SMART REWARDS: The Contribution of the Law Department to Corporate Priorities

Author: Richard Stock - CCCA Magazine (Vol 2, No 1, Spring 2008)

Mid-sized and larger companies typically have organization-wide performance management programs in place. It is one thing for a Board of Directors and the CEO to craft a vision, a statement of values, and corporate business priorities. It is quite another to ensure that divisions and departments develop annual business plans that are sufficiently detailed and effective in achieving all targets. The barriers to the effective execution of strategy are serious when one considers the statistics:

	95% of a typical workforce does not understand its organization's strategy
	90% of organizations fail to execute their strategies successfully
	86% of executive teams spend less than one hour per month discussing strategy
	70% of organizations do not link middle management incentives to strategy
	60% of organizations do not link strategy to budgeting

Performance management programs, patterned on a “balanced scorecard” architecture, can be a valuable tool for a corporation. Well conceived and properly executed, they are the connective tissue between strategy and individual action. However the application of performance programs to support units like law departments, human resource services, IT and finance departments carries a separate set of challenges. Two surveys reported in 2006 that fully two-thirds of support units were not aligned with their organization's business unit and corporate strategies. It should come as no surprise that the performance objectives of individual lawyers in law departments are seldom connected with what the organization considers valuable.

Still, a law department can create value in the organization. It depends on the processes, the relationships and the tools that it can bring to the table. Taken together, these can be assembled into what some (Kaplan and Norton) have termed a “strategic services portfolio.” Admittedly, a law department does not exist to make a profit or deliver programs to customers. Moreover, its primary users are almost always internal - either corporate or a business unit, division, etc. On the face of it, a law department scorecard must enable corporate and business unit initiatives, it must demonstrate efficiency, and it must develop the resources which are entrusted to it. The devil is in the details.

It is always a challenge for the law department to incorporate the basics into their performance plans (scorecards):

	best practices in the choice of key performance indicators (KPI's) for legal services
	the substantive legal work they do
	outcomes and measures which are rarely in their control
	the development of lawyers and staff as intellectual capital

There are also five sets of inputs that General Counsel should use in constructing the law department's performance plan.

1. The corporate strategic plan. This usually sets out the organizational and operational customer-facing objectives, strategic business initiatives, and cost control targets. Sometimes over-riding priorities like safety and the environment are added.

2. A critical success factor framework or checklist. This is often a diagnostic tool covering the range of strategic roles, structural and resource elements and processes particular to the legal services function. Checklists and frameworks are available from thought leaders and associations within the legal services industry.

3. A SMART test applied to the initiatives selected by the law department so that they are Specific (based on a single theme), Measureable (taking into account quantity, quality, cost and timeliness), Achievable (within the reference period, usually one year), Relevant (like the success of the business unit or company), and Time-based (with clear target and pacing throughout the year).

4. The architecture for a law department performance program should include initiatives, outcomes and targets, and measures or indicators.

5. The development of intellectual capital with elements to make the law department an employer of choice for lawyers, to ensure the acquisition of relevant competencies (skills, knowledge) by members of the law department is essential. It is also important to assume a leading role for corporate and business unit objectives, and to position the law department as an early adopter of performance management programs focused on support units

It is a challenge for the General Counsel to choose the “correct” 20 initiatives to populate the law department's performance scorecard each year. The selection and execution of these initiatives determines the extent to which the law department is of strategic value or simply part of the overhead in the organization.