Is your department contributing to the bottom line?

Is your department contributing to the bottom line?
Brian Hilbers, left, and David Gore offer up ways to have legal positively impact the bottom line. Photo: Jennifer Brown
Aligning the goals of the business with the goals of a legal department is often discussed as an ideal model but how many in-house counsel actually achieve that while at the same time fighting against the constant tide of work flowing into their departments?
“You have to ask, ‘What is the value proposition of the legal organization?” says Brian Hilbers, assistant general counsel at Bruce Power Inc.’s law division. “We need to provide business-oriented advice that will positively impact the bottom line of the organization.”

Hilbers was speaking as part of a panel called “Workloads and How to Generate 20 per cent Capacity in the Legal Department,” part of the Canadian Corporate Counsel Association’s 2012 national spring conference held in Montreal last week.

“This is about more than reacting to the demands of running the legal emergency room,” says Richard Stock, a partner with Catalyst Consulting and moderator of the panel.

Hilbers says there was concern initially from those at Bruce Power who didn’t see it as the legal department’s role to participate in activity that directly addressed the company’s bottom line.

“You are providing risk-adjusted advice,” says Hilbers. “You say, ‘The risk is ‘Y’ but if it was me I would go ahead.’”

Bruce Power provides incentives to its internal counsel and strategically measures the work they do.

“We look at the business plan of the company and key clients internally and attribute time to the matters of strategic interest to the company. We spend 20 per cent of our time on strategic work,” says Hilbers.

One of the issues Bruce Power found itself confronted with was also aligning external counsel with that strategy.

“It can be more difficult. You start with the value proposition and your mission and vision are derived from that,” he says. “The mission statement is worth doing.”

Making sure legal departments know what their goals are beyond getting the day-to-day job done is critical to mining additional value out of the department, says David Gore, vice president and legal counsel with Loblaw Companies Ltd., who also spoke on the panel.

“It’s important to engage in really robust goal setting at the end of the year. You need to show you are more than a service provider but a proactive group within the company. And it should be strategic goal setting above and beyond your regular job,” says Gore, adding that in-house counsel need to “join in the risk-taking debate.”

“The most successful legal departments have lawyers who engage in the business,” he says.

The first step, Gore notes, is to start with the numbers and look at the revenue implications and the cost.

Hilbers says another good first step is to look at historical information about what kind of work is being done on a regular basis in the legal department to better know how the budget is being spent, where efficiencies can be found, and what the average spend will be per year.

“It’s all about the data. You need to collect the data and determine what kind of work is done by external counsel. And although we don’t docket, we try and get a handle internally on what time is being spent on what by top legal counsel. We combine that with what external counsel is doing and see where the collective time is being spent,” says Hilbers, noting a simple software tool called Excel Solver aids in the task.

After the data is collected, Hilbers advises looking at it over a five-year period to see where the majority of work is being done, such as standard matters like intellectual property, tax, etc.

“You start to get a feel for both the external and internal counsel time that will be needed. We have a pretty good feeling of how much time we will spend on external and internal over the course of a number of years,” he says.

“The biggest hurdle is getting over the mindset of not being in reactive mode,” says Gore.

Over the last five years the Loblaw-Weston legal department has grown 200 per cent and the external spend has “come down steadily and gradually.”

In terms of unplanned spending, if something unexpected comes up the department tells the business units they must pay for it.

“They appreciate you are putting everything into the budgeting process,” says Gore.

So how hard is it to generate 20-per-cent capacity when the biggest challenges most internal legal departments have is managing workflow and the unpredictability and immediacy of matters in-house?

One way is to try to control who can call legal on matters, but Gore says it’s also important a legal department always be perceived as approachable.

“I would rather control things on the back end. It’s important a legal department is perceived as friendly,” he says.

Another way to add value and control workflow is to organize a department along specialty or client relationship.

“At Loblaw we’ve moved towards the specialty approach such as IP and employment, but it’s also important to ensure some lawyers are perceived as people who will do any areas if needed,” says Gore.

But he notes that you can’t have the same lawyers doing all the grunt work day after day. Interesting projects should be divided up and when it comes to worrying about allocation of workload, check with the client about the work that lawyer is doing for them.

Stock asked the panellists if they are looking at implementing service level agreements with their business units.

“Most people I talk to don’t want to formalize relationships with their business departments,” he says.

Gore says: “We are experiencing pressure to commit to SLAs. When it comes to high-volume areas of work such as commercial contracts there needs to be an agreement of some kind formalized. It’s critical otherwise it can be a free-for-all in those high-volume areas. It shows your company that you are trying to drive efficiency in your department.”

The panel also discussed the move by some large legal departments to embrace the Lean Six Sigma approach to streamline and determine where they can cut inefficiencies.

“It seems quite daunting but what you’re really looking at is the elimination of waste,” says Hilbers. “Basically you need to ask yourself, ‘Is what I’m doing adding to the bottom line profitability of the company? If not, am I supporting something adding to the bottom line profitability? If not, is this something we need to be doing more efficiently?”

Gore says obvious areas to save time and money is in work such as standard, well-developed vendor contracts that can be moved to non-legal personnel. Also, completing government forms should not be the work of the legal department.

“Non-lawyers can do 80 to 85 per cent of that work but it means setting up robust processes.”

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