The In-House Lawyer Survey – More than a number

Our fourth annual client survey shows the maturing role of in-house counsel leading to greater job satisfaction. But in winning more responsibility, are they taking on more than they can handle?

Career-wise, in-house is the new black. As Chris Fowler, general counsel (GC) for BT’s UK commercial legal services division, observes, there is now much more of a desire among millennials to work for companies than in private practice. With in-house teams evolving in status to become more important to the business, the role of the corporate counsel now is far more attractive to law graduates than ever before.

‘Among the young associates I interview, there seems to be a far more informed decision about whether they want to pursue being in a big City firm or being in-house,’ he says. ‘Some clearly like getting their hands dirty and getting involved. I met an associate from Clifford Chance recently, who said: “Once you do ten aircraft leases, you may as well have done 100. I want something more meaningful.” This generation want more out of their career than just the number of zeros on their pay cheques.’

As we observed last year, forward-thinking businesses have increasingly positioned GCs as board-level, central advisers to the chief executive, alongside the chief financial officer.

Certainly this change in perception has had a noticeable impact on job satisfaction. Our fourth annual in-house survey – which drew responses from 458 individuals at major companies operating in the UK – underlines positive levels of job satisfaction in-house, even against the growing demands placed on legal teams. Three quarters of respondents said they felt personally satisfied in their jobs and envisioned themselves having a long-term career as lawyers working in-house.

William Grant & Sons’ head of legal Greg Bargeton says: ‘Partnership is not the foregone conclusion it once was. Those doors are getting pretty firmly shut in a lot of firms. People want variety and in-house offers that. There is a degree of flexibility, and we can pick and choose what work we do; in a law firm, you take whatever lands on your desk.’

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Intel Corporation’s European labour law counsel Richard Devereux says the era of private practice looking down on in-house lawyers as somehow inferior ‘has well and truly gone’. He says: ‘I see pre-partner-level lawyers in private practice (and some partners) looking at good in-house roles and seeing the attraction of being really part of a business, and further being a business partner, rather than just a legal adviser. Getting away from billable hours and having more control over work/life balance is an attraction too.’

Growing up

The Law Society’s Annual Statistical Report, published in April, showed that in-house has continued to expand its share of the profession, with the total proportion of solicitors who work in-house increasing 0.6% to 21%. This reverses the modest decline in in-house numbers last year, which was seen perhaps prematurely as an indicator that the swelling of in-house ranks had reached its peak. While growth has certainly slowed, suggestions of a decline were overplayed. Numbers have increased annually to more than double the size of the in-house profession over the last 15 years.

However, First Gulf Bank senior legal counsel David Johnson, who supports the bank’s treasury and global markets business, says the growth in in-house roles has had more to do with market forces and efficiency than lifestyle choice.

‘What drove growth in-house was a natural progression and pressure towards cost efficiency. It doesn’t take long to recognise the benefits of that. It’s also a product of regulation – that burden facing all industries that in-house counsel can help alleviate. One of the roles of in-house counsel is to bridge communication between the external lawyers and the business, where effectively you serve as a translator. Where there’s a communication breakdown, it’s often because the business person doesn’t understand what external counsel is saying. Having capable in-house counsel streamlines the process.’

Our research supports this trend: although a third of respondents have experienced no change to the growth of their teams in the last five years, 25% say they have expanded by up to 10%; 15% by up to 25%; while 8% have seen their team grow by more than 50%.

BAE Systems group GC Philip Bramwell says: ‘The growing number of employed lawyers in-house is indicative of businesses scaling up and subsequent complexities they face. And with economic growth, companies grow larger. It remains advantageous to have in-house counsel and I see that trend continuing.’

Demonstrable examples can be seen within the energy and financial services industries. The team at Royal Dutch Shell, for instance, has grown by 20% over the last three to four years, bringing its legal team to around 1,000 employees. This is despite having a panel of over 100 law firms in response to challenges of falling energy prices, increased geopolitical risk and ongoing environmental concerns. The regulatory tidal wave following the banking crisis means financial institutions have moved to establish a high-quality bench of disputes and risk-focused in-house counsel, with the likes of Deutsche Bank, which houses 100 lawyers in London in its 600-strong global team alone, establishing a legal risk management function under the leadership of its GC for the UK and western Europe, Emma Slatter.

This growth is complemented by swelling legal budgets. While over a third of survey respondents (36%) saw a decrease in legal budget year-on-year, close to half (42%) say their budgets have grown by up to 10%. Another 14% have seen growth ranges between 11% and 25%. And although the percentage of respondents spending more than £10m has fallen significantly compared to last year (down to 9% from 20% of respondents), nearly a third of annual budgets range between £100,000 and £500,000, while 21% have budgets of up to £5m.

Seventy-one percent of respondents say their companies have a policy of retaining work in-house in a bid to reduce external legal spend. This is down slightly on last year and is the second year running where there has been a fall (81% of respondents having such a policy in 2013), indicative of a modest return to external counsel for specialist advice (see ‘Bang for your buck’). None the less, an overwhelming majority of law firm clients will opt to do as much as possible themselves.

David Symonds, vice president and regional GC for EMEA at Tyco International, says where purse strings are tight, there is an opportunity for GCs to play a more corporate-facing role. ‘What will continue undoubtedly is the pressure to control what it costs to have an in-house legal team,’ he says. ‘However, positions such as mine have developed to include more emphasis on overseeing leadership, management and having input into strategic, not necessarily legal issues.’

Examples of success include AXA UK group GC Edward Davis placing a heavy emphasis on a wide-reaching efficiency drive since 2010 and managing to keep 70% of the legal division’s spend in-house. Also delivering efficiency is Telefónica UK GC Edward Smith, who implemented an internal liaison programme of matching team leaders with directors of the business in an effort to become part of senior leadership teams.

Coca-Cola Enterprises vice president, legal and company secretary, Paul van Reesch, says forging strong relationships internally helps build the reputation of in-house counsel as integral to a business, making a convincing argument to spend the money in-house.

‘It’s a matter of accessibility – it’s easier for my chief executive to walk across the corridor to me than to pick up the phone to an outside adviser. I’m accessible and I know the business. We can have a dialogue and it’s convenient. The approach of in-house lawyers has changed fundamentally over the last 15 years. There is still a stigma there over justifying roles, but every time I talk to a fellow in-house counsel, we talk about how we increasingly add value and balance that with managing risk.’

Overworked?

However, this increased recognition adds a new dimension to the debate about the challenges faced by many in-house teams, particularly in shaping their identity within the business. Despite the top-line stats alluding to high levels of job satisfaction, the increased demands on in-house teams to produce high-quality work to tight budgets means that lawyers are facing the same issues confronted by private practice counterparts in the run up to the global financial crisis: overwork, stress and inefficiency.

In a report authored by LBC Wise Counsel consultant Paul Gilbert over the summer, he argues there is a crisis of wellbeing in-house. The year-on-year increase in in-house numbers and the fact that many people in GC roles are well regarded is at odds with the reality that these teams are ‘suffocating on volumes of work they are not designed to handle, with a role that the business does not value enough, and without the skills or the confidence to find solutions to protect them and their business’.

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The solution, he argues, partly lies in correcting GCs’ tendency to undervalue the process for managing risk and their undiminished desire to be viewed as the ‘trusted adviser’, meaning they often take on too much work and have been pushed into just reacting to workflow, rather than thinking ahead and considering what their role means. It remains imperative that teams have effective infrastructure, operational support and training for employees, and do not simply pursue the aim of getting bigger every year.

As far as legal teams are concerned, companies also need to become less obsessed by quick wins and making short-term cost savings. ITV group GC Andrew Garard says: ‘Innovation should be better. The procurement profession has stifled innovation. Those teams in my experience are great at knowing the cost of everything and the value of nothing. How much is good advice worth? You can’t put that through a procurement process. Too many companies are beholden to a procurement process. You end up with the lowest common denominator. You can be susceptible to getting a half-baked job. You don’t get a relationship – there’s no skin in the game.’

The growth and increased sophistication demonstrated by in-house legal teams has been a defining trend in the last decade, emphasising the shifting dynamic between buyers and sellers of corporate legal advice. One prediction is the growth of in-house teams will continue, but the structure will change, whereby legal teams driven by a more robust regulatory environment will be influenced to create an internal law firm comprising risk-aware, commercially savvy lawyers.

The GC role itself has moved towards demonstrating leadership skills and corporate-facing strategic management. Looking ahead, GCs will have to discover more imaginative ways of handling volume tasks, such as contract or due diligence work, if budget constraints remain a key feature. The most astute GC will seek to operate lean teams that are less reliant on labour arbitrage with private practice.

But there are, after all, many benefits to a career in-house, as the most seasoned GC will attest. The Economist Group GC and company secretary Oscar Grut says: ‘The key difference is control. You may, over the course of the year, put in as many hours as the average commercial lawyer, but the way the hours are spread is much more under your own control. It’s not a structured life, but weirdly you can control how you allocate your time better. And when I look at the profile of in-house teams, they’re more diverse. One reason is the work/life balance and the second is it’s not as political as law firms because you’re working with lots of people who do lots of different jobs. You don’t get stuck in hierarchy.’

Van Reesch adds: ‘I hope the in-house counsel role continues towards being a trusted ear – you expand beyond the traditional legal aspects of advice, and continue giving the commercial and pragmatic aspects of the advice as well. GCs are in a unique position to advise on a wide remit of issues. A good GC will touch all of the business, possesses a good moral compass, understands the risk inherent in growth, but equally wants to see that growth.’ LB

sarah.downey@legalease.co.uk