Business Case
Definition and Origin of the Term Business Case
A business case is a structured decision-making basis that presents the economic benefit, costs, as well as the risks and opportunities of a planned measure or initiative. The term originates from the Anglo-Saxon world and, since the 1990s, has been increasingly used by companies and organizations in German-speaking countries. Originally, the business case was used to systematically assess projects or investments and to create transparent foundations for business decisions.
Significance in the Law Firm or Corporate Context
In the context of law firms and corporations, the business case plays a key role in compensation models, performance evaluation, and career development. The main focus is often on the question of what economic contribution an individual, a team, or a business unit makes to the company or the client relationship.
Compensation
The amount of compensation can be significantly influenced by the business case of a position or employee. For example, consideration is given to how many mandates are acquired, how profitably these are handled, and what contribution they make to the overall success of the firm. A clearly defined and comprehensible business case creates transparency for compensation components such as base salary, bonus, or profit-sharing.
Performance Evaluation
Within the framework of performance evaluation, the business case serves, among other things, as an instrument to apply objective criteria for assessment. Typically, in addition to economic performance, soft factors such as client retention, teamwork, or the development of business areas are also taken into account.
Career Progression
The business case significantly influences development opportunities and career paths within an organization. Demonstrating how an employee can contribute to the company’s success in the future is often part of promotion and development decisions.
Framework Conditions: Legal, Organizational, and Market Standards
The design and application of a business case are subject to different framework conditions:
- Legal Requirements: There are, among others, employment law requirements concerning equal treatment, transparency, and data protection. These requirements must be observed in compensation and performance assessment.
- Organizational Standards: Many companies and law firms define their own procedures and criteria for creating and assessing business cases. These include internal guidelines, standardized evaluation criteria, and regular reviews.
- Market Practices: The structuring of a business case often follows industry-based best practices, market analyses, and benchmarking data to ensure fair and competitive standards.
Influence on Career Paths and Development Opportunities
An effective business case has a direct impact on individual career paths:
- Promotion of Personal Responsibility: Employees who develop a compelling business case often gain more freedom and responsibility.
- Career Development: The ability to realistically assess and present one’s economic contribution is often considered a basic prerequisite for promotions or the assumption of leadership roles.
- Goal-Oriented Development: Regular review and adjustment of the business case enables targeted personal and professional development within the company.
Advantages and Disadvantages as well as Typical Discussion Points
Advantages
- Transparency: Business cases create clear decision-making foundations for compensation and performance evaluation.
- Equal Treatment: The application of uniform criteria reduces subjective assessments and promotes fairness.
- Planning Security: They provide a comprehensible basis for individual and business planning.
Disadvantages and Discussions
- Complexity: Creating and maintaining business cases can be time-consuming.
- Reduction to Key Figures: There is a risk that qualitative factors such as collaboration or innovation are not sufficiently taken into account.
- Market Dynamics: Rapidly changing market conditions may result in business cases quickly losing their relevance.
Practical Examples or Application Scenarios
Example 1: Filling a Vacancy
Before filling a vacant position, a business case is developed, highlighting the expected economic added value, workload, necessary qualifications, and development opportunities. The decision on which compensation model will be applied to the position is then made on this basis.
Example 2: Preparation for Promotion
An employee wants to take the next career step and, together with their supervisor, prepares a business case. This documents how she intends to further increase her contribution to the company’s success and develop new client sectors in the future. The business case is considered as part of the promotion process.
Example 3: Budget and Resource Planning
As part of the annual budget planning, business cases are developed for various teams in order to make rational decisions regarding capacities, investments, and compensation models.
Frequently Asked Questions (FAQ)
What is a business case in a law firm? A business case describes the economic contribution that a person, team, or business unit makes to the overall success of the organization. It serves as a decision-making basis for compensation, performance evaluation, and career development.Who creates a business case? As a rule, a business case is developed in consultation between employees, supervisors, and, if applicable, the HR department.Which factors are included in a business case? Important factors include revenues generated, contribution to client retention, development of business fields, quality of work, and development potential.What role does the business case play in salary negotiations? It provides a reliable basis for transparent and comprehensible salary decisions, including possible bonus arrangements or participations.Are there any disadvantages to a business case? Possible disadvantages lie in the administrative effort and the risk that qualitative achievements are not adequately considered.How often is a business case reviewed? The review takes place at regular intervals depending on the organization, for example once a year as part of target agreement or annual review meetings.
The business case is thus a central instrument for economically oriented personnel decisions, fair performance evaluation, and the development of individual career paths.
Frequently Asked Questions
Which legal requirements must be observed when preparing a business case?
Numerous legal requirements must be taken into account when preparing a business case, which may in particular arise from company law, tax law, and industry-specific regulations. It is necessary to comply with all relevant laws and regulations that are significant for the specific project. This includes, for example, data protection requirements under the GDPR, requirements for the publication or confidentiality of sensitive information, the consideration of competition and antitrust law, rules for contract design, as well as statutory requirements for risk reporting and compliance. It is also important to ensure that any approval obligations are planned in advance in the business case. This is particularly important for investment projects involving public bodies or regulated industries (such as financial services, healthcare, etc.), where there is an increased obligation to comply with legal framework conditions. Failure to meet legal requirements may render the business case invalid or lead to personal liability risks for those responsible.
To what extent is the liability of decision-makers relevant in a business case?
The liability of decision-makers plays a central role in the legal context of the business case. Managing directors or board members are obliged, as part of their duties of care under § 43 GmbHG, § 93 AktG, etc., to create economically and legally sustainable foundations for decisions, which includes the correct preparation and review of a business case. In cases of incorrect, negligent, or intentional false statements, failure to examine significant legal risks, or disregard of legality and due diligence obligations, civil (liability to the company) and, where applicable, criminal consequences may arise. This includes, for example, breach of compliance obligations or disregard of insider information and market abuse regulations.
What rules on confidentiality and data protection must be observed?
A business case usually contains sensitive company data as well as, potentially, personal data of employees, clients, or business partners. According to the General Data Protection Regulation (GDPR), all personal data must be protected, and its lawful processing ensured; this includes, among other things, purpose limitation, storage restriction, and access control. Furthermore, the confidentiality of trade secrets must be safeguarded under the Trade Secrets Protection Act (GeschGehG) by providing appropriate technical and organizational security measures. If confidential information is disclosed to third parties (e.g., investors) during business case presentations, confidentiality agreements (NDAs) must be factored in as a legal requirement.
How is intellectual property handled in connection with the business case?
Intellectual property, such as patents, trademarks, copyrights, or know-how, often plays a significant role in the business case. The legal aspects include the proper identification and registration of property rights, clarification of licensing and exploitation rights, and, where applicable, safeguarding against possible infringements of third-party rights. All relevant IP rights should be identified in the business case, ownership clarified, and risks assessed via expert opinions or legal statements. When involving external partners, particular attention should be paid to the structure of IP clauses in contracts to avoid future disputes.
What legal aspects must be considered in financing and applying for grants?
When financing projects or investments under a business case, all legal requirements concerning financing instruments, borrowing, collateral, and, where applicable, equity participation must be observed. In addition, regulations for applying for and using public funding must be complied with, such as disclosure requirements, subsidy law, proof of use, and documentation obligations. Failure to comply with these legal requirements may lead to reclaiming of funds or even criminal consequences.
Are there any special legal requirements for cross-border business cases?
Cross-border business cases are subject to special legal requirements, as they regularly require legal review in different jurisdictions. This particularly includes compliance with international trade and tax regulations, export controls, anti-money laundering regulations, and the labor, corporate, and data protection laws of the involved countries. Different national requirements regarding contract law, approvals, or reporting obligations must be observed and often require consultation with local legal advisers. There may also be regulations to avoid double taxation and for tax structuring.
What is the effect of compliance and anti-corruption laws on the structuring of the business case?
Compliance and anti-corruption laws, such as the German Act to Strengthen Corporate Integrity (Supply Chain Act), the Anti-Corruption Act, as well as international regulations (e.g., FCPA, UK Bribery Act), have a direct impact on the business case. Even when planning a project, measures to ensure compliance with these laws must be considered, potential risks analyzed, and corresponding controls and process descriptions planned. In case of violations, significant fines, damage claims, as well as reputational losses for the company and personal liability for those responsible may result.
What are the requirements regarding the documentation and archiving of business cases?
Proper documentation and archiving of the business case are legally essential. According to commercial law (§ 257 HGB) and tax law (§ 147 AO), business-relevant documents, including business cases and their decision-making bases, must be retained for at least six to ten years. This also includes electronic documents. Documentation must transparently present the course of decision-making, underlying assumptions, as well as the monitoring and evaluation of risks. Incomplete or incorrect record-keeping can lead to disadvantages during audits, tax inspections, or legal disputes.