Corporate Law Functions Can’t Keep Up w/ Soaring Demands, So Legal Has to Scale Its Capacity: C-Suite Must Say What It Wants from Legal — Part II of IV


The Point

As I suggested in Part I of this series, scaling a company’s resources to meet soaring legal and regulatory demands is, ultimately, a management challenge. Because at-scale impact — using limited resources — won’t happen without disciplined systems and processes by which colleagues work together to accomplish what no single one of them could do on their own.

Successful companies usually have individuals who have proven themselves as managers. They might be serving in a corporate function like finance, or serving as a line manager in a business unit. Or, in the past five years to ten years, proven managers may be found among a new breed of professionals: “legal operations” executives.

But such proven managers are rarely found among lawyers, whether general counsels or others in-house or in firms. Unhelpfully, lawyers in-house and outside counsel “manage” in dysfunctional ways peculiar to their profession: rewarding excessive time spent on tasks and overstaffing work teams with inexperienced attorneys — actually disincentivizing efficiency.

Therefore only proven executives should manage the corporate law function. Attorneys should play a supporting role in Legal, confined to their technical skills in law and regulation.

This Matters to Your Business

Neither C-Suites and boards, on one hand, nor general counsels and law firm attorneys, on the other, have offered a coherent answer to this basic question: What is the corporate law function supposed to deliver to the business?

Executive management routinely demands reductions in, or limits on, legal spending. But they don’t explicitly specify what they want to get in return for their money (see here, here, here, and here).

Lawyers, for their part, either oblige executive management by cutting costs as requested, or make excuses for failing to do so. But they don’t describe the value they provide to executive management.

Nevertheless, a minority of thoughtful outliers in the legal profession have cautioned against a tunnel-visioned focus on cost reduction alone. Consider lawyer and prominent law practice authority Casey Flaherty’s view:

“Saving money is essential. But not as an end in itself. Centering savings in our value storytelling is seductive but, long-term, counterproductive. Our story should be one of delivering business value ….”

Prominent law practice consultant Jae Um offers a similar warning:

” … I think that the current trajectory of client-side procurement and pricing roles are likely to have limited and sometimes adverse impact on the value conversation … I have no doubt that such tactics are effective in near-term efforts for spend reduction. However, price sensitivity does not always lead to buying practices that are value-discerning or value-conscious.”

In helpfully replacing a simple-minded cost-cutting emphasis with a focus on “business value”, Mr. Flaherty and Ms. Um move the discussion in the right direction. But this still begs the more basic question: What exactly is the corporate law function meant to deliver to the business?

Because …

C-Suites and boards need to spell out the specific results they expect of their corporate law function.

I suggest three:

  1. Ruthless, and continuous, removal of waste from Legal’s expenditures.
  2. Compliance systems and processes that have a fighting chance to anticipate, and ultimately prevent, lawsuits, agency enforcement actions, or other full-blown legal and regulatory catastrophes.
  3. For recurring commercial needs that require conformity to legal or regulatory mandates, Legal should implement systems that meet those recurring commercial needs with disciplined business processes. Example: contract lifecycle management systems (“CLM“) that expedite a company’s quote-to-cash cycle with its customers (World Commerce & Contracting reports that “9.2% of total revenue is lost due to ineffective contract management over the life of a typical contract”).

For decades the corporate law function has been run by lawyers, with scant governance by senior management except for occasional griping about costs. Now — with legal and regulatory demands outstripping companies’ resources — the enterprise must do more with less in Legal. That requires at-scale impacts. At-scale impacts require disciplined management. And disciplined management means proven executives — not general counsels or other attorneys whose experience has been confined to practicing law.


Part I of IV: Solving The More-w/-Less Dilemma

Part III of IV: What Currently Impedes Legal from Doing Its Job

Part IV of IV: How the C-Suite and Board Can Achieve a Re-Set

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