Empowering your legal department

option-2The success of a business is typically backed by astute minds, with a brilliant strategy. Having said that, there is no silver bullet to ensure this success, especially when it comes to developing and implementing a sustainable growth plan. There are times when different departments may end up being in an involuntary competition with each other, striving to prove their indispensability, profitability and value brought to the organization. With increasing operational costs and complex networks, how do you think legal teams are tackling this dynamic environment?

From a reactive to a strategic role

Legal departments have transformed themselves from being a reactive group to a proactive, strategic support division. In early 2016, NYSE Governance Services and BarkerGilmore conducted a study of corporate directors and executive officers to identify trends related to the role and responsibilities of General Counsels, and determine how legal departments can better prepare for the future needs of the corporation.  The study concluded that while a lot depended on the company size and industry, but General Counsels are increasingly becoming influential components of the senior management team.

Cost vs. compliance battle

The journey of evolution from predominantly being a cost-centre, to an integral division that is driving business decisions and having a significant contribution to the bottom line has been a commendable move for legal departments.

Recent news reports have suggested that the cost of legal services in India has augmented, with the numbers for public-listed Indian companies rising 7.3% as compared to the previous year. In this cost-effective world, legal heads are now expected to not only have subject matter expertise but also have the business sense around cost containment and strengthening the bottom-line.

Some of the other triggers that are driving changes in the existing processes for legal functions include:

  1. Dealing with numerous litigations,
  2. The big data wave,
  3. Financial pressure and
  4. Regulatory inquiries

A big growth driver to this evolution has been use of technology. Regardless of the region that General Counsels operate in, they have frequent links with increasing technology tools such as document management, legal hold management, eDiscovery, and matter management.

The Indian frontline

India has witnessed a spurt in specialised services across sectors. Among these, the demand for legal services has grown significantly, stimulated by regulatory requirements and rising volumes of data. Consequentially, the role of General Counsels have transformed to manage legal matters with precision, with improving efficiency over time.

Some recommendations for legal departments and General Counsels include:

  1. Increased use of technology: Information technology (IT) is developing rapidly, with new and improved innovations. Today’s generation is more focused on their ability to use technological resources for business. Some of the areas, which can be deployed to enhance the efficacy of legal teams include contract management, billing, time management and knowledge management. IT tools can enable enhancing the circulation of technical know-how within legal departments as well as avoid de-duplication of efforts.
  1. Outsourcing versus Insourcing: Striking the right balance between the amount of work carried out in-house and the amount handled by an outsourced team can be a rather specialised task. While cost is a significant factor, it should not be the only one to be considered.  The value derived in the overall process overtime could have weightage in such an evaluation.
  1. Gain visibility into department expenses: It is said, “you cannot control what you don’t know.”  It is important for legal departments to take adequate steps and quantify the amount (or possible amount) of legal, regulatory, or compliance expenses.  Improvement can be made as and when there is a need, then be measured against the “as-is” practice against proposed “revised” practice. Basic questions on spend, percentage of spend, nature of spend should be frequently discussed to bring in a culture focused toward efficiency and transparency.
  1. Slice and dice outsourced activities: Tasks which are of repeatable nature, that weigh more in time and less in value could be outsourced for better results. Legal departments have traditionally relied heavily on relationships with firms and consultants, while handing over tasks to be outsourced. Breaking tasks into specific activities could give insights into the best partner as well as programmatic benefits of the work performed. At times, this could yield to a wider range of vendors with specialised tasks and overall better results.
  1. Projections and predictability: What cannot be measured, cannot be improved. Legal departments often operate in the reactionary and unknown environment. Today’s reality is that a lot can be projected and predicted, with close gaps. Applying a systematic method to track internal projects and noting what outside counsel and/or outsourcing partner(s) is working on, a legal department can conclude where to focus their efforts early on.
  1. Set key result areas for vendors: It is observed that not many legal departments have focused on quantifying the work performed by outside counsel/outsourcing partner. To explain, if a production manager hired to manage a manufacturing plant fails at controlling defects and sustaining production time, he would be replaced by the management or could get poor performance reviews, in a relatively short term. In the legal space, such objective evaluations are difficult to define or implement due to the subjective nature of the work performed.  However, a focus on performance measures that are quantifiable could help as they could prove to be a powerful and cost-effective tool to improve efficiency.

To sum up, empowering and strengthening legal departments with advanced tools and expertise are contributing to the cumulative success of the overall business more than ever before.

Follow @EY_India and track #EYForensic for regular updates

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