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Reframing Legal's relationship with the business

For any global business, excellent legal advice, experience, cross-border capability and demonstrable cost control are now table stakes attributes of the legal function.

The differentiator is the extent to which the legal function is designed to help the organization execute its overall strategy safely and efficiently to protect the core and preserve business growth. This evolution of the legal function from a cost efficient provider of legal services to more of an overall custodian of the business and value creator links to the ripple effect of the s172 companies act reforms which place an increasing onus on businesses to demonstrate that they are acting in the long term best interests of their customers and stakeholders as well as their own organisation.

To do that demonstrably requires a study of the value as well as the costs side of the equation. This involves putting continuous effort into understanding the end to end business processes that legal serves, having the right data and using it to genuinely further business and organisational outcomes rather than simply supporting what matters to the Legal team or the perception of the Legal team. Working with the business, legal teams need to actively and systematically challenge themselves to assess what work they should be doing and defining what is most important for their business and its customers. This collaborative approach can leverage wider investments the organisation is making in delivery capabilities and, crucially, in a way that allows the legal function to pivot quickly in response to signals from the business.

It helps to have good metrics. GCs can find it difficult to provide the hard evidence that the business demands (of all support functions, not just of Legal) that their teams deliver “value”, particularly in comparison to their peer group functions. Not only do GCs lack sufficiently granular benchmarking data but they also lack the time and the tools to be able to report what they are doing from a service perspective. When facing a massive increase in departmental workload and pressure to cut costs this creates a significant knock on impact. Commonly, the outcome is the worst of both worlds - a function of dedicated but habitually overworked professionals that can be perceived at the same time by the business to be expensive underperformers. Dig deeper into the root causes and you find that most GCs regard strategic transformation as insurmountable in addition to the demands the day job places on their team because the discretionary effort and “space” needed to achieve it is too great. This is particularly true in a Covid environment where change and transformation are made even more difficult, though more imperative.

It is an irony not lost on most GCs that their function has organically grown over time and lacks a deliberate design that is fit for today’s purpose. Yet they don’t have the capacity, bandwidth or budget to change it, so their lawyers fill the void by “working harder”. Despite this, most GCs have realised that they can't wring more value from their lawyers using the traditional techniques. Instead, a change in mindset is needed to angle in on the root causes, not just the symptoms of what drives “value” - that is the key differentiator for leading in house teams in the next 12-24 months.

Start with a clear understanding of what the business values and use it to decide where to focus and what to deemphasize. Use granular and targeted benchmarking, sized and shaped to create a true comparator to your organisation’s needs from a costs perspective. Then classify and map the key business journeys and link business value to the operational cost drivers that underpin them. From there, define your crucial service levels to be clear, objective and capable of easy measurement. Think laterally, what's the business value of taking a more efficient approach - for example in addition to being more cost effective how will this transformation generate demonstrable additional income for the business or decrease litigation reserves sitting on the balance sheet?

Guided by these priorities, simplify and streamline Legal’s underlying services. If this doesn’t happen before any digital transformation, you may well end up digitising existing complexity. Once the simplification is complete, design a new operating model based on these linkages, working back from the business and using digital tools to streamline or automate your processes in line with what the business cares about.

In delivering this change, it is also critical to carry the legal team with you. You must emphasize how this transformation will improve their personal experience, allowing them to expand their skills and expertise through challenging work, focus on delivering legal service and delivering more tailored services that are appropriate to the legal risks of the organisation. In this way the lawyers themselves will also be part of the journey to deliver clear value for money to the organisation by providing proactive, risk-calibrated services at the right price point across the service spectrum.

Lawyer engagement to new ways of working can be hard to generate and maintain without a clear and well executed plan of change. For example, one of the hardest service challenges for GCs is how to create related and effective permeable capacity within their teams when the typical operating approach is linked to subject matter expert structures. Mapping “near relatives” in terms of legal work and creating capacity across similar capabilities cannot happen without proper team engagement and rethinking the fundamental assumption that organizational design should be capability based rather than seniority based or siloed.

In our experience, GCs need support and buy-in from their functional counterparts to develop the road map and transform the way that legal services get delivered most effectively. There is no one-size-fits-all approach to demonstrating legal department value but GCs who start with a shared vision with the CEO and CFO as well as a roadmap that begins with the principles set out above can fundamentally change the efficiencies with which their legal teams deliver services to the business and re-frame the value that their function delivers to the organisation.

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Andrew Giverin

Andrew Giverin

Partner, NewLaw Services, PwC United Kingdom

Tel: +44 (0)7990 575 269

Juan Crosby

Juan Crosby

Partner and NewLaw Leader, Global Tax & Legal Services, PwC United Kingdom

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