The legal function is critical in any organization, ensuring compliance, managing risks, and protecting the company’s interests. Despite its importance, proving the value of the legal department has always been a challenge for many organizations. Why is it that this vital function often struggles to demonstrate its worth effectively? Let’s explore the key reasons behind this issue.
1. Lack of Tangible Metrics
Unlike other departments like sales or marketing, where success is easily quantifiable through revenue, leads, or market share, the legal department’s value is more abstract. Legal outcomes often center on risk mitigation, contract review, or regulatory compliance, which don’t lend themselves to easy measurement. It’s difficult to put a direct dollar value on prevented lawsuits or reduced risk exposure, making it harder to showcase tangible success metrics.
2. Perception as a Cost Center
The legal department is often viewed as a necessary expense rather than a value-generating function. This perception exists because the legal team primarily manages issues that arise from the company’s operations but doesn’t directly contribute to profit-making activities. This positioning as a “cost center” leads to the undervaluation of its contributions.
3. Reactive vs. Proactive Approach
Many legal teams spend most of their time reacting to issues rather than proactively contributing to strategy. This reactive nature, focusing on damage control rather than driving business growth, can cause others to overlook their strategic value. When the legal department is only engaged after a problem arises, it’s harder to demonstrate how they can positively impact the business beyond crisis management.
4. Lack of Alignment with Business Goals
A significant barrier to proving the legal function’s value is the disconnect between the legal team and the broader business goals. When legal departments operate in a silo, disconnected from the company’s strategic vision, their contributions may seem irrelevant to the core objectives of the organization. Aligning legal work with the company’s strategic priorities can help showcase how the legal function contributes to overall success.
5. Difficulty in Communicating Value
Legal professionals often focus on technical jargon and complex legal language that can be difficult for non-legal stakeholders to understand. This creates a communication gap, making it harder to convey the value of the legal department’s work. To prove their worth, legal teams need to find ways to translate legal outcomes into business-friendly language that resonates with the company’s leadership.
6. Underinvestment in Technology
In many organizations, the legal function lags behind in adopting advanced technology compared to other departments. Legal tech tools like contract management systems, risk assessment platforms, and AI-based legal analytics can streamline workflows and provide data-driven insights. Without these tools, the legal team may struggle to showcase efficiency and measurable outcomes.
7. Limited Engagement in Strategic Decision-Making
Legal departments are often not invited to the table during high-level strategic decision-making processes. When legal professionals are involved only after key decisions have been made, they are left to fix potential issues rather than provide input that could prevent problems from arising in the first place. Proactively engaging legal experts in decision-making can help them demonstrate their ability to drive value.
8. Complex and Long-Term Outcomes
The nature of legal work often involves long-term outcomes, such as ensuring compliance, minimizing risk, and resolving disputes. These outcomes can take months or even years to materialize, making it difficult to show immediate impact. Additionally, proving the absence of legal problems (e.g., lawsuits not filed or penalties avoided) is often harder than showcasing positive results, further complicating the legal team’s ability to demonstrate its value.
How Can the Legal Function Prove Its Value?
To overcome these challenges, legal departments must adopt a more proactive and strategic approach. Here are some steps they can take:
- Adopt Business Metrics: Find ways to quantify legal successes in terms that the business understands, such as cost savings, reduced liability, or enhanced regulatory compliance.
- Embrace Technology: Leverage legal tech to streamline processes, improve data collection, and provide measurable outcomes.
- Communicate Strategically: Use business language to explain legal outcomes and show how they align with the company’s broader goals.
- Integrate with Business Strategy: Involve the legal function in strategic decision-making processes to showcase its role in achieving the company’s long-term objectives.
The legal function’s value is undeniable, but proving that value requires the right tools, communication, and strategic alignment. By overcoming the barriers discussed above, legal departments can better demonstrate their contribution to the success of the organization.
