Showing the Value of the Legal Department

If there is one question in-house lawyers ask me the most, it's this: How do I show the value of the legal department? Boy, do I feel your pain. Having sat in the general counsel chair several times, if there is anything more elusive than the answer to this particular question, I'd like to know what it is. Sasquatch? The meaning of life? Why people eat New York-style pizza? These dazzling riddles are all child's play next to the Mount Everest of enigma presented by the topic of today's post. As I looked back through a list of my prior blog posts, I realize I have touched on this topic in several ways. You should read these three as they contain lots of details integral to the discussion below:

• How to Market the Legal Department to the Business
• How to Make Your In-House Clients Love You (and the Legal Department)
• Ten KPIs all Legal Departments Should Track.

Still, I realize that I have not really tied everything together and answered the question people want answered. Sorry about that. But, today is the day I correct that oversight. This edition of "Ten Things" will discuss how best to go about "showing" the value of the legal department:

1. It's subjective!

Sorry if this is news to you, but the biggest hurdle in proving the value of the legal department is the raw fact that "value" is subject. Highly subjective. The value of anything is beholden to the mind of the buyer/user, and it's no different when it comes to in-house legal services. So, the first thing you have to realize is that perception is going to matter — a lot. This means that value is going to be something you have to earn over time vs. simply pointing to a chart or graph and saying, "See, look at all the value we're providing here in the legal department!" There is a place for that (see below) but relying solely on metrics to "prove" value in this instance is foolhardy. Rather, you need to get comfortable with the fact that the task requires a multi-prong attack, part marketing, part charm, part BS, and part numbers. Your quarry is elusive and, potentially, fleeting, i.e., value can often come down to "what have you done for me lately?" Meaning, you can be a hero today, but like Sisyphus, you will be stuck pushing the value boulder up the hill again and again starting tomorrow. Depressed? Don't be! There are many things you can do to make the boulder lighter and the hill less steep.

2. Always be marketing.

Given value is subjective, your top priority becomes marketing the legal department to the business — a concentrated, long-term effort to build the brand of legal as a group of helpful, hard-working value creators. As we'll explore in other paragraphs below, there are a number of ways to do this, and they all interconnect to weave the story you want to tell and the perception of the legal team you want to build. I have set out some of the nuts and bolts of marketing the legal department in my prior post mentioned above. But, to move from the operational to the tactical, you need to keep three things in mind:

• A willingness to "always be marketing," i.e., be ready to promote the value of the department day in and day out at every opportunity until it becomes second nature and a critical part of what you — and the team — do every day. Simply put, consider it part of your job.
• Focus on the "soft skills" and understanding the internal politics present at your company. As my mom always told me, it's not so much what you say, as how you say it. Meaning, a little bit of charm, a little bit of deference, and a little bit of "P.T. Barnum" can go a long way in how the legal department is perceived, especially at the top ranks. This requires that you have a good sense of who your audience is and that you bring skills like listening, empathy, and a desire to be helpful to the fore. While pleasing the rank and file is important, it's not as important as ensuring the CEO, CFO, Chief Revenue Officer/Head of Sales and the rest of the C-Suite (and their chief lieutenants) are pleased with the legal department. Everyone matters, but zero in on who matters most and make sure they are happy with the legal department.
• Recognition that it is unlikely anyone in the business has any idea how good of a lawyer anyone in the legal department really is, i.e., if you're counting on business colleagues to applaud your mastery of the nuance of corporate law or litigation, you will be disappointed. This also means, that as far as the business knows, you and your team are the greatest legal team in the country. Take advantage of that. This requires a bit of marketing (and touting the department) and definitely a lot of "getting things done" results. But, you can use it in terms of the perception of the value of the department. And, remember, client service is critical and, just like on the business side, every customer contact matters. Make sure you and your team understand the importance of everyone in the company having a positive experience when reaching out to or interacting with the legal team. Will you get it right 100% of the time? No. But, instilling a "service first" attitude from top to bottom in the department will lead to far more satisfied customers than dissatisfied ones.

3. Learn the business.

It's difficult to show value if the members of the legal department don't truly understand how the business operates. This means that you and the legal team need to know the company's products and services, its business model, its top customers, competitors, and vendors. It means you have read the company's strategy and business plans and stay up-to-date on what's going on in the marketplace. And you have to have a basic understanding of the company's financial results. Ask key leaders of the business for some of their time and ask them to help you (and your team) better understand their part of the business and how the legal department can help them (or if the department is doing something that is hindering their part of the business). Your knowledge of and curiosity about the business will show through at key times and the business — over time — will come to know that they have a legal team that wants to be more than just lawyers pushing paper around. There is little more valuable than a legal team that is engaged and vested in the success of the business because it understands the business and the issues, threats, and opportunities it faces.

4. Know when you are in the spotlight.

Whenever I was asked what was going on in the legal department, I typically responded first with something along the lines that we were down in the basement getting stuff done, i.e., building the impression that the legal team was heads down, hard at work doing what needed to be done. Then, I would touch on three to four things I thought were important or indicative of legal adding value to the business. I did this because, well, because someone put the spotlight on legal and you never let an opportunity like that pass with something like "Oh, nothing new." Remember: always be marketing. Know when you and the legal team are in the spotlight and then maximize that spotlight to tout the department or demonstrate the value of the department. But, when you do get the chance, don't drone on and on about minutia. If you do, you quickly lose the audience and they will tune you out or worse. Just hit a few (interesting) highlights. You should be able to make any legal issue somewhat interesting to the average listener. Likewise, if asked for your thoughts about something, this is the time to show judgment, to be practical and thoughtful, to demonstrate that you understand how the business operates, the company's strategy, and how the legal team can impact that strategy. And most importantly, talk about how you can best accomplish what the business wants to do (i.e., don't just tell me about a problem, bring me a solution). Another opportunity to shine in the spotlight is during a crisis. If there is one, you need to step up. Hard and fast. Run to the fire, not away from it. Lawyers are uniquely skilled in dealing with the uncertainty and challenges of a crisis. Use the moment to make your business colleagues go, "Thank goodness legal is involved!"

5. Get stuff done.

I remember once when a young man from one of the big consulting shops was tasked with reviewing my legal team. He didn't really have any relevant experience to do so, but he had the ear of senior management as they were spending a lot of money with his company. After some opening pleasantries, he asked me to tell him the legal department's mission statement. I looked at him and without missing a beat said, "Get stuff done." I am not sure if he thought I was pulling his leg or not, but I remember reading the final report and seeing something along the lines of "The legal function is highly focused on results and getting things done." Which is exactly the message I wanted to get across to him and, ultimately, to the executive team and the owners of the company. Meaning, one straightforward way to prove value is to simply get things done. Consistently and with urgency. As tough as it sounds, no one hired you to tell them, "no, can't do that." They hired you and your team to exhaust all your creativity to find ways to get things done. Everyone on the team needs to buy into this reality. Second, don't waste any of your headcount or budget on deadweight. Headcount is the single most valuable resource of a legal department. You need to ensure that you have the best people possible in each role, that they are motivated to get things done and find a path forward, and that they understand that legal is in the client pleasing business and business needs to be good at all times. If anyone is not bought into this, they need to go. Third, it's okay to brand the legal department. At one stop, we adopted "The Department of Yes" as our brand and we included it when appropriate on internal messaging about our getting things done. Soon, the business was referring to us as "The Department of Yes." Nirvana.

6. Measure it.

Business people love numbers. Smart in-house lawyers know how to speak this language in most everything they do. It can be as simple as using a decision tree to walk through litigation options with the C-Suite, or as tricky as hitting your monthly spending forecasts and accruals with accuracy month-after-month. If you can distill something down to numbers (and graphs/charts), you are ahead of the curve with the business. This is where KPIs come into play (see my post on KPIs for more details). Generally, I am not a fan of KPIs because I think it is very difficult to measure what the legal department does day in and day out. That said, there are ways to do it and, more importantly, there are ways to measure and show "value" generated by the legal team. First, if no one in the business is asking the legal department to generate KPIs, don't worry — nothing's stopping you from doing so regardless. Second, if the business is asking for KPIs, then be sure to pay attention to what they are asking for. But, that doesn't mean you are limited to generating only and exactly what they are asking for. Often, the business is asking legal to generate KPIs because it's something on the list to cross off. What you actually come up with may be less important to who is asking than just getting them something that looks like a KPI. Typically, I was free to create whatever KPIs I wanted so long as they gave information about some topic the business was interested in, usually something about legal spend and contracts. This is your opportunity to start telling the story of the legal team the way you want to tell it. I focused on the Big Five value generators:

• Legal spend
• Contract completion
• Litigation
• Compliance
• Intellectual Property

What matters at your company may vary, but once you figure out what's the most important to the business, then you can start to create KPIs that show how the legal department delivers value.

While difficult, there are ways to put a value on the cost of problems avoided. If you can craft KPIs around cost avoidance, you are bringing forth one of the biggest value drivers of the legal team, one that rarely gets quantified. For example, we looked for opportunities to tout litigation avoidance. We would score disputes on a range of likelihood of litigation, i.e., low to high on a scale of 1- 10 (10% likelihood to 100% likelihood). We also knew our average cost of litigation, which included the fact that most litigation would settle rather than go to trial. Using these variables, we came up with a "Cost of Litigation Avoided" dollar figure. Here's a made-up example: in 2018, there were five matters with the potential to become litigation with customers or vendors. Our average cost to deal with litigation is $100,000. (This average amount accounts for the fact that most cases settled but some went deep into the litigation process.) The math goes something like this:

Dispute	A) Likelihood of Litigation	B) Average Cost of Litigation	Costs Avoided by Resolution (AxB)
Dispute 1	25%	$100,000	$25,000
Dispute 2	40%	$100,000	$40,000
Dispute 3	10%	$100,000	$10,000
Dispute 5	70%	$100,000	$70,000
Total Cost Avoidance			$195,000

Part of the trick here is to be conservative and always be able to justify your assumptions. But, if you do not get "greedy," it can be fairly straight forward to generate some number you can honestly say the legal team saved the company by disposing of disputes before they got to actual litigation. This can be even more compelling if you can get someone in Finance to help you develop the model and run the numbers — then it has the imprimatur of the Finance team. This is also a great thing to ask outside counsel to help with because it makes them look good too. You can apply similar thinking to corporate deals or other areas of legal work — you're only limited by your imagination and your ability to come up with reasonable assumptions.

7. Benchmarks.

Benchmarking your legal department is tough. First, there are rarely good matches, i.e., sets of benchmarking data capturing other legal departments with similar characteristics to your department, your company's business (and complexity), and the exact types of legal work expected from you and your team. This means, while not always apples to oranges, it's often like comparing Fuji apples to Granny Smith apples. Close, but not really the same. That said, I always kept my eyes open for benchmarks and I collected them.[1] Not because I wanted to share them with the business per se, but because a) I wanted to see roughly how my department stacked up on whatever was being benchmarked (and did the benchmark give me a reason to rethink something) and b) in case the business did show up with its own benchmarks it wanted to use to measure the department, i.e., I built a collection of defensive benchmarks. I did this because rarely would the benchmarks consultants brought to the table truly match the idiosyncratic nature of my department. And, it was easier to defend against/challenge such benchmarks if I had other benchmarks that showed different or opposite conclusions, i.e., it called their data into question. Sometimes, the data (theirs and mine) was consistent across multiple benchmarks meaning we were really good, on target, or had some work to do. In those latter instances, you just got on with trying to "fix" whatever needs fixing. Other times, if data was consistent across benchmarks and my department looked really good against those benchmarks, I made sure somebody knew about it! That said, I was reluctant to pro-actively waive benchmarks in front of the business because they were certainly capable of finding benchmarks that might not be as good for me. Bottom-line: benchmarks can be interesting because you can probably find one to support whatever argument you want to make, good or bad.

8. Client satisfaction is king.

No shock here but the most important piece of the puzzle in showing the value of the legal department is how satisfied your internal clients are with the legal function. There are two parts to this equation. The first is to focus on letting clients know what legal is doing to drive value to the business (see, e.g., No. 6 above and No. 9 below). The second, which we discuss here, is to make it easy for your clients to love you and the department (see my post on this for detailed steps on "how") and to continually measure satisfaction levels so as to ensure that the legal department is focused on what matters to the business. The best way to do this is via a client satisfaction survey. You can read my post on satisfaction surveys and get a detailed sample survey, but the key for purposes of "value" you want to ask several core questions, such as:

• Does the legal department add value?
• Is the legal department focused on the right things?
• What should the legal department focus on in the upcoming year?
• Is the legal department easy to work with?
• Rate the following attributes on the following scale: Not valuable, somewhat valuable, valuable, really valuable, extremely valuable (then list attributes like speed, helping with business terms, practical solutions, and so on).

There are, of course, dozens of questions you can ask and many different ways to let the business answer. The important part is that you are asking the business to tell you what it values the most and — through the survey — you are telling the business that the legal team is listening! Here's an interesting chart from a — dated — survey of CEOs conducted by the ACC. The survey asked CEOs to rank the reasons for selecting in-house counsel over outside counsel:

Reason	Response
Understands company better	93%
Participates in strategic/business planning	89%
Best to manage outside counsel	81%
Better relationship with me	79%
Cheaper	60%
Provides better service	60%
Costs are easier to control	54%
Trust in-house counsel more	37%
Knows relevant law better	16%

  There are lots of inferences you can draw from these results but what jumps out to me is that CEOs want in-house lawyers who know the company inside and out and are actively participating in strategic and business planning. In other words, "value" to the CEO has little to do with legal skill and more to do with business knowledge and acumen. Therefore, proving value to the CEO is probably going to focus on delivering and messaging along these attributes. Of course, others in the business may have different desires and you can use the satisfaction survey to figure out what those are, work on satisfying them, and then — importantly — reporting out on how legal is doing, i.e., telling the business that you heard them loud and clear and that you are constantly working on improving the delivery of legal services.

9. Tell them!

Yep, sometimes you just have to lay it out for the business and tell them what value the legal team is delivering. For example, when I was general counsel I prepared a report of significant achievements of the legal team and distributed that monthly to the C-Suite and other senior leaders. Likewise, if something really big happened, I made sure the right people in the business knew about the good news (giving credit to both the business team members and the lawyers/staff that helped). Not only was this a good way to stay top of mind with good news, it was also an easy way to generate goodwill with the business just by simply recognizing those in the business that helped get the deal (or whatever) done. Every CEO I have worked with had a senior staff meeting — usually on a weekly basis. One thing he or she always asked was for each leader to report what was going on in their area. This was another opportunity to mention big contracts, litigation, acquisitions, problems avoided, compliance matters resolved, regulatory issues solved, or whatever the case may be. Remember: always be marketing. Over time, it all starts to sink in with the business and the value perception of the department typically grows more positive the more the business learns what it is up to.

10. You can't please everyone.

Guess what? You can do everything right and be the most dialed-in in-house lawyer of all time, finding solutions to tricky business and legal issues, and turning projects faster than anyone has a right to expect. For some people, it still won't matter. They just don't value the legal department. It may be because of a prior bad experience or just a deep-rooted belief that lawyers are nothing more than a necessary evil. Regardless of what you do, how you do it, or how fast you get it done, there is just no pleasing some people. When this happens, you need to recognize it for what it is and just keep moving forward. It doesn't mean you give up or give less of an effort, but just realize that not everyone is going to be a fan of you or your team. You may, over time, win them over but don't let it overwhelm you or the team. Of course, it's a different story if the one person you can't win over to the value of the legal department is when that person is your boss. If this is the case, you have much bigger problems than we can solve in this post.

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As you can see, there is no magic bullet when it comes to showing the value of the legal department. It's the accumulation of a lot of different steps taken persistently over time. And everyone on the legal team needs to understand why proving value is so important and buy into the effort. It only takes one or two "bad experiences" to undo months and months of effort. All of this is a long-winded way of saying no matter where your department falls on the spectrum of perceived value, you have to be patient and work at changing or enhancing the value perception every day.