The in-house lawyer debate – Fit for purpose

Mark McAteer, Legal Business: How has the role of the general counsel [GC] changed over the last five years and how will it be different in five years’ time?

Alessandro Galtieri, Colt Technology Services: It is now absolutely not enough to be just a specialist or a good manager of a team of lawyers. You need to be part of strategic conversation if you are sitting at the board level. Otherwise, you are not really adding value.

Lucy Vernall, Funding Circle: I have been in fintech for the last nine years. It is much more about being that voice at the leadership table, which is a different voice because you have a legal background, but when I talk at the leadership table, it is not about legal or compliance. It is because I bring that judgement, that risk management. At that senior level as GC, I am not really looking at legal capabilities at all.

Ruwan De Soyza, Halma: It is very dependent upon the industry, whether you are talking about a plc, private equity or a large or small private company because they all need a different type of GC. Plcs are moving quicker to needing a different type of GC than PE, because PE tends to already know what it needs from the get go and hires accordingly, and private companies are not dissimilar to PEs in that regard.

GCs in smaller/medium functions are going to move away from having COOs in the legal function. A lot of very big legal functions at a plc level do have that role but it is tantamount to a procurement role and doesn’t always have more legal efficiency or cost saving. When talking to more GCs who are younger in their roles, there doesn’t seem to be a trend to needing a COO to justify why you have a legal function/its cost base. In the past five years I have seen a move away from it in newer functions. In the next five years I think you will see more of them move away from it.

Mark McAteer: Does this mean the old model of looking for private practice to train up lawyers and recruiting people off the shelf has changed?

‘In-house, we are increasingly faced with the choice of a shrinking pool of highly paid individuals or starting to train them ourselves.’
Alessandro Galtieri, Colt Technology Services

Lucy Vernall: My ideal is somebody who has been through a great private practice firm, had great training for a few years and then had a good challenging role in-house, so you have a mixture of both. Getting somebody straight from private practice can work if it’s the right person who is able to adapt quickly but can be very difficult.

Laila Coffey, SSQ: Is that because you need them to be a strong generalist? In larger functions where you might need specialists, you might be able to pick them off the shelf.

Alessandro Galtieri: For large teams, the transition from private practice to in-house could be cushioned because your subject matter expertise will carry you. In a smaller team, it’s very different – I joke that my job description is ‘whatever darkens the doorframe’, because you have no idea how many weird questions will be asked, usually on a Friday afternoon. The new team members need to be ready for that. Especially if they are trained in the Magic Circle, they are not necessarily ready.

Patricia Wick Christias, Microsoft: I shock my recruiters when I give them my brief for who I want. A recent hire of mine was someone who, in 2008, was hit by the wave of law firms letting associates go. She did some maternity cover work and then got herself back to a law firm to get the training in consumer privacy. Then she came to do a commercial legal role. There is this gap in this market right now. People like her are gold dust. You should not be looking for traditional types.

Kathryn Earle, SSQ: Why do you think that brings you more than a commercial IT lawyer who has come from a top private practice firm and then moved in-house?

Patricia Wick Christias: I would rather have someone who has a different perspective, can handle the complexity and can teach themselves something new and you get that by hiring from different backgrounds. It also brings a nice diversity to the team, so there is just different talent that, occasionally, you draw upon.

Ruwan De Soyza: You always want very high technical lawyering standards, but more than that, you want someone who can be flexible and apply it. When we were building [in my previous role] at Worldpay, I did not want fintech lawyers. I did not want regulatory lawyers. Good lawyers can learn applicable regulatory law and how that applies to a business. But you cannot teach flexibility and ability to deal with complexity.

‘I shock my recruiters when I give them my brief for who I want. A recent hire of mine was someone who, in 2008, was hit by the wave of law firms letting associates go.’
Patricia Wick Christias, Microsoft

Alessandro Galtieri: A lot of the repetitive tasks that trainees used to do, which definitely helped them to learn – due diligence being a case in point – will now be done by machines. Law firms have not really changed their model. They are taking fewer trainees so that their internal business model still holds, but overall, it does not necessarily work in terms of training.
In-house, we are increasingly faced with the choice of a shrinking pool of highly paid individuals or starting to train them ourselves. We have trainees and have had some very good results.

Chris Fowler, BT: To me, the big miss in all of this is that training has not fundamentally changed. The expectations have changed, the requirements have changed, the demands have changed but the training has not changed. I know there are moves afoot but I still see way too many people who miss out because they need support and coaching to get there.

Christian Keim, Adobe: We do a mix of both. My experience is to hire, often, the unusual candidate who gives you something in the interview that you do not see in 90% of the other candidates. It is often the one who will surprise you in the long term more and will deliver the results you really want to see, for example believing in someone who does not have the straightforward background but has learned law by some deviations. All that experience can ultimately be what pays off later on.

Chris Fowler: Can they learn that intuitively, though? This is the big issue I have. If I look at who gets on in our organisation, it is the ones who have to regularly make judgement calls, spend time on stakeholder management, and with front-end business teams, who typically have greater opportunity to broaden and hone their interpersonal skills but I feel it could be ingrained into the training more fundamentally.

Christian Keim: I agree. All of these soft skills will be key in the future, especially with more machine learning and AI. That will be the main differentiator for me.

Hamish McNicol, Legal Business: How did you all develop these wider skills yourselves? You are looking for these sorts of people now but your own skills have adapted since you have been in-house.

Chris Fowler: People around this table have succeeded probably because they have advanced EQ. The trouble is that most of the people who have that better EQ have probably learned it intuitively. It has not been coached. I feel for the people for whom it does not come naturally. They need help and I do not think the current training is structured enough to help them in this way.

‘The expectations have changed, the requirements have changed, the demands have changed but the training has not changed to reflect this.’
Chris Fowler, BT

I went to an aspiring solicitors’ event and it was fascinating. There was a chap from one big bank who said: ‘Guys, get a job in a burger bar, because when you are older, customer service skills will be more important and a competitive advantage.’ The reason I am probably doing better now than when I first started out is because interpersonal skills – presenting, setting future direction, project management, stakeholder management – were not valued when I trained. They were almost pushed out of me.

Mark McAteer: 18% of the respondents to our survey said they had spent no money – ie, none of their budget – on external advisers. Is this trend going to continue? And are in-house teams going to be getting bigger as a result?

Chris Fowler: That depends on the type of company. If you are talking about a fast-growing company, with limited assets, absolutely, I should imagine they are on big growth tracks. Talking about a company that is heavily infrastructure-dependent, it is a different story.

Alessandro Galtieri: That number really jumped at me.

Patricia Wick Christias: When I read that, I read something very different. I thought: ‘Has the role of a lawyer changed in-house? Am I giving legal advice or am I giving business advice?’ You are in a trusted relationship with the business and they want general counselling a lot of the time: it has nothing to do with the law. Maybe the demand for external legal advisers has fallen because the role of the lawyer is changing, becoming more commercial and a really valuable part of the business.

Chris Fowler: Another trend I am seeing leads me to ask the question: ‘To what extent is a law firm subcontracting what you are doing?’ You see a number of transactions where there is flexible resourcing and we are sat there going…

‘We add value by being integrated into the business and this will continue. It is not a change; it is an evolution.’
Lucy Vernall, Funding Circle

Ruwan De Soyza: Who am I getting?

Chris Fowler: Yes, who am I getting? It is not necessarily a problem if someone is honest, but how transparent is it?

Laila Coffey: Has that happened a lot?

Chris Fowler: If you look in the market at the number of deals that certain firms have done, where they are talking about managing volume, yes, it is going on.

Ruwan De Soyza: It is old-fashioned body shopping.

Alessandro Galtieri: Many firms have started alumni programmes but in reality often there is no connection with someone having trained in that firm.

Lucy Vernall: Often, they have not trained.

Ruwan De Soyza: You are getting the brand name, but you are not necessarily getting the quality.

Chris Fowler: There is more of a basic point. How upfront are they being about who is delivering what? If they turn around and say, ‘Actually, some of the associates on this are going to be from X and we are going to subcontract that in because it is more cost-effective,’ that is fine.

‘Good lawyers can learn regulatory law and how that applies to a business. But you cannot teach flexibility and ability to deal with complexity.’
Ruwan De Soyza, Halma

Ruwan De Soyza: You know what you are getting. You are making the decision.

Laila Coffey: Are they passing that cost saving to you?

Chris Fowler: I do not know because the transparency is not always there.

Laila Coffey: When you have pushed back, have you seen that those individuals are more cost effective?

Chris Fowler: I have seen them, and it has been the first time I have seen it on the bill, and I have queried it: ‘What is that line item? I did not realise it permitted that in our engagement letter. Let us have a conversation.’ It is the way the world is going. We are getting into an environment where, fundamentally, you have to have a smaller core and flex up and flex down. As in-house functions, we have had to adopt that model and it is inevitable that law firms will. If someone is upfront, I do not have a problem. We can have a discussion about whether it is right or wrong, whether I want to pay for it or there is a benefit.

Hamish McNicol: What will define how in-house legal departments change in five years’ time?

Chris Fowler: I wish we did not refer to ourselves as in-house legal because we do not have in-house HR or in-house finance. We are business partners. There is this whole concept of in-house legal, but you are part of the business. It comes down to the approach the GC takes. Are you a business partner or are you purely compliance? My view is that the far more rewarding and engaging role is to be a genuine business partner. Therefore, why do we need to differentiate ourselves from other functions that are supporting and helping the business achieve its objectives?

Alessandro Galtieri: I totally agree. In our training we still refer to ‘the business’, as [if] we were not part of it, and we talk about ‘internal clients’. That again is a clear hang-up from private practice. The lawyers of the future will be much more integrated with other functions.

‘If you map out where lawyers add value, the fact that they then all sit together in one place, the law department, where the door can be shut so people cannot get in, does not fly.’
Alessandro Galtieri, Colt Technology Services

Look at what companies such as BT have done to analyse what lawyers were doing – lawyers are one part of the workflow on certain things like procurement lifecycle or contract lifecycle. If you map out where lawyers add value at different points in the chain, the fact that they then all sit together in one place, the law department, where the door can be shut so people cannot get in, does not fly. In five years, we will be much more embedded into different functions like HR or ops.

Patricia Wick Christias: I have seen my team go through a mind shift. It was not only the shift to be a business partner – we have always been a trusted adviser – but understanding the business. Five years ago, I could have asked someone in my team, ‘What is that we are selling? What is going on within Bing?’, and they would have replied: ‘I don’t know, but here is this privacy clause that they want me to look at.’

Now it has gone one step further. A lot of good lawyers working within companies fully understand who that company’s customer is. I have individual counsel by industry now. That is where the real richness comes, when you transcend your own organisation into your organisation’s customers.

Lucy Vernall: We may refer to ourselves as in-house lawyers when we describe what we do to others, but we never would within the business, and we do not talk about ‘the client’. It will always be slightly different in big legal teams or organisations because you will have to have those specialists, but certainly in our smaller legal team we add value by being integrated into the business.

Laila Coffey: We are seeing the general counsel being an integral member of the executive team in most of the searches we undertake. The CEO wants that individual as a consigliere; by their side in every decision that is taken. The CEO is often the deal breaker as to whether the GC opportunity is attractive to the market. When there isn’t that level of engagement, the role can be difficult to recruit for.

Lucy Vernall: They are very difficult to recruit for, are they not?

‘I describe the German GC model as the person you try to avoid for as long as possible and then tell them everything is agreed and they just have to bless it.’
Christian Keim, Adobe

Laila Coffey: They are becoming harder to recruit for because prospective candidates see their peers in other entities where the general counsel is deeply embedded in the business and the executive team and the business is, in turn, really engaged with them as a lawyer but also as a business peer. The organisations that don’t will struggle, not just from a legal, but also from a compliance and governance perspective because they are not involving the GC early enough.

Christian Keim: As it is Thanksgiving, we should thank the Americans for having introduced the GC model, which has been more helpful for the business and its lawyers. I often describe the German GC model as the person you try to avoid for as long as possible and then tell them everything is agreed and they just have to bless it.

Ruwan De Soyza: It is going to flux. I spent eight years in fintech, some of whom in which did not want a legal function, did not have it, but now love it and it is a customer-facing role. I have since gone to an older, FTSE 100 company that did not have legal, really wants it, and is working with the new function to integrate it into its businesses. It goes in cycles. At the moment it costs a lot because the function and cost base has grown and the questions come: ‘What value add are you providing? Prove it to me.’ Then later it goes back to: ‘We want it because we have a sticky situation and we need it again.’ In the next five years, in-house legal functions will continue to be wanted and that will increase.

Lucy Vernall: To the point about the US having influence, you are seeing this change in the UK for some smaller fintech companies who historically would have resisted hiring a lawyer as long as possible. They are getting lawyers in earlier, partly because of the US influence but also because senior execs will talk when they have good lawyers on board and see the value they can bring and how important that has been.

Mark McAteer: Thank you all very much for taking part in this discussion. LB

mark.mcateer@legalease.co.uk

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