From Cost to Profit Centre: Redefining the Role of the Legal Department
Martindale-Hubbell global report shows how in-house counsel can turn their time into revenue by taking a stakeholder stance
LONDON, November 2, 2010 - Management boards and general counsel are urged to revaluate the remit of their legal teams in a thought-provoking new report, "The Profitable Legal Department: How legal departments can prosper by generating revenue for their company."
The report examines global best practice and demonstrates how, by adopting the stance of stakeholders, in-house counsel and retained lawyers can develop recovery programs to deliver additional revenue for the business and turn the legal team into a profit centre. Commissioned by LexisNexis® Martindale-Hubbell®, the report was compiled by Patrick Wilkins of European GC and Jeffrey Forbes of the Forbes Institute.
The experience and results of three different recovery programs are examined via compelling case studies from DuPont, Tyco and Standard Life, each of which have successfully generated additional revenue for their business. The report also sets out six-steps to setting up a recovery program, including consideration of five criteria that must be met before any recovery can be pursued.
In the six years since DuPont Legal started its recovery program, more than U.S. $1.5 billion has been recovered for the corporation. In 2009, four out of five DuPont recoveries were resolved without litigation and most without the need for outside counsel. Standard Life's legal team took an innovative approach to get its shareholders to forego a cash dividend and increase their shareholding, which preserved ¬£101 million (approx. U.S. $162 million) for the business. Whilst Tyco's recovery program is still described as being in the experimental phase, it has already successfully shifted the company's culture to an affirmative stance that is no longer reluctant to pursue infringement of IP or theft of customer data.
"With many businesses still under immense financial pressure and fewer transactional deals in the market, looking at other revenue opportunities makes sense. This latest report highlights how in-house counsel who assert their company's legal rights, have delivered a real return on investment for their organisations through effective legal work," said Derek Benton, Director, International Operations at Martindale-Hubbell. "The recovery program approach does not advocate increased litigation, rather a change of mindset for the business, from a passive approach of conflict avoidance, to one that asserts its legal rights to ensure that business-to-business agreements are honoured."
What is a Legal Recovery Program?
A recovery program is a formal process based on vigilant legal intervention. Lawyers keep an eye on business processes beyond a normal business transaction; typically by monitoring agreements, patents and other contracts, to discover or detect errors or infringements and seek a remedy or compensation for them. The main objective is to assert a company's rights by recovering lost value which can positively contribute to profitability. Recoveries can result from patent infringements, to unfulfilled warranties, liabilities for accidents, stoppages in factories, tax matters and shortfalls in currency fluctuations. They are many and varied, and their value can range from as little as U.S. $30,000 to millions of dollars.
Can in-house lawyers ethically seek profit?
Seeking profit does not inherently conflict with an in-house lawyer's primary role as a legal advisor to the company - the core principle of a recovery program is to enforce a company's rights through negotiation. Indeed, most organisations, including those with a formal recovery program, prefer to avoid litigation due to the expense, time and resource demands and therefore pursue litigation only as a last resort.
Ultimately, a recovery program minimises the need to assert future claims, whilst demonstrating a company's preparedness to pursue legitimate claims. Whether achieved formally or informally the results of a recovery program can add quantifiable value to the company's bottom line.
Further Report Information
To obtain a free copy of the summary or full report: "The Profitable Legal Department: How Legal Departments can Prosper by Generating Revenue for their Company," visit: www.martindale-hubbell.co.uk/profit
Note to Editors: A copy of the full report is available upon request.
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