From Reactive Entity to Consulted Partner

Posted: March 2, 2022

KEY TAKEAWAYS

  • When Legal functions as a reactive entity (which is presented business decisions after they have been made), the department’s due diligence leads to pushback and rework for the decision makers.
  • Rework is a cardinal sin in organizations today; the demand for change and speed does not allow for wasted time and effort, and affects not just the organization, but partners and vendors, as well.
  • To minimize rework, Legal must be moved to the decision-making table, where they can consider the legalities proactively, resulting in better decisions, streamlined processes, and reduced throwaway effort.
  • Transparency (why you are doing things, and how those things are done) must exist across the organization – The Legal department must be transparent, and the decision-making process must be made transparent to Legal, as well.

Legal as a Reactive Entity

The Legal Department has historically been a Black Box – a place where information enters, and it is unclear what happens to it before exiting the other the side. When a new business decision lands at Legal’s doorstep, it enters the Black Box and is frequently met with pushback. This lack of transparency (how things are done, and why they are done) presents a problem to the organization, as it has led to the misperception of Legal as a roadblock.

The pushback is a result of Legal asking questions about legal implications which have not been considered until this point. Even if these questions lead to a positive result, it takes time to get there. If these questions and considerations lead to any changes, then things begin to move in reverse. Either way, Legal being informed after the decision is made results in work to accommodate that decision, and these decisions come from every department across the organization.

Issues raised by the Legal Department frequently result in rework for the decision makers, who must go back to the drawing board. This rework is a cardinal sin in organizations; the demand for change and speed in business today does not allow for wasted time, and not only does rework affect your organization’s time and effort, but it also affects any partners or vendors who are involved in the decision. The threat of pushback from Legal represents a threat to your reputation and partnerships, as well. As a result of this pushback, Legal becomes scapegoated, but this issue is not the department’s fault. This is a collaboration issue.

The solution is to move Legal up in the decision-making process. By shifting Legal from a reactive entity (which is presented business decisions after they have been made), to a consulted partner at the decision-making table, Legal is able to ask questions which would otherwise not be considered until much later in the process. Instead of being expected to accommodate new decisions, Legal becomes a proactive part of the decision-making team.

Legal’s Role at the Decision-Making Table

When closing a deal, the business typically doesn’t care about the legal details – it cares about dollars, cents, and value. The legal implications are an aside to be resolved afterwards. But this way of thinking does not work; legal implications are complicated, and there are no one-size-fits-all solutions to variable decisions. The legal team should not be expected to bend the legal solutions to the decision; instead, they should be expected to bend the decision to the legalities. This can only be accomplished when Legal is at the decision-making table.

By shifting Legal from a reactive entity to a consulted partner, the roadblock misperception is resolved. No more net-new decisions arrive at the Legal doorstep, and thus throw-away effort is minimized. The situation wherein a deal is made, agreed upon, and then legal due diligence prevents the deal from moving forward (ie. conflict of interest) becomes a thing of the past. Legal doesn’t have to push the decision back because they do the pushing proactively.

Not only does having Legal represented at the decision-making table eliminate the roadblock, but it also streamlines the process. Legal due diligence comes as a precursor, not a response. Operational efficiency is improved, turnaround time is reduced, the speed of decision making is increased, and the quality of those decisions are enhanced (“Yes, go ahead” versus “Yes, go ahead, but these are the things to keep in mind going forward”). Having Legal as a consulted partner mitigates organizational risk, and decisions move forward with a more thorough plan (more on this in a coming article!)

Transparency to Drive Conversation

Once Legal has moved from a reactive entity to a consulted partner, transparency (why you are doing things and how those things are done) will be critical to finding success. All parties involved must understand why Legal has become a part of the conversation, and they must understand how Legal is expected to achieve the desired outcomes of mitigating rework and streamlining decisions.

This transition in roles requires collaboration between Legal, other departments, and executives. For this to function correctly, every role must be understood. We have discussed how Legal must become transparent, but from the Legal perspective, decision-making has also been opaque. This must become transparent as well.

In our next article, we will dive deeper into Legal’s role at the decision-making table, and discuss how we can achieve transparency through collaboration with the C-Suite, across the other departments, and within the Legal department itself. Until then, be sure to check out our Blog for more Legal Operations discussions!

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