We all know the story of Goldilocks and The Three Bears. She breaks into a house where three bears live and tries each bear’s bowl of porridge that is on the table in the home. The first bowl is too hot, the second too cold, and third is just right. Okay, clearly you and I are well past the age of fairy tales. So, what does this have to do with being an in-house counsel? More than you would think. Goldilocks represents a particularly persistent and seemingly intractable problem that many companies struggle to even acknowledge, let alone adequately resolve.

A Tale of Two Companies

Company X: Burdened by Process

Welcome to Company X. It is a well-established global business with a growing in-house legal team. The company had outsourced all of their legal needs, but new leadership decided to bring the legal function in-house as much as possible. You are the junior corporate counsel on the team. You have closed many relatively minor deals, but are about to attempt your first true big one. Yet, as a result of very recently shifting all legal work in-house, there are no internal processes in place to handle who in finance needs to review the complex financial terms, who in risk management needs to review the insurance provisions etc. What do you do? You’re not sure, but you know something needs to change. You nevertheless manage to find a way to close the deal and quicker than anticipated, yet are faced with the formidable prospect of realizing that you and your team need to establish brand new processes to ensure all relevant stakeholders are on the same page and are brought into the fold from the very beginning. A daunting task.

Company Y: Burdened by no Process

Welcome to Company Y. Like Company X, it is also a well-established global business with a growing in-house legal team. Yet, unlike Company X, the legal function has always been primarily in-house. In addition, there are well-established processes in place regarding risk management, finance, as well as documentation establishing what Company Y’s risk profile and key provisions are. You are also lucky enough to have a robust template library to work with. As at Company X, you are the junior counsel on the team and have closed a number of relatively minor deals and are now faced with your fist big deal. However, you are comforted by the consistent and reliable workflow processes and documentation that your company has in place and use those as guideposts for closing the deal. Again, you manage to close the deal, but realize that the process took far longer than you had anticipated. The guideposts were helpful, but simultaneously too often they seemed to be more like roadblocks. It also strikes you as odd that employee G and employee H were a part of the deal when they really had no material role to play in making the deal happen and neither they nor you thought that they were necessary to the process.

Be Warned: Process is not a Cure-All.

So, what do these two examples illustrate? While it is indeed important to have systems and processes in place, simply having these things in place and working in harmony together is not a cure-all. There is also a danger hiding in plain sight, which is what the two examples above are meant to illustrate. I call it the Goldilocks Conundrum. Just like Goldilocks and her porridge being too hot, too cold, or just right, putting into place reliable and consistent systems and processes can yield gains in efficiency, but having too many or too few can yield just the opposite. You need just the right amount of process, while not becoming hamstrung by their presence or the lack of their presence.

Goldilocks: The “Just Right” Balance

Finding the right balance is elusive. To determine the proper balance requires patience, some trial and error, but most importantly, a working knowledge of the company and its culture. That knowledge only comes with a mix of experience and dedication to truly understanding the company for which you work. How established is the company’s legal department? How big is the company? What space/industry is the company in? How entrenched are the company’s current policies and procedures? What policies seem to work well and which ones are seen as hindrances by the sales teams? How about in the eyes of the legal team? These are the types of threshold questions that one must ask and answer to arrive at what could be the right balance.

Finding the right balance also requires something more than gaining knowledge. It also requires the willingness and the ability to tailor any existing processes to align with the way the company operates, since not all companies or all legal departments operate the same way. Balance also demands that a crucial need be met. This need is to satisfy competing stakeholders with often differing goals. The trick to satisfying this need is getting all parties to buy-in to the idea of changing an existing process. How do you do this? Get each stakeholder to see how having a new process to follow would benefit him or her.

  • For example, having a set of standard templates for commonly used agreements allows the business person to proffer that template to the other side, potentially speeding up the deal and avoiding a drawn-out negotiation. The businessperson sees the benefit for them, which is making the deal and the legal person sees the benefit from avoiding a long negotiation and knowing that the agreement aligns with the company’s risk profile.
  • Another example is having a process in place or a document accessible to both the business side and the legal side that allows for all parties to understand who the right contact for each department is, e.g. for insurance provisions, A is the contact or B if A is out, for financial provisions, B is the right contact, etc. The business person benefits from a more efficient process and knowing who to turn to for a certain type of question while legal benefits from avoiding playing the game of pass the contract, that each of us has played, perhaps more times than we care to count.

Being seen as a true resource and partner for the business team can facilitate finding this balance. Needless to say, it is easy to make suggestions, but far harder to follow through and put some of these suggestions into practice. Given this and how quickly technology can change, I’ll be periodically posting further entries regarding this subject.

For now, the above should provide some good food for thought. A second part in this introductory series arrives next week.