How can Legal Departments Best Contribute to a Company's Performance?

Published On : August 1, 2022

In most modern organizations today, there is a corporate legal department that is responsible for ensuring a company’s actions are legal and compliant. However, opinions are more divided when it comes to assessing their contribution to a company’s performance. Even today, lawyers are generally seen as fussy, grumpy people, who are a potential hindrance to business. This caricatural and subjective vision is the result of several misconceptions, and it is by changing these false (and often incorrect) notions that perceptions can evolve.

What is the standing of a legal department in a corporate setup?

In many 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 feelers and perceptions from peers and management that make those in the legal department feel like they are not contributing in any way, but on the contrary, are getting in the way of closing business deals.

These internal attitudes can be gradually changed through applying strategic management and offering meaningful support services that benefit the organization.

Again, the organization’s senior management also can affect internal perceptions by positioning the legal department favorably and highlighting the contributions they bring to the company.

There are some ways to change the generally negative perceptions about a corporate legal department in any organization. They are listed below:

Try and position your legal department as a Profit Center

A tarnished image and unfavorable rulings against your company may mean paying millions or even billions of dollars in settlements. Most of these unfavorable results are direct consequences of poor risk management and can adversely affect a company’s reputation when it is dragged into an expensive and time-consuming public trial.

Market research has found that 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, and 30% reduction in administrative costs. The growing trend for legal directors is to position the legal department as a profit center. Ideally, they must 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 also must understand operational issues

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

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

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

Define and communicate legal department KPIs

When you try and evaluate your legal team’s contribution, it also means you should be measuring and communicating it internally. Ideally, it should be 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 relatively 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 and respect

Try and earn trust from other departments by expediting agreements. Let your colleagues know you are on their side. You’ll gradually notice that as you deliver more value, you can prove to the management that the legal department is worth investing in state-of-the-art automation so you can contribute more to the company.

In corporate setups, 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…

It can be safely assumed that legal departments who connect with the team regularly, demonstrate complete understanding of the business, and integrate into the company's culture and priorities can become valuable contributors and flourish.