Transactions, litigation, regulatory provisions, and managing legal risk afford opportunities to contribute. In the end, a careful and balanced selection on each of the four dimensions yields the best alignment for the company and for the law department. It's the key to effectiveness.