With the who, what, where, and why of revenue recovery already addressed, I am moving on to the “how.” For that critical information, I am turning to some real-life examples of how revenue recovery has been done by in-house counsel at various companies in a variety of different industries.
First, I spoke with Janice Block, former EVP and Chief Legal and Administrative Officer at Kaplan, Inc., an education and training company, for her perspectives on starting and running a successful revenue recovery program, finding and prioritizing the best recovery sources, and overcoming challenges in that process.
How did you first become involved in revenue generation or recovery as part of a legal department?
Block: I learned how a legal department can generate revenue from my time at Microsoft. In the late 1990s and early 2000s, Microsoft was dealing with copyright infringement due to under-licensing of its software. So, we began conducting research and mining data to determine how many employees at a given customer might be using the software and comparing that to the number of software licenses actually purchased.
If we found potential under-licensing, our legal team would place a courtesy call to the general counsel of that customer to share the results. Our goal was to avoid antagonizing a customer with a cease and desist letter or the like, and instead, put ourselves in the customer’s shoes by giving them the opportunity to look into the issue and remedy any problems.
More often than not, the customer would swiftly place an order to remedy the deficient license numbers and show further appreciation for the friendly way in which we brought this to their attention. In one fiscal year, this even led to our legal team in the Midwest receiving a top sales contributor award from the district office.
How did your legal department at Kaplan pursue revenue generation efforts?
Block: We focused on five main areas:
- Intellectual property — Protecting and properly promoting your business’ IP are often the best ways to monetize it. As an example, the legal department helped our internal clients apply for a patent for a new, cloud-based, mobile, adaptive English language proficiency test. We then worked with those clients to create legal structures that allowed the product usage to grow. I also personally partnered with the product’s founders to help build the business unit.
- Anti-piracy — The legal department established several monitoring programs, particular in international markets, to identify unauthorized sales of our products. We then worked to have those products removed from websites or to have the websites shut down, which prevented counterfeit sales, eliminated unauthorized sales and distribution channels, and drove revenue on sales of our genuine products.
- Insurance claims — We built a comprehensive and effective compliance control environment which enabled us, among many other things, to establish credibility with our errors & omissions underwriters. This credibility and our efforts to build strong relationships with those underwriters helped ensure insurance coverage and prompt reimbursement of legal fees in the event of any litigation disputes.
- Alternative Funding Sources – The legal department researched state and local government aid and scholarship opportunities of which our schools’ students might not be aware. Our team then developed toolkits for our schools’ employees to use in helping eligible students apply for these funds to pay for their education.
- Contracts — There are ways to achieve economies of scale and savings through the organization’s vendor contracts. The legal team developed a contracts database and standardized processes for the handling of new contracts. This allowed us to identify instances where multiple vendors were being used for the same product or service, or where we might have multiple contracts in place with the same vendor. We then worked with our business units to streamline the overall number of vendors and negotiate master agreements with consistent contractual terms and volume discounts/savings.
What challenges did the legal department face in pursuing these areas?
Block: Occasionally, we would get push back from a business unit which might not have fully bought into or appreciated the efforts we were making. Questions also might arise whether the legal department really was responsible for the revenue that was generated through those efforts.
How did you meet those challenges?
Block: Communication and metrics were the keys for us to meet and overcome those challenges. We would create scorecards on a monthly or quarterly basis showing what revenue had been generated as well as the savings we may have obtained for the business. Those savings might range from avoidance of outside counsel fees or discounts, to liability avoidance. We also would benchmark our efforts against peer organizations, where such information was available.
Finally, building strong internal relationships often enabled us to avoid or minimize challenges before they might arise.
What advice would you offer in-house counsel who want to pursue revenue generation efforts at their companies?
Block: First, it is critical to understand the business very well and be able to put yourself in the shoes of your clients to understand their goals, challenges, and strategic initiatives. Ask the right questions to get a lay of the land. By doing so, you can create a trusting partnership with the business leaders and prioritize the right areas to pursue for revenue generation.
Second, don’t spread yourself too thin! Identify the highest potential opportunities that will bring the most return for the legal department’s time. With a first big success done well, you will be able to scale your revenue generation efforts and generate goodwill for your business and your team.