Leverage in the Law Department

Author: Richard G. Stock

For the last five years, nearly every conference for corporate counsel has contained at least one session on positioning the department more strategically within the corporation. There is a continuous search to be involved much earlier in executive business decisions. There are success stories, and some not-so-easy to implement basics, to be considered by CEO's and general counsel.

Strategy

Many executives and general counsel think about "planning" first in terms of external issues - the competition, the economic climate, the increasing number of lawyers, the disruptions caused by new technologies, and so on. The pursuit of operational effectiveness as a priority for the department is seductive because it is concrete and actionable. Throughout the 90's, general counsel have been under increasing pressure to deliver tangible, measurable performance improvements. Caught up in these dynamics, many law departments do not recognize the need to have a clear positioning strategy.

The natural desire of companies to grow too often has the most perverse effect on law department strategy, blurring uniqueness, creating compromise, reducing fit, and, ultimately, undermining the department's traditional position. The prescription for dealing with growth while preserving and reinforcing strategy, is to concentrate on deepening a strategic position rather than broadening and compromising it. The department's activities more distinctive, with stronger fit, and its strategy can be more easily communicated to internal "clients" who should value it.

Alignment and Change

In many departments, an analysis of members' individual commitment will reveal that most have their own agenda, are doing their own thing. When members are committed to individual agendae, the result is they go in different directions with some commitments cancelling out others. The principle of alignment says that if one wants to know the direction the organization is going, and how fast it is moving in that direction, one must add up all of the individual commitments.

"Alignment" is very different from "agreement". Since each professional has his or her own opinion, it is virtually impossible to get them to agree. On the other hand, it is possible to get professionals to align on common objectives, even having their own opinions. When professionals do align, the outcome can be extraordinary.

Selecting the Objectives

The best tool for managing the alignment process is Kaplan's and Norton's Balanced Scorecard. It addresses the serious inability of management systems to link a firm's long-term strategy with its short-term actions. Once there is clarity about the department's positioning strategy, there must be a choice of its objectives in carrying out the strategy. Kaplan and Norton recommend objectives in four areas - clients, learning, business processes, and financial - and each accompanied by measures, targets, and initiatives supporting the vision, strategy and culture of the company.

Law department the objectives in those four areas can cover

• clients - new services to existing clients, partnering and framework arrangements for legal services
• learning and growth - teaching clients, competencies, advancement criteria, compensation systems
• internal process - sharing work product, use of technology; department structure and management
• financial process - resources required by service and client type, and pro-forma billing methods.

Aligning Individual Performance

Provided the department is able to assemble its scorecard, there is one more bridge to cross - getting individual lawyers and staff to personally use a scorecard approach. There are three parts to this step.

1. broad-based communications - have a program targeting all lawyers and department employees;
2. goal setting - translate department-wide objectives into objectives and measures for groups and individuals using personal scorecards, and replace the classic performance appraisal forms;
3. linkage to rewards - tie rewards for lawyers and employees to department success and individual contributions. For proper alignment, department performance is tied to what is measured and what is rewarded.

Even where the department doesn't have full authority to make change, getting complete and integrated alignment will ultimately require explicit suggestions in how its goal-setting and reward practices will be managed.

There are law departments now getting the strategic leverage they need to deliver additional value to their "clients". The scorecards support a clear connection between department positioning strategy and priorities, and what individual lawyers do on a daily basis.