It’s important for lawyers to know their client’s business–and it’s good business, too. Take the case of Gawker President and General Counsel, Heather Dietrick. She was recently profiled in The New York Times (“Gawker’s Top Lawyer Steps Up,” Monday, June 13, 2016 at B1). At the tender age of thirty-five—and only three years into a stint with Gawker– Ms. Dietrick is not only counseling her troubled client but also serving as its President. The dual role is unusual for a company of Gawker’s size and profile. And it also raises some interesting issues about attorney-client privilege and Ms. Dietrick’s susceptibility to being haled into court as a witness. But let’s put that aside and note this—for better or worse—as an example of a lawyer advancing by knowing the client’s business.
No doubt Ms. Dietrick knows her client’s business very well. And, with an MBA to accompany her law degree –coupled with a purported deft touch and firm hand– she earned the confidence of Nick Denton, Gawker’s founder and chief executive. Of course, in an organization whose philosophy and business model is to push the envelope, it’s handy to have a senior business executive with a legal degree. And while some might question Ms. Dietrick’s handling of the Hulk Hogan sex tape litigation-which resulted in a $140million jury verdict and a date with the bankruptcy court-it’s clear that she was well aware of the client’s business, philosophy, and risk tolerance.
OK, so maybe this example is not what most CEO’s have in mind when they say that they expect their GC (and lawyers generally) to understand their business and to serve as strategic advisors, not just as lawyers. The most effective lawyers are problem solvers with legal expertise. They understand the client’s business, risk tolerance, and objectives, providing legal expertise to facilitate management’s informed business decisions. They don’t simply advise on the law; they suggest ways to achieve solutions to challenges that often include legal elements.
Legal delivery is no longer solely about legal expertise; it also includes technology, business process, and the integration of all three. And law is no longer a vertical. Law cuts across industries, geographies, and executives in the C-suite. Business challenges typically have legal implications—that’s why to be effective lawyers must meld their understanding of the business and its DNA with legal expertise. Translation: “just being a lawyer” doesn’t cut it anymore.
Corporate Legal Departments’ “Home Field Advantage”
In-house lawyers have a “home-field advantage” over law firms. Not only are they embedded in the client’s culture, but also they are expected to integrate with the enterprise that is their client. This alignment takes on many forms and levels that include: (1) lawyers and non-lawyer (IT and process experts) within the corporate legal department; (2) legal team members across different geographies and practice areas/expertise; (3) the legal department and the corporate enterprise; (4) and aligning the company mission, philosophy, and brand with customers and the society at large. And there is a fifth alignment element: economic. Law firm equity partners share in PPP but have no long-term financial incentive and, so, adopt a “future is now” attitude. In-house counsel, however, can acquire stock options and other forms of residual equity that give them a stake in the long-term success of the company. These are the principal reasons—in addition to cost/labor arbitrage—why so much more legal work is being done in-house. It’s also an explanation for why in-house lawyers are growing in number, influence, prestige, compensation, skills, and breadth of responsibility. They are more cost-efficient and better aligned with the client than outside firms and their antiquated partnership structure.
This is not to suggest that outside counsel cannot—and do not—sometimes serve a pivotal role with their clients. The best ones do. But it is increasingly difficult for firms to compete with corporate legal departments for the reasons cited. Increasingly, corporate departments are cherry-picking individual outside legal experts where once they were accompanied by the firm. Translation: legal expertise is readily accessible, transferrable, and, increasingly, partnering with others in the legal supply chain and beyond.
I had breakfast last week with a friend who is the GC of a global bank. He sits on the Board and participates actively in the company’s major business initiatives. I asked whether he was taking more work in-house and he said, “Absolutely; it saves us money and we don’t have to bring outside lawyers up-to-speed about our business. “
Then he added: “And when my team says ‘hire more lawyers’ I tell them ‘help generate profit and I’ll consider it.’ And as you appreciate, Mark, good lawyers know the client’s business—and it’s good business, too.”