Author: John Fraser, Lexpert, May 2004
In today’s economy, with its expectations of greater transparency and accountability, no part of a large organization escapes scrutiny. Whether it is a publicly traded corporation or a public agency, an organization must expose more of its operations to internal or external analysis or both. It is tested on the best and most efficient use of resources and the value provided for resources expended. In this environment, the law department can no longer assume its worth but, increasingly, must demonstrate it. The following are the key steps
for the law departments that embrace the concept of showing value added:
- defining a role and mandate within the organization;
- harnessing expertise to uncover new value;
- adopting a client service orientation; and
- establishing benchmarks to measure success.
Law departments play a strategic role in an organization. Staking out that strategic high ground is essential. Providing legal services that are core to the organization’s well-being and continued success is the clear mandate of the department. These services range from representational risk to privacy, compliance, governance, environmental and other regulatory requirements. Here, the law department should provide top-tier counsel and jealously guard its responsibility to do so.
Keeping business lines and the corporate office abreast of changing legislation is another strategic mandate. The law department must communicate these changes and their implications regularly and in a timely way – a massive undertaking and perhaps the most important service of all.
Defining its mandate also means differentiating its role from that of external counsel. A good analogy may be a major highway system. Keeping traffic on the system flowing smoothly and efficiently is the goal. Maintenance and planning are functions that are usually kept in-house. They require a custodian that looks ahead for the best and most direct routes to chosen destinations and keeps watch for problems, unclogging the bottlenecks along the way. Construction projects are usually contracted out. They require a substantial allocation of specialized resources, often for a finite period of time.
The law department ensures the smooth functioning of all parts of the operation, protects the assets of the organization, and enables its business areas to move ahead. The organization will also need external counsel, particularly for special projects or transactions that are finite in time and may be specific in expertise.
Planning for ongoing needs and for the transactions that will place additional demands on the internal legal team or require outside counsel is thus a central responsibility of the department.
In serving line departments the legal department should also assess how its internal clients perceive it in comparison to outside counsel. Corporate and line departments will naturally call those inside counsel whose advice and service they value. Law firms employ this same test to assess associates. Are clients prepared to call them? How responsive are they? How reliable is their advice? Can they be trusted to acknowledge when they need to obtain more experienced help? Do they create “adhesion” with the firm’s clients? Are they proactively thinking about the client’s interests?
These are matters the law department should probe to reveal performance shortcomings and to uncover the ways it can add the greatest value, including new services, to its internal “clients.”
While the function of in-house counsel is often different from external counsel, the law department should establish and report on its own metrics for client service. It should track its turnaround time when counsel is requested and its commitment of resources to its client groups. It should have developed tools for determining need, usage and cost in managing external counsel.
Moving to charge-back arrangements is debatable. Generating revenues internally for providing services without generating any real cash revenue for the organization leads to criticism that the result is merely “ wooden nickels.”
Nevertheless, metrics demonstrate to both the internal client and provider the true cost of the service and help to reveal whether the advice given is worth paying for. Reporting results on business-related and strategic initiatives is a good start. The point is not to turn the department into a profit centre, but to evaluate the cost of doing business and effectiveness in meeting the entire organization’s business goals.
Fundamentally, the law department should be ready to measure its performance. It has the responsibility to protect, maintain and enhance the organization and the integrity and effectiveness of its operations. Keeping the organization abreast of legislative and regulatory developments, managing outside counsel with fair terms of engagement, and ensuring that legal services align with the corporate business goals all add value. Adopting some fundamental approaches in the way its operates allows the law department to better demonstrate the value it provides