The days of in-house legal departments working in the shadow of the executive suite are history, or should be. That’s the perception of general counsel in Indiana, who want a seat at the table in setting strategy for their companies and organizations.
That was one of the themes that emerged from a survey of general counsel in the state conducted in November by Indiana Lawyer in partnership with the Indianapolis office of the Benesch law firm. The survey drew 57 responses, a statistically significant 14.7 percent of those surveyed.
The results of that survey were shared with corporate counsel Dec. 17 in a program sponsored by Benesch. View survey results here.
Asked what their biggest opportunities were in 2015, 75 percent of those responding to the survey said demonstrating to the executive suite that the legal department is a business enabler. In the same vein, asked what they’d most like to focus on next year, more than 55 percent said they wanted to position their legal department as a strategic business partner within their organization.
Cutting costs and bringing more efficiency to their organizations were other priorities for general counsel. Among the ways they expect to do that: negotiate alternative fee arrangements with outside counsel.
But internally, their focus is clearly on being seen as a valuable part of management, not a cost center that only presents legal obstacles to the company’s goals.
Stephanie A. Blackman, vice president, general counsel and secretary for Closure Systems International Inc. in Indianapolis, isn’t surprised that her peers are intent on working more closely with the executive team. Her perception is that the door to more involvement by the legal team has really opened up in the last decade.
“As the legal landscape gets more complicated, CEOs are understanding the value of the general counsel having a spot at the table,” she said.
But that doesn’t mean it always works that way.
“You have to teach them your value,” said Kristin Altice, general counsel for the construction firm Shiel Sexton Co. Inc. in Indianapolis. Altice, who was the first lawyer Shiel hired when she joined the company back in 1999, said companies don’t always know instinctively how to use lawyers to their advantage. “It’s not second nature to them. Teaching that value is a process.”
When that process doesn’t occur, the financial and management sides of businesses sometimes forget about the legal department. Altice said that doesn’t happen at Shiel Sexton because they don’t want her to come into the process late and say “you can’t do that.”
J. Scott Enright, who leads the four-person legal staff at Emmis Communications Corp., is also an integral part of the management team at his company, but that doesn’t mean he never says no. It’s what comes after “no” that really matters. General counsel should follow “no” with “let’s do it this way, instead,” Enright said. “We want to make sure that people with creative ideas are implementing them legally and effectively.”
Another job that general counsel take seriously is finding efficiencies within their organizations. “Implementing operational improvements to enhance efficiency” was cited as the second biggest opportunity for 2015, right behind becoming more of a business enabler, according to survey respondents. More than 65 percent said that would be a point of emphasis for them next year. Similarly, general counsel said in the survey that cost savings/expense reductions was the most critical to their organization’s growth among eight options listed.
For Altice at Shiel Sexton, being efficient means the other half of the company’s two-person legal team is a paralegal rather than an administrative assistant. Working with someone who has legal training enhances productivity, she said.
Blackman, who leads a staff of three at Closure Systems, a company with $1.2 billion in annual revenue, said a good CEO is always going to be pushing the legal department to provide greater service at reduced cost.
A big part of that is negotiating alternative fee arrangements with outside counsel. More than 56 percent of survey respondents expect to use outside counsel, and about the same number said pricing predictability in those relationships is important.
Blackman, whose company operates globally, said firms outside the United States are much more likely to offer alternatives to the billable-rate business model, but she sees law firms here moving in that direction.
Enright agrees outside counsel are becoming more flexible where compensation is concerned. “I don’t care about hours, I care about the cost and value of the service that’s being provided,” he said. Emmis frequently negotiates flat fees with outside counsel or, in an acquisition, demands a lower hourly rate with the promise of a success fee if the transaction meets all the company’s goals.
Bringing predictability to pricing is also a major goal for Altice, who negotiates alternative fee arrangements when she can. But she also realizes that her cost-saving goals are inconsistent with the sales goals of outside counsel, so she tries to do as much work in-house as possible.
Though pricing predictability and reasonable rates were among the three most popular qualities general counsel said they look for in an outside firm, the most popular quality by far was responsiveness and communication. More than 88 percent of those who answered the survey put responsiveness/communication in the top three qualities they value in an outside firm.
“I don’t like getting a bill that surprises me, but what I really don’t like is not getting an outside response when I expect it,” said Blackman.
Asked what most irritates them about outside counsel, the most common answer among survey respondents was the failure of counsel to consider their company’s business objectives.
“The best are the ones that try to take the time to understand our culture, our risk tolerance. They need to do that on their dime,” Altice said. For Blackman, not doing that is a deal killer. “Some lawyers get it, some don’t. I look for and hire the ones who get it,” she said.
It’s easy for Peter Prettyman to see both sides of the equation. Just last month he left Taft Stettinius & Hollister LLP to become vice president and general counsel at the Indiana Municipal Power Agency. He understands the need to keep a client’s business objectives in mind and the importance of being responsive. And he’s been on the other side of negotiating alternative fee arrangements, a strategy for holding the line on costs that he believes is here to stay.
Consistent with the theme of controlling costs, most respondents to the survey, nearly 77 percent, said they expect to keep the number of lawyers in their legal department the same next year. The more than 17 percent who said they expect to add lawyers shouldn’t have trouble luring prospects out of law firms, Prettyman said.
After years of focusing on bringing business in the door, he looks forward to being able to devote his full attention to practicing law at IMPA.
Enright agrees working in-house has its benefits. “I think there’s a recognition you have one client, you’re doing a deep dive and you’re able to make a difference.”•