The legal department is one of the support functions in an organization which is, or at least should be, constantly evolving together with the organization it supports. It cannot be too static or too inconsistent in its approach and way of handling the organization’s legal matters.
Although the core structure of any company is its core business, its product, its service, or its go-to-market solution, the legal framework in which that product or service is created or offered and marketed makes the difference between a successful company that can focus entirely on its product or service and a company where its risk profile is always high. The ramifications are most visible once success starts knocking on its door.
This success can have many forms. It can come either through a large investment or an extraordinary demand for the company’s business solution or product on the market. This triggers an almost instant cash flow and widespread interest in the field where it activates. While the form of success can differ for each company, the immediate consequence is the increased level of attention the company gets on the market from competitors, customers, media, and in the end, from relevant regulatory authorities.
The nature of the business determines the particular legal matters on which a company should focus. Thus we can distinguish among “vital company matters” and “general company matters.” Where we draw the line to make this distinction may, however, be a delicate matter with no obvious solution. A legal professional might insist that from a legal point of view these have the same importance and value for a company. Nevertheless, for management, certain matters are more important to the business of the company than others. Therefore, making this distinction should be a concern – not only for management but also for the legal department. Only once those “vital company matters” are properly addressed is the company able to shift its focus to the “general company matters” and work on both categories somehow simultaneously.
This distinction is therefore extremely important for the General Counsel. It is not something that needs to be documented in processes or procedures because you cannot (as a legal professional will make sure to stress) actually differentiate among the legal matters that need to be addressed in order to be legally complaint. For example, it would be difficult to find a legal professional who could say that it is more important to make sure that company is tax compliant than that it is privacy compliant or that employment law issues in a company trump competition law risks. All these are equally important and compliance with the law overall makes a company successful and protected against potential risks and liabilities. The fine line that a General Counsel should address in his/her work is to understand which of these areas need to be focused on in the early stages of the business and which afterwards, when the company starts reaching its more mature stage. Should there be a matrix of focus points based on the likeliness of their occurrence, or should the legal department treat all issues equally, irrespective of the likeliness of occurrence and ignore the nature of the potential risks?
Either way the challenge for the legal function is constantly present. One way to address vital company matters and general company matters is to create appropriate mechanisms within the legal department that would allow it to timely predict potential legal issues and categorize them in order to prevent or contain any risks. In this way, the level of focus and resource allocation are properly made while an eye is constantly maintained on the newest technology developments.
“It is not something that needs to be documented in processes or procedures because you cannot (as a legal professional will make sure to stress) actually differentiate among the legal matters that need to be addressed in order to be legally complaint. For example, it would be difficult to find a legal professional who could say that it is more important to make sure that company is tax compliant than that it is privacy compliant or that employment law issues in a company trump competition law risks.”
These technologies have an essential role in the shift from a traditional conservative legal approach (which may be burdensome both on legal and on business) to a more modern and agile legal function. The implementation of technology is vital to a modern and effective legal department, allowing traditional types of work to be translated and performed by technological tools as smoothly as possible. There is a tremendous opportunity for legal departments to incorporate new technologies in their work. Risk assessments can now be made formally by the legal department in a company (or even within a law firm) using state of the art tools to improve its legal support for the benefit of the entire organization or its customers. For example, the implementation of certain tools such as those allowing for electronic signatures (e.g., Adobe Sign, DocuSign, etc.) may make paper-based contracts almost obsolete (though it is, at the moment, still far from being the rule in the industry). Contracts or other documents once agreed-upon can be signed by the parties wherever they are, provided that they have access to the Internet or a smartphone, with the help of these tools. Of course there may be certain legal limitations – but those mostly apply to documents that need a notarized form in accordance with specific laws (and even with respect to these documents it is conceivable that laws will evolve and will make them a thing of the past). As a result, a paperless approach needs to be the cornerstone of every legal department’s strategy, as it is advisable to prepare for and get on board with the latest technologies sooner rather than later. The development of automation tools, such as UiPath Robotic Process Automation Platform, can help with creative thinking on how to solve various repetitive tasks in the legal field by creating automatic workflows that can reduce burdensome human intervention, allowing legal professionals to focus on more important tasks. Meanwhile, cloud hosting solutions such as Google Cloud Solutions and other collaborative tools allow legal professionals to access their documents and drafts anywhere.
The use of the most recent tools that technology has to offer is only one of the changes that can be implemented in a modern legal department. Another important challenge is to change of the mindset that legal is purely a support function. The legal department is a business partner in the company, and it should constantly highlight its role as such. The legal function can add value not only with respect to legal matters and prevention work which it is inherently tasked with but also with respect to the adjustment of internal company processes and procedures in order to make them more efficient. From this point of view, the General Counsel is a critical source of change and innovation, taking the company forward with minimal legal involvement. A company’s success goes hand in hand with openness and in-depth understanding of the company’s business by the persons in charge of the execution of its objectives, including the legal department.
Another important characteristic of a successful legal department is effective collaboration with outside counsel. If the changes and overall approach of the internal legal department are not promptly adopted by the corresponding outside counsel, it can drag a project on for a very long period of time. It is essential to ensure that the constant evolution of the internal legal department is implemented also by its external collaborators. In this way, the external collaborators will not remain blocked in a conservative approach which would put a break in the evolution of the legal function of the company. The typical challenge the internal legal department faces in its work with external legal counsel is the mindset that the two are not parts of the same legal function. This leads to a dynamic where the internal legal department’s approach is closer to the practical and business side of the work, focused on being more adaptive, while the external legal counsel is more detached and risk-adverse on any issue on which their advice is requested. This often comes from a lack of understanding by the outside counsel of the actual issues facing the internal department and the solutions it needs, and until both sides are on the same page there can be a lot of back and forth, potentially leading to delays affecting the business of the company.
It is true that it is the internal legal department’s task to make sure the external counsel understands the requirements and needs of the company, as well as to set the right expectations. This does not diminish in any case the proactivity which is expected from the external counsel in highlighting certain aspects and risks without waiting for action from the internal counsel first. Although the lack of visibility into the company’s internal operations by the outside counsel may indeed impact their capacity to proactively look for and propose solutions, there are ways of overcoming this issue, such as making the effort to engage more often with their legal counterparts from client organizations. It is often the case that the outside counsel views their involvement as limited only to a specific issue without making additional efforts to understand the business they support. Shifting from a reactive type of legal support to a proactive approach is the key factor of a successful internal-external legal teams’ relationship.
General Counsel set the tone for their teams – including both immediate internal people and also external advisers – by constantly seeking to improve and by using the latest tools available to work more efficiently towards fulfilling the company’s needs and objectives.
This Article was originally published in Issue 4.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.