Legal Service Organisation
The in-house legal service organisation project.
“Until you make the unconscious conscious, it will direct your life and you will call it fate.”
C. G. Jung
Generally speaking, SMEs do not have an in-house legal service, and only call upon legal counsel if they have to.
This attitude was fine in the past when a handshake was worth more than a contract. Today it is better to think differently. The various economic phases of the last fifteen years have produced major transformations in all production sectors. In order to stay in the market, all companies must work through the value chain and concentrate on those activities with the highest added value. However, outsourcing other activities to specialised suppliers is not possible without adequate legal support.
An in-house legal service organisation project is a small investment for many SMEs that still lack it. It is necessary to run the business well.
One aspect that holds back SMEs from setting up an in-house legal department concerns the hiring of a lawyer due to the excessive cost. Additionally this resource would then not be employed full-time.
Kenning Consulting's experience confirms that this concern is unfounded.
The SME must rely on a professional to have a good in-house legal service. First, the company must organise itself so that the consultant can make a good work. Only then can it have a 'tailor-made' service customised to the company's needs, of quality, at a cost that is not calculated by professional rates.
Let us examine how this project develops, starting with the objectives of the project, who should take on the responsibility of project leader, and the activities of the various actors involved.
What objectives the project must have.
The in-house legal service implemented by Kenning Consulting is a streamlined, business-oriented service, focused on operational activities involving customers and suppliers.
Let's look at these features in detail.
LEAN: In SMEs, it is the department/function manager who negotiates with customers and suppliers. Often this negotiation focuses on operational aspects without a draft contract being exchanged between the parties. This habit must change, because proposing a draft contract at an advanced stage of negotiation could stiffen a relationship that is already well on track. It is therefore important to have standard contracts ready to use for the operational people. This means inserting only variable data in the predrafted text.
COMMERCIAL STYLE : Kenning Consulting gives great importance to this point. A contract has a commercial style if it deals simply with the important points of the business relationship without technicalities. It must be comprehensible to a person without legal background. The form also has its relevance because a long-winded contract is difficult to read.
The purpose of the standard contract is to bring the business negotiation to a conclusion with the final signature without the external lawyers of the two companies having to make changes.
On the contrary, if this occurs, i.e. if the initial draft is modified by the respective lawyers, the relationship starts off with a rigid layout and will have practical difficulties in its execution.
FOCUSED ON OPERATIONAL ACTIVITIES: It is the company that decides how many standard contracts preparing. In practice, the old 80/20 rule must be followed, i.e. 80 per cent of the company's needs are dealt with in a few documents.
In an SME, the administration manager is the ideal project leader.
This person is the one who oversees all administrative processes and can describe them well to external counsel.
He/she becomes the natural manager of the function when the project is closed. In addition, the reduced workload resulting from the efficiency of the administrative processes allows him or her to fully perform this task when the project is completed.
In practice, it is this figure who takes care of the preparation of standard contracts, starting from the texts provided by the law firm for the various types. These documents are first adapted to the company's specific needs, and are then examined by the external lawyer who assesses their completeness. At the end they are submitted to the owner of the company who evaluates the appropriate commercial style.
When fully operational, the in-house legal department must meet the company's needs without burdening management.
In a nutshell, it must be efficient, and for Kenning Consulting this is achieved when:
- has several standard contracts to propose to the operational functions that need them,
- keeps an up-to-date schedule for the proper management of deadlines,
- intervenes promptly when particular situations require it.
The enterprise that has standard contracts to propose to new business partners expresses a professional and organised approach. All the more so if the business relationship involves a large enterprise that does not expect this preparation on the part of the SME.
It is also normal for the large enterprise to ask for its draft text to be adopted, but this is not a problem. In fact, the SME that has already reviewed a similar document with its lawyer is able to propose appropriate changes with clarity and time savings.
Managing contractual deadlines is a critical aspect of legal services. Managing deadlines well requires organisation and a lot of attention during the execution of contracts. A documents management software greatly facilitates this activity. In its absence, it will be necessary to enter the data in a calendar to be consulted regularly.
The third point mentioned above implies a good alignment between business operations and contracts. Let us distinguish supply contracts from those which, for example, require development activity. The former are simpler and each delivery must be recorded in the management system in order to close a specific order. Any significant deviation must be notified to the supplier, for example in the quantity ordered, or the requested delivery date, or a short remaining shelf life. Similarly, if quality deviations from the technical specification emerge during the quarantine period, a non-conformity must be opened and sent to the supplier. These are operational aspects that do not require legal action as the company only has to notify the supplier on the specific points.
Quite different is the case with contracts that have a development activity for which every activity carried out by the company as provided for in the contract must be documented.
There must be good cooperation between colleagues so that any contractual discrepancies are promptly identified and examined to assess their seriousness and then reported to the head of function and/or owner of the company.
In the event of serious non-compliance, the legal advisor must be heard, who proposes the appropriate way to intervene. Each case has its time to respond appropriately (informal email, letter or registered letter), and late intervention is ineffective.
To summarise, when the SME has an efficient in-house legal service, it faces up without fear to other companies, whether partners or competitors, even those that are much larger and much more financially endowed.
What conditions are needed to start an in-house legal services project?
Firstly, the entrepreneur must see in the project an opportunity to improve business management.
The administrative manager must lead this project with the aim of improving the work of his colleagues and in doing so also benefit the administration. In fact, think of the flow of costs and revenues becoming regular. The workload of the administrative manager on the legal service is compensated for by the reduction in the time required to close the accounts.
In addition, experience shows that an efficient legal service makes it possible to reduce the randomness of tax audits and shorten their time.
The external lawyer is a key stakeholder in the project, he or she must not only be involved in the objectives to be achieved. The outside lawyer must also be involved in the organisation to be adopted by the project, which is intended to improve the effectiveness and quality of the service provided.
The rest of the company staff must understand that every activity involving third parties must have appropriate supporting documents for proper management. The operational personnel must read the draft contracts without delay as soon as they are available. In this way, if an important operational aspect is identified that is not described in the draft, it is a good idea to discuss it with the administrative manager and consider supplementing the draft contract.
Kenning Consulting does managerial and organisational work in this project.
The work starts with a review of the various company activities to be carried out with the administrative manager in order to identify those for which standard contracts should be drawn up. The 80/20 rule mentioned above guides this assessment, which must also examine critical aspects of the company's management of customers and suppliers.
We then move on to the assessment of business risks, which find an important point in the analysis of the balance sheet and profit and loss account.
The third topic to be examined concerns legislative constraints. Those of the market in which the company operates permanently are usually already satisfied. Conversely, if the company intends to enter a new market, specific regulatory constraints will have to be considered.
The IT aspect concerns the archive management of the legal service. Some key aspects concern how to store the different documents for later reference. For example, the preservation of drafts that have been modified during the negotiation can be useful for the external lawyer who wants to study the opposing counsel's approach in the event of litigation.
Another aspect concerns the storage of documents for their quick search and consultation by internal staff.
Finally, a schedule must be set up to manage deadlines efficiently.
Benefits of this project:
- Long-term collaboration with external legal counsel;
- The legal service is well tailored to the operational needs of the company;
- It is the only way to get quality legal assistance at a very reasonable cost;
- Legal disputes are reduced and the success rate of proceedings is increased;
- Risk management improves risk assessment with and without insurance coverage;
- Multidisciplinary project with benefits on all other areas.
- € 250 token for two half days of consultancy to evaluate if go ahead with phase two and continue the project with indication of the working areas
- Development of the project with twelve days of consultancy.
The travel expenses duly documented will be added to the costs indicated above.
- € 500 token for four half days of consultancy to evaluate if go ahead with phase two and continue the project with indication of the working areas
- Development of the project with sixteen days of consultancy.
The travel expenses duly documented will be added to the costs indicated above.
Kenning Consulting undertakes to sign a non-disclosure agreement to protect the confidentiality of the company’s data and informations of which it will come to know during the consultancy.
Find out more about our projects for management improvement and you will see they can be useful for your company!