Virtually every organisation will spend a great deal of time developing a formal strategy that governs its activities.
It will analyse its markets, its competitors, its operations and production resources, the factors which influence all that it does, and its prospects. It will worry, hugely, about issues over the horizon which may impact it in the future, and will use the strategy as the starting point to determine the structure of the organisation and to decide how it operates on a day-to-day basis.All in-house lawyers know that legal issues are of critical importance to the organisation and that they can impact everything it does. Often, though, other pressures can mean that that knowledge and impact are not formalised into a legal strategy, and the issues they represent do not flow into the organisation’s strategy. This represents a real opportunity for the in-house team, and this article will look at how legal issues can be embedded into the strategic thinking of the organisation.
Strategy v operations
Legal teams will often work hard to operationalise law – to develop a framework of resources and materials which embed legal considerations to be dealt with on a day-to-day level. You can find much more information about operationalisation in the CLL resource Operationalising Law: Part 2. That operationalisation, though, can only be most effective if it is designed and implemented as part of an overall legal strategy.What, why and how?
Legal teams are often formed as a reaction to an external driver such as an increase in legal costs and evolve in response to new pressures. Growth can be exponential, but often the opportunity is not taken to decide – let alone formalise – what the legal team is intended to do, why, and how. The make-or-buy decision about using in-house or external resources can often be a product of the extent or skill-set of the internal team.There can be a lack of clarity over what the legal work lawyers are able – and resourced – to do. Misunderstandings can arise on a whole range of issues, from cost, to charging, and response times. The result can be that the internal team is expected to do the impossible, with pressure to handle more than is feasible or to do work outside the expertise of the team members, with an inevitable impact on team goodwill and wellbeing, and the client organisation feeling unhappy that its needs are not being met and having the impression that the lawyers aren’t doing what is needed.
Developing a legal strategy
There are significant advantages in developing a formal, written, legal strategy for the in-house legal team, however large or small. It offers the chance to brainstorm the team’s purpose, function and structure; to share and discuss it with key colleagues in the organisation – and to enhance the reputation of the legal team by increasing its visibility, and ultimately integrating it into the broader organisation.Your starting point must be to decide why you have a legal function – indeed, whether you need a legal function at all. What are the key legal issues affecting the organisation – now, as legacy issues, and in the future - and what are the key legal risks from the organisation’s current and future strategy.
A detailed fact-finding exercise will be rewarded. Often, organisations – and even their legal teams – do not have a clear and wide-ranging understanding of the issues impacting them. Legal costs can be incurred deep in the organisation and accounted for without coming to the notice of the legal team. Knowledge of legacy issues can be lost through staff changes and corporate restructures. New organisational strategies can be developed without a full understanding of the legal and regulatory implications.
Only when you understand what the legal issues and risks are, where and when they are likely to arise, and what their impacts may be can you determine what the legal strategy should be, so that you can simply answer the question – why does the organisation need lawyers, and what should they do? To start to develop a legal strategy, you may like to use the CLL Framework for an in-house legal strategy – perhaps as a platform for discussion in a workshop with your legal colleagues.
Strategy and structure
Having decided why the organisation needs lawyers, and what they should do, you can start to consider how they should do it. What is the scope of the in-house legal team – what sort of work should it focus on and why, and what happens to other work? What is the split of work done by the in-house team, by external lawyers, and by other alternative legal service providers? How will you ensure that the organisation has bought into that crucial ‘make-or-buy’ decision, and how will you keep it under review?
This process presents a real opportunity to socialise the role of the legal function in the organisation. You can consult not only with your legal team, but with key users of legal services. You have a real opportunity to share what the team can do, how it can add value, and how it can impact the organisation positively. You can also use the process to gain a greater understanding of what the organisation does, and how it operates, and to build formal and informal links across the organisation. This can be particularly important if you have recently joined the organisation, but it is a powerful tool even for established teams, as people join, leave and take on new roles all the time, and your strategic allies may have changed over time.
It is also valuable to ask yourself the question whether the Chief Executive knows what you do, why, and what is expected. If you think they don’t, the development of a legal structure gives an ideal opportunity to change that.
In developing a legal strategy, it is also important to think about the structure of the legal team – where does it report, where do members sit and what is their reporting line? How are conflicts managed, and what are the options? The senior-most lawyer may, or may not, also have other responsibilities, such as Company Secretary. There may not be a single ‘right’ answer, but there are some drivers which are worth considering in deciding the right structure:
- Independence. A lawyer has overriding duties as an officer of the Court, and the structure must recognise that explicitly. The use of a formal legal strategy can document that so it is understood from the outset.
- Integration. While some may argue that a legal team is created to save money, if real value is to be obtained, it must go well beyond that and be integrated into the organisation. The lawyers must know what is going on, and should not simply receive instructions second-hand. In a team of any scale, the senior-most lawyer should be at the board table, and divisional lawyers should be part of the management team of the operation which they support. A business partner structure can also be adopted to ensure that more junior lawyers are matched to the operations throughout the organisation.
- Conflicts of interest. It should be recognised explicitly that conflicts of interest may arise – and that the obligation of the lawyer may be such that they cannot do what the organisation – or someone in the management team – may think is the right answer. Structurally, a route needs to be created for those challenges to be raised, aired and recognised.
What else can your strategy do?
The formalisation of a Legal Strategy also offers a real opportunity to consider, agree and settle several issues which can become opaque or lead to misunderstandings in an organisation, and is a real opportunity to record how legal can contribute positively to the organisation. Just some of these factors are:
- External lawyers. Often, custom and practice can develop in an organisation about the instruction of external lawyers. People instruct firms they are used to working with. Legal Panels have a raft of exceptions where people go ‘off-panel’ for various reasons. The arrangements for instructing and agreeing firms are lost in the mists of time, and external firms experience confusion about whether they are reporting to the in-house lawyers or non-legal colleagues. The Legal Strategy can be used to make the arrangements clear – and document who instructs and who pays.
- Paying for legal. Is the legal team a cost centre, or should it generate revenue for the organisation through litigation, intellectual property protection or other work? The Legal Strategy can record who pays for legal, and how; how external legal work is budgeted and paid for, and what happens if there is a spike of work needed over and above that which is budgeted. Legal costs can often be the subject of misunderstandings between legal teams and their internal clients, and setting out the agreed basis can be a real help.
- People. Legal teams may often feel they are under-resourced, and can find it difficult to introduce recruitment and development policies that allow them to compete with external employers. Professional staff expect increasing remuneration as their post-qualification expertise builds, while corporate structures can find it difficult to accommodate their requests. Explicit consideration of the issue in the Strategy in conjunction with the HR team can be really helpful. Similarly, the requirement to accommodate appropriate continuing professional development – and its costs – can be covered.
- Standards, measurement and reporting. Most organisations measure almost every aspect of their operation, and it can be advantageous for the legal team to mirror those arrangements by adopting formal standards such as Lexcel or ISO 9001, defining agreed service delivery standards, and using them as a basis for transparent reporting. You can find more ideas about measurement and reporting in How to measure the performance of an in-house team.
- How the legal team is supported – for example by legal operations resources, technology and IT. Increasingly, legal teams need specialist legal software, and dealing with the position openly in the Legal Strategy can mean any debate about the cost, and specialist resource needed to implement it, can be brought out early.
- Legal Risk. The Legal Strategy can be used to identify how legal risks are captured, reviewed, assessed and recorded – whether in a separate legal risk register, or as part of the organisation’s broader risk planning. It can set out the process for gathering and considering risks in collaboration with other colleagues in the organisation, and ensuring they are documented in a way that fits with the organisation’s broader risk strategy.
- Looking forward. Finally, the Legal Strategy can look forward, ensuring that legal plays a full part in the organisation’s planning and strategy for the future. It can consider how legal horizon-gazing work is carried out, when, and how, and can be explicit about whether and how legal is expected to be involved in lobbying work about potential legislative or regulatory change.
Using your legal strategy
The purpose of a formal Legal Strategy is not just to document what the legal team does, how, and why, and who pays for it – valuable as that is. As noted, developing and reviewing the Legal Strategy gives a real opportunity for the legal team to socialise what the team does, and to explore the real value of its work, but when in place, it gives a key basis for the legal team to integrate their work with the organisation, to report what they do, and to open up discussions on how legal issues are handled.
Just some of the opportunities you might like to take based on the Legal Strategy include:
- Visits to in-house clients to discuss issues identified by the strategy. You can use it as an opportunity to discuss performance, future business plans, how the teams work together with legal. These visits can also allow any concerns to be identified and ironed out.
- Joint development arrangements between legal and the organisation, perhaps including allowing legal teams to access senior leadership programmes to ensure that as leaders prepare for new roles, they understand the full gamut of legal and regulatory issues of which they should be aware.
- Risk management workshops. The Legal Strategy can embed risk management workshops to identify and manage legal risks.
- Knowledge sharing. The Legal Strategy can provide a basis for knowledge sharing into the organisation, whether of legal issues, operational challenges or standardised processes and documentation, allowing legal resources to be used more efficiently and effectively.
- Regulatory planning and compliance. A regular dialogue can be established based on the Strategy’s exposition of what the legal team does.
- Using organisational resources. Often, the legal team can use non-legal resources in the organisation to advantage – and having that documented can be helpful so it is fully understood. You can find more ideas on this subject in the CLL Resource Using the Organisation’s Resources.
- Telling the organisation what you do. You can use the Legal Strategy as a platform for exposing the role and responsibilities of the legal team, through a formal Legal Exposure Plan which maps the relationships you have across the organisation, how you engage with the organisation, and both make colleagues aware of your work, successes and challenges, and garner information from them which will allow you better to manage legal risk. You can find more ideas in the CLL Resource Creating a Legal Exposure Plan for your in-house team.
Final thoughts
Although the development of a formal Legal Strategy might initially seem daunting, it can be a worthwhile task, allowing you to formalise your roles and relationships, create a basis for network and understanding across the organisation, and embed the legal team in a way that allows your true value to be achieved and recognised.
Some further reading
CLL Resources:
Framework for an in-house legal strategy
The Lawyer at the Table - Part 1
How to measure the performance of an in-house team
Using the organisation’s resources Part 1 - helping the organisation to help itself
Creating a Legal Exposure Plan for your in-house team
Other Resources:
From complexity to simplicity: unleash your organization’s potential Collinson and Jay, Palgrave MacMillan 2012
In-house Lawyers’ Ethics Moorhead, Vaughan and Godinho, Hart Publishing 2019
In-house Lawyers’ Toolkit Tapp and Page, Law Society Publishing – chapter 10, Demonstrating Value from the In-House Team