Conclusion
If we were to run legal as a business, we wouldn't just concentrate on cost. Managing cost is an important part of business but it must be managed in conjunction with realizing returns for the business.
We need to focus on delivering legal value.Therefore instead of calling this cost, call it spend. Look at how that spend is invested in terms of the true value it delivers to the business: does it assist the business to secure that money comes in, or does it protect the business against needlessly allowing money to flow out?
Decide where to invest to drive maximum value and use this as your business case to ensure that you have the funds necessary to invest to drive further value in the future.
Don't be a cynic. Know the value of everything.
Liquid Legal Context
By Dr. Dierk Schindler, Dr. Roger Strathausen, Kai Jacob
Meents and Allen challenge the very common and inhibiting fact that legal departments are mainly managed with an overemphasis on the costdimension. They conclude that if everything is viewed only through the “cost lens” then effectiveness is often overlooked—and “value” not understood. If cost is the perception and the center of the metrics we offer, we should not be surprised that we fuel the prejudice that lawyers need supervision when spending the company's money.
Even beyond that, as long as hourly rates, lawyers per billion of revenue etc. are the focus of C-level debates, any innovation offered will be viewed mainly in terms of how it can reduce cost—rather than in the context of the value it can provide to the department and the business at large. Meents and Allen point out the paradox in which corporate legal functions find themselves: ever increasing cost pressure while regulation explodes and compliance with new laws becomes ever more complex—and non-compliance ever more costly.
In order to break the vicious circle, the authors offer a change of perspective, based on the question: why do companies buy law? It is all about securing value, either by preventing value leakage from or by securing value creation for the company. The call to action is to cease stopping at legal cost—but rather call it legal spend and answer question if it was a reasonable investment into securing value for the company and if it was worth it. This directly links into the push towards value-based KPI's and performance management that Pauleau, Roquilly and Collard have established, as well as Timmer's concept on managing the legal function.
