Improving the Efficiency and Effectiveness of the Legal Department
LDs cannot assess their performance without measuring their efficiency and effectiveness in respect of the objectives defined as part of the company strategy. Such efficiency and effectiveness cannot be “absolute”: they depend on several factors, such as (1) the company missions, business(es) and strategy; (2) the company values, and (3) the LD's missions, as these are pre-defined.
Whatever the method used to define such missions, they all have the following elements in common: the LD processes incoming information flows (input) and proposes solutions (output). For example, the decision to operate in a new country is linked to an overall strategic objective, which is impacted by a whole set of input data: the business targets, the political, economic and legal environment, the resources available to implement the project etc. The related outputs may be the legal engineering scheme proposed by the LD (contracts, structures, legal entities), its proposals to avoid or mitigate potential legal/business risks, etc. In order to turn input into output, it is necessary to define the complete list of actions—and associated costs—required to implement the transformation process (this is outlined in Sect. 4 below). By analyzing all of their missions and by dividing them into as many processes and sub-processes as necessary, LDs can define their own value chain and provide answers to several questions:
• What objectives have been achieved based on the output delivered by the LD?
• To what extent do these objectives contribute to value creation (or help avoid value destruction) at the company level?
The answers to these first two questions will make it possible to assess the LD's effectiveness.
• What are the costs incurred to achieve such output?
• To what quality level do these costs correspond?
The answers to these two questions will make it possible to assess the LD's efficiency.
Whenever the LD has identified a clear chain of value showing which resources are used to achieve which results and to enable which value creation (or - non-destruction of value), it is able to identify both its performance (in terms of efficiency and effectiveness) and the legal mission(s) in relation to which it is capable of enabling the most value.
The LD cannot identify the complete value creation process in its own “chain” without including external service providers such as law firms. Consequently, the contribution made by external service providers to value creation has to be properly assessed. Such information is critical for the LD to deploy—or re-deploy—its resources in the most optimized way (staffing, internal and external expertise, budget, etc.).
2.4