Profit or Cost Center?
The reason why organizations usually do not have large (legal) departments is simple: they cost money. A legal department performs a support function within the business and does not generate direct revenue.
From around 2005, there has been some debate on transforming legal departments into profit centers, referring to the recovery programs initiated by, inter alia, the legal departments of DuPont, Tyco and Michelin.11 In these programs, legal departments pursued actions against insurers, infringers of their intellectual property rights, suppliers acting in violation of competition law and partners that failed to honor their contractual obligations. These programs sometimes brought in more than the entire legal budget. Exercised with prudence, recovery programs can be a sensible and recommendable initiative. However, exercised too rigidly, recovery programs can harm business relations, for example if dubious claims are also being pursued. Furthermore, some successful programs may have resulted primarily from “deferred legal maintenance”. Finally, not every organization will lend itself to a successful recovery program. Normally, a legal department may save money, but not make money.9