A Valuable Asset?

Author: Richard Stock - Lexpert (Vol 10, No 9) July/August 2009

At the beginning of the current decade, companies were unsure what to make of their legal departments. Were they a cheaper alternative to law firms? Were they the "business prevention police?" And were they good enough to stand on their own? Simply put, what value did they provide?

Most corporate counsel were recruited from law firms in the early years. Few had been law firm partners, and fewer still had held positions of influence in other corporate legal settings. What a difference a decade makes. Lawyers working in Canadian corporate and government legal departments now number in the thousands. Their achievements are regularly noted by their executive teams and business units as well as by the private bar. Many have acquired significant experience with several employers with responsibility for multiple jurisdictions.

While there is no doubt that those lawyers who are thought leaders and those that work in well-endowed companies deliver an impressive track record, the spectrum of performance is still much too broad today. Too many corporate counsel are not achieving their full potential. They cannot answer the question "What difference do lawyers make?"

Is Value Quicksand?

There have been 15 years of conferences for corporate counsel with panels trying to define and debate the "value" of corporate counsel. And so it should be, since the "value proposition" evolves over time. Like "excellence" however, value is elusive and it is "relative" to the user ,varying with the company's needs over time. In recent years, legal departments have formally aligned their annual objectives and key performance indicators with those of the company and its business units. They conduct annual surveys focused on general satisfaction and service levels. Still, rarely are the "results" delivered by the legal department evaluated on their own. Instead, they are buried in the general satisfaction responses.

There are several reasons to develop a working definition for the value of the legal department within each company. Firstly, it helps to manage expectations for service, competency, results and costs. Secondly, clarity helps in the management of the department's legal and support services. And thirdly, it accelerates the identification of leadership opportunities for members of the legal department.

Should Legal Departments Have Clients?

Very few corporate legal departments require their lawyers to record time and then charge business units for the " effort/time " at a designated rate. The practice of doing so is far more prevalent in government and other public sector legal departments. Even when timekeeping and chargebacks are not the order of the day, corporate counsel often refer to the primary users of legal services as their " clients ". Perhaps this is a carryover from the time spent in a law firm, or perhaps it is the terminology adopted from others in the department. The same can be said about the notion of " having a practice " as corporate counsel.

Our observations suggest that corporate counsel who regard themselves as having clients and a practice may be diminishing their effectiveness or, at the very least, not seeking out opportunities to add " value " in the organization. This worldview warrants a review to ensure it is not too transactional or isolated. An evolving " value proposition " for the legal department and for each of its lawyers will see them better aligned with corporate and business unit strategic initiatives.

Business Competencies for Effectiveness

Leadership is one of those skills which allows the lawyer to gain leverage and to assume a position of influence and power in any organization. One working definition says it is "the ability to take a role as leader of a team or other group. It includes demonstrating a positive attitude, energy, resilience, stamina and the courage to take reasonable risks, not necessarily reserved to formal positions of authority."

Members of the department will have acquired different levels of management and legal experience. Those with 7 - 10 years as lawyers should already be regarded as "champions". There should be evidence of taking ownership and leadership on important business operational issues. They must be willing to take risks and demonstrate creativity by championing new and innovative approaches leading to business success. Clearly, this involves much more than legal competence.

There exists a group of business competencies that corporate counsel should acquire as they reach the 7 - 10 year mark as lawyers if they are to be truly effective as corporate counsel. This knowledge and skills include an understanding of the organization, its industry, management practices, and their applicability to the organization. There are five (5) such business competencies which together constitute a pretty good roster for the corporate lawyer.

The first is to be "customer-focused". This means focusing one's efforts on building relationships, and discovering and meeting the ends of the company's customers, whether directly or indirectly through a business unit. Evidence of corporate counsel who do this requires concrete attempts to add value to the customers and to make things better for them in some way. Such counsel seek more information about the underlying needs of the customer and work with a long-term perspective in addressing the needs.

The second is being "achievement-oriented" by demonstrating a bias for taking action, focusing attention to achieve effective outcomes, demonstrating a sense of urgency, and showing some initiative in implementing a plan focused on achieving business results. Effective corporate counsel set stretch goals that will take their performance beyond agreed standards. They will make the time to improve performance and to try something new.

The third business competency is to be "resourceful". Much of this requires the ability to understand and manage relationships in a matrix organization or in other organizations dealing with their employer. Effective corporate counsel use ongoing systems of information (e.g., personal networks of relationships, a professional association or groups) in order to drive the organization toward positive business results.

"Critical thinking" should come easily to lawyers. It is the ability to comprehend a situation by breaking it down into its component parts and identifying key or underlying issues in complex situations. Corporate counsel should use analytical techniques or tools to break apart problems to identify solutions. They should be proficient at synthesizing information to identify key issues and make decisions - or, at the very least, help the business units in doing so.

Truly effective corporate legal departments are populated by lawyers that have a "strategic business sense". They understand the business implications of decisions and then strive to improve organizational performance. This depends on having an awareness of business issues, processes and outcomes as they affect the performance of the organization.

General Counsel must manage the performance and priorities of corporate counsel so that they acquire the leadership and business competencies before too long. The opportunity is greatest in formative years.