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The In-house Lawyer: Enabler or Impediment?

January 24, 2014

In my blog yesterday, I suggested that the owner of contracting in any business must be prepared to take accountability for the quality and effectiveness of the overall process. That means acquiring an understanding of the impact that contracting has on business performance and optimizing the balance of multiple stakeholder views to ensure that it is driving the best possible results.

This means, among other things, an appreciation of the market and bottom-line effect of the way contracts are structured, negotiated and managed.

Several in-house lawyers responded to my blog, suggesting that it is not reasonable to expect lawyers to take on such a broad role – a point on which I neither agree nor disagree. This is not about what is reasonable, it is about what is necessary. Some lawyers are anxious to develop their business role and contribution – contracting represents perhaps their biggest opportunity to show bottom-line impact. But not all of them want to do this; they prefer their more traditional advisory role. Either position, in my opinion, is easily defended. The one that I do not find defensible is when in-house teams reject the wider role that contracting demands, but also stand in the way of others performing it. This latter group takes the position that contract terms are themselves risky and that no one outside the law department has (or could ever have) the competence to make sound judgment on them. They therefore either mandate standard terms or they insist on situational review and approval. Either way, they stand in the path of both efficient and effective contract management.

I have seen some great examples of legal groups showing initiative and leadership in overseeing the contracting process and being able to explain the business value they have delivered. I observe many others who lack the courage to let go of control and the imagination to see how they could empower others to make better decisions. The irony is that these controllers are creating risk for their business, because their lack of holistic understanding generally results in higher frequency of downstream claims and disputes and inferior economic performance from their contracts. In fact, early IACCM research suggests that these ‘business impediment teams’ may be responsible for around 30% higher levels of claims than the average and a negative impact of up to 5% on profit margin. That is a big price to pay for little or no demonstrable benefit.

This research data is something I will expand upon next week.

  1. wade blazengame permalink

    I think legal departments, especially those in large public companies, provide their contracts teams with sufficient latitude to accommodate front-line personnel. Maybe things like waiving non-competes or right to hire in standard agreements should be within the powers of the contract dept and sales teams. But matters touching on indemnity and liability should be areas where legal departments continue to exercise a bit of oversight; overall, the other aspects of agreements are typically left to the ops divisions to deal with. So even the standard agreement you describe has some in-built flexibility.

  2. B.R.Srikanth permalink

    It is a tough question. Are lawyers’ experience domain capable of assessing probabilities of risks occuring on particular clauses and deciding to accept or insist on it? I have examples of them vetoing and the higher ups in larger organisations who come from Propsoals or Operations are unable to do anything about it – even leading to situations of not bidding for a proposal at all. Presumably, if they are co-opted onto a Business Development Dept or Subcontracting Dept or Operations, it may be different.

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