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Legal departments, among other corporate functions in Europe, don’t get enough CEO guidance on focus

A survey of more than 50 function heads of European companies found that “fewer than one in 10 function heads felt they had received sufficient guidance on how their function should contribute to the company’s overall strategy.” Reported in MIT Sloan Mgt. Rev., Spring 2012, at 12, the research by the Ashridge Strategic Management Centre found that the functions often had KPIs but “these rarely assess the overall contribution of their function.”

The thesis of the article is that without CEO guidance, a legal department, for example, can under-perform and disappoint clients. They can become self-serving. They fall short of helping the business divisions with “the practical support they want and need.” Instead, “corporate functions measure themselves against industrywide best practices or implement initiatives that increase their influence or simplify their own work”

The article suggests that CEOs fail to direct functions because either (1) they focus on business units or (2) they feel they lack enough technical knowledge to give direction to the staff group.

The article urges CEOs to remedy this gap with three changes. (1) Define the main sources of added value at the corporate level and have the legal department define its role in relation to those sources. (2) Review the strategies of the legal department annually. (3) Put corporate functions in a matrix and take a company-wide view of which of their initiatives has priority. (4) Break out shared services into a service-oriented shared service group. General counsel should push for (1) and (2) but few of them would support (3) and (4).