Disruption is a key element in the in-house counsel’s world, and producing more for less a constant challenge, not to mention leveraging technology and globalization. Building a truly outstanding legal team requires hard operational awareness as well as softer intuition crucial to managing across borders and cultural nuances. Author and multinational general counsel Bjarne P. Tellmann explains what it takes in this encapsulation of his new book on the topic
The role of the general counsel (GC) has become ever more challenging. Gone are the days when law firm partners might have viewed the GC’s position as a “lifestyle-friendly” prelude to retirement. Indeed, in recent decades the GC’s role has become one of the most complex and challenging in the corporate world. This evolution has come about due to changes in the macroeconomic environment, as well as within the legal profession itself. Let’s consider each in turn. On the macroeconomic level, regulatory expansion, globalization and risk convergence have played particularly prominent roles in this respect.
Government regulation has increased worldwide. In the past 15 years, for instance, the US has expanded its rules on money laundering, corruption and fraud, and increased its use of sanctions. Other countries have followed suit. Consequently, companies must now comply with many new, often inconsistent, regulations that impact both their international and domestic operations.
The growth in regulation has been accompanied by increased enforcement and ever-more severe sanctions. In the antitrust area, for instance, the European Commission recently imposed a record €2.4 billion (US$2.79 billion) fine on Google, dwarfing its previous record – a 2009 fine of €1.06 billion against Intel. Antitrust fines imposed by Chinese authorities, meanwhile, increased by 280% between 2014 and 2015 to US$1.12 billion, while the US Department of Justice imposed a record US$2.85 billion in antitrust fines in 2015 – more than twice its previous high and over three times greater than 2014 levels.
These developments have both raised the stakes for companies and imposed a tremendous burden on corporate legal departments who are tasked with helping companies to navigate these environments.
Globalization has impacted the GC because virtually every major legal matter now has cross-border effects. Problems rarely stay in one place for long, and the many moving parts are increasingly difficult to manage. Enforcers and litigants, as well as investors and counterparties, have become networked and globalized. The GC must manage many moving parts, ranging from political and cultural obstacles, to legal and regulatory barriers. In addition, the GC must increasingly serve, lead, unify and inspire people in different parts of the world, with differing cultural norms.
Risk convergence has also impacted the GC’s role. The speed and impact of reputational harm in an era of social media means that news on Twitter travels faster than any legal response. “Pure” legal matters have become rare. Instead, the legal, economic, reputational and political dimensions of risk have merged. In such an environment, where the non-legal implications of legally appropriate action can impose real harm, GCs must carefully consider the holistic implications of their advice.
Changes within the profession
The above macroeconomic changes are both increasing the demand for legal services and expanding the range of topics legal must involve itself in. Ironically, despite the increased need, legal departments face ever increasing cost constraints. Corporate profits are under pressure, and GCs are asked to do ever “more with less”.
To meet this challenge, GCs must source their needs across different types of providers, identify opportunities, roll out technologies and tools, and optimize process flow and service delivery in new and innovative ways.
Fortunately for the GC, globalization and technology have disrupted the “one-stop shop” law firm model, presenting new opportunities to work more efficiently. Many of the tasks that were performed by law firms have shifted in-house, enabling more preventative and pragmatic handling of core legal risks. At the same time, GCs can more cost-effectively assign categories of work to alternative legal service providers, including offshore and near-shore outsourcers, high-end staffing agencies and law firm subcontractors.
Technology also enables in-house tasks to be undertaken far more efficiently. Communication and collaboration tools, self-help and knowhow-based platforms, efficiency technologies and transparency are just some examples of kinds of advances that have made life easier for corporate legal teams in recent years. Artificial intelligence and machine learning are increasingly relevant as well, enabling the automation of higher-value work, including cross-disciplinary legal thinking, pattern spotting and legal analysis.
At the same time as technology and globalization are pulling the legal value chain apart, they are pushing the job of the GC into closer contact with other professionals, facilitating a growing “convergence of the professions”. Professionals who previously sat comfortably in their silos are expected to connect and interact with each other in new and innovative ways. Professional convergence is happening not only because it enables companies to better manage converged-risks, but also because is a critical ingredient of innovation itself. To paraphrase American popular science author and media theorist Steven Johnson, the more networked we become, the smarter each of us gets; and the smarter we get, the more innovation gets generated.
Professional convergence has led to a growing demand for “T-shaped” people, who combine deep cognitive, analytical and/or technical skills in one discipline with broad multidisciplinary and social skills that enable them to connect across other areas. GCs are naturally “T-shaped” because they possess deep legal expertise while also acting as central connectors across the corporation. And as a relatively small and cohesive group, they communicate effectively with each other through dense networks.
The GC as mini-CEO
To succeed amidst these intense challenges, today’s GC must master potential role overload and become a mini-chief executive − able to communicate, inspire and build outstanding legal teams, identify and anticipate risks, formulate and execute strategy, implement procurement and technology pipelines, control costs, ensure efficacy, and nurture culture and talent. The GC must also be an outstanding leader and team builder because without a world-class legal team even the most distinguished GC will eventually fail to deliver. Building an outstanding legal team is the GC’s acid test as a leader.
In my recent book, Building an Outstanding Legal Team: Battle-Tested Strategies from a General Counsel, I outline a model for building a world-class legal team. The approach starts by dealing with the “hardware” – that is, the hard, operational components needed to build the globalized, connected legal organization of the future. These include aligning operating and service delivery models with core legal risks, appointing the right leadership team, restructuring relationships with external providers, rolling out powerful new technologies, controlling the legal budget, and optimising the internal-to-external spend ratio.
In-house lawyers are often not good at these tasks, and many do not like doing them. There is a certain tension between managing the day-to-day substance of being a lawyer and running a legal organization. GCs often neglect the latter because they lack both the training and the time. But to succeed in today’s environment, it is critical to focus on this, and the book provides a blueprint for doing so.
Having tackled the hardware, the “software” refers to the softer, less tangible but equally critical components of culture and people. It is essential to start with culture because that is the sea within which the legal department’s talent swims. If the culture is suboptimal, talent will leave, stay away or be prevented from doing their best work.
One must consider what is meant by culture, why it is important, and whether culture can be built from the ground up. It is necessary to examine tactics to ensure ongoing, iterative culture improvements, the challenges associated with leading and motivating people across generational divides, and the skills that today’s in-house lawyers need.
Having considered both the hardware and the software, I conclude in the book by assessing the threads that wind their way between the two: change management and strategic direction. Both of these aspects are critical to the GC’s transformational success.
The importance of CQ
One aspect that is given careful consideration within the “software” element is the set of skills that lawyers need to succeed in the “new normal”. Given what has been said, it may not be surprising that many of these skills are non-legal. Indeed, substantive legal skills are now a “hygiene factor” − clearly critical, but not in themselves sufficient.
Space here will not permit a consideration of each critical skill, but one example – “cultural intelligence” or CQ – may give the reader a sense of what is needed.
In an increasingly global and interconnected environment, few tasks are purely domestic, and lawyers who are unfamiliar with cultural differences can derail delicate negotiations, repel promising talent and frustrate the GC’s ability to build a world-class team. CQ is therefore critical. Some of the most important understandings that lawyers with high CQ will bring to their jobs include:
Cultures approach leadership differently. In some countries, such as France, leaders typically employ an autocratic style; the leader is expected to have all the answers. Variations of this approach exist in Latin America and the Middle East, among others.
By contrast, Scandinavian countries typically have a flatter, more egalitarian, consensus-driven approach to leadership. In such cultures, explicit displays of hierarchical order are avoided.
Knowing what style is typically seen in what cultures is essential for any legal leader.
Does open disapproval of an idea signal a rejection of the idea, or of the person? Is open disagreement considered to be a positive or a negative force? Cultures vary on these points and lawyers must understand the nuances.
Understanding the role of “face” can be critical in this respect. In Confucian cultures such as China, Japan and South Korea, group harmony is important, with everyone maintaining prescribed roles relative to each other.
Open disagreement risks upsetting the social order, because it may be viewed as a suggestion that the person you disagree with has failed to live up to their prescribed role. That may cause them to lose face, generating a sense of shame in the recipient and disunity in the group. Consequently, disagreement should be stated indirectly or subtly.
By contrast, many Western cultures view open and constructive disagreement as a positive. Rather than being viewed as an affront to the individual, it is typically seen as an honest effort to move the proposed idea forward. In such cultures, remaining passive or silent might be viewed as passive-aggressive, destructive or derelict.
High-context v low-context cultures. Cultures that are sensitive to open disagreement, such as China and Japan, tend to be regarded as “high-context” cultures, in which people have a high number of shared norms and context.
In such cultures, there is no need to spell out openly what is meant because everyone understands the context.
By contrast, cultures that are more likely to depersonalise open disagreement, such as Germany, the US and the Scandinavian countries, tend to be recognized as “low-context”, where people are conditioned to convey information more explicitly, not assuming that others will implicitly understand the context. Action points and “wrap-ups” are common at the end of meetings, to be clear on what has been agreed and who is responsible for what actions, and the deadlines that need to be met. Such summaries might be viewed as unnecessary or perhaps even patronising in high-context cultures.
Another cultural difference that can be critical for lawyers to understand is how trust gets built.
In task-based cultures such as the US, UK, Germany, Denmark and Australia, trust in the commercial context is often built, through good work, excellent analysis and reliability.
In relationship-based cultures, such as Nigeria, Brazil, Saudi Arabia and China, trust is more often built through personal bonds, friendship and affection. This kind of trust can take much longer to build and develop.
Many cultures fall somewhere in between these extremes, and complexity can be added in the form of familial, tribal or other cultural ties.
Finally, legal leaders should be familiar with the methods that people from different cultures typically employ to develop their arguments. In many European countries, particularly Latin countries such as Italy and France, people will typically employ deductive reasoning, which typically focuses on diagnosing the problem before considering possible solutions.
By contrast, other cultures, such as the US and the UK, tend to employ what is known as inductive reasoning, in which the bulk of time is spent focusing on the solutions, and far less on diagnosing the problem.
Lawyers who have had significant foreign assignments usually display good CQ and will know how to modify their approach to fit the audience, so that they are more persuasive and effective as advocates. It is a critical skill to success in the 21st century legal department.
Change and opportunity
The volatile and complex environment that companies and their legal advisers find themselves in has raised the stakes for today’s general counsel. Pressures are growing, threats are more diffuse and the costs of getting it wrong are rising. Internal demand for legal support is increasing, but legal department resources are shrinking.
The pace of change – particularly in the past decade – has been relentless. We live in exponential times. More change happens in a year or two today than historically happened in a lifetime.
To succeed as GC in this environment you must be able to build, lead and inspire an outstanding legal team. It is only by doing this that you can manage the professional convergence and role overload that comes with the job.
There are, however, plenty of opportunities amidst the threats that can help you build an excellent organization. The innovation revolution is unbundling the traditional law firm model and disaggregating the one-stop shop approach to handling legal matters. If you patiently and methodically build your legal team, and develop the skills that your lawyers will need to succeed, you will find yourself shaping the change rather than reacting to it, which is a much better place to be.
Bjarne Tellmann is the New York-based general counsel and chief legal officer at multinational publishing and education company Pearson. This article has been adapted with the kind permission of Globe Law and Business from his new book, Building an Outstanding Legal Team: Battle-Tested Strategies from a General Counsel
(see: http://www.globelawandbusiness.com/OLT/ for more information)