Rethinking Legal: Transforming a Cost Center Into a Value Center

“Is your legal counsel part of the team accelerating your business, or do you consider them primarily a cost center?”

I recently posed this question to a friend who also happens to be an experienced C-level innovator as we chatted about some of the opportunities and challenges facing his rapidly growing business.

“How do you measure their value?”

In my 11 years as general counsel to MRIS, and having now returned to private practice after completing the merger creating Bright MLS, I have had innumerable conversations with, and about, lawyers. Being GC during a time of so many industry innovations, disruptions, and business and legal challenges (and successes!), I firmly believe that there is need—and ample opportunity—to rethink the legal function to add significantly more value to the businesses that are driving change.

It’s the value side of the equation that is key. Typically, growth-oriented companies operate under time, money and resource constraints, offering less room for error than in more established companies. Leadership of these companies often don’t consider themselves ready for an experienced, full-time legal resource, although they regularly contend with matters that, if not strictly legal in nature, have legal considerations. Consequently, they do so without the benefit of counsel that has regular visibility into their normal business operations.

Attorneys are instead called upon as firefighters, brought onto the scene for the crisis du jour, whether it be an employment issue, a dispute needing resolution, an intellectual property issue, or a looming business deal or corporate matter. In little time, a company using counsel in this manner can find that it has built a network of on-call, on-demand resources ready to jump into the breach who, when the task is done, then return to the firehouse to await the next call.

The result, particularly in the context of growing companies, is that legal too often becomes a reactive function brought in later, when urgency is high and options are fewer. But while engaging counsel primarily on an as-needed basis may yield acceptable results, one should ask whether the approach is optimal. Put another way: Is the business getting the best return for legal dollars invested?

I would argue that the answer is probably no, except perhaps when there also is a senior level resource who also acts as the company’s “general counsel” having a view of the entire organization.

While at MRIS, I was privileged to be part of a collaborative business team that changed the model for delivering legal services to one where legal was a hands-on partner. Together we built an integrated internal and external legal function that performed as a team of coordinated resources supporting the company as it navigated a decade of change—ranging from new and alternative business models to growth of new technologies and players (such as national portals, social media, listing syndication and the shift from desktop to mobile), legal issues (such as content rights, copyrights and patent assertion entities), market consolidation, and various industry initiatives. As a GC, I often found that the smaller adjustments made before time and commitments limited options were more efficient, more cost-effective, and often mitigated the need for larger ones.

A general counsel operates most effectively at the convergence of business and legal. Integral to success is the experience, judgment and opportunity to walk with the senior team as an accountable advisor and guardian of the business. Ideally, this is coupled with a grasp of the drivers and the market to support advice that is both actionable and responsive. Building such a function requires an investment of time and attention, and, perhaps most importantly, a collaborative mindset that allows counsel to be present while decisions are made and before inertia sets in.

In other words: fire prevention before firefighting. In the medical field, one might put it in terms of wellness before illness. For growing companies, filling that functional gap to bridge the reactive and the proactive—whether the resources doing so are internal or external—provides an opportunity to transform the legal-business relationship for the benefit of the business. It requires a shift in thinking, and a shift in assessing value, but by moving beyond a transaction-based relationship to one that also is visible in the operations, legal can be a more valued partner to business, more than just a cost center.

I look forward to continuing the conversation.

Erik M. Feig, Esq. was general counsel of Metropolitan Regional Information Systems, Inc. (MRIS) from 2005 until completing the merger forming Bright MLS. He currently is Of Counsel to the law firm Nemphos Braue LLC in Maryland.