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Jameson Monteiro, Head of Legal Operations, Assurant, shares his experience of financial management and his tips for getting a seat at the table. The views in this article are the author's own, and do not represent the views of Juro nor those of CLOC.
2008 was, by any measure, an interesting year to start working in legal operations. The global financial crisis drove legal operations to the forefront of our minds; without it, this book might never have happened. As the member of the legal department with a financial background, I started reporting to the CLO, with a mandate to analyse and manage the most important financial indicators for legal - and make sure the CLO had them too. 10 years later, as head of legal operations, I form part of a legal and compliance group with a headcount of 300-400, including 65 attorneys, more than 40 cost centres, and a budget of more than $100m. It’s safe to say that the influence of financial pressures on legal has caused profound changes in what we do, and how we do it.
The first change to note was that the instruction from finance to make budget savings was now a concern that applied to every team. The prevailing wisdom had seen legal as the tail wagging the dog: a passive participant in its own budget conversation, usually told to reduce expenses regardless of what it needed. The development of legal operations as a discipline has allowed us to challenge that assumption, and emerge as a genuine business partner, due to the value we can bring to the table. The cost pressures remain, but we have a voice: where before we were told what to do, now we’re asked.
You need friends
This all means that the legal operations function is empowered to take control of legal’s budgeting and financial management. In my case, my internal customers are all the direct reports of the GC: the head of litigation, the head of government relations, the deputy GC, the head of corporate legal. I take budgeting and spreadsheets off the plate of these lawyers and let them focus on what they’re really here to do. Lawyers neither need nor want to analyse every line of a complex budget - therefore it’s our job in legal operations to understand that detail at the ground level, and know which details need to be reported up to the key decision-makers at the top.
To do this successfully, you need friends. It’s vital to network with the right people around the business: senior financial leadership under the CFO, and the financial stakeholders for each business unit. Understanding the financial operations of each business unit, at a granular level, will help you align with them - do they budget quarterly, or to an annual timeframe? To the calendar year, or the fiscal year? Is their business unit (and the company as a whole) in a growth phase, or non-growth? Is it preparing for a sale, or an acquisition? As well as aligning on these issues, you need to align your systems - do they manage budget with enterprise software? Do they use SaaS providers? Can you get a login to their dashboards? Access to the right people and the right systems will help you collect the data you need to make informed decisions, and report on those decisions at the right level - but you need stakeholders around the business to trust and buy into the process before you can do this.
Making the weather
Accurate forecasting is a great way to prove the value that financial management of legal can bring to a business. The number one external spend for legal departments is always outside counsel, and colleagues in the business often struggle to understand how those costs break down. Using an e-billing / matter management solution is a great way to cultivate a historical dataset, against which you can forecast future matters, whether that’s a lawsuit or a response to a new regulatory issue. Once an external law firm is attached to a legal issue, we can analyse their previous costs and project several billing scenarios - usually high-end, middle and low-end - and present those back to the business. With historical data to refer to, we can show them how each scenario would likely affect various financial and operational metrics in the business, and they can choose their preferred approach. Not only does this bring predictability, but it gives business units ownership of legal matters - they can prioritise the various legal investments they’re prepared to make, based on their risk appetite and the consequences they’re prepared to accept.
For a legal function to try and declare with any great certainty which will be the big-ticket legal costs several years from now is probably futile
However, it’s important not to try and forecast too far ahead; it makes sense for the business to work to three- and five-year plans, but for a legal function to try and declare with any great certainty which will be the big-ticket legal costs several years from now is probably futile. The current calendar year, plus the year that follows, is a sufficient time horizon to bring valuable insight, and stop short of analysis paralysis. Spending six months building a five-year legal budget plan, only to see the company sold a few months later, would be a frustrating outcome for any professional.
Like so many other areas of legal operations, communicating the right way is key to building trust and getting buy-in when it comes to financial management. Delivering accurate numbers to key stakeholders should be a no-brainer. If you pull data for a report and provide numbers to your CLO, who then presents to the CFO, only to find that his or her numbers don’t match, there are few ways to burn legal’s reputation faster. Getting that reconciliation right, on an ongoing basis, is crucial to being seen as a trusted business partner who adds value. Similarly, always communicate fully the risk profiles of legal budget decisions. As forecasters we can predict storms, but not always whether they’ll be category 1 or category 4; if stakeholders opt for a low investment against a legal issue, they need to know in detail the range of consequences that could follow. And if the picture changes, make sure they know as soon as you do - trust that was hard won can quickly be lost if not.
Suppress your inner lawyer
Of course, not every in-house department has the headcount to devote fully to financial management. Inevitably, lawyers without finance backgrounds will sometimes own and deliver this process. Making a success of this requires lawyers to understand how they differ from finance professionals. Lawyers operate for the most part in a world set in stone - the law is the law, and can be known and defined. Finance can’t - its stakeholders operated in a world where they must make decisions on 60-70% of all the information they need, and forecast the rest.
Making decisions without the full picture is hard to swallow for many lawyers, but it’s inevitable in financial management at scale
Making decisions without the full picture is hard to swallow for many lawyers, but it’s inevitable in financial management at scale. The more business-minded lawyers know that occasionally they need to suppress that legal mindset, and not sweat over every detail. Even 60% of the relevant information will quickly start to tell a story and point us in the right direction, if we know where to look. As time goes on, and financial management improves, the wins it brings start to be self-reinforcing; investing in it now is a smart way to future-proof legal’s value to the business. Embedding sensible financial management like this is the foundation upon which much of your legal operations success will be built.
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