The Five Pillars

Author: Richard Stock - Lexpert (November / December 2006 at p. 122)

Progressive law departments can have an important impact on their organizations: in our studies, there is a significant correlation between the CLO or general counsel's experience in the company and strong law department contributions to corporate priorities. In other words, a top notch in-house department makes for a healthier company overall.

But attaining the optimum partnership usually takes time. After about 5 years, relationships have been forged with the CEO, the CFO and with business units. Legal resources have been secured and the mix of inside and outside counsel is carefully balanced.

Industry sectors vary in their demand for legal services: increased regulation, threats to intellectual property, industry consolidation, privatization, etc. Yet, there appear to be at least five functions that law department leadership must perform well in order to have a well-managed department.

The first is organizational alignment. By taking into account the company’s corporate business plan for the year, and for a 3-year mid-term horizon, a law department can clarify the roles it should carry out. These range from policy advisor, regulatory and compliance specialists, custodian of the IP portfolio, deal negotiator, risk manager and more. Discussions with the executive suite and leaders of business units are essential. The law department must be part of the business unit planning cycle and they must meet regularly after that.

In some settings, law departments prepare service level agreements with primary business units to define the scope of legal services anticipated from inside and outside counsel, standards and protocols for access and turnaround of legal services, location of lawyers and cost management.

Another aspect of organizational alignment is the clarification of corporate objectives and goals, with implications for services from the law department. These are then reduced to writing by the law department so that initiatives can be agreed upon and tracked.

The second function that must be done well by the law department is the deployment of its human resources. Law departments are intellectual capital in a company. They should be properly leveraged for maximum effectiveness. Among other things, this means that the lawyers and staff must be challenged and expected to gain new skills and knowledge. That goes beyond the identification of legal relationship coordinators for each major business unit.

Law departments do not know enough about the complexity, frequency and distribution of the work they carry out. Few departments have matter management systems to track activity and the source and type of legal work. Fewer still want time-keeping systems.

The creation of centres of legal expertise, often in tandem with preferred outside counsel, is rarely a formal process. Individual lawyers will typically contribute up to 90% of the hours on a legal matter, with insufficient reliance on more junior lawyers and paralegals in the department and on a carefully selected mix of outside counsel. The most effective law departments rely heavily on legal service teams to support business unit objectives.

Attending to the non-structural elements of human resources in the law department is also key. That requires extensive use of competency-based tools to ensure the best balance of legal capabilities and business priorities. Competencies are a compendium of knowledge, skills and attributes which lawyers are expected to have acquired as they reach different career milestones (entry, intermediate, expert and management) in the law department. Competencies normally cover four broad areas: personal attributes, leadership, business/finance, and legal. Thomas Davenport’s book “Thinking for a Living” is a must-read for CLOs and a good read when aligning human resources.

The third activity in an effective law department is the management of initiatives. It is the set of carefully chosen initiatives that affects every lawyer and key users in a meaningful way. Initiatives are discussed and planned annually with corporate and business unit leadership, and progress is reviewed regularly thereafter. It is a given that professionals and management never have spare time and are never caught up in their work. Still, companies and their business units have targets and deadlines. A good law department has criteria to guide the selection and timing of initiatives. It goes further by monitoring the allocation of work to members of the law department and to outside counsel. Compliance with service standards while backlogs are traded off is part of the continuous triage that defines the dynamics of professional services.

The fourth activity of the effective law department is strategic communications. Too often, law departments are poor promoters of their achievements. Perhaps every artist needs an agent. The company's leadership may have a poor understanding of the diversity and impact of what the law department achieves in its different roles. That is one reason why surveys dealing with service levels and results are conducted by more accomplished law departments every year. Participants receive feedback on the results, as well as follow-up visits after all major transactions, litigation and hearings. A careful selection of matters and good timing by the CLO makes strategic communication a key element in effective legal services.

The fifth activity is a focus on best practices. Innovation is the hallmark of an effective law department. Departments benchmark everything from techniques for organizational and human resource alignment, to the management of initiatives, and strategic communications. They also readily participate in the benchmarking of non-financial and financial practices of other law departments. They rely on primary research and competitive intelligence to learn about and then introduce best practices.

Organizational and human resource alignment, the careful management of initiatives for the law department, strategic communications and a focus on best practices for legal services are the pillars of a well-managed law department.