In House Counsel’s Dharma: Ways of Running the Legal Department Like a Business Unit

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In House Counsel’s Dharma: Ways of Running the Legal Department Like a Business Unit

Amar Sundram | April 2013

This is a very tricky topic. Are we saying that in-house legal department should be converted into a profit centre? Are we saying that just as sales department and collection departments have a target, legal department should also be given a target and be evaluated at the end of the appraisal year, accordingly.

Or are we saying that legal department, like any other line vertical, should be totally aligned to the vision of the organisation and should be treated as an integral part of the business?

The Wall Street Journal reported somewhere in May 2011 that Ford could offset their entire legal department budget with plaintiff recoveries, quoting the then Ford GC David Leitch. The Journal also reported that companies like Ford, Tyco and Michelin are devoting more and more time and effort in plaintiff suits, which are filed to recover monies and thus off-set the expenses pertaining to the legal department.

In India, some of the financial institutions have collection – legal department where the entire job profile of the in-house lawyers is focussed towards recovering dues and bad monies and quite often some percentage of the total recovered money is linked to their bonus.

There are some external lawyers / law firms, which specialises in the recovery of bad loans and their professional fees are linked to the amount of money recovered.

The question is where are we heading to? Is such an approach ethical and professional for a lawyer? Has the organisation recruited the lawyer for recovery of money? Is the in-house counsel justifying his competency in becoming a recovery agent for the organisation?

However, the much larger question is – Whether an in-house counsel is capable of running its legal department much beyond recovery and has become an integral part of the business itself. If the answer is “yes”, the next logical question is “how”.

Like any other department in the organisation, legal department is also an equal contributor in the overall growth of the company.

The following initiatives must be taken by the Legal Head / General Counsel of the company:-

Participate in all important business meetings:

Mainly at the inception level. This will help understand the proposed business structure, be as important a constituent of the business team as any other. Many a times, these discussions touch upon a legal provision (doable or not doable action points) and that is the time when GC needs to step in and help the business team with legal clarification.

John B. Doughlas III, in his classic article “Reebok Rules”, reminds corporate counsel to attend business meetings and exercise business judgement. Use legal training techniques in meetings to develop and challenge ideas and suggest some of your own. Learn what creates value for your business and apply these drivers to the selection of the work you perform. Once done, legal has already caught the attention of the top management.
Contribute in the execution of the business plan:
The Head Legal /General Counsel needs to brief the legal team members of the meeting clearly preparing them with the possible queries coming. This preparation helps the team members to remain equipped with all the homeworks (research works) so that once the business team actually approaches them, there is a solution / clarification available.
Be client focussed:
Many a times, the common misconception faced by in-house counsels are that they are treated as a support function but not treated equally with other business team members. Such misconception never helps the team to rise and get integrated with the organisation. On the contrary, the members of the legal team should feel privileged that almost all the business verticals of the organisation seek their support with their expertise in the legal field and thus the exposure and the information available to the legal team is much diverse. It is equally important to generate confidence in the internal clients so that they feel confident to approach the legal team and discuss the legal issues.
Have a good talented legal team:
The legal team in any organisation is always a small team as compared to other business team. Hence, it is very important to have quality and talented members. Be very careful in the selection process and pick up the best talent. Remember, a good team would ensure less dependency on external law firms and thus saving on expenses. While it is desirable to have specialised subject experts in the overall team, a lot depends on the total team strength. If there is a constrained in the manpower strength, have generalist counsels with exposure in the respective specialised area of work, as per the requirement.
Build a good library:
It is often seen that in-house counsels don’t keep a track of the latest happenings on case laws, legislative changes and are dependent on external law firms. It is so important for the General Counsel / legal team to remain abreast with the latest judgements in the respective field of business operation and keep the top management apprised. Equally important is to keep a tab on the legislative changes happening. Sectors like Telecom, IT, Banking, Taxation etc have seen so many notifications / circulars issued from Regulators. Hence, it is critical to keep the management totally updated with changes. All of these have an impact in the way the business is run and the revenue earned.
Have an annual plan for the department:
Set a goal for the department with each member’s clearly defined role / contribution / accountability. This goal should be aligned to the organisations vision, mission and values. We are often faced with the question from the team members as to how to set a quantifiable target in the Performance Management System (PMS) like any other function. This is indeed a challenge as lawyers believe that their work is more to do with art than maths (numbers). Since the PMS is common to all the verticals, it is important to participate in the same and try to quantify / measure the work in terms of total number of litigations, a likely time frame to close (fill it with riders), target percentage reduction in terms of legal spending etc. Have a detailed MIS within the legal department, which must be reviewed on a monthly basis amongst the team and could then be shared with the top management. Do ensure to flag critical legal cases / issues drawing the attention of the management.
Effective communication:

Remember, this is the best skill which lawyers possess and must be utilised by the in-house counsels to the maximum. Be clear in your writings, information giving, briefing the top management, internal opinions etc. Many a times, in-house counsels feel the pressure of giving a green signal to many of the complicated business projects / initiatives, even when the law does not provide for it or where law is silent or where there are grey areas. Quite often we have heard business people saying that in-house lawyers are expected to make the things happen and not to block the business by quoting some provisions of the law. While it is important to be a part of the business and therefore take benefit of the interpretations of law; make sure that such opinions are within the riders supported by relevant case laws. Be solution oriented professional and if there is a clear legal impediment, feel free to point out the consequences in case of contravention.

The traditional way of looking at the functionality of the legal department by the organisation has undergone a sea change these days. Legal spending being a necessary expense is now viewed by many organisations as a business investment. A good quick legal advice, preventing a potential litigation or adverse action by the regulators, is always preferred than expensive time consuming court litigation. It is, however, equally important for inhouse legal professionals to review their short term and long term plans periodically to keep the legal investing within the controlled limit.

One of the ways of doing it is to take a strategic decision on litigation, reduce / curb protracted litigations. Enter into a strategic settlement with the disputed parties at the right time – this will save cost in terms of external counsel’s expense and also allows the in-house legal counsel team to focus on more productive / new areas or work.

Remember, legal department is the custodian of the legal interest of the organisation and no organisation can afford to ignore it. It is upto the in-house legal professional to provide visibility across all functions, provide ethical leadership and integrity and thus add value to the company.

About Author

Amar Sundram

Amar is National Director – Legal / General Counsel, Ernst & Young Services Pvt Ltd. This article is written by the author in his personal capacity and does not reflect an official view of the organisation he serves.