A main focus of global in-house counsel today is demonstrating value to the businesses. In December 2009, Bright Ideas Editor Leigh Dance moderated a discussion in New York led by contributors to the book, including Peter Beshar, Bruno Cova, Ann Lee Gibson, Despina Kartson, Bruce MacEwen, Deborah McMurray, Mike O'Neill, Norm Rubenstein, and David Syed, on the topic of “Global Legal Services Tomorrow”. Other senior corporate counsel, outside counsel, and legal marketers participated as well. These experts from top global companies and law firms agreed that the changing landscape of the global legal services industry demand a greater focus on value and communication. The topics of greatest interest to global in-house counsel at the discussion included:
In 2009, The Association of Corporate Counsel led a “value challenge” to put together a toolkit for use by in-house and outside counsel relationship managers. According to Fred Krebs, President of the ACC, the predominant conclusion is that there has to be a lot of change, collaboration and communication between in-house and outside counsel. The ACC fundamentals which relationship managers should consider instruct corporate counsel and outside counsel to “Meet, Talk, Act”:
• Meet: Arrange a meeting with your three best clients or firms with a single question for discussion: “Working together, how do we improve the value of legal services?”
• Talk: Discuss the following topics:
1. How can we reestablish trust and improve our relationship, on both sides?
2. How can we better budget and manage costs and staffing?
3. How can we evaluate progress and performance?
4. How can we create a culture of continuous improvement?
• Act: Determine a process to implement ideas, and set follow up meetings to assess your efforts. Track your progress on:
1. Improving the value of legal services
2. Decreasing costs
3. Maintaining firm profitability
4. Improving training and career satisfaction and reduce attrition
5. Develop approaches that can be scaled up and attempted in other areas
Compliance and monitoring controls are also top of mind for General Counsel today. Peter Beshar, General Counsel of Marsh & McLennan Companies and Bright Ideas author of “Living Through a Corporate Crisis and Preparing for What Might Come Next” discussed the use of metrics in monitoring the business, and the approach that he and his colleagues at Marsh took to develop ongoing reporting to present corporate law department activities and expenses in a way that effectively uses the language of the businesses.
Bruce Ortwine, General Counsel of Sumitomo Trust & Banking Co., discussed the “compliance balancing act” that in-house counsel deal with when managing compliance risk. Ortwine “considers two categories of compliance: with a capital ‘C’ and with a lower case ‘c’. The capital or ‘Big C’ version of compliance refers, for instance, to violation of a legal/regulatory requirement that can create major risks and potential consequences including reputational loss and other damages. These aspects of Compliance include government investigations and major litigation, and generally fall properly within the domain of the lawyer. The lower case or ‘Little c’ version of compliance refers to the range of day-to-day processes the company employs to manage its compliance risk.” Ortwine explains that “Most companies need to improve the coordination and collaboration between the legal and compliance functions, with clear delineation of responsibilities.”
Global In-house counsel will continue to be focused on demonstrating business value, strengthening outside counsel relationships and compliance risk monitoring as we begin a new decade of change.
The dominance of Western-trained lawyers working in global companies operating in China is changing quickly. We all know that there has been rapid change in China’s legal market in the recent past. In Bright Ideas Editor Leigh Dance’s January 2010 Legal Week article “The China Syndrome" , Dance notes that “In a random selection of 40 global corporate counsel in China, to find that all were Chinese seemed significant. In the past I had noticed progressively fewer Western inside counsel among China-based international companies, and now the unanimity stood out.”
Angell Xi, Asia-Pacific counsel for GE Fanuc Intelligent Platforms, observes: "There is more Chinese legal talent in the market, with good qualifications and experience. They can practically solve more problems and can be less costly than foreign counsel." Xi finds that much of the new homegrown talent is well educated and equipped with good language and communications skills, and often good leadership skills as well. They have a global perspective, learned and fostered from practising in both domestic and international law firms. Many have worked within global companies where they were mentored by experienced foreign and Chinese counsel.
Amy Sommers, a partner with Squire Sanders & Dempsey, who has been based in Shanghai for six years, sees two reasons for the trend: "There is a growing pool of highly-qualified and experienced People's Republic of China nationals with domestic and international experience. Global companies no longer need to look primarily to their existing roster of in-house counsel to transfer them into China in order to fulfill senior legal department functions."
Second, Sommers points to cost. "By hiring Chinese nationals, these companies can offer very attractive compensation but avoid an expatriate package. However, the highly-skilled practitioners sought by global companies command a high earning power and so, in total, the local hire strategy may not be as much of a cost advantage as they expect."
The skill set China in-house lawyers need to be successful today are commonly shared by in-house counsel around the globe. Beth Bunnell, previously a partner in a global firm, regional counsel for a Fortune 100 company in the region, and now co-head of Asia Legal Resources, points out that the skillset for in-house lawyers in China is not unlike that of other jurisdictions - strong legal technical skills, effective communications, commercial acumen. Also important is the ability to get things done - to work independently and replicate locally the company's internal processes. Another skill mentioned frequently relates to risk management. One Chinese in-house counsel described it as "the ability to bridge the risk management gap between local and HQ".
Bright Ideas contributor Michael O’Neill, SVP and General Counsel for Lenovo, has an excellent vantage point from which to comment. He has in-house counsel in North America and Europe, as well as a large team of Chinese-qualified in-house lawyers in Beijing. O’Neill sees the change happening more slowly, and (with the exception of Chinese lawyers educated in the West) sees real differences between Chinese and Western-trained business lawyers and their role in the corporation.
“Chinese legal training seems to concentrate more extensively on codes and regulations than on case law. Consequently, there is not as much emphasis on the analysis of legal theories and fact patterns,” O’Neill said. He goes on to explain that differences in education and practice result in western-trained lawyers being more adept as advocates, both inside and outside the court room. “Global businesses have tended to embrace western-trained lawyers’ ability to analyze and advocate, and welcome them as a part of their business teams and as a sounding board,” O’Neill says. Western lawyers are often engaged by their corporate leadership in a role that goes beyond their functional expertise as lawyers, a situation which he doesn’t see happening often with Chinese lawyers. Many Western-trained senior corporate lawyers are seen as business leaders as well as legal counsel.
O’Neill concludes that, “As the Chinese business leaders evolve into global executives, Chinese-trained lawyers who have global experience will be given similar opportunities to engage as business partners.”
Global corporate counsel in China will continue to develop and increase in strength and numbers as China grows as a global business leader.
In-house counsel are under pressure, with scarce resources and as many demands as ever, if not more. How do General Counsels of large global companies maintain morale and keep their in-house lawyers motivated? Here are some tips, suggested by leading corporate counsel in the US, UK, Europe, Middle East, and China, on managing in-house counsel in a difficult environment.
• Stick to the basics. Communicate a lot with your team. Trust your instincts to know the important issues to focus on, and guide them in maintaining their focus.
• The in-house legal function is a service provider: focus on delivering acceptable legal outcomes. Promote your successes to your business colleagues.
• Try to streamline or offload high volume/low value tasks, so that in-house lawyers are not bogged down with repetitive and uninteresting work. Some of that work may be done by training personnel in the businesses you serve. Other work may be outsourced to a law firm under alternative fee arrangements.
• With budgets under constant scrutiny, let your legal team know that you will stand up for the corporate counsel function and defend against cuts that would harm the team's ability to cover key legal risks.
• Your legal team needs to know the current organizational appetite for risk. For some companies, the appetite for risk is changing rapidly from one quarter to the next. Make sure all in-house lawyers are clear about corporate objectives and risk appetite (and share that info with your outside counsel as well).
• Acknowledge to your in-house team that you appreciate what they do, and make sure they know that you recognize how hard they are working.
When the going gets tough, in-house lawyers work harder. While the weeks may be long in this stressful business environment, in-house lawyers tend to be more highly valued in tough times, and to have a greater impact on their business.
Senior corporate counsel around the globe agree that the demands on in-house counsel have increased since 2008. Bright Ideas Editor Leigh Dance, President of ELD International global legal services management consultancy, recently led events in Dubai and London focused on in-house counsel performance and management challenges, and how outside providers can help. At the Dubai program, co-hosted by ELD International, K&L Gates global law firm and The Risk Advisory Group, Richard Gray, Chief Legal Officer of Aldar Properties; Hassan Hassan, Associate General Counsel of GE Healthcare; and Nick Hornung, General Counsel of Istithmar World, led the group to discuss the General Counsel skills needed to respond to 2010 demands in the Gulf region.
Have demands on corporate counsel in the Gulf increased in the last year? The senior in-house counsel participating in a Dubai roundtable discussion in late November answered with a resounding “Yes.” The counsel came from organizations including Al Tayer Group, Al Futtaim Group, Dragon Oil, Dubai Aluminum, Dutco, General Electric, GE Energy, Halliburton, Millenium Finance, and Royal Bank of Scotland, among others. Have in-house legal function budgets been cut in the last year? Absolutely, the group said.
Project management capability, and specifically the ability to resolve complex problems, is essential for corporate counsel in the Gulf. A General Counsel must be able to spot issues and guide decision makers in doing the right thing and avoiding undue legal risk. This involves a clear head, a cool temperament and a demonstrated understanding of the organization’s businesses and its issues.
By the time various legal issues reach the level of the Regional General Counsel, they are often very complicated, and typically have more elements of risk than just the legal element. Gulf corporate counsel must build relationships with business people so that they can understand the context of the issues and the business rationale. In order to deliver legal outcomes, it may be best to stick to the basics and ask the fundamental questions. Experience, judgment, and good communications skills—all within the framework of the company itself and the environment you are operating in— are extremely valuable.
Counsel at different levels of the in-house team often perceive their role and responsibilities inconsistently. As General Counsel, it is important to regularly communicate with the in-side and outside counsel team on what they do and how they do it. Guidance and feedback should not be an afterthought. Junior in-house lawyers must learn to recognize and practice the elements of delivering business-focused legal advice. Outside counsel need to understand the organization’s motivations and priorities in order to help deliver the most valuable legal outcomes.
Other points from the 2010 Demands in the Gulf discussion:
• In-house lawyers need to be clear with their instructions to external counsel, and law firms need to be clear with their clients on fee arrangements and time recording.
• In-House counsel need to be able to communicate with businesses in a "straight-talk" way, using the language of business people. This requires a business understanding that is not taught in law school, and in-house counsel need to gain that familiarity in order to be accepted and respected within the businesses.
• All too often, in-house counsel must translate the work product of their outside advisers into a more concise document that can be effective with business managers. One in-house lawyer said that summary advice needs to fit on a Blackberry screen.
• General Counsel are under pressure to add value to their businesses and to obtain added value from external lawyers. In-house counsel in the Gulf are in an extremely demanding environment and are constantly under cost pressure. Many corporate legal departments are suffering manpower cuts. Cost effectiveness from external lawyers is of paramount importance.
• Corporate governance is not fully understood in many Gulf companies. Without local enforcement of corporate governance standards, many General Counsel face a tough challenge in convincing their executives to implement elements of good corporate governance. Corporate counsel would appreciate more explanation and ‘ammunition’ from their outside advisers to help them convince their own leadership of the business benefits of good corporate governance.
• More and more corporate law departments seek alternative fee arrangements with law firm providers. Many corporate law departments are asking their law firms for fixed prices and other pricing structures not tied to the billable hour. Corporate counsel also use other means to set expectations and obtain greater value from their outside lawyers, including clarifying the assignment and how it will be resourced in the engagement letter, reviewing fees regularly, other communications processes, and conducting debriefs after major matters are completed.
• In providing greater impact as a high-performing corporate counsel, there may be a need to give up some high volume, low value tasks. Some in-house counsel are becoming selective in what they spend time on; they are not accepting all of the matters passed on to them. They use alternative approaches to requests for legal assistance, such as Q&A guidance on the corporate intranet, or the use of standard forms.
Corporate law departments of the world’s largest enterprises benefit from each other’s experiences to improve their management and structure for delivering legal services globally. In-house lawyers seeking improved performance and productivity for their corporate law departments will find many best practices and practical approaches in Bright Ideas: Insights from Legal Luminaries Worldwide. Many of the chapters are authored by leaders of global corporate law departments.
If your corporate law department faces new demands brought by global growth, increasing regulation and decreasing budgets, many structures and operating systems of the past no longer serve the law department today. Global corporate law departments must improve efficiency and effectiveness to respond to:
Bright Ideas Editor Leigh Dance, a consultant to some of the world’s largest corporate law departments, finds that corporate law departments have many similar needs for structure and process, and can benefit greatly from each others’ best practices. “Every corporate law department has its points of difference, but the issues are generally not unique. There are many structures, systems and processes in place that provide more than a starting point for corporate law departments that want to improve. Every organization has different needs, but it’s far more cost-effective and efficient to adapt from other corporate law departments’ approaches then to reinvent the wheel.”
Profits from Bright Ideas book sales will go to Advocates for International Development, an international pro bono organization. www.A4ID.org