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7 reasons why CEOs & CFOs need to pay more attention to legal - urgently

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Ciarán Fenton outlines the issues he perceives in the relationship between the in-house legal team and ‘the business’ 

In June, I addressed 180 in-house lawyers at a conference at the Law Society on the topic of the relationship between the legal function and ‘the business’. The previous month, I spoke to a similar number from across the world at an ACC conference in Rome on the same theme. I have also spoken at similar conferences and workshops over the past five years and have worked with many in-house legal teams on improving performance and leadership.

So, from these experiences as a non-lawyer, ex-accountant, and former divisional managing director, what follows is an overview of my presentations at these conferences: the seven reasons why CEOs and CFOs should pay more attention to their legal functions, urgently. I acknowledge that these are generalisations and that behaviour varies significantly but I believe that they are true for a great many businesses.

FAO CEOs & CFOs:

1. Distance

In-house lawyers refer to you as ‘the business’. This should worry you. Other functions use the same terminology. But with lawyers it’s different. They use it as a protective, distancing and exclusive term. I don’t blame them. Sometimes you don’t make it easy for them to feel fully included. This isn’t good for your business. You need them to feel fully part of a team which has a shared purpose. If they don’t, your ROI on legal will be negatively affected, at best, and your risk exposure will increase, at worst.

They refer to themselves as ‘in-house lawyers’. Why the qualifier? Do you refer to yourselves as the ‘in-house CEO’ or ‘in-house finance’? No, you don’t. But does the language matter? Yes, because I believe it is symptomatic of their desire to maintain their ‘umbilical cord’ to private practice. They use it because they don’t feel safe. You don’t make them feel safe. The function has not fully settled into corporate life in the same way as finance, marketing, sales, operations and IT have. Like HR, legal is sometimes the Cinderella of the executive committee and, frankly, you have to shoulder some of the blame. And blame aside, it is not good for your business to have a function which feels semi-detached. Many in-house counsel deny this. They even become cross with me for saying it - a sure sign that the issue has heat. But when I challenge them at conferences and in articles to drop the ‘in-house’ term altogether, I get no takers.

The dogs in the street, as the saying goes, are talking about ‘disruption in legal services’. But many lawyers struggle to understand what all the fuss is about because their lives have not changed dramatically - yet. They’re not trained to engage with anything that is not capable of cold logical analysis. And, let’s face it, ‘disruption’ is as woolly as an Aran cardigan. And so they don’t get it. But their Ryanair moment is coming, and they won’t see it before it hits them. At the ACC Conference in Rome they talked about wanting to ‘own’ the disruption. Yet, apart from a few atypical lawyers, there’s no sign of any Michael O’Learys amongst them organising themselves to do this.

As a CEO or CFO you know that second guessing disruptive behaviour in the market is absolutely critical. My view is that the disruption won’t be technological – although that will assist – but there will be a revolution in lawyers’ behaviour in the provision of legal services. Sooner or later, an O’Leary type will exploit the 2011 Legal Services Act to figure out how to eat lawyers’ lunch, and they will. Whatever happens, if you are letting the preparation for disruption entirely to your lawyers, this could be very bad for your business indeed.

4. The seven for ten trick

By far the biggest mistake you are making is that you are asking them to do ten things for seven dollars when ten things cost ten dollars. This isn’t entirely your fault as in-house teams are often poor at communicating value and don’t know how to say ‘no’. They persist in doing ten things for the seven dollars you give them. Why do they engage in this masochistic behaviour? Why do they perform the ‘diving catch’ endlessly? They do so because they are trained to ‘get it done’. Their identity is tied up with execution. They would prefer to stay up all night writing a deliverables appendix to a contract that ‘the business’ should have done, rather than miss the signing deadline. But this behaviour is lethal for your business.

If you think you are getting away with it, you’re not. This is a ticking time bomb for you. Serious risk lurks for you in the ‘ten for seven’ fudge. You must know what value they should and are capable of providing to your business. They don’t because they are not trained in communicating value. You must allow them off the hook of providing the three things you are not paying for. Not doing so will be bad for your business, sooner or later.

5. Wellbeing

Stress amongst in-house counsel is the biggest ‘elephant in the room’. A number of observers – Paul Gilbert in particular – has been warning patiently about this for a long time. It’s being ignored. Lawyers are trained – I’m sorry to keep banging on about training, but it’s true – to work extremely hard and not to complain about the hours. It’s what they do. But they are poor at dealing with ‘soft issues’ in themselves and in the people they lead. They are not natural leaders – although there are exceptions.

In addition, their career structure is miserable. The only way up is to lead and manage. Most of them hate that. They love the law. So many are stuck under GCs who won’t and can’t move. And this, I’m afraid, is totally your fault. Your job as leaders is to create an environment in which people thrive. Well I’m afraid you get an E for your progress within the legal function’s career structure. It’s a mess. You have imported lawyers into your business for perfectly good, selfish reasons but you’re not taking care of them, never mind leading them. This is bad for your business.

6. Lack of shared strategy

The purposes (plural), of ‘the business’, of the legal function and of individual lawyers are all interdependent. There is little evidence - just attend any legal conference if you don’t believe me - that you have all got around the table to thrash out a shared generic purpose. But if you did, you would then have some hope of finding a shared strategy and agreeing behaviour and plans to implement it. These are the core elements of a target operating model (TOM). And I’m afraid that legal has no generic TOM. This is very bad for your business.

7. A wasted asset

Finally you are, as the Americans say, ‘leaving so much money on the table’ by not paying attention to these matters because legal is, invariably, not run as a business. In-house lawyers know much more about your business than you think they do. They have an angle and knowledge that’s going to waste. This must be bad for your business.

If you would like to know more or get involved in the debate, I have written on these matters in a pamphlet about the GC-CEO relationship which is available for download on Amazon and in paperback at Success Store. I’m also hosting #LegalWithTheBusiness – a One Day 50/50 Workshop for GCs and The Business at the IOD in London on Tuesday 27. September 2016. Every lawyer must bring a colleague from ‘the business’ and every non-lawyer must bring their in-house lawyer - if they dare. At The Law Society Conference I mentioned this to a senior lawyer. There was an uncomfortable beat and pause and then he said: ‘Good idea – but it will work only if they get on well together’. That says it all.

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