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Building A One Tribe Mentality

February 14, 2008

What is the role of Legal? This is a question I increasingly encounter – and which has ramifications far beyond the Legal function itself. The answer has an especially significant effect on those in areas like Contract Management and Sourcing, because they have high levels of inter-dependency. It is a little like international relations – if Legal decides to get aggressive we all know about it; similarly, if they retreat into their shell, others are seriously impacted.

So what is the ‘ideal’ scope of Legal’s role and why are they asking this now? And how might the answer affect other groups and functions?

The question arises because of growing business complexity, compounded by increasing regulatory oversight. As with so many aspects of recent regulation, the obligations of Legal are unclear, but they have certainly expanded. And the expectations of other functions in terms of the role they expect the lawyers to play also vary, as the following examples show. So first, here is the question that sparked this particular article; it comes from a Senior Attorney at a major global brand, who has been charged with putting together a recommended model for her in-house team.

“Our legal dept is looking to restructure how and what we do as a team to add more value for the company and also to understand what things we should be delegating to outside counsel, train the business on etc. Part of our goal is to achieve better productivity and work-life balance as well.”

The challenge for Legal groups may be extreme, but is not unique. Certainly they are in the front line when it comes to increased regulatory and governance oversight; and they share with other functions the challenge of greater complexity, combined with the need for increased speed of decisions and actions. As our brief case studies make clear, this is not really a question that Legal can answer in isolation; an effective solution depends on working closely with other key stakeholders in the business – prime among them groups like Procurement, Commercial and Contract Management.

Achieving Reconciliation

These dynamics of regulation, complexity and speed are in conflict – especially when you add the fact that no one is going to be given significant additional resource. Hence the urgent need for change; simply doing what we have always done, but faster, is not a solution. And Legal is one of the few groups with the power and influence to drive these changes – they have the ready ear of executive management, so their fate (and in some respects those of groups like Contract Management and Procurement) is in their own hands.

I believe there are 5 areas where Legal must focus if they are to reconcile the conflicts they face and help other parts of the business also become more productive and valuable in their output. These are:

Automation – what tool set do you need – and is it Legal or is it enterprise? Does it support current working practices or introduce new practices? Is it focused on enabling or controlling?

Offshoring / outsourcing – what role do these have in the mix? Should you outsource yourself, or require your external advisors to do so? Build a ‘captive center’ or contract with an outsourced provider? What work goes and what stays – will I outsource tasks or processes?

Management system – do organizational roles and interfaces need to change – and how? What are the business factors driving increased workload and to what extent is this through traditional organization not being capable of meeting new needs?

Standards and templates – what role do they play, how are they managed and maintained? What flexibility needs to be allowed, to whom and in what conditions?

Scope of role – what must the 21st century legal department do (core); what does it enable, but oversee; what does it advise, but then let others operate.

Of course, this list attacks only part of the Legal remit – it focuses largely on their role in supporting trading policies, practices and relationships, but my sources tell me this is perhaps the fastest growing workload. Global Sourcing, Outsourcing, Alliances, entering new markets – just a few examples of areas requiring increased focus.

Views From The Front Line

I thought I would test my ideas with a few General Counsels and this is what they said:

“This is an excellent summary of key critical elements. It is certainly on the short list we have at (company name) (role of automation; effective enterprise contracts management system; core/non-core activities and what can be outsourced/near-shored/transferred to business; governance model; simplifying cross-organizational decision-making). One area where I think an IACCM or a GC Rountable plays is the consultant/advisor role. For example, you’d rely on IACCM or GC Rountable to come on-site and help you analyze your current environment. Difference to me in organizations based on my involvement is that IACCM is the leading thinker on contractual/commercial relationships and the contracts function. GC Rountable is probably better at the more traditional attorney specialty roles (litigation management; outside counsel spend; etc…). ACC is the ideal forum for various legal departments to engage on best practices, trends, recommendations, networking, etc…”

That endorsement was followed by another, which also encouraged thoughts of a more integrated organization model, to support ‘commercial competence’.

“I tend to agree. The GC round table focusses on things that are core to legal; litigation external counsel etc. It tends to be less strong on the model that should or could apply in a business, about how and why a management system is in place. It also tends to assume that lawyers should naturally be in charge.

For example, if in a contracting environment the question is one of what the relevant IPR law is, and there are a number of alternative interpretations and cases, then it makes sense to employ the best lawyer in the world to manage external counsel. This is only likely ever to be a real world issue in a very small number of situations and most of the time getting a timely and relevant answer from external counsel that addresses the business issues is the typical demand. If the business issues are understaod by someone with sufficient relevant legal training, either that person can answer the question him/herself, or manage the externals. This is the model we have adopted and for commercial contracts there is little need for a formal legal qualification: provided sufficient relevant legal training and knowledge and experience and good commercial judgement are present.

We have a ‘one tribe’ better faster cheaper answer to the business model by merging the legal and commercial functions and we save time into the bargain by cutting out the transaction costs between different internal tribes. IACCM’s inclusionary and one broad church approach is the one place where cross functional and real business issues are discussed.”

And the final input similarly saw a need for increased integration, better knowledge management and understanding of roles and value contribution.

“I definitely agree with the one tribe or integrated team approach. The ACC and GC Roundtable are Legally oriented and should be so – in house lawyers are their audience.

IACCM has a broader audience because of the realization that contracts are completely intertwined in the commercial process and all business enterprises. The vast majority of contracting/committing and contracts themselves should be managed by a business system and organization with in-house legal brought in when needed. The balance is often difficult to achieve until the organization as a whole “buys-into” the one team approach and a certain maturity level is reached in the organization. At (company name) we still fight the mindset of some managers that “if it is a contract, it’s legal and I don’t need to read it/be involved ; give it to the lawyers and run away.”

This is in part due to cultural issues unique to my company and in part due to a contracting system that is not fully integrated and not robust enough to really serve the business needs. Once we get alignment between the CM system and business needs, and then roll out better training, we will achieve the one team approach I believe will yield a better commercial enterprise”.

So it would appear we are on the right track – and that IACCM must seek to partner not only with its members, but also with the complementary providers who can together offer a more holistic solution to this increasingly urgent need.

One final point is interesting. The three General Counsels we consulted were all in major multi-national companies, each with revenues exceeding $25 billion. However, they all represented companies headquartered in different regions – one the US, one in Europe and the third in Asia. It truly is a global economy, leading to increasingly common challenges and issues that cut across jurisdictions, cultures and organizational norms.

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