Is the value added by a legal team defined by cost savings or the value of matters worked on, or by the achievement of an organization's strategic goals?
Commentary regarding the need for in house corporate legal teams to demonstrate their value has been plentiful. In this blog article, we consider what the ‘value’ added by a corporate legal team looks like, and how it is measured or articulated.
Get your organization to see the value of your in house legal team, and be viewed as more than just a necessary cost centre.
Value added by corporate legal departments to their businesses fall into three categories.
Historically, the value added by an in-house corporate legal department has been measured by cost savings achieved through bringing legal resources in-house, or by seeking better rates from external law firms. Undoubtedly these cost savings are valuable and should be clearly quantified and highlighted by legal managers.
However, a simple ‘total’ year on year is insufficient.
The cost of external (and internal) resources need to be measured relative to the size of the organization, its revenue and market capitalisation as well as the deals, disputes or restructuring the legal department has managed throughout the year. These costs should be benchmarked in the same manner that all other functions or salaries are benchmarked, against organisations of similar sizes and/or within the same industries.
An alternative to this approach may be to treat internal legal teams as a quasi-law firm, charging a nominal hourly rate back to the business. For most in-house lawyers, this approach looks and feels much like the law firm from which they migrated and can work against the collaborative appeal of being part of a broader business, or cement the view of the legal department as little more than a cost centre.
Measuring the value of contracts, disputes or risk management can draw attention to the critical role the corporate legal department plays in securing key commercial outcomes on valuable legal matters. By taking note of the value of legal matters to which the team contributed, actioned or avoided, it would be difficult for a business to ignore how central the role of the lawyers are to the overall business.
Yet the role of the in-house lawyer may vary enormously from central to peripheral, so legal team value can be difficult to determine, or perhaps overstated by using a simple ‘total’ figure. Consider also circumstances in which a value cannot be ascribed to the legal matter, such as the hundreds or thousands of marketing approvals required each year, regulatory filings with no monetary value, or even the legal dispute for which the risk is reputational rather than financial.
To place a monetary value on these items may provide an indicative figure for discussion purposes, but it needs to be treated with caution.
A key role of any in-house corporate legal team is to facilitate its company’s ability to achieve its strategic goals. Achieving a strategic goal can rise or fall on the legal framework surrounding it, which makes the legal team critical to the strategic direction of a company.
It is important to emphasise this point: the legal team is critical to the strategic direction of a company and the achievement of its strategic goals.
Measurement of the extent to which each and every task undertaken by the corporate legal department furthers a company’s strategy is an important way to demonstrate the value added by the legal team.
By measuring the strategic value of a legal matter – say on a scale of 1 to 10 – and cumulatively measuring the value added by the team to the strategic direction of the company, it becomes clear to all stakeholders that the legal team holds a critical role in the company.
Tip: it's easy to measure the strategic value of a matter using legal operations software.
This ‘value add’ metric can alter the manner in which the legal team is viewed in two ways:
Irrespective of the methodology adopted, any demonstration of legal team value which adopts data based language will provide the business with comfort that value is being added to the company.
A focus on company strategic goals will ensure alignment of language between the business and the in-house legal department and is more likely to bring the lawyers to the decision making table.
Below are some tips to help show the value of your Legal Department.
According to the North East Journal of Legal Studies, General Counsel stated that one of best ways to demonstrate and add value was to understand the business and proactively addressing legal issues, trends and risks that impact the company. This can help shift your legal team from firefighting to a forward-thinking legal department that does more than just fix issues.
Our client BlueScope said: “Business people think in charts and graphs; lawyers think in blocks of text. I needed a way to translate our narrative into charts and graphs that show how and why the legal team spends its time – not only for my decision-making, but to track over time the busyness of the department, the priorities and time commitments.”
The more you can back up your opinions and decisions, the better, as your Legal Department will be more credible to the C-Suite. Using legal technology like a matter management solution can help generate legal reports to keep stakeholders in the loop with key insights and trends.
Tip: check out Xakia's Best-In-Class Legal Reporting white paper to help you tailor legal reports for your CEO and C-Suite.
Provide timely, effective legal advice and provide superior customer service by providing regular updates on legal matters to your business clients.
Use metrics such as:
Xakia's legal analytics software allows you to use data to make informed decisions on resourcing. It will also provide you with important legal data and metrics to show your value to the leadership team. If you would like to learn more about our legal matter management solutions, speak to the Xakia team today about a demo today or sign up for a 14-day free trial.
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