How to deliver despite increasing responsibility and 30% stretched budget.
Written by Genevieve Landricombe, Legal Transformation Director, Landricombe & Son Consultancy
General Counsels (GCs) and Chief Legal Officers (CLOs) are facing 30% salary pressure as US firms’ war on talent is having its anticipated trickle-down effect. Simultaneously, boards are increasingly looking to GCs to manage enterprise-wide risk.
In many industries, particularly those with low regulation, risk management is still maturing. The result is that unwritten expectations of GCs, both by their boards and themselves, is to be the arbiter of risk, law and ethics.
The danger here is that the Legal function is set up to fail. Anecdotes include a board member saying, ‘Your job is to make sure no one sues us’. Even in mature organisations, in the absence of other metrics the two most common board queries to GCs are around high profile disputes and the cost of external legal support.
The common purpose for all legal functions is interpreting law, communicating it to their organisation, and dispute management. There are several other accountabilities a GC might own, but it is imperative that they be clarified. Examples include:
- Accountability for the design and delivery of legal processes (eg contracts)
- Legal and regulatory compliance
Both examples above are process-driven and, once embedded, have elements of routine repetition. Traditionally the skillsets required to build, maintain and analyse processes have been scarce in legal departments. Indeed, while the world is changing, we still observe some lawyers baulk at the words ‘process’ and even ‘excel’. There is no reason these responsibilities shouldn’t sit in Legal, but the skill-gap must be identified and filled.
The path to confusion is clear; GCs are dual-hatted between functional leadership and trusted advisor. Both roles are appropriate but must be distinct. If the purpose of the GC is unclear, lines between the roles of trusted advisor and functional leadership blur. The result is often an unsatisfied board and stretched GC, where neither party is clear on what constitutes good performance.
The trusted advisor brings experience and knowledge to share with the board. In many instances this role does not have formal duties, purpose or ability to measure. The GC should be clear on where their duties begin and end; perhaps they communicate legal obligations but hand over to a COO or Product Owner to develop compliant processes.
The purpose and metrics of the Legal function are easier to write down; but should be given careful consideration. These often include mitigating Legal Risk, ensuring we have appropriate business contracts in place. In these instances the GC should discuss de Minimus levels with the board. Is the board prepared to accept the risk involved in business users managing low risk, low value contracts? How does the answer change if the GC creates a playbook or a locked workflow? Can the GC size risk appropriately to manage these conversations?
When GCs lack the skill, or time, to clarify purpose they find themselves onboarding lawyers, in an attempt to be involved in every NDA or contract. Legal spend spirals, and often external law firms are appointed to undertake routine, volume work. As we face 30% salary increases for in-house counsel, organic growth is unsustainable.
There is a plethora of technology and external providers which can be used to mitigate Legal Risk. However, time and again Legal functions buy technology to address a single problem, without consideration of the full jigsaw. Operating models must be created cohesively, aligned to the function’s purpose and with appropriate metrics. Performance of all three pillars should be measured and reported: technology, in-house resource, and external firms.
Invest the time to clarify the function’s purpose and performance metrics, then build an operating model to meet those needs. The development of the operating model and metrics is not a side-of-desk piece of work. If the task is given to a Deputy GC, the operating model cannot be de-prioritised when urgent legal work arrives. If so, the cycle of increasing volume, and increasing headcount, continues.