Lessons to Learn

January 10, 2008

Some very notable minds down the ages have suggested that “the only thing we learn from history is that we do not learn from history”…At this time particularly this seems a rather unhelpful thought on which to dwell; even if we do not learn from history it is surely tempting nonetheless to wonder how the flying fig tree did we ever end up where we are today!

Clearly these are not good times; markets have been in meltdown, banks are still in disarray, manufacturing seems to be teetering on the brink of a major recession and even law firms are laying off hundreds of lawyers while television commentators and journalists are looking for the opportunity to make their careers with national prominence and, no doubt, the odd prestigious award…

These are indeed not good times, some might even think this period is more than a little surreal, but when the emotional dust has settled a little and the bar room economists have given way to those of us left to make the best of things as they still stand, what should we do? What should we do, indeed?

In my view in-house legal teams have now to address ten key issues; but this is not a ten point plan for survival nor is it about “making do” in straightened times. I think it is much more positive than that and many of the issues I cover, in fact, will have resonance whatever the economic climate. That said we cannot escape the point that with significant costs being saved, anyone in an in-house role is potentially at some risk. At best we all face the prospect that more has to be managed with less and probably for some time to come.

This is a time therefore for thoughtful leadership and the clarity of approach which will stand any team in better shape for the times, hopefully not so far away, when our businesses can be more self-confident and plan for growth.

Nothing in my ten-point plan is about knee-jerk responses to the present economic privations; all the points, I hope, can be considered as part of a careful and balanced approach to managing risk and delivering value.

1. Define the role of the in-house team

No team on the planet can be (or should even try to be) a full service in-house legal function. There will always be work that is outsourced and always legal risk that is, for whatever reason, left unmanaged. When resources are so precious, however, now is the time to define the role. The 2×2 grid below is obviously rudimentary, but we must all carefully consider the definition of work and its categorisation.

Work which is core and urgent Work which is core and not urgent
Work which is not core and urgent Work which is not core and not urgent

It must be the case that going forward in-house legal teams focus on the “core and urgent” work, ensuring that as little non-urgent, non core work as possible is part and parcel of the daily routine; remembering always that providing a great service is not about pleasing people, but about doing the right things.

2. Develop the strategy for using external lawyers

Some commentators might suggest that now is a great time to drive a bargain on fees. I think that risks being a cheap shot.

If we believe in the quality of relationships, if we want commitment and partnership, then driving down fees may only give short term gain; it is also potentially destructive of value, of quality and of the long term investment in strategically significant relationships.

It is easy to posture and as an example I read recently how in-house teams should now force change on advisors…how shallow.

It is clear that some change may be appropriate, but not through the arrogant demands of a general counsel who perceives a chance to drive a hard bargain. Perhaps panels should be rationalised, perhaps using fewer firms makes sense (it might make sense anyway), but now is the time to sit down with your law firms to solve problems together and, I suggest you look at three things:

  • What does the business need and how much can it afford? Does the cost of outsourcing legal work have to reduce? If it does then in what areas and by how much? What impact does this have on quality and on risk management?
  • What do the law firms need from the relationship? Will they trade some cost reduction for more certainty of volume? Would they be willing to provide a service in a different way to save costs (secondments perhaps)?
  • What does the in-house team need from the relationships with law firms? Management information and performance indicators may need to be aligned to savings in costs and efficiency; personal development and CPD might need to be devolved entirely to the law firm

Dialogue is crucial.

3. Focus on value, and value add, not just cost reduction

Cost reduction can drive many positive things; it can lead to process improvement, it can lead to policy efficiency and it can cut out waste. These are things however that should be looked at in the best of times, not just now.

When I look at the question of how to save costs, the first issue to address is to identify those things that the team does that adds value; let’s not throw baby out with the bathwater. I want to know how aligned the team is to the strategic imperatives and how much good the team does as a result.

The second issue to address is how we can then improve the policy and process around those key value adding activities.

Sooner or later the analysis will reveal those activities that are adding less value. The question then is to determine what consequences flow from ceasing that work? In my experience there is always a rump of work which for often unfathomable reasons the legal team has always done. This work has no other natural home and would be inconvenient if it was stopped, but it doesn’t add value.

At this point however, any decisions will be taken in the context of clarity and progress given that the in-house team has already:

  • Identified its most value-adding activity
  • Considered process improvement and policy efficiency around this activity
  • Identified the low risk, least valuable work and can now make rational decisions about how this can work should be resourced going forward.

Again the opportunity is for thoughtful dialogue, not for quick and sometimes harsh cuts.

4. Ensure internal processes are secure

When resources are tight and business pressures build, it is easy for some corners to be cut and for some issues to be considered less robustly. This is a potential risk and it should be thoughtfully managed.

Throughout any business there will be processes and policies that have been developed with support and guidance from the in-house lawyers. Compliance in the widest sense of the word is part and parcel of good business where trading ethically and with regard to local laws is essential, regardless of the macro economic picture.

The challenge for the in-house legal team is to be proactive and thoughtful. My strong steer is for every in-house legal team to launch a process review initiative. Every team should be announcing that it will immediately undertake a thorough and detailed review of all business critical process and policies to identify appropriate relaxations and other safe changes that can speed process or take out cost.

Don’t wait to be asked; this is your prerogative and your expertise.

5. Still look for cost savings

Having said all that, the in-house legal team should not be immune from looking for cost savings.

I used to have a director that challenged me every year to find five separate savings of just £5000. You might think that this was hardly worth doing, but the exercise was always worthwhile.

I used to engage the whole team in the pursuit of savings and some of the things we found included renegotiating the vending machine leases, changing the toner supplier, outsourcing our library, renegotiating the value add elements with law firms, recycling stationery and changing our travel policies.

I know some of this is plain obvious, but the important point is to get the whole legal team engaged across the business. If the lawyers are perceived as ultra cost conscious and careful with the company’s money it carries enormous weight with bosses and will help you to preserve the important things when you are under scrutiny.

6. Invest in technology

I doubt any team in the current climate will negotiate new spending opportunities, but this is my hobby horse just now.

The absence of meaningful management information in many teams means that it is hard to do the analysis I have suggested earlier. I am not a fan of overblown, expensive kit; I am not a believer in placing administrative burdens on the legal team that do not have real added value, but I do think there are systems on the market that are relatively inexpensive (they can even be rented by the week) and which are easy to implement and which will give vital information to the team.

If the business case can be made that an investment of £x will mean a saving of £x+y then that case should be made. If the in-house team duck this issue then it risks losing out to more capricious decisions and the lack of transparency will not help anyone.

7. Network like fury

I have to pose a slightly negative thought amidst my unrelenting positivity! You may lose your job.

And if you don’t lose your job you may find career options are curtailed. In all the maelstrom of furious activity therefore I also think there is a small space that should be self serving. We should all be networking like fury; what is your market intelligence like? How many people do you consider reliable contacts? In how many sectors do you have people you could call?

Networking will not necessarily find you a new role, but it will help you evaluate the opportunities for career change and to balance what you have now when other opportunities might present themselves.

Networking however, returning to my usual “glass half-full” tone, will also give you a great chance to sense-check the value of your initiatives to save money or improve efficiency and to swap ideas and information that will help you deliver more value to your business.

8. Align performance indicators to your business needs

It is sometimes possible that the things we value most should be valued less when circumstances change. I remember working with an in-house team that focussed so much on ensuring that every single piece of legal advice was routed through the legal team they hadn’t realised what a bottleneck the team had become.

It was a very commendable thing that legal risk was so tightly managed and the team could assert that everything the business did was overseen by a lawyer; it was however a great shame that the business did not value the service and thought the lawyers to be uncommercial and bureaucratic.

It is the particular responsibility of the General Counsel to lead the debate and test assumptions with senior colleagues. There should be no question marks around the commercial credentials of the lawyers and our business colleagues should see and appreciate that the in-house team is aligned to their objectives too.

9. Continue to offer personal development opportunities

My guess is that for the next year or more promotion opportunities will diminish and pay rises may be less generous. In these more difficult times therefore it is a very powerful signal to the lawyers in the team that they are still a very valued resource to make sure that their personal development is not compromised.

Consider for example:

  • Short term secondments into law firms
  • Short term secondment swaps with other in-house teams
  • Spending more time in business areas to learn more about the operational priorities
  • Ensuring as much training as possible is sourced through the law firms you use, but not just the typical seminars, something much more bespoke and even tailored to the individual
  • Networking though regional lawyer groups (why not start your own?)
  • Networking in local business community groups such as regional CBI

10. Deliver and articulate value

My final point is a point for all seasons, but it has never been more important.

Lawyers are not valued because they know lots about laws, rules and regulations. Lawyers are valued because they listen well, empathise and find solutions that are accessible and easy to implement.

Lawyers are valued because they both deliver and articulate value; this mantra must be at the heart of every action and every interaction. I want lawyers through their emails, calls, meetings and reports to exude a sound commercial appreciation of their vital role in the communication and value chain and to know when to intervene and when not to.

Be confident, be proactive, be sensitive and be good.

Nothing is certain, but improving the probability of our success is something we all can influence. This is our responsibility and it is one we owe to our businesses, to our colleagues and to ourselves.

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