When we know what our organisation does and understand the laws that govern that activity, we know what legal services we need to provide. The next step is to create a strategy to provide those services.
RATs, CATs and legal strategies
As in-house lawyers, we have a duty to:
- Ensure our organisations understand the level of legal risk inherent in their activity so as to take informed decisions made by accountable staff at the right level of seniority about risk appetite; and
- Keep risks at tolerance (RAT) through contracts, advice and training (CAT). In other words, to use CATs to control RATs!
So how can we achieve this?
Find the RAT
First, we need to understand what the organisation does, what it’s planning to do, where it does it and which aspects of its business would create the biggest impact if they were to go wrong. Often, it’s the small things that cause the biggest problems - the national head office that got closed down because it had no system for responding to hand delivered letters from regulators being a great example.
Next, we need to think about laws and regulations and consider how they’ll affect those activities and plans. We also need to think about how important and unpredictable those laws and regulations are and which, if any, are outside of our team's remit. If you ever feel a law is beyond your scope for reasons such as geography, specialism or departmental function, but are unsure, always clarify.
From here, we can define a residual area that is ours and create our legal risk heat map. This is a framework for visualising the interaction between:
- Legal and business issues of high importance;
- Fast-changing business activities and areas of law;
- Business functions most affected by complex, fast changing and punitive laws (corporately and for individual employees); and
- Slow-moving, predictable functions with lower levels of risk.
With our heat map prepared, we can now have informed discussions about our organisation’s appetite for legal risk. This is the trade-off between what we do to identify and control RATs with the CATs and what it costs. Consider direct costs, such as your legal team and supplier costs, as well as indirect costs, such as restrictions in business activity and the expenses related to compliance activity across the organisation.
We now have the RAT. It’s time to build a strategy to deliver effective CATs to control it.
Get the CAT
Here, you’ll face a number of decisions. In most cases, there’s no generic right or wrong answer. It’s about finding what works in your circumstances. Factors to think about are:
- Your organisation’s structure and business model;
- Its products and services;
- Its risk appetite; bearing in mind that stated appetite and actual appetite shown by actions may differ; and
- Your skills, motivations and career aspirations.
Of course, your work has to serve your personal objectives as well as those of your organisation and your team. This means your task is to create a strategy that delivers benefits for all three of these stakeholder groups.
Your biggest decisions will probably revolve around these two questions:
- How should we be doing what we’re supposed to be doing; and
- How do we get from where we are to where we need to be?
Aim to answer these questions in that order, and then check that your short and long-term plans make sense and are achievable.
The reason we suggest this approach is that we can become fixated with where we are in the present moment and with how we use the current members of our team. This can stop us delivering what the organisation needs, especially if our team has not seen much evolution in recent times and so may itself need to be changed.
Be prepared to work with or around things that are beyond your control. Examples of these include the legal obligation to appoint an independent data protection officer if you have an organisation in Germany. In the UK, General Counsels working in the financial services sector may come under the mandatory regulation of the FCA. If so, they’ll have requirements about how they run their teams imposed on them.
You may also have to fit in with internal constraints such as corporate locations and group structures.
Some of the big questions to ask yourself as you shape your team’s long-term strategy include:
- What work will you keep in-house and what will you outsource? You may decide by criteria such as cost, subject area, geography or level of complexity or specialism;
- Will you use locum and temporary staff, paying premium fees in return for flexibility, or hire and develop permanent staff members?
- Should you centralise or decentralise your team? On the one hand, you’ll have challenges associated with a lack of local knowledge and business engagement. On the other will be reporting line challenges, flexibility and considerations about the career prospects of your team members;
- Centralised or decentralised external spend commissioning control – or a hybrid? For example, could HR do its own thing with employment law while your team handles all other legal work?
- Should you be a modern, proactive and strategic contributor to the business or a traditional, reactive advice provider?
- Is the business partner model, where individual lawyers lead in the support of client groups, most suitable, or would a pooled resource model work better?
- Would regular team rotation or the job-for-life model best balance the needs of the organisation and your team’s personal development? Giving lawyers experience in a range of client-facing, business partner, subject matter and legal team operations roles by moving them every two to four years will give them well-rounded skills and experience. The job for-life-model, on the other hand, assures stability, continuity and predictability at the possible risk of key person risk and declining performance;
- Is hiring top performers at the risk of higher churn rates a better bet than recruiting moderate, yet longer-term performers and committing to greater people management? The answer may vary by legal area or geography. For example you may opt for the former to lead the legal team for a high risk, high growth startup division and the latter for a regional legal head in a small, stable division;
- Should you adopt technology and train team members proactively to empower internal clients or exercise tight control and review performance on an as-needed basis?
- Are you happy to empower clients to take accountable ownership of delivering agreed CATs to their teams? Or would you prefer to do it yourself? Doing it yourself is fine in small businesses, but it’s difficult to scale up as the organisation grows;
- Should you control a centralised legal budget or decentralise budget management to business units? A third option is a hybrid model; and
- Are you happy to run the legal department for the rest of your career, or do you aspire to the CEO role?
Thinking long and hard about these questions will help you plot how you get from where you are to where you need to be.
It’ll also help you identify how your new legal team strategy will affect other teams and departments in the organisation. You may need to build a compelling sales pitch to get their enthusiastic buy-in.
Finally, deliver the same pitch to your CEO and CFO – and start delivering!
Conclusion
Business changes constantly. For this reason, you need a strategy that allows for change and allows you to deliver for your organisation and the career aspirations of your team – including you. The strategy must evolve too. Regular evolution avoids painful revolution. It’s also good for personal development.