As a recession looms, in-house legal departments should take the opportunity to cement existing - or forge stronger - connections with their C-suite...
Recession Readiness - Part 4: Show Your Value
Legal Departments that can quantify the value they deliver are far more likely to survive budget cuts and layoffs in a recession. Find out how to get started.
We may call it a recession or a slow-cession or a downturn, but no matter the name, the current economic climate is bringing considerable stress to your colleagues in Finance.
A January survey by Grant Thornton found that budgetary pressures weighed heavily on the minds of Chief Financial Officers, who ranked their top three concerns as:
- Cost optimization
- Workforce rationalization
- Liquidity and expenditure management
In sunnier economic times, cybersecurity was the prevailing area of concern. Now, it ranks in fourth place.
Your CFO is looking for cost cuts and, potentially, job cuts. This spells danger for any in-house Legal Department that is not proactively tracking and sharing the value that it brings to the business – and too many in-house legal teams assume that their colleagues know about and understand their contributions.
A survey by CMS asked two distinct audiences to rate the value of the Legal Department’s contribution to the business. While 38% of lawyers said their contribution was “very strong,” a meagre 14% of CEOs agreed.
In the same survey, 100% of CEOs said it was important that the legal function add economic value. 14 percent of lawyers disagreed.
We trust that you are not among the 14% of lawyers who are in denial about the need to make commercial sense for the business. Yet, we also acknowledge that tracking Legal Department value is not always easy.
To get you started, consider these three questions, then go to your Legal Department data (whether it exists in a modern legal matter management system or in more old-school formats):
1. How does the Legal Department drive the business and its strategy?
What major deals did the in-house legal team complete this year, and what was the contribution to the company’s revenue and profit? Quantify this where you can in the language of the business, not in legalese: Your colleagues want to know about dollars, units and customers.
2. How much risk did the Legal Department successfully limit?
What were the major areas of risk incurred this year, and by how much did the in-house Legal Department shield the company? If you are able to show the C-suite and the board that you are lowering the litigation risk profile, you will reap a reputational reward.
3. How is the Legal Department already “doing more with less”?
Show that your Legal Department are responsible stewards of the organization’s resources. Recall any moves that have been made for better efficiency, whether through in house legal software, shifts in resourcing, et cetera. Again, quantify where you can.
For tips on presentation, review our roundup on Reporting for Legal Stakeholders: CEO and Board.
While economic stress looms large, the in-house legal teams that can show how they advance the organization’s goals – and its bottom line – are more likely to be shielded from budget cuts, job cuts and skeptical scrutiny. And by getting in the habit of tracking and sharing your wins, you will position your legal team for long-term success (and rewards) in brighter economic times.
As the likelihood of a recession looms, what else can Legal Departments do to prepare?
Download our white paper: Four Ways Legal Departments Can Survive (and Thrive) in a Recession to learn more.