“You have to make the case to the CEO that what you’re doing makes sound business sense when you look at the cost of bringing on additional resources relative to the value that will be delivered at the end of the day,” said Janice Odegaard, senior vice president and general counsel with Suncor Energy Inc., speaking at the recent Canadian Corporate Counsel Association annual national meeting in Calgary as part of a panel called, “Why it Makes Sense to Expand the Legal Department.”
Odegaard spoke about how effective legal departments can get overwhelmed with work but sometimes it’s not high value or value-add work being done. If there is work being done that is not necessarily adding value or perhaps it should be done in a different level of the company then that needs to be addressed.
“You have to have a shared vision with the business about what the legal department is there for and what they’re going to deliver and that they are adding value. This isn’t just about identifying risks — it’s not about being the department of ‘no,’ it’s about being a valued and trusted business partner within the rest of your business and bringing that value. If you can close the loop at that end efficiently you have a business case.”
So how do you assess whether the business shares the same vision of growth for the legal department? Odegaard and her co-presenter Gail Harding, senior vice president and general counsel of Canadian Western Bank, both use surveys to obtain feedback from internal clients and both also have regular dialogue with the business leaders to make sure they’re on the same track and have the same priorities. “The business is always in the process of change. It’s important to be closely aligned with that,” said Odegaard.
When as general counsel you identify a need to bring on additional resources you have a choice, she says, and that is usually the external versus internal debate.
“Generally when we use external counsel we use it for peak work — we don’t staff up for peak work but staff up for an average or below average level of demand,” she says. “If there is specialized expertise required that isn’t fundamental to the business that doesn’t constitute a full-time job — we would look to outside counsel for that.”
That includes commoditized work where external firms have come up with systems to replicate transactions that are very predictable and routine. “It’s also temporary work where all of a sudden there’s a huge transaction and you need seven to 10 lawyers with different levels of expertise feeding in — we’re not structured for those transactions,” she said.
The other discussion is when does it make sense to bring the work in-house permanently? The economics of doing the work internally can be advantageous relative to externally. “One of my biggest mantras is keeping the institutional knowledge within the company,” said Odegaard. “If you need legal support in an area that is core to your business if the knowledge gained is going to be critical for that function for a period of time it makes sense to have someone internal do that work rather than have an external counsel do it and not having an internal expert.”
There are other alternatives to expansion such as controlling what work comes your way. For example, in a large organization that is naturally more process driven it may make sense to introduce service level agreements in which the legal department comes to an understanding with the businesses it serves about the level of service expected. That starts with an understanding there is a cost associated with using internal counsel. Most companies have mechanisms to allocate costs but sometimes you have to remind people there is a cost involved.
You can also make sure regularly performed transactions such as procurement contracts are robust and well understood by the business unit, not requiring constant review from the legal department.
Suncor also underwent a litigation reduction initiative after its merger with Petro-Canada in 2009. “It’s not that we just settled everything, but when we came out of the merger we had 500 active litigations. When we analyzed those a lot of them were in the downstream business and many were environmental involving alleged contamination of sites, etc. We looked at them in terms of settling them or, if needed, to fight them. We did reduce a significant amount of litigation and freed up a body through that process,” said Odegaard.
Also, if there is a case to expand the team it’s not always lawyers you need to bring in-house, something Odegaard has recently realized. For example, compliance and accounting professionals can be very effective in a code of conduct program or compliance program. Suncor also has two patent agents — one is an engineer but not a lawyer. “When you look at the work required you don’t necessarily need to have a lawyer although it’s important the team is led by a lawyer or to have one on the team.”
And because of the number of labour unions in their business, Suncor is looking to bring labour law work inside. “When lawyers can come in and have conversations with their business groups and they all speak the same language that demonstrates value. When you go back to the business and say your level of activity is increasing or regulatory environment is getting more complex and we think we can support them better and here’s what it’s going to take, that conversation has a level of receptivity with a business that already values what you bring,” says Odegaard.
At Canadian Western Bank, Harding arrived in 2004 as its first in-house counsel. She says that can make expanding the department that much more challenging as management doesn’t always realize how much work there is to be done. “Every dollar I spend is a direct dollar off our bottom line,” said Harding. “It’s the mindset I’m facing every time I go to ask for additional resources. By the time an organization comes to realization they need a lawyer they probably need several.”
“The work is going to be unmanageable if you go in the first year and try and do all the things that need to be done. That drove me to look at the highest value work — what are the business priorities of the company — and I decided that’s where I needed to spend my time.”
Harding became inventive with hiring summer students and temporary help. Eventually the business people came to her and asked how they could keep a temporary person and bring them on full time. “I learned a valuable lesson of leveraging my peers in the business units,” she said.
She also decided to document and report on the work her department did for the business units. She listed all the projects legal was involved with and where they added value. If there was an item in an annual report about a new business venture or launching a new product her top 10 list was about how legal was involved in those projects.
“I may not have thought that launching a business credit card was that important but if that is one of the things that was a key business priority for the year in my year end summary I wrote about where legal was involved with that project and how we helped bring that business objective to light,” she said.
Her department has grown to five lawyers now and she is able to demonstrate their cost is far less than that of the billing rate of a second year lawyer at a national law firm.
“I see my role as GC as the one constantly putting the brand out there and saying ‘We add value’ because no matter how much I think they need help I find it difficult to expand resources if our clients don’t perceive value. I’m constantly communicating where we add value,” she says.