In-house lawyers must be able to operate comfortably in the grey areas of business uncertainty, argues Royal Mail Group general counsel Maaike de Bie.
Increasingly, with constant pressures on budgets, we have to do more with less. At the same time, the scandals of the last 15 years (Enron, Parmalat, WorldCom and the financial crisis of 2008–2011) have resulted in a myriad of new legislation and regulation. All these changes have had a direct impact on the role of in-house counsel. Also, there seems to be an increased sense by regulators and legislators that in-house lawyers are to be gatekeepers of a company. So it is critical to deploy agile ways of working that add most value to the company while keeping it safe, enabling it to achieve its strategy objectives with high integrity. And to do all this through endless change.
What is legal and what is right
In the past we may have been expected to provide just the answer to the question ‘can we legally do this?’ or to document a commercial transaction. This has all changed. The expectation of an in-house legal function is now to: provide advice proactively; be business partners; think in terms of risk (and reward); take a view; and be commercial. As in-house lawyers we need to help our companies find solutions to what are often difficult questions and grey areas. But we also have to keep in mind our professional duty of acting in the best interest of our client (that is, the company) and therefore we may view a question from a very different perspective than our business colleagues.
We not only look at short-term objectives and the merits of a particular transaction but also at the long-term impact of decisions, looking at the bigger picture, viewing it holistically – taking into account ethical, legal, policy, political and risk considerations.
As Ben W Heineman Jr wrote in his blue paper for the Harvard Law School Program on the Legal Profession, ‘the foundational goals of a modern corporation should be the fusion of high performance with high integrity’. The role of in-house lawyer is that of a ‘lawyer-statesman’, moving beyond the first question – ‘is it legal?’ – to the ultimate question – ‘is it right?’.
I strongly believe that our role as lawyers involves a combination of law and ethics. It is part of what we do – it is in our DNA. We link performance and integrity, so we are acting in the best interest of our company and stakeholders.
So, with all that change, the increase in legislation and regulation, the resulting increased importance of (and reliance on) the in-house legal team, plus the motivation to combine performance with integrity, how do you stay on top of it all – especially when asked to do more with less?
As a first step to designing the most fitting way of working, we must understand the business we are in – what it stands for, its goals and objectives, its long-term strategies, its (key) risks. Frequently, as we start our day we end up distracted by urgent and ‘must do now’ matters. We focus on putting out today’s fires and dealing with what seems like a never-ending string of emails.
With so many matters to deal with, it seems more important to just keep ploughing through and to keep doing what we have always done – leaving the more strategic thinking for another day when we have more time.
To break out of this hamster wheel of reacting to fires and emails, we need to refocus our resources on only those things that are truly important for the company to achieve its stated goals and objectives, to keep it safe and to help assure the company it is doing the ‘right thing’.
What is important?
If we look at our business environment, we can see many changes. Some are big (for instance, the company I work for became privately owned – for others the change could be merging with another company) and some are more gradual. At the same time, changes are taking place in the in-house legal function. We are evolving from being mere legal advisers and producers of contracts to key supporters and enablers of business initiatives. Hence we are becoming part of the overall business value chain.
This necessitates a new way of thinking about how we operate as a function. This changing environment requires us to consider how we manage and organise ourselves, and how we are at our most efficient and effective. We must be a business enabler – that is what our business colleagues expect from us. Yet we also need to adhere to our professional duty to act in the overall best interest of our client – not just taking account of business objectives but also including considerations of ethics and integrity, and looking at risks holistically.
To become a successful business enabler, we need to understand what matters to our business and to focus on those initiatives that support its overarching strategy, goals and objectives. Typically, these will focus on growth. At the same time we will need to figure out a way to exert the requisite control over all of the other activities that may not be central to a company’s strategy or growth initiatives but are still important to its successful functioning.
Geoffrey Moore has developed a well-known business model to determine where a company should put its resources, called ‘core vs context’. In short, he says that too much time is spent on tasks that are context and too little on tasks that are core, with ‘core’ being what is important to a company’s competitive advantage (how it differentiates itself). Everything else is context.
Moore’s original audience was the high-tech sector. However, this model has since been adapted to apply to many different sectors. I think it can be adapted for ours and be a helpful tool for in-house lawyers looking to devise an efficient way of working. The graphic below illustrates those activities that are important for the business and therefore important for us to focus on when providing our (legal) support.
Moore created a grid to highlight what is core to a company (that is, how/where it makes its money) as well as what is business-critical. The graphic is slightly different from his, to reflect our role and the services we provide, and is designed to help inform us where we should be focusing our scarce legal resources. When this grid is analysed, the related business and the legal support required can be grouped into one of four quadrants. So what do you think fits within each of these four quadrants and where do you think we should be allocating most of our resources?
Quadrant 1 – Core and critical
These activities enable the enterprise to differentiate itself in the market (be competitive). Being successful in this quadrant generally means growth and profit. This is the quadrant of new business initiatives, new products and markets, acquisitions and innovation.
Quadrant 2 – Context and critical
These activities must be done well, yet do not actually contribute to growth or the company’s ability to stay ahead in the market. Despite there being little upside in these activities, there may be an enormous downside in failing to appropriately manage the activities in this quadrant. Doing these activities well prevents the company from incurring significant (further) losses or damage. This is the quadrant of litigation, investigations, compliance failings and brand protection.
Quadrant 3 – Core and non-critical
These activities are important but ‘business as usual’. They are not critical to the company to differentiate or stay ahead. However, they are important to keep the core business going. This is a category that could be a good candidate for standardisation and/or outsourcing (to reduce costs and free up time of in-house lawyers).
Quadrant 4 – Context and non-critical
These represent activities that are not part of what the business is about (not core) and form part of any business – for example, HR services and processes fall in this quadrant. As with quadrant 3, many of these activities may be standardised and outsourced. In-house lawyers should have very little to do in this quadrant.
Efficient way of working
It is easy to mistake business-critical for core. They are not the same thing. Business critical/core will generally end up making money for the company, business critical/context will generally cost the company money with the only upside being that it prevents serious (further) damage or saves the business from losing money.
We may find that we are spending scarce resources disproportionately on activities that ultimately do not matter that much to the overall needs of the company; that we focus too much on the current ‘crisis’ and the ‘urgent’ emails and not enough on the developing and new initiatives.
This is really the crucial point. The role of an efficient in-house lawyer is to get to the heart of the company, and while working with business colleagues to continuously identify those activities that are essential to the business and focus resources there. Hence it is important to understand that core/critical brings growth and money to the business and that safeguarding context/critical saves the business from losing money.
Effective way of working
To be most effective in supporting our business we need to develop a number of non-legal skills. First, as discussed above, how we manage our time and resources (efficiency). Second, how we develop our own management and leadership capabilities (effectiveness). Of course we cannot be everywhere all the time; it is therefore vital to be wise about where we focus our own time and resources. Moore’s grid is a useful tool to determine how best to do that for our company.
Further, smart outsourcing can be achieved in the non-business critical areas. This is the place where innovation can pay off, to find new ways to automate, standardise and reduce costs. This is a topic that merits an article on its own.
In my experience, in-house teams are most effective when they are seen as part of the business, part of the overall team. When we are asked for legal support, we are on the same side of the table. We are not seen as the naysayers, the ones that block the deal. This can at times be a great challenge and depends very much on the culture of the company and its overall perception of the in-house legal team. It is often when we are asked for our advice at a late stage in a transaction that we find ourselves in the position of having to say ‘no’, or requiring significant changes to a proposed structure – the very thing that perpetuates the belief that lawyers are blockers (and usually adding a lot of extra time). If the in-house team is involved from the outset, it can then offer solutions and workable options from the outset (usually saving time); this then supports the view that the team adds value. In-house lawyers have a unique view as they see across the entire company; as such, they can offer useful commercial views which are generally welcomed by business colleagues.
At the heart of all this, a key skill is building relationships of trust and confidence with our business colleagues. To help us achieve this, we need to develop management and leadership skills, and possibly adopt new attitudes. We need to think like business people, not just like lawyers, and to operate comfortably in the grey areas of business uncertainty. We need to hone our (commercial) judgement, to be sensitive to the motivations and concerns of our business colleagues, and willing to offer opinions not always rooted in the detail of the law. This also means steering away from black-and-white answers, being more nuanced in our advice and ultimately willing to ‘take a view’.
Achieving a better management of our time in line with business needs, and developing our skills as well-rounded business partners to our colleagues, will help us to do more with less. It will also help our colleagues see the value we can add and encourage them to involve us early on for our input. That puts us in a better place to proactively champion not only what is ‘legal’ but also what is ‘right’.
- This is the third in a series of thought leadership articles on the in-house lawyer sector. It is an edited version of a chapter in The Future of the In-House Lawyer: The General Counsel Revolution, published by The Law Society (£79).