Structuring your team around organisational goals will make you a valued business partner, as opposed to a mere reactive problem-solver.
It’ll put you at the heart of strategy, business development and change and position you as a key player in the organisation in the eyes of your senior colleagues.
Get ready to play a leading role
As an in-house lawyer, you’re in a unique position to help your organisation, grow, change and exploit new openings. How well you take these opportunities will depend on how you structure your team and align your approach to the organisation’s wider strategy.
The foundations of a quality in-house legal function
Before we explore where you can add value, let’s look first at how to lay the foundations of a legal function geared to business strategy. The three key steps here are to:
- Define the legal function’s role. Without this, neither you or your colleagues will have anything to measure you against. A typical definition could be:
"To inform decision makers about the level and type of legal risk their decisions involve and deliver risk through contracts, advice and training (CAT)."
Note that this definition doesn’t seek to eliminate risk. Instead, it provides for the organisation to set its risk at tolerance (RAT) and for the legal team to follow it. This will, of course, vary from organisation to organisation;
- Define the scope of your work. Agree what geographies you’ll be working in and which legal areas you may need subject matter experts in. This will be based on what and where the business does things and the amount, complexity, ambiguity and frequency of change there is in the types of laws that affect those business activities. For example, you may need to recruit specialists in employment law, government relations or sector-specific regulation; and
- Calibrate the legal risk appetite. This is complex, especially in multinationals, where culture, differing laws, joint ventures, passive partners and other factors make matters complicated. However, all organisations have a legal risk tolerance that underpins their approach to change. This may need to be reassessed during, and after, periods of change. This is why, at CLL, we talk about setting CATs to control RATs!
Deciding when to be proactive and when to be reactive will depend on the principal drivers for change and the potential consequences of either option.Changes in your local sanctions or regulatory regime will be heavily legal in nature, so you should be proactive and influential in helping the business to understand and to address them. An example is where a court decision removes ambiguity in a legal area and the in-house counsel, being quick to spot the commercial significance of the decision, allows their business to react to it more quickly than the competitors and gain "first mover advantage".
Other factors to consider when planning your approach include:
- How involved you should be. Even if a legal issue is driving change, you’ll still need to determine how involved the legal function should be. Assess too, where in that process your involvement lies. It could be much earlier than many people expect. If the legal voice isn’t being heard on the strategy committee, the enterprise risk group, key management groups or at board meetings, the chances are you’re hearing about things too late. That could cost the organisation dear. And, as many a large bank has learned recently, it’s not just the fines that come as a nasty surprise. The legal fees can, too;
- The functional remit of the legal team. Be clear about what this is, especially if there are any overlaps with other departments. When left vague or unclarified, areas of crossover have a nasty habit of causing problems; and
- Knowing the effectiveness of the legal team and individuals. We’re rarely in the perfect place from the perspective of personal and team competence, capacity, access or knowledge. Effectiveness across all your legal services is likely to vary from lawyer to lawyer and from business unit to business unit. As you strive to create the best department you can, avoid:
- Overreaching yourself by straying across boundaries with other departments; or
- Overpromising due to limited capacity, competence or influence.
Flag up gaps and uncertainties when there’s still time fix or work around them.
Your role in change
As an in-house lawyer, you’ll have a unique cross-business view. You’re trained to spot risks and join the dots between different business units. This means you’re unusually well placed to help the organisation generally and senior management in particular to identify necessary changes, whether they’re legal-related or otherwise.
Follow these steps to help identify, scope and manage change:
1: Scan the legal and regulatory horizon. Develop a thorough understanding of:
- What the organisation does operationally;
- Which jurisdictions it operates in;
- Any potential changes in the law that may affect the business;
- The laws, regulations and contractual commitments associated with its activity, such as:
- Employment law;
- Local shareholder requirements; and
- Treasury group funding arrangements.
This will help you deal with any potential legal, regulatory or contractual outcomes that could affect the business's plan.
2: Scope the legal aspects of changes. Building on the baseline established in step 1 above, determine what impact planned changes will have on the business. Consider if these will be transitional or enduring, when they’ll take effect and what this means for working practices, training, procurement and the organisation’s products and services. In doing this think about how often those laws change; how complex or unclear they are to apply; where different laws conflict, particularly internationally; and where the sanctions on the company and/or on individuals within the company of getting it wrong are material. These areas will need more focus, effort and resource on your part to keep the company on track;
3: Review risk appetite. As the organisation changes, review its risk appetite to ensure it’s still relevant. Anti-money laundering and anti-bribery laws, together with the Modern Slavery Legislation, are all having an effect on risk appetite as are increased regulations on "Treating Customers Fairly" and creating direct personal liability for directors and managers within the Financial Services sector. Reputations as well as legal liabilities are major considerations in procurement and sourcing decisions. This is also true when endorsing celebrities and sports personalities. When a US swimmer falsely claimed to have been held at gunpoint in Brazil in 2016, a string of major sponsors exercised reputational harm clauses and severed their ties with them. This indicates that that the in-house lawyers at those sponsors had done a good job of thinking "what if..." some time before when negotiating those sponsorship contracts.
4: Decide how to execute the change. Model each change. Agree with senior management and the appropriate business unit heads, the least disruptive way to put the changes in place.
5: Communicate. Share legal knowledge with each business unit affected by, or making, the changes. Make it relevant to their business plans, contracts and areas of risk so that they have a positive interest in making the changes happen. Ideally, get the business units or senior management to fund this step when they also benefit from it. It’s a great investment for them when measured against the possible consequences of their people operating with inadequate legal knowledge.
6: Build relationships. Work closely with adjacent departments such as procurement, HR and finance. As well as helping them understand your legal priorities, this will help you understand their challenges, too. It’ll also help you scope and deliver change. It can help in other, unexpected, ways, too. Why struggle with project management, for instance, when you could borrow a PRINCE2 expert from another team?
7: Understand your support role. You’ll be embedded in most other functions’ operating, change and innovation programmes to some degree. The better you understand, document, agree and monitor these arrangements, the more helpful you can be without over-stepping or under-stepping your role or having to pick up the pieces of an avoidable oversight.8: Be a watchdog. Keep an eye out for errors or omissions in the execution of change. Ensure other leaders across the organisation act as watchdogs too.
9: Be a navigator. Try to ensure the organisation doesn’t run into problems because of its focus on change. Your wide view of the organisation will help you spot any potential obstacles. Again, others should share this responsibility with you.
With the right structure, your in-house legal team can play a central role in business strategy and organisational change. The key principles in achieving this are to lay solid foundations in terms or your role, your scope and the organisation’s risk appetite and to know where and when to operate proactively. Also, develop your own role and your relationships with other key business units and adjacent departments with these objectives in mind.
Janice More has provided the commentary below:
In my experience, proactive rather than reactive lawyering is the most successful way of operating in-house and should be the goal of all in-house legal teams. Of course the legal team must be able to respond to unexpected challenges and issues, but this should not be the day to day modus operandi of the legal team.
Proactive teams will invest resource in knowledge capturing and sharing, best practices, templates and guidelines, policies and processes, training for lawyers and the business and spend considerable time getting to know their businesses and business colleagues.
Teams that rely only on reactive lawyering will likely find themselves and their businesses dealing with investigations, litigation, and regulatory issues and scrutiny – which results in legal and other budgets being consumed with legal fees and huge opportunity costs in the business as management focuses on defending and dealing with these issues instead of achieving their goals.