Driving value through in-house legal functions

How to ensure the legal function adds maximum value?

Ensuring the organisation sees legal as a revenue and performance enhancer not a cost centre. 

• Larger organisations can often have ‘preconceived norms’ of what is expected of a GC whereas smaller in-house teams or sole GCs have more scope in defining how value is perceived.
• Demonstrating value can often seem difficult initially for legal functions and how this is realised depends on context. GCs should understand the context of their role in light of the organisation’s priorities in order to define better the areas where value can be delivered.
• Saving time and money are obviously key deliverables to show the value of a GC, and are particularly useful drivers for compensation discussions.
• GCs emphasised the importance of understanding the organisation’s priorities and objectives, allowing them to build trust with key stakeholders and ensure the board/senior management trust the advice of the GC.
• Often value add can be tied to a business target/objective. In a sales driven environment, understanding the sales cycle and implementing measures that reduce the legal aspects of the sales cycle (both time and cost) through technology (e.g. contract management tools) demonstrate clear value.
• GCs commented that it is difficult to identify, implement and measure meaningful KPIs for an in-house team and so for the most part have sought to avoid this kind of assessment.

Using technology to deliver value.

• Before considering, implementing and delivering any new technology (including artificial intelligence (AI) tools), clear objectives must be identified. Key priority factors discussed were:
  • Defining what success look likes and how do you get there from the outset, including ensuring that the tools in question clearly have the capability required to deliver the organisation’s desired outcomes.
  • The business case should demonstrate who else will benefit (finance/revenue/sales teams) not just solving for a legal issue or process. Demonstrating cross functional gain is important.
  • It is crucial to ensure that the technology integrates with existing platforms in a user-friendly way to encourage widespread and early take up.
  • It is important to have someone from the wider organisation as a stakeholder involved in the project who understands the project’s road map.
  • It is important to assess the organisation’s tolerance of new areas of technology/AI. Anything perceived as too radical could create extra barriers to implementation/acceptance and may ultimately be rejected.
• There is value in talking to existing users of any potential new technology to get additional end user insight which is not offered by the product sales team before adopting.
• GCs noted the importance of the GC/in-house team being cheerleaders for the product and demonstrating from the outset the value it can bring on successful adoption.

Efficient use of external counsel.

• It isn’t always best to use a panel structure: building a network of firms who understand the organisation’s approach through relationships can be a more valuable business model. Panels don’t always align for support needed, especially in niche areas.
• Where there is a focus on building relationships with external counsel, this facilitates a deeper understanding of the fabric and approach of the organisation so external counsel can provide more targeted and relevant value.
• Allowing counsel to be involved directly in the dialogue with your internal colleague/client can often allow external counsel to understand better the organisation and support it more effectively.
• It is crucial that external counsel understand the organisation’s approach and risk appetite with regular two way reviews.
• When using external counsel, expectations around costs should be made clear at the outset. In particular, of more importance than ever is the need for counsel to be up front and transparent around costs: any mission creep on a mandate needs to be addressed openly and in a fair way, which should be mutually beneficial to the relationship.
• GCs should be clear internally how and when they plan to use external counsel and ensure this is accepted within the organisation.
• GCs noted that it can sometimes be difficult to manage the internal expectation that external legal spend should drop with any increase in legal team size/headcount.
• Using external counsel efficiently will ultimately depend on their knowledge of the internal teams (what they can do and at what cost?) and the organisation’s knowledge of external advisors’ capabilities (what they can do and at what cost?).
• We are starting to see a shift in more innovation and flexibility around counsel’s fee structures where the focus is more on the project budget (based on value add) rather than hourly rates applied across the broad.

Delivering better commercial decision making

Articulating legal drivers in a way that resonates with the organisation, influencing at board level and managing different approaches to risk.

• It was broadly agreed that legal needs to be involved from the outset in any important matter so they can highlight any pressure points and red flags, including around strategy and governance. This ultimately allows GCs to deliver more value, manage team workloads better and communicate effectively with key stakeholders.
• As a GC, it is important to understand the commercial drivers for the organisation across the short, medium and long terms. If this distinction is not made, it can be difficult to translate legal drivers into something that will have an effective impact in commercial decision making.
• Know your audience – who is making the decisions? What resonates commercially with one decision maker might not be the case with another.
• Good GCs have the ability to be alert to handle risk effectively in the relevant circumstances and find the correct stakeholders to assist.
• It shouldn’t just be that risk sits with the GC – all the stakeholders in the business should be contributing to the conversation around mapping risk, and this will in turn support the GC’s ability to lead on risk management effectively.
• Decisions around risk can change, so it is important to record where decisions come from and form an audit trail.
• Managing risk sensitivity will not only depend on the board/management’s tolerance to risk but also that of the GC – be self-critical and understand where your natural risk appetite lies then challenge yourself if that instinct is right in the circumstances.

Building a team which adds fresh perspectives and diverse ideas

Attracting and retaining in-house talent against a backdrop of rising salaries and a changing professional workplace, career progression and succession planning.

• There are many routes to team recruitment now – traditional paths (e.g. using recruitment consultants), secondments from external counsel, SQEs and paralegals – so it is worth canvassing ideas in the industry to see what might be the best fit depending on requirements.
• Pay isn’t always seen as the main motivator, with more lawyers than ever prioritising flexibility of work, clear scope for career progression and diversity of work.
• Finding out what candidates are interested in, and allowing for development in other areas/initiatives beyond legal, can be a good way of recruiting/retaining people.

We are very grateful to all of our roundtable attendees for attending and contributing to such an interesting and dynamic discussion.

Oliver is a partner in our Banking & Finance team, whose key expertise involves advising corporate borrowers on significant financing and refinancing transactions as well as restructuring matters. Penny is a commercial partner specialising in structuring and implementing major procurement projects and commercial contracts. Gemma is a corporate partner advising on acquisitions and disposals, restructuring of corporate groups and joint ventures.

If you would like to contact Oliver, Penny or Gemma concerning anything raised during the roundtables or are looking for any financing, restructuring, commercial, regulatory or corporate support, we would be very pleased to hear from you.

Blake Morgan’s Counsel+ GC roundtables are by invitation only. They are free to attend and run on a discreet, Chatham House Rules basis. If you would like to be invited to a future session, please contact [email protected].

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