How can Legal add value to Business?
"What's measured, improves."
- Peter Drucker
In any modern-day business, the legal function serves a pivotal role and results in substantial value generation. Whilst departments such as sales, marketing, and research and development have certain metrics in place to determine their impact on the revenue stream, the legal department, a significant cog in the business machinery, often faces a dearth of such clear mechanisms. It is, therefore, critical for organisations to identify or create specific metrics to assess the value added by the legal function.
For this, a strategic approach must be adopted and sustainable processes put into place. These strategies and processes must be in line with the vision of the organisation and its lifecycle stage. As a business grows in scale, the metrics it deploys to measure the value added by the legal function must also evolve, as should the associated strategies.
The absence of quantifiable metrics for the business-essential legal department is a structural lacuna and a major bottleneck for the efficiency of the department and its position in the organisational order of priority.
If the legal function can establish clear metrics to measure the value it is bringing to the table, it can bolster its standing as a prominent business vertical. Akin to most other business verticals, the legal function must adopt a customer-first outlook and think holistically like a business as opposed to a department operating in a silo.
There are various business metrics that can be utilised to ascertain the contribution of legal operations to revenue, such as:
1. Customer Acquisition
Since the process of contracting usually constitutes a direct link between an organisation and its acquired customers, the number of new contracts and the associated revenue, actual and potential alike, can be used to determine the value added by the legal function. This number can also be compared with previous periods to establish patterns of periodic growth.
2. Skill Assessment and Upskilling
Another key contributor to the revenue stream is the skill sets of the workforce. With the data at its disposal, the legal department can assess the existing skill sets of an organisation's human resources and drive the development of upskilling strategies.
3. Customer Focus
By focusing on customer-centricity, the legal function can transition from a conventionally rigid and complex way of operating to a more interactive and customer-friendly approach, leading to a positive impact on revenue.
Although the value added to a business by the legal function is not as tangible as that of other functions, it can use the following strategies to relay said value addition.
The legal function can directly build value for a business in its role as a consultant and strategist. With an in-depth understanding of organisational operations and goals, the department can play a key role in strategy formulation and course correction.
2. Risk Management and Mitigation
By assessing existing risks and anticipating potential risks, the legal function can help a business in comprehensive risk management and mitigation. It can also drive employee training on critical subjects such as compliance.
3. Legal Opinion and Feedback
One of the key ways the legal function can add value to a business is by offering insights on business decisions, market events and disruptions, and prospective shifts in the business ecosystem. This can help an organisation stay ahead of the curve and plan efficiently.
4. Negotiation Support
The legal function can help a business attain substantial value by lending support in the negotiating and contracting processes. A skilled and experienced legal team can also be of immense value in ensuring optimal compliance.
5. Resource Assistance
Not only is the legal function one of the key verticals of a business, but it is also pivotal from the perspective of data sharing with other verticals along with important insights. The legal operations vertical can, thus, drive higher overall efficiency in an organisation by serving as a resourceful resource.
In an age where digitalisation is a prominent facet of an ever-evolving business environment, the legal function of any organisation must align its operations to fit the model. No longer can reliance on skills and experience alone suffice for legal teams; they must adopt a proactive approach to understand and fulfil the organisational goals, the key amongst which is customer satisfaction.
One of the ways through which the legal function can support an organisation constantly grappling with disruptions is by restructuring itself into a department driven by data and powered by potential. Instead of taking stock and responding in the wake of any major event, the legal function must anticipate and plan in advance to help a business sail smoothly through the roughest of storms. This entails collaborations with other departments and a proactive problem-solving approach.
It is no secret that data is one of the key differentiators between successful businesses and their competitors. By leveraging the power of data analytics, the legal function can drive substantial enterprise value addition. As opposed to instinct-driven projections and strategies, data-driven patterns, plans, and projections utilise the knowledge of what was and what is to chart an efficient course for what can be.
The application of data analytics can empower the legal function and enable it to serve the organisation in various ways, for instance:
Drafting of accurate contracts
Identification of pivotal patterns
Anticipation of disruptions
Forecasting of demand
Mitigation of risk/s, etc.
It is not uncommon for the identity of the legal function to be pigeonholed to a cost centre. With the evolution of business, however, all of its departments must reinvent their identities, and the legal operations department is no exception to this.
The only way the legal function can add more value to a 21-st century business is by realigning itself to fit the requirements of a digitally driven business environment.
The focus of the legal department must shift from cost-centricity to value generation. As such, it should prioritise:
Seamless collaborations with other departments
Streamlined data sharing
With the vast reservoirs of intellect, skill, and experience at its disposal, the legal function can easily reinvent itself to be identified as a value adder and enabler for business.
The legal function carries immense potential to contribute to a business in a myriad of ways. Not only can it add more value to an organisation, but it can also ensure the measurement of said value through specific metrics.
Should you wish to assess the value added by your organisation's legal function, reach out to us now. As one of India's leading consulting firms, we can assist in the transition of your legal department from a silo to a holistic unit.