20
Fri, Sep
26 New Articles

Where is the Added Value of the Legal Department

Where is the Added Value of the Legal Department

In-house
Typography

It is good to have at least general idea of the answer to the question of where the added value of the legal department lies, otherwise you might become a very expensive administrator whose contribution to a company success is questionable. 

My experience as an in-house lawyer comes from work in legal departments consisting of up to four people. I have worked in long-established legal departments and those I had to create from scratch. The only common feature of the companies I worked for was that they were in a constant process of transformation, always entering into new businesses and new areas of risk, and thus constantly challenging their lawyers with additional work. Being overloaded with work, you have to ask yourself every day whether doing something is really valuable for the company or is just a simple administrative task better performed by someone else. 

How You Are (Dis)Organized

A lack of proper understanding of the legal department’s role results in it being overburdened with mundane and non-critical “legal” work. Quite often in this context “legal” means that the use of Microsoft Word instead of Excel or Power Point is required. This is a simple way to transform a legal department into extremely expensive administrators who do not create much (if any) added value in projects they are involved in, with a presence the company may find difficult to justify.

Unfortunately, there is no one good answer to the question of what the role of the legal department should be. It is evident that when you ask your colleagues they might have very different expectations in respect to the areas where in-house lawyers should support them. Some expect legal help with drafting any communication to third parties, some prefer to limit lawyers’ work and consult with them only regarding single sentences in an agreement without providing them any context. 

The different expectations are often related to the different set up of an organization; for instance, contract management often is assigned to the legal department not only directly, but also often due to the common understanding that if something is not clearly assigned to any other department, legal will handle it. To preserve capacity to work on tasks where your input has really value, you need to be assertive and decline (in a polite manner) all requests which are disruptive to work and related to a misunderstanding of the in-house lawyer’s role. 

Naysayer – No, I Do Not Think So 

Based on the questions asked about the role of legal department, I sometimes get the impression that many believe that an in-house lawyer’s job is primarily to say “no” every day. This is related to the outdated perception that a legal department consists of naysayers and deal-stoppers.

In the last ten years of my work as an in-house lawyer I am pretty sure that I did not say “no” to a deal more than a handful of times. My role is not to stop the deal but to find a legitimate way of doing it which also suits the company’s business model. If something important from the legal perspective needs to be highlighted, you need to do that, of course – and preferably at an inception stage of the project. In essence, by frequently saying “no” without proposing any legally safe and acceptable alternatives, you are failing in your role as in-house lawyer. You should be perceived as an enabler of projects, and as someone who helps find a legally safe way of implementing them. 

Of course, you need to understand what “legally safe” means, because doing business often involves a certain level of legal risks. Various companies have different appetites for the risks related to their activities. The companies I have worked for valued their brand perception and integrity of their employees, therefore a quite significant number of legal risks were ruled out by definition and without the need for a legal department to escalate them (e.g., regarding corruption, bribery, etc.). 

However, we all know that the law is not always clear, and – depending on a court’s interpretation – we may face some additional costs which can significantly impact the business model adopted for a specific transaction. The task of the legal department is not to make sure that this risk will be entirely removed (which is more often than not impossible) but to quantify the potential exposure and its likelihood in a way that can be understood by business, included in the business model, and constitute a basis for a business decision.

Longing For Crisis

The ultimate test for in-house lawyers usually comes during a time of crisis. This is the time when you should show legal knowledge, integrity, and business understanding. During crises there is often not enough time to fully utilize external lawyers (due to the dynamic situation), therefore in-house lawyers need to take much more pressure on themselves. 

Moreover, apart from legal knowledge proficiency in the use of Power Point and to some extent Excel is required to properly communicate with company’s executives. Apart from those technical skills, this also requires good understanding of the nature of the crisis and alternatives which are available to the company. 

A huge crisis does not happen frequently – but smaller ones are not unusual. This is (unfortunately) the simplest and quickest way to raise your profile within the company, as no-one questions whether an in-house lawyer adds value during a crisis or not. However, the downside is that failure to perform in the face of the crisis (or, of course, bring responsible for it), may be the simplest way for a lawyer to get fired – so there might not be a second chance. 

Business Adviso – Can You Learn This At 

Law School?

Nowadays business works together with in-house lawyers from a project’s inception to its end. In-house lawyers need to provide advice on the project’s structure and its legal ramifications, and may need to draft/review agreements. 

The main objective of the legal department is to find not only the way to implement a project, but also to implement it in the most efficient way, preferably with limited or no external legal costs. In-house lawyers also have to be aware how their advice impacts a project’s financials; i.e., they need to provide pragmatic advice considering both business outcomes and legal consequences. 

In order to have a broad business perspective and sound business judgement on top of their legal skills, in-house lawyers need to be connected with their business colleagues on a day-to-day basis. Only then can their advice provide added value for the business, as communication in financial terms (often related to short and long term gains) will be perceived by business as especially valuable. They should also be able to distill complex issues down to specific items and act sometimes as project manager, to bring all stakeholders together in order to work out a proper solution. 

Moreover, business advisory is the area where in-house lawyers are able to differentiate themselves from external lawyers who are often perceived as specialists in isolated areas of law but due to either lack of knowledge about a particular business or their obligation to protect their law firm from liability, rarely offer genuine business-strategy advice.

Summary

Even in most promising projects, in-house lawyers must make sure that the right thing is done (and escalated if needed) regardless of consequences. However, at the same time, in-house lawyers have to contribute to the bottom line of the company not just by preventing something that is wrong, but by proposing alternatives which are compliant with business models proposed for a given project. 

Of course lawyers are always required to do some firefighting, but by our presence in business coupled with pragmatic advisory and the promotion of compliance we need to ensure that the number of crises is kept to a minimum. If we can avoid being overburdened with mundane tasks that do not require lawyers (but no-one else wants to take care of) and constitute distraction from other tasks, we should be able to prove our value to the company and facilitate its success (despite the fact that performance measures for in-house lawyers are still in infancy, but that is a topic for a different article).  

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.

Our Latest Issue