Blog - Management speak

Business or law is not Hobson's choice

The challenge for external advisors and in house teams is, like all other areas of any business, to demonstrate value, says David Holme, founder and CEO of Exigent.

Tashatuvango

At a recent GC conference, a question was debated that revolved around legal team KPIs. This caused some considerable consternation about how to define them and some took the view it was an impossible task. I can’t help but disagree. The business rightly sees the legal function as part of the end-to-end process of ‘doing business’ successfully. The same principles apply in a macro sense to all the functions in the chain of product or service delivery. 

Improving contract delivery 

For example, we’ve worked with a large multinational financial services company to improve their delivery processes of thousands of contracts per annum, as there was frustration across the business about the speed of delivery. They valued speed just as much as accuracy. The departments initial response was to request more resources. However, the view of the Board was that the team must work under the same constraints as the rest of the business to deliver value for the right cost. 

Not all work units are equal

With our help, the department then looked at the issue a different way. The answer was to review the value of the individual work units or contracts in this case and prioritise them according to risk and opportunity. Because not all work units are equal, by analysing the flow of work, a value could be given to each area, the workflow could be made smoother and those contracts that were actually mission critical could be delivered. It also became clear that the other parts of the delivery chain valued speed of delivery and assumed quality of product was a given. It was found that even applying a simple metric to the work units showed how value was being enhanced. This in turn made a measurable value for contract turnaround, which became one of the department's KPIs. 

Extracting value

To state the obvious, the legal function touches, negotiates and stores vast amounts of valuable information. Every significant agreement touches this team in some way. But extracting the value is rarely an area of focus. We have seen portfolios of one contract type total nearly $1bn that was not measured, aggregated or compared. Of course, there is value in getting contracts right to reduce dispute cost, but spending (in some cases) 50 to 60 per cent of the team’s time negotiating them and another 10 per cent enforcing those very obligations that are painstakingly negotiated is, in business terms, putting too much in the 'Investment' and not enough in the 'Return' in ROI. Demonstrating value by systemising obligation enforcement is potentially a significant contribution to the bottom line.

Pioneering law firms

Some pioneering law firms are already improving their ROI on contracts: Morgan Lewis in the USA, for example, has recently partnered with Exigent to offer contract management to their clients. They will use our technology and a mix of resources both on and offshore to reduce risk and simplify the contract management life cycle. It’s a truly ground breaking initiative that allows corporates to take full advantage of technology, process and legal expertise to manage large portfolios of contracts. 

Facts and numbers count

In summary, as Carly Fiorina said: 'That's the thing about business. Facts and numbers and results actually count. It's not just about words as it is in politics.' In this data driven world, businesses demand value from all departments. In business you can’t define value without numbers or measurement. Analytical tools and looking at the issue differently show us that most things can now be measured and objectified.

Posted by:

David
Holme

29 October 2015

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