Managing a law department is no easy task, so we’ve talked to experts and got the low-down on the nine simple steps in-house counsel can follow to build a better law department.
There’s no question that in-house law departments serve an important function at companies across Canada. But because they’re one of many cogs in the corporate wheel, these lawyers don’t always get the recognition, attention, and resources that they would if they toiled for traditional law firms.
Improving your in-house department, however, doesn’t have to be an expensive or all-encompassing endeavour requiring CEO sign-off every step of the way. In fact, if you heed the advice of our panel of experts, a lot of the common sense initiatives they recommend could generate substantial savings, both in dollars and time.
1. Develop a strategic plan
Considering that law departments tend to be reactive to most things rather than proactive, the first step that needs to be taken to improve an in-house legal department is to develop a strategic plan.
Deborah House, vice president and deputy general counsel for the Washington, D.C.-based Association for Corporate Counsel, says legal departments need to conduct a thorough analysis of their operations, including an examination of their strengths and weaknesses as well as threats and opportunities.
“The point of a strategic plan is to identify what the law department needs to do to be the best law department possible,” she says.
Failure to set out a strategic direction comes with significant risks, she says.
“You will just react to the most recent crisis that has walked in your door. You won’t be pro-actively eliminating them before they get there,” she says.
For example, if a corporation’s strategic plan is to acquire a number of smaller companies to fuel its growth, the law department needs to determine its role in the strategy, whether it has lawyers who know how to do M&A work internally or if it should go to outside counsel.
“If the CEO says, ‘We’re going to acquire this company tomorrow,’ I’m not running around in circles trying to figure out how to respond because due to our strategic planning, I have the right players in place,” she says.
House says your law department’s plan should also be communicated to your clients.
“If you show them you’re doing strategic planning, it makes you much more of a true business partner with them rather than just a guy that causes overhead,” she says.
2. Collect your corporate knowledge
In-house legal departments are constantly building knowledge and generating opinions but it’s not always done as part of a coordinated effort. Tom Smee, senior vice president and deputy general counsel for RBC Royal Bank, recommends compiling a list of frequently asked questions about the company’s business and market so that other people in the firm can get the answers they’re looking for without always having to ask a lawyer.
Its team of about 135 lawyers worldwide, including slightly more than 100 in Canada, developed a list of more than 300 frequently asked questions for business people or bankers to access. If they still don’t have an answer after consulting the list, they go to a member of the legal team, Smee says.
“It’s a great efficiency-generating mechanism and a good use of the accumulated knowledge [of the firm]. There’s probably a lot of research, through no fault of anyone, that gets done two or three different times,” Smee says.
3. Hone your management skills
Lawyers are trained to know and interpret the law but heading up a corporation’s legal team also requires an ability to manage.
James Wilber, a Milwaukee-based principal at Altman Weil Inc., a management consultancy to the legal profession, says it’s important to understand that one’s management role is just as important as your legal one.
“It’s not unusual to find management is given the short shrift in the daily needs. With putting out the legal fires and the large amount of work that most law departments have, it’s a challenge for the managers to find the time to manage,” he says.
But without devoting sufficient time to the managing side of things, human resources, technology, and departmental costs will be far from optimal, he says.
He says management and business don’t tend to come naturally to most lawyers simply because they don’t have that kind of training. You can, however, get a baptism by fire by immersing yourself in the business issues of the day.
“Lawyers in a law department need to be good business people too. After all, they’re working in a business corporation,” he says.
4. Operate proactively, not reactively
Richard Leipsic, senior vice president and general counsel at Winnipeg-based CanWest Global Communications Corp., says its legal team tries to “develop antennas” to a wide variety of issues so it can be in front of them and alert management in a timely manner.
“You want to be able to sense what’s important or what’s going to be an emerging issue. Try to get out there before things get out of hand or you’re playing catch up,” he says.
This requires the development of good relations within the organization so lawyers can be the employees who learn things early on, he says.
“You have to be sensitive. Try to recognize things as emerging issues when you read them in a report or a business development plan,” he says.
Leipsic says he does his best to encourage the media giant’s business people to involve its lawyers as early as possible in various processes.
“We don’t like it when issues go unidentified or things are coming to us as a work in progress. We don’t like to be raining on other people’s parades but that happens because they’ve forgotten to get us involved early. They’ll have regulatory or legal issues they haven’t addressed and sometimes have to retool what they’re working on,” he says.
Leipsic recommends getting out from behind your desk to meet as many people within the organization as possible. Be positive and creative, he says, so you’re seen as a solution to a problem as opposed to a potential speed bump.
“It’s a question of having relationships so they’ll have confidence in you that you’ll help them and give them a creative solution as opposed to reasons why there are problems,” he says.
5. Tighten outside billing and reporting practices
Bruce Bowman, vice president of legal and general counsel at Canada Safeway Limited in Calgary, says he has long been struck by the lack of business sophistication many lawyers in private practice have with regard to billing practices.
“Lawyers will often generate a ton of work in progress, which is income to the firm, but it languishes unbilled. From the client’s perspective, that’s not in their interests. It might seem so at first blush but clients can be faced with very unpleasant surprises with many months of work having been done by the outside law firm,” he says.
Canada Safeway has implemented a mandatory monthly billing and reporting policy from the law firms with which it works to avoid such surprises, Bowman says.
“Every month I get a stack of bills from law firms. It allows me to keep track of the expenses we’re incurring but also the status of various matters, some of which I’m not intimately involved with. I find that very important, especially for a small department,” he says.
Bowman says Canada Safeway tracks the hourly rates being charged by individual lawyers and requires they keep him posted of the number of hours put in and the nature of the work being done. He cautions against being overly concerned with comparing the hourly rates of different lawyers.
“Lawyers vary tremendously in the way they record their time and in their own personal efficiency. A lawyer charging $275 an hour might actually be less expensive than a lawyer charging $200 an hour because of personal time-keeping habits and efficiencies. It’s not a scientific process. As an in-house lawyer, you have to be careful not to be slavishly addicted to hourly rates. They’re not necessarily indicative of the ultimate cost,” he says.
Bowman says because his firm has so many middle and senior management people who deal with outside lawyers on a regular basis, in-house counsel might have to intervene occasionally to make sure the personal relationships aren’t getting in the way of the company’s interests.
As such, the company forbids law firms from giving gifts or heaping lavish entertainment on its management.
“It detracts from the arm’s-length relationship we want to maintain with outside lawyers,” he says.
Leipsic is also a fan of having established policies. He says many problems can be avoided if your company’s people know the rules and what’s expected in certain situations.
For example, having a policy on file retention gives people a clear understanding of when they can destroy documents.
“It adds a lot more efficiency in the legal department. We don’t have to answer the same question 10 times,” he says.
6. Develop a career path
There’s little doubt that in-house legal work is more interesting than it was a decade or two ago, but Royal Bank’s Smee cautions you’ve still got to foster a sense of career development and growth opportunities.
“You don’t want people to ever feel like a hamster in a wheel. You want them to develop their skill set and have the ability to move around (within the corporation). Someone’s role needs to develop along with their talents and abilities even if their place on the corporate chart stays the same,” he says.
That might mean having greater client contact, working on larger projects or cross-enterprise projects to keep things interesting, he says.
7. Adopt alternative billing methods
Wilber says it’s important to have a good handle on your law department’s outside legal spending. He recommends looking for every possible way to get lawyers hired on various projects off hourly pricing.
“Fixed fees are more predictable where outside counsel has some skin in the game. That’s an incentive to be as efficient as possible. You could even include some incentive to earn a premium if they bring things in under budget or ahead of schedule. Most law departments could save a large proportion of their outside legal spend if they moved [outside lawyers] off hourly based legal work,” he says.
Once you’ve decided a particular matter can’t be handled in-house, Smee recommends matching the risk and complexity of the matter to the expertise of the outside firm.
“A lot of people would habitually go to a particular law firm but that might not make sense [in every case]. You need to have a suite of different law firms with different price points and capabilities in a particular space so you can get the work done really well but less expensively. It’s not rocket science, but if you do it, it saves money,” he says.
It can be a bit of a juggling act, Smee admits, because you don’t want to push work to the cheapest lawyer because they might be the least equipped to do it.
“A partner might have been able to do the work in 30 minutes at $500 an hour while an associate spins his wheels for seven hours at $250 an hour. It ends up costing a lot of money. It’s a false economy,” he says.
8. Delegate, delegate, delegate
Leipsic says there’s a tendency for general counsel to stay engaged in a plethora of matters that they should be passing off to others.
“We don’t delegate early enough or we don’t get the other people in the department engaged early enough so they have a hard time with the learning curve,” he says.
Leipsic says it’s not uncommon for lawyers who have come out of private practice to consider getting the legal department involved in certain matters as a misuse of billable time.
“We’re not billing our time and there’s a resistance to get a lot of people involved. You’re trying to preserve their time but that usually becomes counter productive. When they have to get involved later on, they’re coming from behind the scenes and having to play catch up,” he says.
9. Demonstrate your value to management
Wilber says it’s crucial for law departments to be able to demonstrate their worth to the company.
“It’s always a question in the back of the minds of CEOs, ‘Why do we have lawyers here anyway? Why can’t we outsource all of our legal work?’ There should be an ongoing dialogue [to say] why it’s in the company’s best interests to have an inside legal department,” he says.