How you present factual information can be key to the general counsel and CFO working well together, Eric Dutcher, CFO of outsourcing company MBO Partners says.
The GC is expected to stick to factual information when answering questions or giving advice but the way the information is presented makes the difference in how it’s received, Dutcher said in a Cockpit Counsel webcast with Tim Parilla, chief legal officer of contract lifecycle management company LinkSquares.
If you want to get CFO buy-in for adopting CLM software, for example, the best thing you can do is demonstrate the kind of time- and resource-savings you can generate.
“If I can say this [contract task] is something that normally takes four hours a week, and it’s a weekly process, and it takes 16 hours to automate it to a one-minute process, my payback is less than a month,” Dutcher said. “That becomes a no-brainer.”
As a GC, you might present the CLM as reducing future personnel spending by enabling a new hire to be more efficient, which in turn will reduce the need for future hires. Or you can position the tech investment as replacing the need to hire, say, another paralegal.
Both of these are effective ways to position a CLM investment to the CFO, but you can also position the software as a form of automation that saves staff time.
“You don't have to look at it from a new position, old position perspective,” said Dutcher, who in a prior role helped revamp a struggling MoneyGram’s business model. “It’s really, what is the time this frees up?”
The relationship between the GC and CFO works best when it starts openly and honestly, Dutcher said, because both lead support functions that must work together across the organization.
“Procurement, new business signings, contract management, risk mitigation – all of these elements involve finance and legal activity,” he said.
Information curation, typically a CFO-led function that has grown in importance along with data collection, is another area finance and legal must interact closely together, he said.
“There are legal constructs and restrictions around what you can do with the data or what you can do with an insight once you’ve gathered it,” he said. “If you ultimately can’t do something with the data legally, then chasing that insight isn’t as valuable and you’re better off redirecting those resources.”
Both positions have also evolved similarly in recent decades, from mainly specialized skill areas – accounting and finance expertise on the one side and legal and regulatory expertise on the other – into advisory roles in which the CFO and GC apply their specialized knowledge in the service of risk management and business strategy.
“Bringing legal in earlier in conversations is part of the change” that’s happened in recent years, he said. “Ten or 20 years ago, legal would be the last organization to touch a product development or something the organization was building from a technology perspective. More and more you’re seeing the legal team on the front end of the conversation.”
The finance function in a similar way has traditionally been one of the last to touch a transaction, but that’s also changing.
“Whether it’s rolling up numbers or drawing insights or being brought into conversations … sitting in the CFO’s chair can be difficult just because we were often the last organization to touch something,” he said.
Having the two positions come into conversations earlier is positive for the business because it reduces the likelihood a project will get stopped at the last minute because of something leadership failed to think through.
“The earlier we can understand the legal ramifications of something we’re doing or a particular attribute or a tech build we want to do, the better we’ll be able to prioritize or adjust something early on that otherwise might stop the process at the end of the transaction,” he said.
Dutcher recommended GCs lead with the facts when working with finance and other function areas, but adopt how the facts are presented depending on the audience.
“Start with a fact-based message on everything you do,” he said. “But then tailor those facts to a myriad of audiences. Because we have to talk to investors, regulatory bodies, potential clients, even the employee base in some cases. It’s the same set of facts but the way they’re presented become critical, a highly complicated task these days.”
He also recommended GCs, like CFOs, don’t just answer the questions of other C-suite executives but dig deeper to find out what objective is driving the questions. That way, the GC can answer the question while also offering guidance that can inform whether the objective needs rethinking.
“Someone will ask a random question, ‘How much does this cost?’” he said. “I can answer how much that costs, but what are we trying to accomplish? If we can get to the root cause of what the thesis or hypothesis or the initiative is, then I can answer how much something costs but then also give the five other data points and five other elements that are relevant to that.”
Or someone might think it would save money to end relationships with vendors that aren’t providing that much service to the company, but without getting the GC’s strategic input, the result could be different than what the person expects.
“Let’s say you’re a company going down the cost-reduction path,” he said. “Often people look at vendor lists and say, ‘We’ll cancel these vendor relationships because we don't really use them.’ But if you haven’t looked at the contract, it might not actually save you money if you have an early termination penalty or the effect of terminating the agreement doesn’t lower the cost.”
“We both have a large number of internal clients,” Dutcher went on, referring to the GC and CFO roles. “We’re both sources of truth, business advisors, risk mitigators. So, it’s important we understand where the company is trying to go and how we can help the company get there.”