The Gazette begins a series of interviews with top in-house counsel by talking to James Ormrod, legal affairs director for HP UK, Ireland, Middle East, the Med and Africa.Hewlett-Packard is not a big company. It is a vast company. According to its own numbers, HP has over one billion customers in more than 170 countries, and around 321,000 employees. Its turnover in the year to October 2008 was $118.4bn. Its UK and Ireland (UK&I) division alone turns over £5bn, and engages in seven or eight mergers and acquisitions a year. In other words, HP buys, on average, seven companies a year, just over here. I’m not sure I even buy seven shirts in a year.

James Ormrod is legal affairs director for HP UK&I and MEMA (Middle East, Mediterranean and Africa), and he is utterly undaunted at the prospect of buying companies, even very large ones. HP’s last major buyout was of one of the world’s largest services businesses, EDS, which solidified HP’s services capability last year. The kind of work HP’s in-house legal team takes on – M&A, employment, contracts – is Ormrod’s bread and butter, and when I asked him if he was ever daunted when tasked with buying a large firm he may even have looked slightly incredulous.

This probably comes from his background. His first four years in a law firm were at SJ Berwin (from 1991, before it became its modern self) in corporate finance and private equity. He was then seconded to BellSouth in Atlanta in the US. He went there originally for a year, to do M&A work ‘and some divisional general counselling in support of the wireless data business’. BellSouth ended up offering him a job, which he took. In 2001, six years on, he moved to what was then one of the behemoths of the IT world, Compaq, in Houston. He says he did this to get away from a career that had become almost solely about M&A or corporate finance.

At Compaq he went into general commercial work for the first time, as part of a three-person team supporting North America sales and services. Compaq merged with HP in May 2002 (the deal was announced in September 2001) in one of the biggest corporate buyouts of all time – $25bn – following Compaq’s rather spectacular fall from its top spot in PC sales. Ormrod was kept on in the HP legal department, had a number of commercial jobs supporting the ‘channel’ (what IT companies call the resellers of their products) and sales and other various roles. Towards the end of 2005 he was sent back home to the UK&I department, which he led. In December 2008 he was promoted to his current position. So there is a lot of M&A experience behind him.

It must have felt ironic to escape Bell for Compaq to get away from pure M&A, only to be the target of one of the biggest M&A deals ever.

‘It was fun actually,’ says Ormrod of spending four months working on integration planning while the Compaq buyout was challenged and then finally allowed. But it can’t have been fun, I ask, being in the target company? His answer sums up, to me, both how in-house counsel see the world differently and how anyone would feel when a merger is imminent, even if they are a solicitor at a law firm.

‘From a legal practice perspective, the first thing you’ve got to do is get to grips with what is almost certainly an unfamiliar environment and an unfamiliar set of tasks,’ he says. ‘So it’s a bit like, as they say in the US, "whiteboarding" – you just conceptualise what your objectives are, what the obstacles are, try to parcel that up into various tasks and just get on with it.

‘But the other [experience] is as a corporate citizen, and this is one of the things that characterises in-house work – you become a subscriber to the business, you develop personal ownership of the business and the brand. And what’s about to happen to this world in which you have a personal stake? That’s hard, particularly if you are the acquired business, because unless you happen to be one of the blessed small number of people [in charge], no one consulted you about this, right?

‘That takes some adjustment, combined with the fact that you’re working to facilitate certain objectives but you’re not the master of your destiny and you don’t have full or perfect information about what’s happening, so there’s a lot of uncertainty.

‘Actually, my experience has been that, when something like this happens, when you come out of it, you’ve got a richer set of opportunities.’

That was certainly the case for Ormrod, who went from Compaq’s legal team in 2002 to running the legal show for HP in four regions by 2008. It might also be good for EDS, though news reports abound of thousands of layoffs as well as requests to reduce pay among EDS staff now employed by HP.

It is this wealth of corporate experience, as well as how lawyers can be ‘real’ business people with ‘ownership’ of the company brand, that the Gazette will explore in interviews with a series of senior in-house counsel over the next 12 months – how in-house legal works, how to succeed in it and what’s great about doing it.

For Ormrod, it’s all about the information, and if a legal team is positioned correctly, everything flows to that team, especially when things are tough.

‘It’s important for an in-house department to be not just functionary, but to work with the business both tactically and strategically,’ he says. ‘If that positioning is right, you’re likely to have good information and to feel that you have sufficient insight into the business.’

Ormrod stresses that a legal department must become an integral part of the business. That’s reasonable – 10 years ago the IT press was exhorting IT managers to push to be part of the business, not just the ‘plumbers’. Now chief information officers and board-level IT directors abound. But for a legal department to be an integral part of business creation (not just a cost) seems almost harder for companies to accept than it was for them to learn to love IT people. Why is that?

‘It’s a combination of corporate culture and the leadership of the legal department,’ Ormrod explains. ‘For things to be the way most in-house lawyers want them to be, you need to be working with a business where people value their lawyers, not just as sources of legal information, but as analysts, communicators and consultants. And you need strong leadership – you need a general counsel who is respected and admired by the C-level people in the business, someone who on the one hand is a "go-to" person, who can facilitate their ends, but also someone who needs to be consulted. It’s an interesting balance and a matter of mutual respect and value.’

The impact of having a good general counsel, says Ormrod, is huge – as is the impact of not having a good one.

‘It’s no good having someone people are simply scared of not consulting, someone who’s merely a policeman and is living to say no,’ he says. ‘That affects the profile of the entire legal department, and the way senior management interacts with the senior counsel gets replicated all the way down the organisation. That’s why it’s absolutely critical to have an A1 person.’

Having an ‘A1 person’ is a small example of the long list of American influences Ormrod seems to have absorbed. All that time in Atlanta and Houston has, it seems, heavily influenced his language, but it has also patently influenced his thinking. He is always striking out for the business impact and the business benefit, something bolted to him, it appears, over the years of being deeply involved in his businesses.

Being completely business-conscious, he says, is a key element in the mix of methods in-house lawyers need if they are to mould the right relationships within a company.

‘I’ve learned that there is no substitute for being at the operating level with the senior people. I have to be working with these people because it’s only through these means that they get to know who I am, and I can get their confidence and hopefully their respect. Similarly, I know what their hopes, fears and desires are, what’s worrying them and what their primary objectives are, and I can demonstrate a willingness to help them. I think this is important for in-house lawyers – to be a part of their team – apart from being a functional subject matter expert, also to be a willing participant in their staff to get stuff done.’

This sounds very different to private practice. ‘I see in-house work as the wide end of the farm,’ he says. ‘I was only in private practice for five years but it’s a very narrow spectrum of work – it’s document-heavy and it’s repetitive. You go into an in-house environment, your spectrum of work and clients will expand markedly, and it’s likely that you’re going to get more responsibility and have far more options.’

Ormrod acknowledges that having worked for big companies such as Compaq and HP may skew this perspective a bit. However, he says the questions someone thinking of going in-house should ask don’t change: ‘What’s the level of the general counsel? Are they vice-president, executive vice-president? Do they report to the chief executive, the financial director? Find out how the department is organised and how they’re aligned with the business. If you can, try to have a meeting, preferably informally with a couple of members of the department, and gauge what these folks do and what their personalities are.

‘Is their view of their role to respond to emails, answer the phone and give legal advice to questions? Or is their view of their role to do that and participate in business teams, to influence, to proactively help direct the business? In terms of personality, are they back-office, humble types? Or are they fairly ambitious, driven types? Is the department high- or low-profile?’

Once you are there, working in-house, and hopefully running the show, the skills learned in private practice come into play but in very different forms. In-house counsel are a fixed cost to a business – external law firms are (traditionally, but moving away from being) variable costs, and not cheap either. So as in-house leader, it is as important to work out what not to be working on as it is to know what to focus on.

Working out ‘which is which’ is ‘relatively easy’, says Ormrod, but what’s difficult is how to deprioritise work you shouldn’t be doing, ‘because you can’t just ignore the phone’: ‘There’s a desire for legal support and a need for it, but there are things that come first. So you have to work out what to cover off in a light-touch or even no-touch way. That’s a big challenge for a legal team.’

There’s no magic to it, he says, ‘it’s about processes’. But, I say, it’s not like private practice, is it? ‘Not at all. In private practice you’re in the business of giving legal advice, turning documents, billing and recovery – that’s your measure of success. In an in-house environment, you’re in the business of providing legal coverage, so what is at the centre of your professional life is: Where should I be working? How should I be working? Because not only are you the legal resource of the enterprise, you’re also the legal intelligence of the enterprise, which is: What are my legal issues? What do I care about? How do I cover this off cost-effectively with what I’ve got? And that’s what’s difficult, and that’s what’s really stimulating.’

A good example is dealing with defamation, for example. Obviously a good law firm will advise a client when it’s not a good call to go after some blogger who has it in for them. At the end of the day, however, if the client wants blood, it’s their job to extract it. But in an in-house situation, the business has to come first.

‘This is probably one of the differences between a legal functionary and someone who has some tactical nous,’ says Ormrod of our hypothetical scenario. ‘You can say that, technically, there may be some defamation there but if we go after these people, how effective will it be and what’s it going to do? It’s going to shine a spotlight on the issue. And how are we going to be perceived? A $110bn corporation treading on freedom of speech?’

This leads us to a thorny area of in-house versus private practice: some lawyers may not fancy an in-house career because it’s not going the ‘lawyerly’ way – it’s not going to be partnership, or helping people through probate, or looking after a family business. Some might feel it’s getting into bed with the soulless, amoral corporations.

‘Often there is a sense or portrayal of large corporates as having no sense of moral or ethical duty,’ he says. ‘It’s not true, because corporates are collections of individuals and I’ve seen, for example, in redundancy situations, people going beyond the legal minimum for no reason other than a sense of moral or ethical duty. The reality is that when you’re within a large organisation people think morally and ethically all the time.’

Being dedicated to the business doesn’t detract at all from one’s professionalism, he says.

‘I don’t feel remotely embarrassed about focussing on the top and bottom lines. When you’re in-house, yes, you’re a lawyer, you’re a member of the legal department, but you’re also a member of the business. Your mission, the big game, is to win in the market. My mission is to beat people like Sun and to beat them well. That’s the game, it’s great fun and it’s stimulating, and we in the legal department understand that [the department’s] there to drive revenue and to drive margin.

‘Happily, I don’t feel any sense of conflict between doing that and "doing the right thing", because actually if you want to drive revenue and you want to protect the margin, you [become] well-perceived in the market. You have the brand that has integrity and you’re in compliance, as well as being economically efficient.’

You’re also in the business of being cost-efficient and maximising shareholder value, which these days for in-house legal departments is about outsourcing and getting rid of the billable-hour model at your external firms. Ormrod agrees that the billable hour is over for most types of work – HP UK&I has had its main external firm, Shoosmiths, on a target-based model for two years, and has saved 50% a year in legal costs compared with four or five years ago, he says.

‘One of the first things I did when I arrived was drive a clear distinction between what we’re going to do in-house and what we’re going to do through external firms,’ he says.

Shoosmiths has had to take on a lot more of the management of HP UK&I’s legal spend to make sure it hits targets – something previously done in-house. HP legal has done what any business could do with any cost – it has used management information to calculate a predictable possible cost and then asked a supplier to work within that cost projection, with incentives for success. Ormrod is using management information as leverage, I say, to get away from hourly billing because it’s really inefficient.

‘Exactly,’ he says. ‘We’re a value proposition to our outside counsel, including Shoosmiths. They can earn a decent income from us, but what this provides is a target and an incentive for them to be as efficient as possible in managing the work that we give them. They know what their target is and they have a financial incentive to come in under that target, because they share the gain and they share the pain if they go over it, just like how we staff and address these issues internally. It’s lovely because not only does it help put no more pressure on my cost, it also means that they’re doing a lot of what I would have to be doing if they weren’t, in terms of scrutinising how they’re staffing and working against a particular task.’

I suggest that, if someone in non-legal work heard Ormrod say this, they’d say it was a no-brainer and ask why it hadn’t already been done. He agrees. The crux of this argument must be keeping managing partners all over the City awake – do the same work for less money, manage it better, and manage it yourselves, or we’ll go somewhere else.

That ‘somewhere’ could easily be abroad. A growing number of countries are becoming home to legal process outsourcing (LPO), taking on work that is gradually but inevitably eating into law firms’ profits. Ormrod is playing very cautious about offshoring work to LPOs, he says, but HP is doing ever more of it. He calls it ‘out-tasking’; complete matters or work areas aren’t handed out – just ‘relatively mechanical, repetitive tasks’. This work is going to India, ‘primarily to give my guys more hours back in the day’. Work being passed out, for example, would be work on requests for proposals (RFPs – companies looking for HP’s quote on a job). Responses to these are to an extent mechanical, after the set-up with the Indian LPO has been done, including standard positions.

This gives hours back to HP’s legal people – but, I ask, what do they do with those hours? They must be taking work back from external firms – they can’t just be grinding the flour ever finer?

Ormrod starts out saying out-tasking isn’t affecting HP’s external firms, but it is – it’s letting HP’s legal teams take back work they wanted to do and felt they should have been doing but didn’t have time for. ‘What we’ve said we’d do internally is general commercial work – sell-side or buy-side – and it’s our objective not to use external counsel for that. In the past, if we ran out of capacity for supporting, for example, complex IT services work, we’d go to outside counsel and that is a very expensive solution. And we really didn’t want to pay external lawyers hundreds of pounds an hour to do that because we have the knowledge to do it and we’re a fixed cost. We needed to find cost-neutral ways to deliver that and the LPO providers gave us the capability to do so.’

That ‘extra’ work was probably providing some tasty profit margin to HP’s external firms – and it’s going to dry up. It’s going to dry up partly because out-tasking is, Ormrod says, going very well for work of ‘volume [or repetition] and limited complexity’.

But it’s also going to dry up because of the recession, and because of the Legal Services Act, and because businesses like HP just won’t stand for the old ways any more. And the legal departments of those companies will be looking for an angle to make themselves more valued, especially when sales are down.

This doesn’t mean wholesale offshoring – Ormrod is emphatic that LPOs cannot take on most of HP’s legal work – but anything that can make HP more flexible in tough times is going to win friends. ‘I’m very interested in [out-tasking], not as a means of reducing our presence and capability onshore, but as a means of flexing with the business as the business grows – how to free up time for our people to be working on the high-value stuff.’ And were it to be useful, it would make no sense not to maximise it, would it?

‘You betcha,’ says Ormrod with a smile. ‘If the quality’s there, you can operationalise it successfully and the cost is lower, it’s a no-brainer. But it’s not easy.’ Something tells me that something being difficult won’t stop HP.