General Counsels in an SME and the many hats they have to wear
Following discussion at this week’s PLC GC Leadership Series conference on ‘the evolving role of General Counsel (GC)’ panellist Janvi Patel writes on how the role of a GC within Small and Medium-Sized Enterprises (SMEs) is unique and evolving. Historically most SME GC roles were restricted to purely legal advice and even seen as a business ‘inhibitor’, essentially there to point out legal pitfalls or just as a way to reduce external legal spend.
However, there has been a dramatic shift over the past 10 years as CEOs and other Board Members have come to appreciate that while GCs are smart, experienced lawyers, with wide sector and industry experience, they are also great strategists, risk analysts as well as project managers and people managers. This means that SME GCs have the ability to extend their role outside of their “basic” legal function, and from a SME GC perspective, their roles have become exceptionally wide and multi-faceted. The value of having a lawyer on the management team is being recognised.
The Board Member Hat
Today’s SME GC often commands a Board level position or reports directly to a CFO or CEO. It is a business critical appointment where the incumbent will need to have an understanding of a broad range of business areas and business drivers. For most commercial/corporate lawyers this is where the action is. They can help make decisions and advise on strategy. It also enables the lawyers to fully understand the company’s risk appetite but also to be able to think ahead when negotiating and structuring deals. There is real value for both parties to have the company’s “legals” and its strategy and vision matched up. With compliance an increasingly important function in companies of all sizes it has become a smart decision to include the GC on the Board.
The Generalist Hat
Legal teams within an SME are often 1-5 person teams. This means that all SME in-house lawyers, especially GCs, are expected to deal with a wide range of queries and provide strategic overview as well as tactical advice. As such, SME GCs need to be able to listen to business owners, peers and understand what the business priorities are to ensure they are not only able to give the best legal advice, but also able to manage risk and to add commercial value to the business.
In addition, as many in-house lawyers will tell you, they hear about business issues and deals on the grapevine and for newly formed in-house teams this will often be the case. Making friends with colleagues is essential, but being part of a small management team also means that on any given day GCs may be involved in other key business areas including HR, Finance, IT, Procurement, and Marketing. There is therefore real value in developing a good working relationship with other senior management/department heads to understand their part of the business, where there is overlap, and learn about their area of expertise and business.
The Expert Hat
SME GCs are legal sector experts, but also industry experts. GCs have to advise on the legal matters which are often outside their usual area of expertise. Commercial lawyers are known to advise on a broad range of specific areas which may include; privacy, data protection, employment, health and safety and so on. However, as many GCs will have had exposure to a wide range of clients they are also expected to bring this industry expertise to their advice. Finally, as lawyers GCs are expected to understand the legal market and the different types of external legal advisers out there to help resource matters effectively.
It is clear that GCs of SMEs are expected to be ‘experts’ in many fields, but GCs are perfectly placed to be such experts. They are highly trained, able to multi-task, to digest complicated information, to translate it and to offer practical, commercial solutions.
The Visionary Hat
Most CEOs and CFOs will tell you they have aggressive growth plans which will most likely include an acquisition, restructuring, diversification or divestment. SMEs are often in a transitional stage of their growth path and therefore GCs need to be able to visualise and embrace the challenge of working in this type of business and relish the opportunity it represents. In practical terms, GCs of SMEs need to create and manage legal, risk systems and processes so that the company is ready and well placed for the next stage in the company’s growth plan. As much as the CFO needs to manage their finances ready for the next stage of growth, so does the GC. Horizon scanning is an essential skill for the value adding GC.
The Manager Hat
GCs may have a small legal team or at least have to manage their external legal providers. GCs need to manage and motivate lawyers who are used to constantly working towards the next step in their career, in an environment where there is no real career path. This means that GCs have to think outside the box in terms of motivating their team, whether it is offering them the most interesting deals instead of sending them to external providers, giving them greater responsibility internally, or assisting them to widen their horizons; for example supporting them to take on charitable work or non executive positions.
GCs also need to ensure that they manage the relationship between legal and other parts of the company, especially the commercial and sales teams. GCs need to ensure that they are adding value and helping deals get done rather than being the department that holds up deals by asking too many questions, and being risk adverse. It is a key relationship to manage and will ensure that legal is brought into projects from the start rather than being informed of a deal at the time of closing.
The Budget Holder Hat
GCs are expected to manage the company’s external and internal legal budget. This is where knowledge of the legal market is essential, especially in light of the recent changes to the legal market and the variety and calibre of third generation legal providers now available. In-house budgets are limited and CFOs are very reluctant to increase legal spend – many may even think they have hired an in-house legal team or GC to take care of the legal spend and therefore a further allocation is not necessary.
It is important for SME GCs to set expectations. GCs need to find the time to step back and understand the pipeline and flow of deals, the company’s objectives and prioritise ruthlessly so that they are getting more done for less.
This is again where a GCs knowledge of the legal market is critical. With good external resource management GCs can obtain senior, expert assistance on a daily rate at the same cost of mid level lawyer from a City private practice firm working two-three hours.
If a GC utilises their knowledge of the company’s plans and structure and external legal market it is possible for a CFO to be happy about the company’s legal spend and their legal support.
It is clear that a GC is expected to provide advice which goes beyond pure legal advice, but the opportunity for in-house lawyers to demonstrate their commerciality is a role which should be relished.
Contact Janvi: 020 7127 2500