Demonstrating the Value

“In God we trust, all others must bring data” is a famous quote attributed to a renowned American statistician, W. E. Deming. In-house counsels commonly believe that they play a key role in terms of value creation, but how many of them can really prove it? KPIs can help LDs to demonstrate the reality of this assertion, as well as how this happens: how in-house counsels—and their external advisors—create value, what kind of value they create and whether such value is created with efficiency/effectiveness.

It is obviously impossible to properly address the value that an LD can enable (or contribute to enable) without referring to a common standard of value at the company level. As a matter of fact, the nature of the value enabled by the LD cannot be “decoupled” from the overall value enabled and/or protected at the company level. It is thus necessary to determine which type of value the company prioritizes, and how the company assesses it.

At a principle level, two value categories can be identified: financial value and strategic value.

(a) Financial value can be expressed through a broad range of financial targets: e.g. economic value generated, return on investment, invested capital return rate, cash-flow generation, proportion of revenue generated by new products or services, etc. In this respect, the LD can seek to show how it contributes to financial value, either directly (e.g. cash retrieved through litigations or dis­pute resolutions, or by (re)negotiating or implementing penalty or delay clauses) or indirectly, for example by describing how it enables the launch and development of new products. It can also be relevant for an LD to show how it helps to avoid or mitigate the destruction of financial value (e.g. through the implementation and management of intellectual property rights, or the implementation of compliance and business ethics programs). This can become an integral part of KPIs.

(b) Strategic value refers to the acquisition, preservation or loss of a competitive advantage in the medium or long term. It can relate to the company's reputa­tion (with respect to the different stakeholders, public authorities, NGOs, etc.), its leadership on the market, its international development, etc. In this regard also, the LD intends to show how it helps enable value creation (or how it avoids value destruction). As an illustration, the LD can assess the impact of training performed by legal staff to avoid non-compliant behaviors within the company. This training can result in a reduction of efforts in terms of investigations and external inspections and therefore mitigate negative press exposure. The LD can also use adjusted property rights and contractual mechanisms to promote innovation and market leadership. The LD can finally build the proper legal argumentation to open a new market or to promote deregulation, etc.

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