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January 13, 2023

How to avoid Silos Work in Legal Ops

How to implement digitalization, service delivery, collaboration, business strategy, and business culture to avoid silos.

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For companies to survive in today’s volatile economy and grow revenue, cross-silo collaboration is essential. But performance management systems discourage it. More than 8,000 senior managers across biotech, banking, consumer products, energy, and law are found to be affected by siloed performance targets.

Most companies incentivize employees to maximize short-term results, making them focus on reaching their numbers at the cost of losing sight of the organization’s larger goals. Despite this, legal operations continue to succeed.

The main reason, more companies realize how beneficial legal operations can be to their legal department and overall company. Across the globe, companies create efficient legal departments and optimize workflows every day.

This article offers tips on managing legal operations and ensuring the entire organization benefits successfully.

In this article, we will cover the following:

Legal operations ensure that the firm offers legal services efficiently and profitably to stimulate the legal departments’ growth and performance. It also involves running a law firm’s business side, which includes;

  • Increasing company productivity
  • Reducing/avoiding risks
  • Compliance monitoring
  • Handling departmental budgets
  • Implementing new technologies
  • Using legal analytics tools to analyze data
  • Third-party provider sourcing and management

Achieving operational excellence often involves focusing efforts on specific departments or teams and implementing strategies accordingly.

Any activity that keeps a business running falls under the category of operations. Aside from the items above, several departments and processes support them, such as:

  • Sales
  • IT
  • Facilities management
  • HR
  • Finance
  • Marketing

Organize Your Company to Avoid Silos Work

Divergent goals of different units of an organization can result in silos of work. In addition to being an obstacle to collaboration and leading to decreased performance, silos also make it difficult for customers to have a positive experience.

Using customer knowledge is the best way to make decisions. But due to time pressure and lack of information, business decisions are often based on assumptions. Often, information is needed to reinforce an existing conclusion or speed up a current procedure.

Unfortunately, most companies have silos with a limited understanding of their customers instead of sharing the same knowledge across teams and adding information specific to that team. In the customer’s eyes, these silos manifest as communication breakdowns, contradictory information, poor service, or other forms of negativity.

Ultimately, success in today’s marketplace reflects the culture you promote, so it is extremely important to align your strategy accordingly.

To facilitate collaboration across departments, here are a few practical tips:

A successful digital transformation requires cross-functional collaboration. Why? Because the success of a business depends on all departments working together in symbiosis to maximize revenue.

A strong partnership with the legal department, specifically legal operations, is beneficial to the overall health and success of the company. Due to social and economic factors, organizations are re-imagining legacy technologies and processes to collaborate remotely.

Across businesses, legal ops teams have been formed as a strategic priority to ensure cross-functional alignment. In addition to compliance and risk management, legal operations are the glue that holds together the legal function and touches every department in the organization.

The legal role in a business evolves, and so must its relationships. Below are a few ways legal ops can align with other business departments.

The legal department often acts as a cost center in less innovative firms and dictates contract terms within a silo. In a 2018 study on contract management, 87% of employees said legal reviews could take up to six weeks. Often, legal is blamed for the prolonged sales cycle and bottlenecks across departments.

But a more efficient communication system, processes, and technology can help the legal department leverage its strategic positioning within a company. The legal department can lead the charge by creating best practices:

  • For cross-functional communication
  • Advocating easy information exchange
  • Making sure documents are accessible when needed

By doing so, each department and the company can run more efficiently. Moreover, businesses can thrive internally and externally by streamlining cross-functional processes and maintaining healthy workplace relationships.

Incorporating Technology into Your Business

Tech tools help encourage cross-departmental operational team collaboration in the legal department. Despite not having the biggest tech stack, legal can benefit from investment in tools that:

  • Manage vendor relationships
  • Reduce outside counsel spending
  • Manage online contracts

With digital contracting and contract management, legal ops can better understand all contracts without micromanaging their execution. These tools allow them to embark on cross-functional initiatives impacting the business significantly.

Exchange of Knowledge

Since Legal works with every department, they must provide new and innovative information-sharing methods. Legal is often the company’s compliance expert (unless there is a separate compliance department) and provides guidelines for operating with less risk for the rest of the company.

Strategic planning can benefit more than just legal ops. In this case, you might need to procure a tool with the following:

  • A robust reporting system that is accessible by all departments
  • Stores and tracks all contracts in one place
  • Provides other departments with the necessary data

Developing Standard agreements

Aside from providing strategic business input, the legal department also oversees contracting. Yet contracts tend to take up the majority of their time, which leaves the Legal department with little time to focus on:

  • On higher-value agreements, when drafting new terms for low-value contracts
  • Reviewing vendor and sales agreements before they are sent out
  • And keeping track of versions and updates for existing online agreements

However, legal ops can better organize contracts by differentiating between standardized and personalized contracts and identifying which ones to focus on. They can create pre-approved terms for other departments to add to or remove from agreements they’re negotiating and redlining, such as M&A deals.

This allows them time to negotiate and redline high-value contracts.

Developing a Strategy

A siloed legal operations department cannot form a strategy. Legal ops and in-house must be fully aware of the company’s goals and strategic initiatives and how their role contributes to them.

It is more effective for legal to collaborate with other departments in developing a strategy that aligns with and supports the goals of the individual departments and the company. Changing simple processes like contract management can improve cross-functional alignment with legal and legal operations.

It is possible to streamline legal processes and enhance the relationship between legal and other departments by implementing legal technology like digital contracting.

Making Technology Work for You

Technology is king in professional services today. Besides measuring operational efficiency, it also frees up your team from a lot of administrative work and adds intelligence to the process.

Using color-coded antiquated spreadsheets as a unified source of truth will only cause more inaccurate data across project management, legal operations, and finance.

Team members are often forced to fill out unnecessary spreadsheets used only for payroll. This slows down teams. For resource management or time registration, for example, spreadsheets or disparate systems won’t be able to move data efficiently simply because they’re not designed for this.

Let’s examine spreadsheets for a moment. Are they capable of providing answers to questions like

  • Is the project currently on track?
  • Is there an operating margin?
  • Is the project profitable?

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Spreadsheets are not the answer

They can’t be since spreadsheets can only automate a few things. Thus, if a spreadsheet is a barrier to getting your work done or tackling the core issue quickly, you should consider another way to improve your personal KPIs.

It can be challenging to track how the numbers relate to the actual operation, even after gathering the numbers. Essentially, each operation becomes a black box: inputs go in, outputs come out, and little attention is paid to how the transformation works.

This is an obvious disadvantage of using point solutions from different vendors or, more importantly, the lack of connectivity between them. To avoid this outcome, service businesses have begun to use centralized software.

Additionally, it’s always challenging to keep separate spreadsheets updated for management problems. People forget to fill them out or do not have the time to do so. There is often no way to know how the changes you make might impact the work of several others.

Software Can Help You Make the Digital Transition

An organization seeking to expand during the digital age must have an entity management system. Companies need a solution that simplifies all compliance aspects to navigate compliance and grow effectively.

With Newton’s corporate services offerings, your organization will benefit from a full-service team of professionals dedicated to simplifying your business processes and enhancing your growth.

You no longer need to worry about locating compliance documents, ensuring departments work together, or hiring an internal team as you grow. With a full range of corporate services and entity management solutions, we’re here to help. Find out how Newton can help your business today.

About this article

Sources

Harvard Business Review (2022). Performance Management Shouldn't Kill Collaboration
StartMyLLC (2023). Contract Management Statistics 2023 – Everything You Need to Know
Forecast app (2021). How to Improve Operational Efficiency: A Start-to-Finish Guide
CLOC (2019). What Is Legal Operations?
BCD.CA. MakingTechnology Work for Your Business – A Guide for Entrepreneurs
Asana (2022). 6 ways digital transformation can improve your business


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Featured Image: Photo by Tim van der Kuip on Unsplash
Featured CTA blog post: Photo by Jurica Koletić on Unsplash / Photo by Christina @ wocintechchat.com on Unsplash

Published by Dena Standley in Legal Ops
Tags: Challenges, Legal Ops, Silos Work
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January 6, 2023

Challenges in Corporate Governance

Learn about the most important challenges of corporate governance and how three major jurisdictions, Germany, Luxembourg, and the UK differ.

Dear Legal Ops!
Welcome to this week’s Let’s talk about Legal Ops, offered by Newton. We tackle corporate legal departments, speed up processes, and career growth. Please send us your questions; in return, we come back with real insights and actionable tips.
If you find this post valuable, don't miss the chance to check out our latest posts.

Subscribe to get access to more posts like these!

Corporate governance can, in theory, seem a rather obscure and vague subject, especially when confused with the issue of a company’s ethical behaviour – or lack thereof. Many definitions have been given to the concept of governance. Quite simply, however, it can be summarised as the system by which companies are controlled and directed. It comprises the processes, rules and laws governing a company’s conduct, particularly concerning its shareholders and board. In the following article, we deep dive into the challenges of corporate governance with a brief comparison of the differences between Germany, Luxembourg and the UK.

In this article, we will cover the following:

Why is Corporate Governance so important?

The Wirecard fraud case currently being tried in Germany is one of the country’s greatest corporate frauds in its history and an embarrassment for its regulatory authorities. It raises significant questions about how this scandal could have been allowed to occur – especially given the importance that German regulation places on corporate governance.

In the 21st century, good corporate governance is considered so important due to the fundamental role it plays in ensuring that a company is run both effectively and efficiently, with appropriate regard to the interests of every relevant stakeholder, including employees, shareholders, and customers. Fundamentally, corporate governance plays a key role in both building and organising relationships within companies, and generating profits for shareholders and other stakeholders.

A vital component of corporate governance is the fact that it also tends to determine the ability of a company to cope with a crisis. in this way, a company’s stability and success can be largely attributed to its level of corporate governance, given the importance of a firm framework based on clear values such as honesty and accountability. The strength of these principles in an organisation will direct the way it is managed, its success and the extent of its attractiveness to investors.

As the Organisation for Economic Cooperation and Development (OECD) notes, corporate governance is the “structure by which business corporations are directed and governed.” Good corporate governance, in terms of transparency and compliance with key principles such as accountability in organizations, also has wider implications for business and society in general, on both a national and a global scale. It results in increases in shareholder value, the ability of businesses to weather difficult financial periods and environments, and the general improvement of the global economy.

Germany has been rocked by the Wirecard scandal. The company, which grew from a small and unknown payments company to become one of Europe’s largest fintech firms, had long been held up as an example of the opportunities that Germany’s digital economy offers companies for advancement. Yet the later discovery of Wirecard’s engagement in dishonest accounting procedures and the concealment of debt of billion of euros, culminating in its collapse in June 2020, has left investors and regulators in shock. Crucially, it has raised pertinent questions about the sufficiency of Germany’s regulation of companies and corporate governance.

Understanding the Challenges and Complexity of Corporate Governance

Corporate governance does not take place in a vacuum. It is the result of a nation’s legal, cultural, historic and economic development and landscape, and it is for these reasons that governance structures vary so differently between jurisdictions. Global corporate governance is a pipe dream; there is no alternative but to accept the often-wide international variations between nations and companies, and the legislative and regulatory bases upon which their corporate governance is based. This is in any case inevitable, given the fact that corporate governance may be said to be inextricably connected to the prevailing economic development of a country’s economy and the way in which this has determined organisational ownership and control structures.

Corporate Governance in the UK

This distinction is especially noticeable in the way in which European corporate ownership patterns differ so distinctively from UK ownership structures, and this has carried over into patterns of corporate governance. In Europe, share ownership tends to be concentrated much more significantly in the hands of a smaller group of shareholders and as such, is more orientated towards bank ownership rather than that of financial institutions. Whilst this results in a strong group of owners, it also means that other shareholders are weak and scattered and subject to the control of capital-owning blockholders that have the power to appoint managers. This is precisely the opposite of the UK, or the Anglo-Saxon system, where share ownership tends to be highly fragmented. This results in the ability of a company’s board to exert a significant amount of power over a company’s direction – something that is rarely seen in Europe, where many companies are tightly owned by wealthy families in possession of over 20% of shares.

Although today most countries have corporate governance codes, such as the UK’s Combined Code on Corporate Governance, these are generally soft law that is not legally binding but is rather intended to influence behaviour and set standards. Whilst the UK Combined Code is certainly sophisticated, it is essentially a guide for company self-regulation. The overriding principle in the UK is that of “comply or explain”, by which a compromise is intended to be achieved through the allowance to companies of some flexibility whilst ensuring that reporting and governance requirements are met.

Yet this soft law has no overarching ability actually to improve director accountability and company transparency. Although the UK Code might initially appear strict, it can be criticized for its broadness as well as being open to interpretation. Many companies consider that they have complied with their duties by issuing generic policy statements.

Corporate Governance in Germany

In contrast to the UK, Germany may be said to have one of the tightest regulatory structures for corporate governance. In addition to this, in contrast to the UK, German boards are comprised of two-tier organisations, which is intended to ensure a separation between management and control. Yet, in reality, the functions assigned to the management board and supervisory board are divided differently depending on the specific industry, company size, tradition, and, especially, if one board or the other has strong leaders.

A vital reason for the mandatory policy of the two-tier board in Germany is the politically entrenched policy of labour co-determination. This powerful instrument of corporate governance enables workers to enjoy rights that allow them to actively shape their working environment. This is hardly something that a one-tier board would be likely to tolerate. In contrast to Germany, the reason for the existence of the one-tier board in the UK is likely historically due to the emergency of entrepreneurial activity and resistance to any state or trade union attempts to oversee company structures and introduce labour co-determination. Although labour codetermination is a feature in many European countries, German regulation is significant for its regulatory mandate that there must be an equal shareholder and employee membership at the supervisory board level.

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Corporate Governance in Luxembourg

Luxembourg, in contrast, is a rather more complex case; public limited liability companies, for example, have the choice between a two-tier or a one-tier board structure. It is certainly curious that the overwhelmingly preferred option in Luxembourg is the one-tier structure, suggesting that in the absence of regulatory force, companies prefer the freedom of a mixed board that does not separate supervisory and management functions.  Perhaps Germany too would not embrace two-tier boards and labour codetermination were its companies provided with such a choice. That’s not to say, however, that Germany is without fault. Local emphasis on employee representation has blocked companies from making necessary redundancies, whilst the evolving door that exists between the two tiers of a board has resulted in problematic conflicts of interest.

As an international financial centre, Luxembourg’s corporate governance principles should objectively be stricter, and yet there is no single corporate governance code that is applicable to all companies. Furthermore, the risks of short-termism have been recognised and there is a need to improve board governance structures and improve the focus on reporting requirements. Indeed, there have been various rumbles over the years regarding violations of good corporate governance principles, especially in relation to the close relationships and overlapping interests that exist between the political class, the business community, and its regulators.

Conclusion

Regardless of the differences in corporate governance between the UK, Luxembourg and Germany, rules are only as good as their enforcement. Each nation has developed its own systems and rules in the context of its historical, cultural, economic and legal features, and corporate governance is also inevitably shaped by the economic and political landscape. Regulation and the monitoring of corporate governance is a complex endeavour, and whilst the aim is ultimately to ensure accountability, an accommodation must also be made with the practicalities of business.

About this article

Sources

Financial Times (2019). German governance must be fit for purpose Recent scandals have exposed shortcomings in the corporate model
Kelleher, E. (2013). Luxembourg faces fresh criticism over good governance
European Journal of Business & Management Research (2021). Corporate Governance and Financial Fraud of Wirecard
Mondaq (2022). Luxembourg: Corporate Governance Comparative Guide
No. 13 Hans-Böckler-Stiftung, Dusseldorf (2018). Co-determination in Germany: A Beginner’s Guide
Reuters (2022). Wirecard bosses’ fraud trial begins after scandal that rocked Germany
Deakin Law Review. Vol. 23: 177-208 (2018). Are Corporate Governance Code Disclosure and Engagement Principles Effective Vehicles for Corporate Accountability? The United Kingdom as a Case Study
The Organisation for Economic Cooperation and Development (OECD) (2014). The OECD Principles of Corporate Governance OECD Publication Service
Thomson Reuters. Practical Law (2022). Corporate governance and directors' duties in Luxembourg: overview
United Kingdom (2018). The Combined Code on Corporate Governance

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Featured Image: Photo by airfocus on Unsplash
Featured CTA blog post: Photo by Jurica Koletić on Unsplash / Photo by Christina @ wocintechchat.com on Unsplash

Published by Alexandra Singer in Corporate Governance
Tags: Challenges, Germany, Luxembourg, UK
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Flexible workflows for corporate governance

SOLUTIONS - coming soon

Corporate Governance

VCs & Venture Backed Companies

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Trust Companies

Startup

Business

Enterprise

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© Newton 2023. All rights reserved.