Law In-Corporates

Law In-Corporates

My area of interest this time is about legal departments, lawyers and their role in companies. I am also addressing the need for lawyers and legal departments to play a bigger role other than only addressing compliance, drafting contracts and giving legal opinions. Optimising the utilisation of a legal department within an organisation not only lowers corporate risk but it is also seen as an enhancement of shareholders value. Therefore it is wise for managers to become well versed around how law fits and floats around an organisation and be willing to work with lawyers to produce the best results.

At the same time it is imperative that lawyers indulge in learning a business environment with legality being the focal point. When the team makes strategic decisions, lawyers should not hesitate to exercise restraint when legal grey areas are being venture into by executives. Just like in the case of an operation, in an operating theatre a surgery is not only done by a surgeon alone but also a whole team of others to comprise executives (nurses), technicians and doctors. When and if a surgeon ventures too far into the allowed parameters of the patients consent and vitals, the Anaesthesiologist kicks in to resist this adventure. This produces an environment of check and balance.

Managers shouldn't resist temptations to view law as a compliance subject. Rather engaging and understanding law will present the manager a variety of formulas to manage the organisation and reap the maximum benefits from the legal department. Once managers incorporate this mindset basic contracts potentially become tools to enhance shareholders value, strengthens corporate relationships, recognises and minimise risks, predict future sales, form future alliances and the ability to forecast upcoming technologies.

Managers should always look out for better ways to leverage legal resources. A culture of creating this awareness is paramount. This activates business strategies. There must be active cross breeding of the different departments in any organisation. When this cross breeding is enabled, managers must know how to manage it, because application of law is often not clear as it is fact specific. Purely technical legal advice is often inadequate and the need to create a hybrid application of the conjoining of the different departments makes all the difference in an organisation. Points to consider are that while lawyers may not understand the nitty grit-ties of business objectives, managers are equally vulnerable when it comes to to the application of law.

Allowing a free flow of legal and business information between the various departments will enable the legal department to appreciate the reason why a decision is being made and the path of the strategy that it depends on. Bringing in lawyers from the early stages of developing a product or service is as important as forming technical departments, finance and human resource departments in any start up. This prevents potential conflicts, grey areas and it also encapsulates a security capsule for the “product”. The mindset to engage legal advice when a conflict happens should no longer be the way forward. Legal assistance is today paramount in the infancy of any start ups. If I may say… prevention is better than cure. Engaging legal minds earlier captures value and risk management increase substantially. Managers and legal personals must work as partners to meet organisation objectives. Just as how a manager or CEO is a member of the top management a lawyer should also be in the team of top management weighing in on all Corporate strategies.

A manager has to posses a good degree of legal understanding relevant to the industry. For example in a construction industry it is important that the manager understands construction law and or in the medical healthcare industry the manager or the Medical director understand the principals of medical legal application. They need to know when the boundaries are going to be crossed rather than calling in a lawyer when the boundaries are crossed. If they are able to spot legal problems then they are potentially minimising risk for the company.

While there is this need for managers to become tuned into law, there is equally the same need for lawyers, to be more business savvy? Lawyers engaged by firms must make it a point to learn enough about the general practice of management in order to communicate effectively with the management team. A lawyer who is not familiar with Porter’s Five Forces Model will not understand reasons for business strategy and internal controls if not he or she will not be able to give value to a team or be useful in considering alternate goals. It is easy to convince a manager to become tuned with legal basics but often it is harder to work with lawyers because of their rigid mindset which is, business and corporate decisions is common sense. This in my opinion is narrow minded.

Having a legal degree and an MBA myself, I very often find a corporate decision made with tight legal opinion is very often a very conservative decision and it limits the potential opportunities and growth of that business plan. The best decision from experience is therefore an opinion taking into account management and legal strategies which works in symbiosis. This airs the opportunity for corporate growth

Legal departments within an organisation law should not be viewed differently from what managers do. Allowing these two specialities to mix creates the perfect hybrid. The end result is strategic development. If we look closely we will find that law affects and is applied to every aspect of Porters Five Forces Model. CEO’s and managers are well aware of what the Porters model is and it is important that lawyers and or legal departments within organisations are also exposed to it. Law can be applied to every aspect of Porters Five Forces Model which includes competition in the industry, new entrants into the industry, suppliers, customers and threat of substitute products.

When working on analysing and guiding business strategies and creating competitive advantage as a corporate research and development consultant I always at every step pick up needs for legal input. In fact after 20 years in this industry I see that the efficiency of the Porters Model doubles when corporate and legal strategies are aligned.

Aligning the different strategies at infancy is shown to create opportunities throughout. One example that I have encountered and written about in an article was about a start up of a fin tech company I worked with. I was engaged to magnify the features of this product, get funding and to assist in market penetration. They possess all it took to make it however failure to have their features patented at infancy with a provisional patenting caused them to fail bringing the product into the market. When funding was sought, they had to reveal their priced feature which leaked. Competitors already in the market immediately activated to incorporate this feature into their existing product. By the time the start up company got the investor and tried entry into the market, this feature was no longer a new novelty. Thus while we penetrated a tough market, the product could not stand on its own. We had to form and alliance and from here the product was bought over by an established competitor.

If only managers are more attuned with legal requirements and they are then better equipped to convert constraints into opportunities as they understand the value in applying aspects of law and the value of compliance. As I was not involved with the company in infancy I was unable to align the legal, technical and product development strategy at the early stages. This beautiful product fell through. Clearly the reason for failure was the act of not patenting the product at infancy. Always a lesson to remember. Thus by practicing strategic alignment of the various teams and treating legal compliance as an investment rather than cost, organisations are more likely find new opportunities for value creation.