Legal Departments kill ideas by doing their job of protecting the companyOne of the reasons it is difficult for larger companies to become more entrepreneurial is because many have given their legal departments too much control. In their well-meaning desire to mitigate liability and avoid litigation, compliance often gets the last word on anything creative or out of the ordinary, allowing the legal department to sit in judgment over any new idea. They stop many a new idea by simply doing their job of protecting the company.

Often they take a passive role, waiting for ideas to be presented to them because “everything has to go through compliance.” In this case, they don’t actually create anything, but they can stop anything. Many creative people are discouraged from making suggestions because they know they will “get stuck” in compliance, thus earning them the nickname “the sales prevention department.”

What makes matters worse is that the more the company has to lose, the more power the compliance people get until it’s hard to tell who is really running the company. Even though the company’s very existence is based on remaining relevant and cutting edge, Legal is not paid on production or sales performance.

Where is their financial consideration to foster creativity or entrepreneurialism? Unable to recognize important market opportunities, they can drag their heels until it is too late. If they think their job depends solely on preventing litigation, and not necessarily corporate health, growth, or profitability, they may believe  the easiest way to preserve their job is to just say no to anything unproven or unconventional.

How can big companies untie themselves for this torturous bondage? Can they learn from small companies how to change the paradigm of their legal department to encourage entrepreneurship within their corporate structures? We believe they can.

1. Performance, Not Attendance. Start by changing the way your legal department is paid by giving them a financial consideration to be more creative themselves. Give them a stake in the success of the company. Tying their bonuses to sales and profitability can focus them on being true members of the “sales support” team. They are then encouraged to do more research into legal interpretations and alternatives.

2. Not “If,” but “How.” It’s important for legal to attend sales meetings where they can hear the challenges of the field firsthand so they can anticipate legal creative strategies. Instead of presenting them with a finished proposal that they can sit in judgment over, show them the purpose of the proposal and ask them to find a way to legally achieve the goal.

3. Guidelines, Not Long Lines. Once legal is paid based on the performance of the company, they will not want to miss fleeting sales or other opportunities that present themselves. Encourage them to develop guidelines so “everything” doesn’t have to go through compliance. Well-written guidelines can remove some of the backlog of applications for compliance that choke off creative solutions.

Small companies must reign in their legal costs and often pay in-house legal on company performance. They can’t afford to pass everything by legal, so they rely on prewritten guidelines to survive.

By changing the legal and compliance paradigm from “Just say no” to “Just say how,” big businesses can become more entrepreneurial.

Next time we will examine how big business can encourage entrepreneurial thinking by soliciting, recruiting and awarding for creative ideas.