LEGAL
The fast pace of globalization has not left the corporate legal department behind. We all find more instances where collaborating with our colleagues from around the globe is required to resolve the legal issues our company faces. This leads to challenges apart from the standard language concerns than can touch on all aspects of our business. Not just that, it also requires us to reevaluate some of the more simple actions we take daily. As more companies expand their legal departments’ reach beyond their native borders, there are many practical issues to take into consideration as you develop your global process and workflow relating to matters and invoices. Below are some of the key problems we have seen through years of both working in corporate departments and also working with companies looking to unify processes in locations around the globe.
Initiating any project, much less one on a global scale, can be a daunting task within any corporation. Coming up with the concept behind the project may be the first step, but many ideas fail to gain any traction because they failed to get properly initiated. The general counsel or others of similar influence and authority within the Legal Department are vital for providing direction and fostering support for the project among difference constituencies. Enlisting the support of executive sponsors in your company’s relevant business units is often the vital piece needed to help get your global initiative off the ground. Their backing of the project from the start will help minimize push back and serve to drive adoption of the new process and implementation of the desired change.
In addition to obtaining the backing of executive sponsors, you will also need to clearly articulate the business case and set your high-level objectives for the global initiative. Absent a clear purpose and identified objectives, it will be difficult to gain the backing that you need to get the initiative rolling.
While seemingly intuitive, having the wrong people can delay and many times kill your global initiative completely. As attorneys, we typically do not have the capacity to do all of the legwork necessary to bring the global initiative to fruition and need to rely on others in our department to get the initiative completed. The big question then is who should be the appropriate individuals to actually implement the initiative. Probably the most vital component of the project team is the project manager/coordinator. This individual is tasked with following up and ensuring that the other members of the team are staying on track and completing the necessary tasks on schedule. The project manager will also need to identify any challenges and risks (e.g. Office Politics, resistance to change, resistance to technology, language barriers, etc.), gather or work with others to gather the necessary information, and develop a project plan for the global initiative. The truly successful global initiatives generally have a project coordinator who is familiar with the legal department’s operations, understands the business, and has developed personal relationships with other groups within the company (i.e. human resources, accounts payable, IT, etc.).
The project coordinator usually cannot be on the ground in each of the global locations. As such, having office coordinators for each location will also help to ensure consistent (or as consistent as can be expected) messaging across all of the global locations.
We don’t like to think much about them, but our companies’ IT systems, specifically those supporting finances (e.g., Oracle, SAP, etc.), drive much of the day to day operations of our business and the processes that support it. In some cases, different locations of the company may use a different system, and as a result, use processes that are very different. Understanding these systems and how they drive processes can make your life much less frustrating as you seek to create global processes within your legal department.
To gain this understanding, you will need to reach out to those individuals who have a better understanding of these systems and how they may impact your department. Often this involves speaking with someone in the finance department about how their current processes work. This person will likely be able to offer insight into what potential issues may arise with your proposed processes. As the legal department seeks input at the initial stages of a global rollout, establishing a relationship with the appropriate individuals will make the rest of your rollout much easier. We have seen far too many process changes derailed or slowed down from failure to take into account these outside systems and processes.
We all need to collect and track information related to our matters. Individuals within a legal department often care about different pieces of information, which can lead to different methods and processes around matter management. Multiply that by individuals in locations around the globe working in different languages and the problem expands exponentially. While the information is out there, it becomes a major time suck to gather and organize the information into anything coherent for the general counsel or other executives. That fire drill has ruined many a night or weekend.
Departments who want to successfully work across the globe need to put processes in place that will standardize the collection and organization of matter information. This may be as simple as utilizing standard matter intake and report templates in Word. Many larger organizations utilize matter management software to handle these processes. Matter management software comes in many shapes and sizes. It can be standalone software or it can integrate other software you have. It can be behind the firewall or available over the Internet. It can be simpler or it can be complex with many advanced features. Only your department will be able to determine the right fit. As implementations of matter management software can take anywhere from a few months to over a year, you will want to be careful and methodical in your decisions since you will want the relationship to be a lasting one.
Whichever route you choose for your department, seek the input of individuals outside your location in making your choice. It is very difficult to get buy in after the fact if they have not been part of the process. Without that buy in, you will have an extremely difficult time realizing the objective after which you are going. Getting that buy in, though, is much easier than it may sound. Ask as many people in the department, including the support staff and paralegals, what process they use and what they like about it. Ask them if there is anything they wish their processes did better. If you are looking at software, ask them if they would like to participate in a demo (the vendors love to do demos). Each of these steps not only allows individuals to feel involved in shaping the eventual processes, it will lead to better processes by taking into account various viewpoints.
While in theory invoicing should not be a major concern (you get a bill and pay a bill), the expansion of your department’s processes only expands the issues surrounding your bills.
Each department has a process for handling invoice approvals, but most departments require the attorney overseeing the matter to review and approve the invoice. It is then often sent to a managing attorney(s) for approval. Within a domestic department, this can take days or weeks. With an international department, invoices that must cross borders for review can significantly extend the approval process. While we discuss some of the help technology can offer below, the approval process is one that must be investigated and streamlined as the department expands. Each department should consider who is essential in reviewing and approving invoices. Does it make sense for the general counsel to review all invoices over $5,000 or should that be raised to $20,000? Each department must decide for itself, but streamlining this process can lead to significant savings if leveraged properly.
Each jurisdiction views taxes on legal services slightly differently. While some states in the U.S. do not tax legal services, some do. Most countries that charge a Value Added Tax (VAT) apply it to legal services, though it is often at different rates. Some of these taxes may be refundable or recoverable, but some may not. A common related issue faced by expanding departments is how different countries view invoices. For example, in the U.S. companies are allowed to make changes to the invoice prior to payment, while in the E.U., an invoice cannot be changed. These cultural differences impact a global department as it reviews and approves its invoices.
These rules can be confusing for any attorney, but they are extremely important, as breaking invoice requirements can lead to a company losing the ability to recover its VAT or receive a tax refund. This can often be large amounts if there is significant work involved. In order to avoid making mistakes, each department should speak with their local tax departments and local counsel to learn the relevant invoicing rules. With the rules in hand, it becomes much easier to design your processes to meet them.
Hand-in-hand with approving invoices and dealing with local tax issues is financial reporting. Financial reporting involves providing the proper financial information to the proper entity. It also relates to accrual (or pre-bill) information that is often required. It can be difficult to track which invoices have been received and what periods they are billing for. Without processes in place to monitor and track each invoice as it comes in and also as it is paid, legal departments struggle to provide this information. Often they then must rely on their outside law firms to provide information regarding individual payments to them. This can be extremely inefficient as it requires significant investments of time by administrative staff and attorneys around the department. Invoices instead should be received by a central person(s) who records the invoice and sends it off for approval. This person should then also record when it is sent for payment.
While all of these issues are difficult in their own right, they become more difficult if your department is attempting to roll out internationally while still using a process focused around paper invoices. Due to the physical nature of paper invoices, transferring information from those invoices around the globe takes much longer. A global department will need to seriously consider an electronic invoicing (“e-billing”) system. Like matter management systems, there is a wide variety of e-billing systems. Most include functionality that allows for the receipt of most foreign invoices in compliance with foreign invoicing rules.
While there are standalone e-billing systems, for your department to make best use of the information from the system, the focus should be on systems that integrate e-billing with matter management. This can be through one integrated system or by software ties that feed information between systems. The ability to tie the financial information for the invoices to the matter information allows for your department to leverage all available information and make better decisions. E-billing does not solve all of these problems, but it makes them much easier to overcome and provides a single process that can be used for everyone in the department.
It is surprising the number of processes that fail because they have not been communicated effectively to outside counsel. Without the proper communication of your expectations, your outside counsel cannot provide you with the information you need. This can also cause frustration for both your legal department as well as your outside counsel. Not only will this frustrate the global initiative, but it can also damage your relationship with the outside firm. As many of your outside firms likely have global operations, you can enlist their expertise and organization to communicate your desires on a global scale. The department must also take into account the difference in how companies deal with their law firms around the globe. Some areas of the world hold their outside counsel to a higher degree of respect than others.
Turnover, attrition, and growth are all potential problems that can undermine your global initiative. Even if the initiative itself was “successful,” the loss of key individuals who were involved in implementing the process can set you back significantly. In order to avoid these potential pitfalls, it is vital that you document as much as possible in relation to the new processes that have been put into place. Components to that documentation include the initial objectives, goals, and business case, the project plan, instructions for the personnel involved, and training and ongoing support manuals for new employees. Having this documentation in place will help ensure that your processes remain in place over time and through various personnel changes.
On the flipside of the first problem area (initiating the project) is the enforcement and follow-up after the global process has been put into place. The initial implementation of the initiative/process may be complete, but if there is no one following up to ensure that the relevant steps are being taken, then your efforts may have been in vain. Establishing a systematic approach (which could include automated email alerts, onsite inspections, and periodic conference calls, for example) will reinforce the importance of the process to those individuals involved. The key here is to ensure that the enforcement is consistent and sustained. Just because the process is still functioning as expected three months down the road does not mean that it will be working the same way in a year.
While rolling out unified processes to a global legal department poses significant challenges, these challenges can be overcome through diligent communication and expectation-setting both in and out of your legal department. Modern technology provides tools that can improve the communication and performance within your department, while giving you the information your business clients need. In our experience, the companies that have successfully rolled out global processes have followed these steps and have reaped significant rewards in efficiency and cost savings.
Reprinted with permission from the Association of Corporate Counsel 2016 All Rights Reserved
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