How Procurement and Legal Can Team Up to Deliver Value, Minimize Risk

Procurement’s relationship with legal is one of the most important and necessary alliances they can form. The strength of that working relationship will have a direct impact not only on business outcomes but also in protecting the entire organization from risk.

In a recent episode of The Sourcing Hero podcast, Kelly Barner spoke with Lisa Haitz, who brings over 20 years of experience in finance, legal, commercial operations, sourcing, and procurement to her current role as an advisor and fractional CPO. Lisa shared her insights on the best time for legal to be brought into the procurement process, the role technology and AI play in creating alignment between procurement and legal, and tips for building a strong working relationship between these two critical functions.

Involve legal early and often

According to Lisa, legal needs to be viewed as a partner and brought to the table early in the procurement process. “Whether you are bringing them in to design your process or maybe improve your process, they need to be a partner at the table,” she said. This allows legal to help set up the right contract structures, templates, and guidelines from the start.

Procurement should also have clear parameters around what they can handle independently versus when to involve legal. To achieve this, Lisa recommends monthly meetings between the teams to discuss current initiatives and identify upcoming needs, potential risks, and what is or isn’t working well in the existing processes. For high-stakes agreements like large deals or master service agreement renegotiations, legal should obviously be looped in from the very beginning. An open dialogue builds trust between the teams over time, and, in Lisa’s words, this means working together “early, early, early.”

Align on technology

When it comes to technology platforms for contract management, redlining, and related requirements, Lisa says there can sometimes be a disconnect between what procurement and legal teams prefer or the ways they implement the technology.

In particular, she has seen a shift where procurement is now increasingly driving contract lifecycle management (CLM) software implementations, whereas legal used to be the primary driver. Regardless of which team initiates it, implementing a CLM or similar system requires close partnership and strong change management between procurement and legal.

“While they may not see eye-to-eye or may not be on the same page because they have different objectives, having them all part of the same project team and focusing really closely on change management is the way to go when you are working a CLM or a tool like that,” said Lisa.

Regardless, the two teams need to be on the same page about goals, processes, and how to leverage data from the system to drive improvement. Working together to get buy-in and manage change is a critical part of this process.

Explore AI together

The use of generative AI for tasks like contract drafting and analysis is still in its very early stages, Lisa admits, but she does see more exploration happening within legal departments as they wrestle with complex legal questions around AI’s role in contracting.

In procurement, many companies initially put a halt on adopting generative AI until they could assess risks and guidelines. “A lot of companies said, ‘you cannot use it until we figure this out,’ and I think a lot of companies are still in that ‘we haven’t figured it out’ phase,” she said. But, some have set up internal AI capabilities for testing use cases like RFP creation, and technology vendors are also starting to incorporate generative AI into their procurement software products.

Lisa believes the adoption of generative AI in sourcing and procurement is lagging behind other functional areas of the business for now, but she expects that to change: “I think it will come. I think we will figure it out. I think we will make it safe and secure. It will be a great tool to help enhance what the teams can do today.”

Build strong relationships

Whether legal resources are in-house or leveraging an externalized model, the key to harmonious procurement-legal relationships, Lisa says, is open communication, operating rhythms, and mutual accountability.

“Approaching it as a partnership, knowing that the outcome is this – which is to get the contract done or have a lean process or whatever that might be – and having both parties be held accountable…it really does boil down to making sure you have strong relationships with the people that are supporting you,” she said.

She encourages procurement teams to have empathy and patience for the rapidly changing legal landscape, including the need to think like business operators, embrace technology, and stay ahead of emerging risks. Building a solid understanding between the two helps create a true partnership that not only benefits each function individually but the business as a whole.

For more of Lisa and Kelly’s conversation about how procurement and legal can team up, listen to the full episode here: