Clarifying General Counsel
Most people have a fairly rudimentary understanding of what the role of a law firm’s general counsel entails. A good starting point in understanding the general counsel of any organization, law firm or otherwise, is in its name. General counsel means the "lawyer for the lawyers." In the law firm context, its primary responsibilities are to manage risk and help avoid liability. The general counsel is charged with ensuring that the law firm’s lawyers comply with the more than 200 rules of professional conduct specific to each state bar. Generally, their role is to audit compliance and provide advice on best practices and the ethics rules .
The general counsel also oversees mostly administrative functions, such as the recruitment of in-house lawyers and overseeing persistent and costly issues such as client disputes and aggressive collections. The general counsel is often responsible for the initial review of new client engagements too. They may also be involved at times in lateral hiring, partnerships and internal investigations of some allegations or claims of partner misconduct, antitrust concerns and conflicts, etc. In many instances, the work of the general counsel will be on a strictly advisory basis and the firm’s lawyers will have the autonomy to act outside the general counsel’s recommendations. For large firms, another attorney or often multiple attorneys, may support the general counsel.
The Importance of a General Counsel
General counsel hold a place of crucial strategic importance to a law firm. For one, they literally hire the senior leadership team of the firm by essentially recommending contract extensions or terminations. General counsels also serve as effective rainmakers. When general counsel add high net worth clients to that firm, their partner firms see the value and are more inclined to bring more clients to the firm. Lastly, the general counsel serve as a critical advisor to a law firm’s management staff.
More importantly, general counsels join a law firm based on a professional services agreement that requires him or her to adhere to both the Law Firm’s Standards and Guidelines, a private document, and the firm’s partners handbook. As such, appearing at a deposition becomes a conflict for a general counsel as it may expose or seem to expose to unhappy partners confidential settlement negotiations. This can become a serious problem if the client is so difficult that the general counsel chooses not to appear for a deposition because of the threat of even disclosing confidential settlement communications that expose the client because the general counsel may be exposed in a deposition to excessive questioning beyond the scope of cross-examination such that the general counsel should have avoided the deposition at all.
The general counsel role, while less frequently filled than the chief financial officer or chief operating officer roles, is one of the most significant senior officer positions in all law firms. As such, chief financial officers, chief operating officers and practice group leaders must be prepared for the possibility of a general counsel being an at-will employee unless its partnership agreement is expressly modified to give all key lawyers an override vote for the hiring and firing of a general counsel who will serve as a key officer of the firm.
A General Counsel’s Skill Set
Although there is no formal set of qualifications for the general counsel position, the following baseline skills are necessary:
- Strong analytical skills proven by prior success at a top school
- People skills that have led to leadership success in other settings, i.e. law school leadership positions, college sports teams, student government, or instrumental success in the arts
- Business savvy demonstrated by MBA or applied business skills
- A strong commercial law background, such as corporate law, IP law, real estate or trade issues
- Substantial experience in house so that the role is more practical and less theoretical
- Good judgment to know when to spend money for outside counsel and when to rely on in-house resources
- Good risk assessment ability
- A strong track record of obtaining cost reductions and improved service from outside counsel
- Good negotiation skills so that law firm partner bets do not get the better of the GC
Hiring a General Counsel
The recruitment process for a law firm’s general counsel often includes the following steps:
1. Identify the Law Firm’s Needs. What type of counsel does the firm need? Most firms start by asking this question of their client contact(s), because that person most likely has an idea to what extent, or whether, the firm needs a dedicated GC. The firm can then review those responses and interview GC candidates.
2. Consider whether to use an outside consultant. While most medium and large sized firms do not have internal legal recruitment personnel on their staff, smaller firms may want to consider using the services of an external legal recruiter or consultant who specializes in recruiting GCs for law firms that have such needs, or where there is no longer one member of the firm responsible for serving that role.
a. Internal resources
b. Legal recruiters/consultants
- Review suggestions and encourage referrals. Most GC recruiters or consultants will recommend several GC candidates to the firm based on their understanding of the type of person the firm is seeking and the needs identified by its client contact(s). The GC(s) can be vetted by asking interview questions that are tailored to both the candidate’s background and the firm’s specific needs , and by reviewing their resumes and references.
- Maintain confidentiality. It is standard in many circles for firms to require GC candidates to enter into confidentiality agreements before providing them with law firm information or allowing them to meet with lawyers in the firm. This practice is especially important for those firms that do not disclose the names of their general counsels on their website and conversely, use that "labeled" GC resource as a business-development tool. If your firm has questions about confidentiality or other matters related to interviewing GC candidates, please contact us.
- Conduct Interviews. In addition to GC recruiters and consultants, law firms should consider interviewing several GC candidates. When doing so, we recommend including an attorney in your firm who already serves in a GC-like capacity, if possible, as one way to gain insight into the educational needs of the position.
- Consider Succession Planning. Law firm general counsels, like many other professionals, come and go. We recommend that law firms consider the continuity of this key role, especially if the firm believes that its GC is an asset. Ask your GC to help you identify his or her ideal successor. Also, consider appointing a second-in-command if there is a succession plan in place, with lining up that individual as an alternative to transferring the role to the identified successor. Securing the needed resources to ensure the continuity of the GC role can help a law firm maximize its value.
General Counsel Challenges
A Law Firm’s General Counsel faces a myriad of challenges both day to day and ongoing. Having spent a career as a practicing attorney in large law firms I have seen many of these first hand, and some are highlighted in this list: Dealing with human capital issues. Lawyers who think of themselves as entrepreneurs. Credit risk and the moral hazard of bad debt. Dictionaries don’t classify these issues. Nor do they belong in the business section. Regulation of lawyers. Too many times, as someone who has been as lawyer and executive I am surprised how far off course a firm may get with some regulatory requirement or licensure protection. It is vital to stay on the right side of requirements that flow from state bar regulation, SEC regulation, accounting rules or tax requirements. I am startled at the number of firms that haven’t mindfully revisited their capital structure or the SRA for years. Litigation risk. Litigation involving employment practices, discrimination, securities matters, antitrust claims or even wage and hour issues can pile up quickly, as can reputational risk. Kontakt believes these risks will continue to grow and managing them is of utmost importance. Technology risk. Firms are being highly disrupted by technology. Candidly, it is part of the risk facing every firm and potentially damaging to revenue. Managing it requires the ability to accept the relationship of firm to its going forward strategy and the economic model which will support it. Conflicts of interest. The conflicts of interest rules have these interesting ways of coming back to haunt. Firms that have not examined their screening process frequently find incoming lawyers can be impossible to accommodate. Less common now, but it still happens. Client due diligence. AML or anti-money laundering policies and procedures can be painful to implement and you can see the lawyers struggle with them. Yet, it is very important due diligence be done at the outset of an engagement and central to managing litigation risk after having been hired. These have been my own observations based on personal experience.
Generational Changes Affecting General Counsel
Among the expected changes likely to be observed in the not too distant future are: 1) the increasing use of technology to automate legal work, and 2) heightened collaboration between internal and external lawyers.
As the body of law grows and evolves faster than human knowledge can keep up, machines will assume an increasingly larger role in conducting legal work. Experts expect that by 2030, technology will be able to perform roughly 30 percent of all legal work. This technology will include advanced AI-based legal research tools that not only match case law with the specific requirements presented by the client or case at issue but also learn over time. It will involve increasingly sophisticated "expert systems" that will be able to analyze situations for a client in real time and refine its analyses accordingly. At least as importantly, it will include interactive software for training employees and helping them become ever more technically proficient, as required by the demands of their jobs .
As machines increasingly assume legal work, virtually all firms will adopt workflow management programs and procedures to streamline their business processes, including digitizing their libraries of documents and forms, among other things. In keeping with the digital trend, more and more internal legal departments will also employ outside firms on a subscription basis for specific tasks, such as annual reviews or quarterly audits. To dramatically streamline their services, most firms will also offer clients flat-fee pricing, project pricing, or some combination of the two, which will completely transform their approach to the billable hour.
Finally, the growth in the use of technology in the law will also fundamentally shift the ways general counsels staff their departments. Increasingly, firms will hire personnel for their analytics skills, technical leadership, and subject-area knowledge, along with their traditional "lawyering" skills.