Organizational Damnation 56: Legal

While not quite as many organizational damnations in our list as there are technological (which are enough to drown us on their own), there are still quite a few and Logistics, covered back in our post on organizational damnation 48, was just the beginning. Legal can be just as big of a thorn in our side as Logistics, if not bigger.

Everyone hates lawyers, unless, of course, we’re talking about their lawyers working for them doing exactly what they want and succeeding. In your organization, the lawyers work for the Chief Consul who works for the CEO and orders his organization to do what he feels the CEO wants him to do, even if it is not what anyone else in the entire organization wants him to do. So if the CEO has mandated the Chief Consul to get a standard legal template in place for all direct materials contracts, that’s what the legal team is going to try and do (even if half of the clauses are irrelevant to half of the categories or are so onerous that no supplier worth it’s weight in salt would ever, ever sign). If the CEO orders the Chief Consul to make sure the organization doesn’t get mud in its eye due to child labour in the supply chain like the competition did, you can bet the Chief Consul is going to order an operational review of each and every supplier you do business with and their suppliers and so on. And while neither of these are bad things, the Chief Consul and the legal team could get dangerous tunnel vision and make Procurement’s life very, very miserable in the process.

But it’s not just tunnel vision and insistence on onerous clauses or unnecessary deep supply chain reviews (on suppliers you already vetted over the last two years, a vetting process which included surprise audits) that’s the problem, it’s their definition of what a good contract management system is. If you’re a leading Procurement organization, chances are you’ve noticed the similarity between a good Category Management Process and Contract Lifecyle Management (CLM) and are looking to obtain a good CLM or Strategic Sourcing (SS) / Supply to Contract (S2C), or Supplier Relationship Management (SRM) solution with strong contract management capabilities. However, the minute you mention you want a solution which either has “contract” in the title or “contract X” as a significant module, Legal is going to insist that “Contracts” are their domain and they need to be the solution owner of the “contract” solution.

Why is this bad? Because, at the end of the day, all that Legal cares about is contract creation (drafting, authoring, and signing), contract archival, and contract retrieval and their definition of a Contract Management solution is one with strong drafting and authoring capabilities, version control, audit trails, clause repositories, Microsoft Word integration, etc. In a 3-phase, 22-step contract lifecycle management process that starts at the need identification and the production of a business case and ends with a proper post mortem, contract creation is one step — but they will ignore everything else, including all important workflow management, change management, performance management, relationship management, and risk management — among other significant features from a Procurement / Supply Management point of view. The best solutions will be immediately eliminated from consideration if they are missing one unnecessary bell or whistle that Legal wants in the drafting phase and the Procurement organization will end up with the best contract authoring tool on the planet — that does absolutely, positively nothing else.

But this doesn’t come close to the hell you’ll get the first time you try to help them with cost control. The minute you bring spend up they’ll get all defensive that the organization needs the best outside consul it can get, that talent doesn’t come cheap, but the extra cost is well worth the reduced risk that comes from having a high-risk contract drafted by a true expert or the best litigator defending your organization in what could be a very costly court case if the organization loses. They’ll do this even though you agree with them 100%, have no intention of reducing legal spend just to increase legal liability, and only care about getting spend under control for everyday cookie-cutter services and legal firm expenses.

For example, many real-estate transactions, franchise transactions, insurance transactions, etc. are templated, sold by nimble, specialist firms at fixed rates, and do not differ in quality or risk whether you pay $1,000, $5,000, or $10,000. However, many large organizations with a lot of local offices or branches will often pay significantly different amounts for the exact same service that should be a fixed price across the state, or even the country. the doctor knows a number of spend experts who have analyzed legal spend for large organizations and the differentials on some of these cookie cutter category are often a factor of 3 to 5! There’s a huge savings here, which can be used to insure that the organization always has enough in the legal reserve to hire the best talent for the strategic transactions and legal challenges when talent truly matters. Plus, allowing every law firm to choose their own e-Discovery firm and technology, their own business centre / copy house, and even their own messenger service / delivery carrier can lead to significant variations in expenses as well. If the organization takes control of the expenses and insists that it’s lawyers and outside law firms use it’s contracts, non-talent expenses can often be halved as well. Like the Marketing Sacred Cow, the Legal Sacred Cow represents a huge savings opportunity which, when approached correctly, does not increase the organization’s risk one bit. In fact, the increased control, standardization, and visibility reduces risk while increasing the funds in reserve for Legal in case of a law-suit or similar emergency. But Legal never sees it that way at first, and sometimes doesn’t come around.

Legal will drive you nuts. It really is the case that you can’t live with them, can’t kill them. Because, at the end of the day, no matter how miserable they make your existence, there will always be that big contract where you need them to make sure your behind is covered. And, just like the lawyer, you will have to take two sides.