“Our lawyer will have your documents ready in a minute. Once that’s done, you’re officially hired.”
This is arguably the most common, and potentially only, interaction that many people have with legal.
It stands to reason when you realize that numerous employees see legal as a department that only prepares some necessary paperwork. Yet if you ask people about legal’s main function, the vast majority will answer that it’s to protect the company. While true, nowadays legal is more than that: It takes part in financial management, strategic planning, technology implementation, and more.
Failure to fully understand legal processes and the value they bring to your organization may lead to incidentally blocking revenue growth or putting your organization at risk.
How Other Departments See Legal
The reason other departments may not understand the value of legal might lie in the way they see lawyers. If other employees see them only as a unit that prepares contracts and protects the company when it comes to disputes, they may not realize everything that legal does on a daily basis.
This is how many of legal’s colleagues see legal:
- 78% think lawyers are the company’s protectors
- 46% believe they are trusted advisors
- 61% claim lawyers add too much red tape
- 22% feel they create unnecessary obstacles
- 49% state that Legal contributes to an inflexible corporate culture
Based on the above, we can conclude that the legal department receives a high level of trust, yet at the same time, they’re also seen as a roadblock. If other units believe that Legal is a type of back-office function that also slows down processes, they won’t be able to see the real importance of a lawyer’s day-to-day work. However, this can be fixed by understanding legal’s main functions.
Key Legal Team Functions
A modern legal team should not only be a trusted advisor, but also a valued business partner. Lawyers play a big role in reaching business goals. Neglecting the fact they impact business operations could end up blocking the company’s growth.
Here’s a glimpse at the many functions of legal departments:
Protecting the business
There are several ways that legal manages to protect their organization.
Ensuring compliance
Regulations constantly change, which can force internal company requirements to also change. Lawyers should always stay current on new regulations and add necessary changes or amendments to contracts.
Negotiations
Negotiating is the process of discussing the terms of agreement with counterparties. These terms establish the rights, duties, and consent of all parties. Lawyers ensure that your interests are protected by covering all of your company’s bases while reducing monetary, administrative, and compliance risks.
Legal risk management
Lawyers are often involved in commercial decisions. In-house legal counsel must assess and communicate potential risks and legal issues that arise from decisions. This helps organizations make more-informed strategic choices without putting the company in jeopardy.
Courtroom litigation
If a lawsuit is initiated against your company, it’s up to legal to prepare all materials to defend the company and minimize damage.
Data privacy
Data privacy comprises the rules, practices, guidelines, and tools that help organizations establish and maintain privacy requirements. Lawyers are responsible for tracking changes and updating data privacy needs when their company must meet regulatory requirements. If they don’t, non-compliance could trigger fines.
Diversity, equity, and inclusion
DEI strives to ensure companies hire individuals of various backgrounds while taking steps to guarantee they feel welcome. It also attempts to enable support that allows employees to perform to the best of their abilities. At many companies, Legal plays a major role in developing the policy and ensuring that processes and programs are impartial, fair, and equally accessible for all employees.
Preparing documents
Legal teams help business departments produce well-developed contracts that account for a company’s interests while safeguarding it from potential lawsuits. Although some simple contracts like NDAs or DPAs can be delegated to business departments, complex agreements may still need a lawyer’s involvement for reviews, negotiations, and approvals.
Managing cost-efficiency
Risk management partly entails identifying factors that drive costs and reduce profits. That’s why Legal is now expected to proactively initiate cost-reduction proposals, either by eliminating unnecessary expenses or finding opportunities to innovate. Here are some different ways that Legal can affect cost efficiency:
- Limits on outside counsel costs: 76% of in-house legal teams consider this to be the highest priority for cost-efficiency management. Such legal spend can depend on the size or name recognition of the outside law firm or professional, the number of outside counsels you work with, and your relationship with them. By maintaining well-established relationships with a few law firms, it’s easier to renegotiate terms and prices.
- Resource allocation: To optimize outdated processes and streamline operations, legal resources should be allocated wisely and to the fullest. Sometimes this requires hiring legal ops specialists who can create a strategy, develop a technology roadmap, and manage legal projects. The startup cost might be high, but the return pays off in the end.
- Routine work delegation: When Legal standardizes routine and decision-making, it saves time and money. Departments that leverage self-service tools can also reduce the risk of manual errors by not allowing unauthorized changes to pre-approved text. Delegating and automating repetitive work further saves funds for more important endeavors while speeding up sales cycles.
- Legal tech adoption: Self-service and standardized templates are typical starting points for leveraging technology to speed up contracting. Legal tech enables lawyers to automate the entire contract workflow, which results in faster drafting, reviews, real-time collaboration, approval flows, esignatures from anywhere in the world, and much more. Taken together, it boosts the speed of operations, optimizes legal spend, and opens new revenue opportunities.
The nature of Legal’s work is one where if everything’s running smoothly, other departments won’t notice, but if there are bumps in the road, everyone points at Legal. Day in and day out, lawyers work towards protecting the company’s interests while ensuring privacy, efficiency, and equal opportunity.
Communicating Value
The value of the legal department can be explained much easier once other departments realize how Legal influences their day-to-day work. Here are some common company operations that Legal can impact:
- Deal cycles by setting the pace of legal operations (i.e., how fast they prepare or review sales documents and whether they have to prepare documents themselves)
- Effectiveness of fulfilling procurement needs by providing access to templates to quickly create contracts
- Avoidance of shortages or overspending by providing access to contract data
- Company revenue by carrying out effective negotiations
- Competitive advantages by enabling research and development (R&D), as well as product innovation
- Business model, operations, projects, products, services, or expansion plans by explaining regulatory compliance requirements and changes
- Company strategy by being involved in business planning and ensuring that accountable decisions are made at the right level, as well as informing decision-makers about the level of legal risk of decisions
- Company’s spending by assessing risk, managing external counsel, leveraging technology, and controlling costs
- Organizational reputation by ensuring compliance with regulatory requirements, assessing risk, and representing their company in court
For other departments, the ability to fully perform their responsibilities directly depends on the efficiency of the Legal department. Generally, this means how effectively they run the business. This makes it crucial not only to understand the value lawyers bring, but also for communicating it.
Make your contribution measurable
Performance management measures will show your team what you’re doing, what resources your work requires, and what results it generates. This will help measure the contribution of the legal department to overall company performance. The metrics you choose should show your impact, such as the average time to close a deal or the economic value generated by legal.
The next step is to make those measurements visible. This can be done by creating a report with timeframes and highlighting your department’s impact on revenue, operations, organizational efficiency, and possible improvements in the company’s workflows.
Improve communication
Establishing effective communication between legal and other departments is vital. To do that, there are a few things to do:
- Define the channels for communication and prepare a schedule of updates to stick to.
- Make sure to receive and give feedback when communicating. This will help business managers and lawyers better understand each other and the specifics of the work they all do.
- Let your colleagues know how and when they can contact you or other lawyers. When it’s clear who should be contacted regarding particular matters, this will free everyone from unnecessary questions like “Who can help me with this”? or “How can I reach this person?”
Effective communication is more than just an exchange of information. It’s when everyone knows they’ve been heard and understood.
Share legal information and knowledge
Share your knowledge to improve planning, risk management, and operational efficiency. Providing a legal council when it comes to strategic decisions is a great opportunity as you can explain the risks you’re trying to avoid, the value you help generate, or some better ways to achieve desired results. Also when there are some regulatory changes that affect sales operations, you can communicate it to business departments, letting them know you’ve got their back.
Your insights may be more helpful for your colleagues than any information they find elsewhere. Identifying risks and dealing with issues can be made much faster and easier thanks to your experience and insights. In addition, sharing your knowledge is a great way to improve overall interdepartmental collaboration and communication.
Define standard workflows to reduce inefficiency
Lawyers cooperate with other departments on a regular basis. Establishing a clear process will enable you to avoid becoming a roadblock that causes others to want to avoid legal. Technology like CLM systems will allow you to delegate simple legal matters to business units and accelerate approval flows while increasing efficiency and control of contracting.
Be proactive in risk identification
Proactive risk identification means carefully examining a situation or process to determine potential risks, sources of risks, and probabilities and impacts of each risk. Once you find a risk, communicate it to other teams to let them know. If some frequently pop up, preparing a guide for your colleagues will allow them to stay aware of liabilities and strategies for dealing with them.
You can also include lists of risks that any employee can encounter. This might include contract risks (inaccurate descriptions of products or services, broken obligations), compliance risks (failure to meet regulatory requirements or internal organizational policy), and security risks (privacy violations, data breaches).
Knowing risks that may lead to reputational and financial losses also helps demonstrate the value of a lawyer’s work, as well as how Legal protects their organization and each employee in it.
Ways technology can help
Despite being aware of the role lawyers play as company protectors, many business units still consider legal a non-critical function. Consequently, many managers avoid working with lawyers to get the job done faster, which in turn exposes the company to risk.
Still, neither side can be blamed. The culprit is the lack of effective communication between departments and inefficient processes. Technology can help resolve this miscommunication between departments in a few ways:
- Self-service contracting: Modern, sophisticated CLM systems allow lawyers to create pre-approved templates with uniform language. Business teams can use those templates and generate compliant contracts in less than a minute without waiting for anybody. As a result, everyone gets their work done while cutting out unnecessary bureaucracy.
- Improved communication: Business units can request contracts or reviews when necessary via CLM. The request finds the right person, so managers don’t have to puzzle about whom and how they can contact for a particular matter.
- Centralized storage and data analysis tools: A centralized repository serves as a single source of truth for your contracts. By using it, you can always gather information for reports to estimate performance, make better decisions, and identify risks.
Besides, technology can reduce the time spent on contracting by up to 80%.
Wrapping Up
Business and legal teams share a common goal. Both want their organization to succeed. That’s why it?s critical for all teams to work together. But to coordinate their joint efforts, they must understand their respective roles and value.
AXDRAFT CLM can help you enhance communication between departments so that they fulfill their responsibilities efficiently and effectively. Book a demo with our team and we’ll show you how AXDRAFT empowers departments to bring the best possible value to your organization.