Dynamics of value-add counseling and the corporate legal function
By Dr. Klaus-Peter Weber,
Within a globalized framework of increasingly demanding advisory tasks, the roles and responsibilities of corporate legal departments have changed massively in recent years. This evolution is expected to continue. Hence, any state-of-the-art legal function is not only subject to such developments, but should actually be a dynamic driver of them and shape the elements that measure corporate success.
The new game – advisory roles redefined
While there is increasing consensus on the ingredients of successful legal inhouse counseling in the global corporate environment (these being professionally first-class, focused yet holistic, businesssavvy, adequately scoped and timed to name just a few), the challenges faced by corporate legal functions and their general counsel are manifold. The good old days when quietly avoiding or at least minimizing risk on a case-by-case basis while patiently explaining the intricacies of applicable legal concepts to internal clients was good enough are long gone. Today, active legal risk management has become a permanent and truly quotidian activity. However, it constitutes only one of the most basic components of the legal advisory function’s work. Sharing the overall responsibility for an enterprise, as well as for the corporate and governance structures which the group chooses to give itself, can safely be described as one of the most prominent elements of any contemporary successful and impactful legal function. Based on redefining the corporate advisory role in this way, actively supporting executive responsibilities, being part of the overall value creation chain, and providing regular contributions to corporate success that are easily discernible by the rest of the organization, has become indispensable for any effective legal department.
On your marks – positioning the legal function in the corporate value chain
The business of business is business. This venerable adage could not be more true for the contemporary legal function: The business of Legal is also (and predominantly) business! While this may sound like a matter of course, it is often not. In today’s globalized and fast-moving business environment, all corporate functions are mercilessly submitted to the usual set of corporate performance measurement criteria ( just like any numbers-driven business unit) and need to define and continuously demonstrate their contribution to the overall business purpose: creating and safeguarding value. The function’s position within the corporate value chain and the availability of internal and external resources will more often than not be directly linked to such contribution. >> Legal departments have evolved into gatekeepers and enablers of sustainable corporate development and overall business success << For an advisory function that shoulders responsibility of deciding on potential showstoppers for almost every corporate endeavor, it is all the more important to be able to regularly and cross-functionally contribute to the overall business success and sustainable development of the organization. To put it bluntly: Senior executives of any business division, and even more so corporate top management, need to be able to perceive, understand and value the contributions of the legal advisory function at all times. It is only through this deepened mutual understanding of joint and holistic corporate responsibility that the general counsel becomes an integral part of any executive board and earns his or her permanent seat in top-level corporate-management and decision-making bodies.
The daily race – watch my d/time!
Managing constraints on legal resources and mastering the omnipresent morefor-less dilemma are permanent activities for any corporate legal function. From a pure business perspective, value-add legal counseling is easy to define: provide exactly what is needed, where it is needed, when it is needed and at the best-available cost! While keeping an eye on cost efficiencies and strictly monitoring outside advisors’ fees are standard elements of in-house legal management, the time pressures on establishing sound advisory relations and meaningful exchange with business partners have increased significantly. This is due to a whole panoply of reasons: soaring workloads within business divisions, growing need for global alignment on all types of business processes, fast-paced readjustment of business goals due to market variations and overall shortened corporate decisionmaking life cycles, to name just a few. Consequently, making the best use of an internal client’s time has become increasingly important for successful in-house counseling. On the formal side, this involves accurately generating and processing all readily available information in order to be professionally well prepared to provide legal or strategic advice. Yet, on the personal side, it requires timely establishment of trusted advisory relationships: The true ratio for a business goal, adequate levels of advisory input, acceptable degrees of risk and overall entrepreneurial direction can be quickly and efficiently aligned only when well-functioning individual relationships are at work. From the perspective of an outside law firm, understanding the elements of this daily race can sometimes be a challenge. However, such knowledge about an organization and the interplay among its players is essential to support valueadd counseling by the legal department as well as to enabling optimal internal communication and appropriate risk management. Knowing when to speed up and help business change gears and when to slam on the brakes in the middle of the road and go for an analytical deep dive is key—for the corporate legal function as much as for any outside advisor!
Keeping up the pace – change is a constant, not an issue
Any modern legal department is bound to spend considerable amounts of time, management energy and financial resources on adjusting to the advisory needs of their business partners. While the corporate business environment is constantly changing, the legal function cannot afford to stay behind in splendid isolation. Rather, it needs to keep and often even set the pace, or risk losing ground, impact, acumen and eventually its co-leading management role as advisor for the organization at large. Among the typical objectives of a modern corporate legal function, there are normally only a few strictly legal targets: A contemporary annual goal-setting process first of all encompasses securing strict alignment with and feeding significant advisory activities into the current business goals of the organization. Furthermore, it includes the promulgation of governance and necessary compliance objectives. Finally, it permanently refines those core legal functional goals—including providing regular trainings, enhancing contract management systems and developing tools for efficient communication on important legal advisory topics—in order to provide continuously optimized services to internal clients and to add value to the organization. Staying on top of sprawling national and international regulatory developments, playing an instrumental role in paving the way for internal clients’ success and implementing best legal-risk-management practices while at the same time keeping a sharp eye on alignment with overall group strategy as well as on compliance with regulatory and governance requirements are no small objectives for the legal function to achieve. The rewards, however, can be tremendous and have helped modern legal departments to step out of their traditionally static roles while securing legally sound business decisions and becoming pivotal players for shaping their corporate organizations. The reality of these dynamics also contains an important message to the outside legal advisory community: Change is a systemic constant in the in-house legal context and needs to be adequately reflected by outside legal advice. Even the most proactive and well-informed outside counsel cannot overestimate the speed and impact with which such constant readjustment is taking place. In general, and in order to help pave the way for lasting business success, “embrace change” has become the mindset required to master and, not least, enjoy the legal advisory ride!
The road ahead – mastering the challenges
Corporate legal functions and their general counsel, particularly those embedded in large international or global matrix organizations, are operating and advising in a constantly and rapidly changing multipolar business periphery. Thus, current advisory in-house roles need to cater to a fast-paced, dynamic and sometimes unforgiving corporate environment, while at the same time preventing unwanted exposure and providing constructive challenge to the intertwined framework of management responsibilities, governance structures and corporate strategies. Legal departments can only efficiently master these challenges if they clearly define their position in the corporate value-creation chain and visibly and effectively add value. In this dynamic environment, a very high degree of versatility and adaptability on the part of the corporate legal function is indispensable. As a consequence, legal departments have evolved into gatekeepers and at the same time enablers of sustainable corporate development and overall business success. The rules of the race have changed along that transformational route and the challenges are manifold, but so are the opportunities!