What are the pros and cons of a matrix structure of lawyers within a large organisation?

I have assumed that the matrix structure suggested is where the lawyers are embedded within specific business lines and report to a senior person within that business line, but also report functionally to a senior lawyer e.g. a hard line to the COO and a functional dotted line to the Global General Counsel. 

PROS

1. Better overall speed of delivery and more responsive for urgent matters (as locally accountable).
2. Lower cost of delivery overall (versus a post-box outsourcing model or a shared service arrangement).
3. Better understanding of the business being advised, so more applied and contextualised advice and problem solving.
4. More embedded legal risk management, where the lawyers are visible and so can easily be consulted and observe non-compliance. Easier to align with strategic priorities and work more on value added tasks when know the business. 
5. Extension of legal privilege to more of the activities of the business (as the lawyer is more involved). 
6. Involved throughout: legal issues addressed early on; more consistency; better MI; helps to foresee issues and head them off. 
7. Helps to build relationships with counter-parties and intermediaries and so execute new products or services, etc. more quickly.

CONS

1. The lawyer may feel isolated from fellow legal professionals and find it difficult to work easily when subject so closely to business pressures. 
2. The lawyer may “go native” and give in to pressure from the closer business line staff. 
3. Work may be duplicated unnecessarily if generic or common areas arise e.g. the impact of Brexit. 
4. Conflicts may arise between lawyers advising different areas of the business as a whole but whose specialisms overlap. This may lead to inconsistency in approach or personnel difficulties. 
5. Supervision may be difficult if the local manager does not fully understand the law and the legal reporting line does not have enough visibility as to the productivity of the lawyer in question.

The pros of embedding lawyers within the business is the closeness it brings to the day to day which creates a deeper understanding and ability to tailor advice. This has the benefit of making it more likely to be adopted when there are legal risks that must be managed. It also helps build a real trusted adviser relationship with all the benefits that brings including being brought in early, frank discussions about legal risk and the substantive merits of proposals and the clients being able to get a quick sense check from someone who knows the hinterland.

The cons can be that the embedded lawyer can become hyper-specialised which can have an impact on their career development. And it brings a need to make sure one doesn’t become too embedded in the sense of losing the facility of being a critical friend that is core to being a good in-house lawyer. But neither of these are issues that are not capable of mitigation. Secondments internal or external, keeping up legal awareness and training can all help keep the skill set updated and flexible. And the risk of “client capture” really just needs an awareness that it can happen and having a good network of legal colleagues to test instincts with on the most finely balanced calls.

Another challenge is whether you have federated management or a central GC reporting structure – there needs to be an ultimate point of accountability but it has to be in a system where oversight is achievable and meaningful.

What can also work well for a legal function is to have a mix of embedded lawyers and a central core of specialists – assuming the business is big enough to sustain that. This gives options of movement between the two and provides a more independent view on issues needing specialist advice or handling.

It’s worth stating at the outset that a matrix structure of this nature isn’t appropriate for every business. We in The Royal Mint, for example, only have two in-house lawyers, and so work across every corner of the business already.

However, other larger in-house teams might benefit from the structure. For example, it could help with:

• Gaining a better understanding of different business units (particularly if there’s a rotating reporting line for various non-legal business units).
• Building trust and better relations with commercial stakeholders.
• Giving more timely advice to the relevant business unit.
• Developing business-related and softer skills. 

On the other hand, a matrix way-of-working may mean that:

• Resource which may be needed elsewhere in the business is monopolised by one department.
• Managing more than one reporting line becomes difficult (e.g. in relation to career development, supervision etc.).
• Priorities and workloads are conflicted (e.g. between the legal team and the business unit).
• The matrixed lawyer is boxed into one or a small number of legal and commercial areas only.

Often organisational change happens in cycles with the centre taking priority and the business areas doing things their own way. From time to time the balance shifts. A common approach where the business areas need priority is embedding lawyers locally. This can have some benefits but also comes with risks. 

Embedded lawyers can pick things up quickly. They have a greater understanding of business implementation which is often different to what is written in strategy papers and websites. Embedding lawyers can also reduce costs and allow the legal team to take advantage of synergies by leveraging their previous involvement in matters so that they need less time to get up to speed on the history of a matter. 

However, there are downsides. A key risk is likely to be lack of consistency in advice and a difficulty in having a strategic organisation wide perspective. it is harder for embedded lawyers to ensure their advice is consistent with other areas of the business. It is also harder for lawyers within a particular business unit to keep track of the issues arising across the organisation. 

Embedded lawyers are also likely to face conflicting pressures from the wider group which they will need to manage along with their specific business area. Establishing good lines of communication will be key as a risk that often arises is whether issues will be escalated to the wider group or decision making is siloed and taken at too low a level leading to a risk of misaligned legal advice. 

Jonathan Friend - Senior Lawyer - Information Rights, BBC

Legal team structures are not absolutely good or bad. It’s more a question of whether a particular structure is functional for a given business at a given time i.e. whether it helps or hinders the business to meet its needs. For example, if you are a mature, complex business and you need a relatively high degree of control from the centre, a matrix might make more sense. 

A matrix can provide a sense of community and connectivity to lawyers that allows them to work together and provide relatively consistent legal advice using standardised templates, positions and risk appetite across the whole organisation. 

By contrast, if you are a large corporate and want to create a high-growth start-up type business, having independent lawyers reporting direct to local management can help make that business more agile and potentially more likely to succeed. 

Even in the latter case though I would think the legal team in the mother-ship would want to set out some fundamental points of the legal framework.

PROS

• Much better insight about the activities of the business areas, their needs, priorities and issues – leading to better work product from the embedded staff and better knowledge and information sharing within the legal group.
• Better ability to communicate effectively back to the business on behalf of their own work area and on behalf of the legal team as a whole.
• Better business understanding of what legal does and willingness to pay for the cost of legal support.

CONS

• Risk of being corrupted/pressurised/coerced into doing the wrong thing/not following business priorities and legal requirements – losing sight of the fact that the client is the business as a whole - not any one department or team and of the fact that lawyers also owe duties to the courts.
• Harder to build and sustain collegiality, cooperation and development of lawyers in the team and to evolve their workload over time. 
• Can make it harder to build budgets, resource and get approvals for staff, tools etc due to perception that business units own, pay for and so control the lawyers that sit with them.

Best approach

Have business partners from within the legal team for each business unit but keep control of them and payroll for them with your legal team – so that the lawyers get a close understanding and engagement with the teams but are better protected from the cons mentioned above.