Legal’s Reputation in 2023: Business Partner or No Police?
2022 had the makings of a good year. The world was set to gradually leave the pandemic in the rearview mirror and life was ready to return to normal.
But any bullish momentum that existed at the start of 2022 has since completely evaporated. Now companies are grappling with rising interest rates, budget cuts, and layoffs. Cost savings is the name of the game, while cost containment is the rule.
All this just means that Legal plays an even greater role in directly impacting an organization’s revenue generation and operational efficiency.
Last year, Onit launched its Enterprise Legal Reputation (ELR) Report, which described the role and perceptions of Legal in organizations. This year, Onit released an updated ELR report to explore how the situation and opportunities for Legal have changed year-over-year.
Naturally, the current situation isn’t straightforward. While there are great opportunities for Legal to demonstrate its value to the company, Legal must take steps to overcome the perceptions of other teams and create favorable conditions for operational success.
In this blog post, we’ll be exploring the results shared in Chapter 1 of Onit’s 2023 ELR report. In a future post, we’ll analyze Chapters 2 and 3.
In November 2022, Onit teamed up with Provoke Insights, a market research firm based in New York City, to collect the data needed for the 2023 ELR report.
4,500 professionals across four countries (United States, United Kingdom, Germany, and France) were asked a set of questions about their Legal department.
4,000 respondents were non-legal enterprise employees and the remaining 500 were corporate legal professionals. For the purposes of the research, corporate non-legal employees excluded individuals working in non-profits, education, and government.
Legal Department Reputation
Before Legal can start to take advantage of any opportunities that exist, Legal needs to not only ensure it has a good reputation among other teams, but that it backs up its reputation.
Legal’s brand image already works in its favor. Just like in 2022, 78% of non-legal employees see Legal’s primary reputation as that of a trustworthy company protector who provides good counsel. In the United States, Legal has a second reputation as a reliable authority figure in all legal matters.
However, whether or not a team trusts Legal is a different question. In 2022, approximately 45% of teams claimed that they trusted their Legal team. That number dipped to around 43% in 2023.
On the surface, this looks concerning. However, a closer look reveals that trust in Legal grew in both the United States and Germany, but dipped slightly in the United Kingdom and fell more sharply in France.
So even though there’s no dramatic growth in trust across the board, it is encouraging that some legal teams have succeeded in cultivating trust. Now it’s time for Legal to build on any gains and show they merit even greater trust.
Legal as a bottleneck
For this to happen, Legal must iron out its shortcomings. Namely, for the second consecutive year, Legal was described as “inefficient” by 59% of respondents. In fact, many respondents described Legal as a “bottleneck” that “adds unnecessary roadblocks”. Some teams who went into interactions with Legal anticipated ahead of time that they would “simply expect to experience holdups”.
If there’s a silver lining, it’s that this is far from insurmountable. In fact, some legal teams have already succeeded.
Colleagues who describe Legal as “very efficient” state that Legal has been effective at handling sales and revenue cycles. From 2022 to 2023, the number of people who felt this jumped by 4% in Germany, 6% in France, and 15% in the United States.
This proves that Legal isn’t just a control switch that redirects contracts. It also demonstrates that Legal has a real, growing material impact on processes. Now the challenge is for Legal to find the right balance between compliance, speed, and good data management. Simply put, Legal must pursue efficiency.
For legal teams with a poor reputation, they can undertake initiatives and quick wins that revamp and boost their standing among internal clients.
One possible approach would be to implement a CLM system or contract management software that can drive operational efficiency, eliminate bottlenecks, and free up Legal for high-value projects. This would provide Legal with more chances to shine as a strategic advisor and business partner.
The value of a good reputation is that it can smooth out much of the friction that can occur during interactions.
Legal Department Interactions
Familiarity breeds positivity. The teams who interact the most with Legal end up having the best interactions.
These are the most frequent reasons cited for why teams reach out to Legal:
- Contract review and signing (46%)
- Compliance (46%)
- HR matters (37%)
- Intellectual property (25%)
However, just because a team has good interactions doesn’t mean they believe they have a good relationship. Some teams who report having decent interactions with Legal add that Legal falls short of being able to forge a true “business” relationship with them.
One factor potentially holding legal departments back is the lack of modernization. Compared to last year, Legal is trending towards more modernization at 26%, up from 19%. While this positive growth is a good sign, it also means that 74% aren’t in the process of modernization.
And despite the fact that automation and technology have been trending all year, teams don’t think they’re the ultimate solution to eliminating all friction with Legal.
As a result, Legal can’t improve the quality of their interactions with technology alone. To ensure that they have a material impact on the business, Legal will need to shift their approach and create a people-process-technology framework where processes and technology allow Legal to get their work done better and more efficiently.
If a legal team knows that its interactions are going poorly, it should explore the reasons, what lessons can be learned, and how to improve in the future. This may necessitate a shift in thinking where Legal stops treating colleagues like “just another request” and starts treating them like real customers who should be satisfied.
Legal Department Relationships
Positive interactions forge strong relationships. Fortunately, in 2022 and 2023, many teams reported having a positive relationship with Legal.
However, there is a large degree of variance. IT, Marketing, and Procurement were more likely to report problems while HR and Finance enjoyed better relationships with Legal.
Although Legal’s “brand image” as the company’s protector and trusted advisor remains, all departments experienced a drop in the quality of their collaboration. Year-over-year, the sentiment of some teams towards Legal dropped by as much as 15%.
A majority of HR and Finance departments still claim to have positive dealings with Legal, but the numbers fell from 62% for each to 56% and 51% respectively.
More stunning are Sales and Procurement. Both teams had double-digit drops. Sales fell from 43% to 30% and Procurement from 37% to just 22%.
While it’s natural for there to be some variation between departments, what’s troubling is how the quality of interactions fell across the board.
Without knowing the exact reasons why a team had a negative reaction, the best conclusion that can be drawn is that Legal has plenty of room for growth and improvement.
The value of a positive relationship is that good relationships make it much easier to fuel collaboration and work together on big and small projects. Teams become more willing to approach Legal for any issues, while Legal may feel more comfortable delegating certain contracting tasks to non-legal teams.
For Legal to foster better relationships, legal teams will need to shift from simply “checking the box” to “ensuring customer satisfaction”. By making relationships more transactional in nature, Legal can remake itself into an efficient partner who collaborates and maximizes material impact on the business.
To smooth out any wrinkles that appear when collaborating, Legal will need to maintain a high degree of transparency and responsiveness, which has been a weak point in recent years.
Legal Department Responsiveness
Although the Covid-19 pandemic is mostly in the past, many companies haven’t fully returned to the office. Some have, some won’t, and some are still weighing their options and considering a hybrid setup.
One fear that some executives have is that work from home may cause their employees to become less productive or responsive.
When it comes to Legal, two in three respondents described Legal as unresponsive, which was also cited as a primary reason why Legal hasn’t been able to successfully step into the role of key business partner. On top of that, 71% admitted that they had to wait days or weeks for Legal to respond to a question or request.
Many internal clients acknowledge that the time it takes to address a legal request will greatly depend on the nature of the request. Some might be done in minutes, while others could require months of support. While respondents are willing to be flexible, they indicated that they would at least like some status updates regarding the original request.
The implementation of a CLM would be able to automate such responses, freeing Legal from spending time sending messages about basic updates. The CLM can also be configured to inform stakeholders about status changes, alerts, and other notifications whenever requests are accepted and work is done to fulfill the request.
When Legal is unresponsive and not transparent, teams get tired of waiting. Accordingly, they do what they need to do to make sure work gets done, even if it means bypassing Legal.
The continued lack of responsiveness has had an impact on the number of colleagues who are willing to bypass their company’s legal department.
In 2022, 65% of employees admitted to bypassing their legal department. In 2023, in spite of the adverse economic environment, that number inched upwards slightly to 67%.
The leading reasons why teams bypass Legal are as follows:
- Too much bureaucracy and red tape
- Slows down work and employees
- Poor understanding of business needs
2023 has been a difficult year. On the one hand, teams need to be able to act quickly when responding to challenges. The bank runs at Silvergate, First Republic, and Silicon Valley Bank are proof of how current events can trigger collapses faster before a response can be made. As a result, teams are likely on edge.
But on the other hand, bypassing Legal exposes companies to excessive contract risk. Rushed contracting can result in non-compliance penalties, wasted funds, reputational losses, or becoming locked into disadvantageous boilerplate provisions. Once considered a systemically important bank, Credit Suisse ended up being brought down after years of scandals, mismanagement, and risky deals that drained profitability.
Any solution should take into consideration the need for teams to act quickly as well as ensure all contract management actions are carried out in compliance with policies and regulations.
An extreme solution would be to declare that all contracts must go through a specific process in order to be considered valid. While effective, this wouldn’t help Legal improve its reputation and ability to collaborate with other teams.
A better approach would be to set up contracting processes that speed up contracting stages. This could be automated document drafting, e-signatures, pre-approved contract templates, or GPT-3 features. Any process that’s enacted should reduce red tape while guaranteeing compliance.
The ideal solution would be to bring all stakeholders to the table and hash out how Legal can support other teams in their work so that there is a positive material impact for the company.
Legal Department Impact
When asked how Legal can provide effective support during times of economic uncertainty, the leading answer by far was better communication & collaboration with 43% of non-legal respondents, followed by a distant second of streamlined processes and accelerated deliverable due dates.
Specifically, non-legal teams want Legal to provide a better and more involved client service experience.
Phrased differently, this means non-legal teams want Legal to help them. This is a win-win for Legal. It gives them a golden opportunity to drive a material impact for the company’s top and bottom lines while affording Legal a chance to earn more trust.
This foundation already exists as 57% of respondents believe that Legal has a positive impact on corporate culture and 56% feel that Legal helps generate more sales and revenue. Legal needs to capitalize on this knowledge and keep pushing forward, shoring up its weaknesses while building on its strengths.
Legal as a strength
One such strength is contracting and at the negotiating table. 91% highlighted Legal’s role in such activities as key to the company. 76% drew attention to Legal’s ability to negotiate as a major material factor in generating revenue for the company. And another 61% mentioned that Legal positively influenced the company’s brand image. Both of these results further underscore the material impact Legal has on the organization.
Bolstering these beliefs is that 53% of non-legal employees think Legal helps accelerate deal cycles, which is up from 48% in 2022.
While this is another good sign, there is still room for improvement: 45% of colleagues who describe Legal’s ability to negotiate as poor also feel that Legal is too slow, while another 15% report that legal operations are too “manual” and inefficient.
To keep making gains in accelerating deal cycles, Legal will have to determine if it’s time to search for a new technology that will help them accomplish their work faster in a more efficient manner.
Legal can also spearhead operational transformations by exploring the possibility of delegating certain contracting processes.
For example, to address the tendency of teams to bypass Legal, Legal can set up workflows that speed up work and keep Legal in control while allowing other teams to operate at their own pace. This includes collaborative contract management, where legal and non-legal teams work together efficiently throughout the contract lifecycle.
Simple, routine contracts that are high-volume and low-value, and whose terms experience little to no change, can be automated so that other departments can process them with minimal involvement from Legal. This can include common documents like NDAs, DPAs, employment agreements, and license agreements.
Instead of waiting for weeks and months, teams can create their own legal-approved documentation in minutes, catapulting sales cycles to new heights.
These are just a few examples of how Legal can spark a material change to processes while supercharging revenue generation. At the same time, Legal can pivot from doing to leading while asserting itself as a critical strategic business partner whose contributions are essential for company success.
Chapter 1 of Onit’s ELR report reveals that the current situation for legal departments is both quite complicated yet rich with opportunities. However, in order to enjoy the opportunities that exist, legal teams need to improve the way they work and interact with other teams.
Although every legal team has its own problems, the first step should be to address and prevent non-compliance. Bypassing Legal carries significant risk and could lead to a complete catastrophe for the company.
That being said, Legal’s solution shouldn’t be to blindly mandate changes as it will simply wreck Legal’s reputation even more. Instead, Legal should collaborate and discuss possible contract lifecycle management solutions with stakeholders. This would have the dual effect of addressing non-compliance while building channels of communication.
Download your copy of the 2023 ELR report for even more analysis and insights.