Andreas Bong, Managing Partner at Otto Henning GmbH, provides tips on how general counsel can arm themselves for the future and save on costs. The management consultancy has focused on legal departments since 2002 and compiles the Legal Department Report (see page 28) every two years, which provides insight into the organization and strategy of the company lawyers in Germany’s top 150 companies.
How should small teams position themselves in the company to make themselves heard?
The legal department must be anchored in the company’s core processes. International companies also need to create transparency on global events by having lawyers from their subsidiaries report defined incidents to headquarters. This is the only way to minimize and maintain an overview of the company’s risks in the long term, while saving costs at the same time. Since 2005 the trend in larger companies has been towards establishing closer ties between the legal department and the CEO; the current figure is 71 percent of the top 150. Direct access to management is also necessary in small companies because this provides early insight into the corporate strategy, enables proactive, timely advice and greater ability to assert opinions. Unfortunately, this is not always the case.
Not every company has clear guidelines on when to call in the legal department. How can we ensure that the company lawyers are informed of relevant legal issues without being flooded with ad hoc questions to be examined, if possible, by tomorrow?
As head of the legal department, I have to identify my core topics and clients of particular relevance. You have to show up and participate in their regular meetings in order to be able to manage. Key messages can also be communicated when onboarding new employees: How and when are the lawyers to be involved? Which services we can provide, and which ones we can’t.
There are still reservations about involving lawyers because they are seen as naysayers and an obstacle to getting things done. How can lawyers market themselves and their services?
This opinion often results from involving lawyers too late in the game. Lawyers then ask the questions that have not yet been considered, and this jeopardizes speedy processing. We have long argued for a change: company lawyers need to be bold. They must be perceived as proactive consultants with their sleeves rolled up and doors wide open, offering advice applicable to everyday business, who commit themselves and actively provide support on issues. Instead of saying “not possible”, they should be pointing out practical solutions. It makes sense to clarify the economic value that can be created in the company and to communicate relevant successes.
When should company lawyers obtain external advice?
A clear make-or-buy strategy is important. The core services should always be provided internally, i.e. everything that is strategically relevant and complex and is frequently requested by internal clients. Infrequent requests of high strategic relevance and complexity, on the other hand, are more suitable for outsourcing, such as M&A deals. Due to their volatility and international reach, it would not be advisable to do everything internally. A permanent external assignment can be recommended for comparatively simple and constantly recurring topics, as these tasks tend to tie up the highly qualified internal lawyers. Legal process outsourcing is the keyword here.
Where can legal technology help to reduce the workload?
Many of the standard IT tools do not directly help achieve the ambitious goal of reducing the internal or external budget. These tools often only target the support processes within the legal department, of which the client takes little notice. In the future, company lawyers should specifically analyze how the core processes related to services for the client can be digitally optimized. The more standardized the business processes, the higher the chance for a worthwhile IT tool. An example of this would be the use of contract building tools with text building blocks. Specialized departments can use the contract building blocks to draft contracts fairly independently and recognize legal risks with the use a red flag, for example. In the future, there will be more and better offers, such as for confidentiality agreements, development or cooperation contracts, because the software recognizes risk-related wording and combinations. An increasing number of service providers offer the service of constantly adapting contract components to the current legal situation. But most companies, especially smaller ones, are still at the very beginning.
What topics and trends will be a top priority for small legal departments over the next five years? And what actions will be required of the company lawyer?
In addition to the targeted use of legal technology and a clear make-or-buy strategy including global law firm management, company lawyers must continue to standardize, especially with regard to cooperation with lawyers in international subsidiaries. I also see additional savings potential in small teams, for example, related to topics that lawyers have dealt with up to now, but which could be transferred to legal assistants. The problem with strategic decisions is that company lawyers always have their nose to the grindstone and have little time to consider these issues. The head of the legal department should advance these issues and distribute responsibility to many shoulders. Sometimes it may even make sense, in consultation with the management, to temporarily increase the percentage of external contracts awarded in order to save in the long term.
Interview: Franziska Jandl