As lawyers navigate their journey to becoming General Counsel, there is often little opportunity to learn how to start a legal department from the ground up. For many, legal operations experiences are learned at varying levels within legal departments (whether corporate, government or law firm) that are well established with long-standing practices and ways of working that have simply evolved over time. These departments may differ widely from manual processes to use of the latest technology tools. Some attorneys may never gain access to or participate in the details of legal department budgeting, technology selection, development of legal department goals, client relationship strategies, talent development or outside counsel management. These are just a few elements that serve as pillars to supporting a well-run legal department. Without significant exposure in these areas, it can be daunting to accept a position as a company’s first General Counsel where you are tasked with driving these and other pillars as your primary objectives.
Are you ready for this challenge? Taking on this challenge as the first General Counsel offers a unique opportunity: to shape the legal function from the ground up, but first, you must understand why the company is seeking a legal function. Many reasons exist for companies to establish a legal department: increasing regulatory pressures, outside counsel cost savings, significant litigation, better risk management or business expansion. It’s important to know what your company needs from its new legal function and what challenges you may face in preparing to address these needs.
It may seem simple for those who have worked in established legal departments that are viewed by executive management as strategic partners or value drivers. However, introducing a new legal department where none existed requires not only operational changes, but also a cultural shift. Is the leadership team ready to embrace the role of legal as a strategic partner rather than just a cost center? Is the company operationally ready to accept regular legal oversight and input? Is the company culture able to quickly adapt to the changes a legal function may bring like greater compliance, new views on risk tolerance, and lawyers as decision-makers, not just advisors? Knowing the answer to these questions will help you assess the level of challenge you may face in establishing a legal function as the new GC.
The GC Mindset: Although the role of building a legal function may be daunting, remember most lawyers practice for many years before earning a GC seat. A new GC will have to enter this challenging role with a “GC Mindset”. This mindset demands not only the well-honed skills of a talented legal practitioner, but also proficiency in strategic decision-making, business acumen, strong leadership and influence, talent development, executive presence, crisis management, and financial literacy – to name a few. In short, with the appropriate GC mindset in place, the challenge of building a legal department from scratch will be achievable for most GCs.
Some things for GCs to consider in building a legal function:
1) Prepare a 90-day Plan
Initially it is advisable to set a 90-day plan focused on learning about the business, assessing its legal health and developing a strategic plan forward. It’s prudent to incorporate a few quick wins in the 90-day plan to address risks that may require immediate attention like establishing outside counsel guidelines or overseeing key litigation. Quick wins also could include formalizing relationships with key stakeholders or creating a basic compliance framework, which will demonstrate immediate value to the business. The first 90 days are vital to laying the proper foundation for a longer-term plan.
One caveat to keep in mind: it’s important to check in with the CEO as the 90-day plan is being implemented, including a discussion of monthly goals, expected costs and any anticipated cost savings. Often there is an expectation of immediate savings when in-house lawyers are hired. However, this may not occur for some time as the initial costs of establishing a department are incurred and a new GC evaluates where there may be opportunities for savings while managing risk. Setting expectations early can prevent misunderstandings later on.
2) Understand your business intimately
First and foremost, if you don’t understand the business, you won’t succeed in this role. To truly excel as the first General Counsel, you must develop an intimate understanding of the business. Ask yourself: What are the core revenue streams? What are the strategic goals of the business? Consider going on a roadshow to meet key stakeholders, conducting in-depth interviews with leadership and department heads, and thoroughly reviewing the company's legal portfolio and overall legal health. Without this foundational knowledge, your efforts to build an effective legal department may fall short.
3) Determine the Legal Demand Drivers
Next, you need to understand the organization's risk profile and its tolerance for risk. This includes identifying the key legal risks and determining the legal demand drivers, such as critical risk areas and the business goals that will influence your legal strategy. For example, does the company have significant litigation, heightened regulatory or compliance risk or is programmatic M&A a priority to drive business growth. By aligning your efforts with the company’s key legal risks and strategic objectives, you can effectively prioritize and manage the legal challenges ahead.
4) Align on Legal Resources and Budget
Once you have determined the key legal risks and what areas will demand your department’s time, you will need to identify resources. You should begin by looking at the existing legal service delivery model and the annual amounts spent on legal services. Likely most costs will be associated with outside counsel and/or other providers. You should evaluate how these resources were deployed against legal matters. How much time and spend was allocated to areas like litigation, commercial transactions, compliance or IP. This will provide a ballpark for you to begin to benchmark your annual legal budget. Next, determine whether in-house counsel, external counsel or other third-party provider will be best suited to support each area of legal work and what technology may be needed to support the work of your internal team. With these resources determined, you should be able to set a tentative legal department budget working with accounting, HR and IT to make sure your estimates are reasonable.
5) Establish your Department Vision
Once an estimated budget is set, determine the vision of your legal department. What is your mission statement? Will you focus your team’s efforts? How do you want to be perceived by the business? Will it be a department that leverages technology, knowledge management processes and collaborative teaming strategies? How will you drive value for the business? What are your key enablers for success? Knowing these aspects of how you want the department to engage with the business will help you to better clarify your legal department strategic plan.
6) Legal Department Strategic Planning
Companies often drive change through multi-year strategic planning. Establishing a legal department with all its complexities is well served by creating a Legal Department Strategic Plan (LDSP). An LDSP should outline a framework that sets forth your legal department objectives over a defined period. Utilizing an LDSP helps a new GC to prioritize goals, focus efforts and resources, help stakeholders work toward common objectives, and align understandings around intended outcomes. After the first 90 days of diligence, depending on the nature of your business, your strategic objectives within an LDSP could include the following topic areas: Legal Talent, Legal/Business Engagement Model, Knowledge Management Processes, Corporate Governance, Compliance, Outside Counsel Management, Technology Resources, IP Portfolio Management, and Costs to Deliver.
The LDSP should provide an outline of the current state of the legal function under each key objective alongside the required new action steps/outcomes and a timeline for completion. The plan should set out legal objectives over 1-3 years, with an understanding that it is dynamic and iterative based on the needs of the business and how quickly these efforts can be deployed. Hiring talent, on boarding new technology, establishing legal ops, and change management associated with a new legal function takes time. Shifting cultural norms takes time. Be patient and regularly communicate expectations and resource demands with your stakeholders. Be willing to calibrate your approach based on company goals and stakeholder feedback.
7) Track your Execution
For many GCs as part of annual budgeting exercises and quarterly or annual performance reviews, legal department objectives and results are reviewed and evaluated. It is important to track progress as part of your multi-year LDSP. Capture wins, in-progress actions, annual budget, future objectives and resource needs. Providing a strategic roadmap for your CEO and stakeholders provides an opportunity to calibrate your strategy, set refined goals and manage stakeholder expectations. Remember you will be judged on how well you execute. An LDSP is a useful tool for a new GC to demonstrate detailed efforts towards establishing a high functioning legal department that aligns with the goals, cost expectations and timelines of the business.
Building a legal department from the ground up is a rare, once-in-a-lifetime career opportunity that allows you to showcase the true value a legal function can bring to an organization. By effectively mitigating risk, shepherding strategic initiatives, and becoming a valued, trusted resource, you have the chance to shape the company’s future. However, to achieve success in this role, it’s essential to approach the task with patience and thoughtfulness. Keep your ears and eyes open, listen to diverse viewpoints, build strong relationships, and gain a deep understanding of the company’s culture. With these strategies, you can lay a solid foundation for a legal department that not only meets the immediate needs of the business but also drives long-term success.
Advisory Board Member, Ready Set GC
EVP & General Counsel, Reliance Worldwide Corporation
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