Legal Core vs Non-Core

The notion of deciding between core and non-core activities sends a shiver down the spine of most lawyers.

To many, the separation implies that non-core activities have been judged less important, anathema if your approach to risk is “none shall pass!”.

Before getting to what is and what is not a core activity, how to decide and how to move forward from that point, let’s consider why we’re doing this in the first place.

Strategy is about saying “no”

In the previous we discussed the importance of strategy. Now comes the piece many people do not understand about strategy.

Strategy — in any context — is first and foremost about realising that you simply cannot do everything, and then deciding what not to do.

You may have grown up in an environment — private practice — where this question is very often ducked, for seemingly good reasons.

Most firms do not ‘grow their own’ all the time. Lateral partner hires arrive with heterogeneous client bases and are assimilated into the firm, which then gains all kinds of clients which might not fit with its strategy. Instead of offloading these clients — politically risky unless they are diabolically unprofitable — the firm allows the partner to keep acting for them, and the firm grows in a very lopsided way which inveighs against clear strategy.

Companies have a much keener focus on strategy. Those which try to do too much quickly come a cropper. Their Legal departments should look, therefore, to what commercial people do, not what other lawyers do.

While operating your strategy, take a lead from the French Resistance in WWII: Everything which is not working for you is working against you.

Core thinking

To focus on what are your Core priorities, ask yourself the following questions:

1. What is your team’s purpose?

2. What is your team actually doing with its collective hours?

3. What should your team actually be doing with its collective hours? (see Q1)

4. What should your team not be doing?

5. What activities could possibly sit elsewhere?

Your main purpose, as previously discussed, is to contribute to the growth agenda of the company. Everything you do needs to be seen through that lens.

So, you will naturally prioritise activities which support this goal, for instance strategic partnerships with other market players, M&A, funding and so on.

If your department is bogged down in low-risk contracts, for instance data subject access requests (DSARs), administration around contract management or general project management, you’re wasting your precious internal resource.

Insourcing…

Before you send things outside the company, consider what your internal users might be able to do themselves, with minimal support from you if things go awry.

Try giving DSARs to the team which uses them and instruct them on what they need to do. Make it clear the commercial risk sits with them, but that you have their back if things escalate.

Similarly, most negotiations are commercial activities with a legal wrapper. Legal should not be project managing them from start to finish. That responsibility should sit with the department in question, again with support from Legal if things get tricky.

One client we advised implemented this process and made negotiations fully 30% shorter on average as a result.

We discuss this topic in some detail in our previous piece on Legal Design.

…and outsourcing

Before we discuss outsourcing, we need to get our terms straight. When we use the ‘o’ word, we are not talking about taking specialist advice from law firms on such matters as regulatory conduct or M&A.

Instead, we are talking about internal processes which could and should be handed over to a third party.

Outsourcing will save you time and money and guard the aforementioned precious internal resource for more important activities.

Understandably, though, many lawyers are nervous about outsourcing whole chunks of their activity, especially if they’ve never done it before.

Let’s look at a list of the main objections to outsourcing. Do these mirror your own concerns?

• I’d rather do things myself or supervise my own team, to make sure the quality is right.
• If we lose whole ‘volume’ functions, we may just become a postbox for legal enquiries for the business.
• Outsourcing is admitting that some things are less important, and as lawyers we know that everything is important.
• We have internal resources which are sunk costs, it’ll be cheaper if they do it.

Outsourcing is a matter of trust and control.

You trust your own team and supervising them directly gives you more control, but keeping everything in-team can cause problems. Getting your team to do low-risk volume work will dent morale, make it more difficult to recruit and waste your highly qualified resource.

If you find the right outsourcer, they become an extension of your Legal team. They’ll be more specialist than your team on the particular task you give them — as they do the same thing day in and day out — and more flexible, able to substitute resource quickly and effectively so you have no breaks in service.

If you choose to create an internal ‘champion’ instead for something like DSARs, for instance, if that person is sick or leaves, the gap needs to be plugged immediately by another team member or service ceases. Alternatively, if you get your whole team to do it, you’re wasting a portion of everyone’s time.

As to becoming a postbox or being seen simply as a hub, that’s your ego talking. What the business cares about is profitable growth, and the more efficiently and effectively you can handle all its legal and quasi-legal issues and steer it out of danger, the better. Nothing else matters.

On the final point, about costs, this is a mirage. Your internal resource may be a ‘sunk cost’ in your eyes, but it’s a resource that should be deployed to maximum effect in pursuit of your strategy, not gummed up with a glut of small fry contracts. If your team is occupied in this way, you’ll end up having to get law firms to do more, and as you will know only too well, there’s no more expensive way of doing something.

What about those ‘grey areas’?

It’s a typical lawyer reaction to think there might be grey areas between core and non-core activities. How about something which is pretty important but somewhat irregular? How about legal processes which are vital but completely humdrum?

Our view is that grey areas are a cop-out. Imagining there is a middle ground adds a level of confusion and is entirely a signal that you are afraid to make a decision on something.

The truth is that there are no hard and fast core and non-core activities, it will vary from company to company. The power to make the decision on which processes are core and which are not is in your hands, so make the call.

Any grey area or middle ground is entirely in your head, and allowing it to exist will be confusing, inefficient and fail to effectively express your strategy. In that sense, it’s not working for you, it’s working against you. Don’t allow it to arise in the first place.

How to find a trusted partner

Trust is key, and if you’re concerned about this, you’re right to be. Perhaps you’ve been burned in the past or have heard horror stories, or maybe you’ve just never done this before.

Either way you need a good process for identifying and querying your potential providers.

Here’s a quick checklist, which you can build into your thinking:

• Recommendations are good, but don’t rely on them to the exclusion of everything else on this list. Remember there are diff’rent strokes for diff’rent folks.
• Does the provider seem to align with your values? What are their values, and are there any which you raise an eyebrow at?
• How well do they understand your business? Build some good questions you can drill them with at the pitch meeting.
• What is their intended pattern of communication? What do they use with other clients? If it’s a quarterly check-in, it may not be enough for you, but daily might be unnecessary and irksome.
• How transparent is their cost structure, and how forgiving is it to changes along the way as you develop your services?
• Are you intending them to liaise directly with the business? See how they generally do things and use your instinct as to whether you’d be happy for this to happen.
• What services do they offer? If they can do everything you need to outsource, great, but this is a dream scenario. Building a group of trusted advisers who are best of breed is better than creating a panel of generalists to whom you throw bones and see who’s cheapest.
• Do you like them? It’s easier to work with people you like, but if they’re outclassed technically by people you don’t much care for, that might outweigh the Like Factor and get you a better service, even if it may feel a little chilly.

In summary

As Head of Legal, you shouldn’t be letting your preconceptions or fears rule you. Your job is to execute your carefully planned strategy to maximum effect in pursuit of the company’s goals. You need to make decisions, not duck them, and make choices which may be counterintuitive to less experienced heads, but which you have calculated will contribute to your strategy not work against it.