One 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.
Who Are We.
Having built and sold a bestselling national brand, we appreciate the value of brands and everything it takes to make them successful. Companies are valued by their brand equity. Achieving and maximizing brand equity requires tremendous respect for all your customers, from your wholesaler to your end user.
Starting in our laundry room with no money and no knowledge of the industry, we built the famous Barefoot Wine brand. We learned a lot they don’t teach in school and much of it the hard way. Although our success was in consumer products, our real world experience will be helpful to anyone looking for information and advice about brands.
We have written the New York Times Bestselling Business Book, The Barefoot Spirit: How Hardship, Hustle and Heart Built America’s #1 Wine Brand, which chronicles the history of the famous brand from its inception through its acquisition. Our book is now required reading in schools of entrepreneurship across the country. We hope this book will provide inspiration and encouragement for all those contemplating starting a brand or wanting to improve their existing brand.
Michael Houlihan and Bonnie Harvey
-Barefoot Wine Founders