A recent Corporate Counsel article highlighted a growing trend: More senior legal leaders are migrating to startups to take on general counsel roles. For some, it’s an attempt to find a better work-life balance (whoops!), while others are eager to build and manage their own team or see it as an opportunity to work for a mission-driven company.
This is great news for startups, especially those in regulated industries, where building strong in-house legal teams has been a challenge and fees can really add up if they choose a law firm. Founders can find top-tier talent out there, and discovering the right resource for your small to midsized company has never been more likely.
The abundance of available legal talent brings challenges as well as opportunities. Whether you’re the CEO of a high-growth startup or even a midsized technology company, finding the right legal leader will have implications for your business down the line. It’s a move you want to get right from the very beginning.
Know what a GC can bring to the business
The primary benefit of bringing on an in-house attorney is that they will become an expert in every aspect of your business, which will let them provide more actionable legal advice as well as a (sometimes) unique input on various business decisions.
You don’t want a lawyer who will panic and create more chaos in an already chaotic environment, and you definitely don’t want the lawyer who presents you and the rest of the management team “the facts” and leaves the decision to you (it’s a “business decision”).
Another big aspect is that law firms are, by nature, highly risk averse. This can often be at odds with the business’ ability to accomplish its objectives. However, CEOs are going to take risks to move the business forward, and having an excellent lawyer in-house who can manage the potential downside of those risks is critical.
CEOs need a lawyer they can trust to manage a situation after it becomes an issue, as well as one who is thoughtful and clear on communicating potential risks up front. Leaders don’t need someone telling them not to take risks or saying, “I told you so” when things go wrong; they need someone who can manage the consequences (good and bad) of business decisions in a calm, organized and professional manner.
Finally, cost is a factor. Law firms traditionally charge an hourly rate, which can become frustrating to manage and fiscally untenable for a startup trying to stretch funding. While alternative fee arrangements are becoming more commonplace, most firms limit those arrangements to a relatively “plain vanilla” representation and will charge hourly for more complex matters.
Hiring a full-time lawyer and paying that lawyer a decent wage will allow you to better manage costs and they, over time, should provide you with better advice.
Experience and attitude matter
An important aspect to evaluate is the risk appetite of a legal chief candidate. Many in-house attorneys claim to be “commercial,” but that’s rarely the case. Relatively few in-house leaders are willing to actually make the call to take on almost certain risk to accomplish a business objective.
There’s something about how lawyers are trained that makes us jump to the worst-case scenario, but in reality, there’s a lot of room between taking the risk and the catastrophic scenario. Great GCs make the business decision, shoulder the risk, and do so with the confidence that they can manage the results to preserve the commercial value of the decision while managing the matter to prevent the worst-case scenario.
There are a handful of ways a CEO can get a better understanding of a candidate’s experience in managing difficult situations. First, ask them about a time when they had a view that diverged from advice given by outside counsel. Get the details. Why did the candidate disagree? What decision did the candidate ultimately make? Did the candidate present the decision to business counterparts and allow them to make the choice?
Another excellent way for a CEO to vet a GC candidate is by talking to references. Be straightforward with the person giving the reference, and let them know you’re trying to understand the candidate’s ability to not only articulate an issue clearly, but also form an opinion and make decisions with business considerations in mind. Ask the reference how the candidate interacts with outside counsel, how frequently and in what situations.
Most importantly, before making an offer, a CEO should clearly communicate how they expect the candidate to address risk, provide input, take thoughtful positions and drive business results. Make sure you see eye to eye on the scope of the role and that expectations are set. For most CEOs, the hiring of a new C-level executive is a very important decision, and your legal chief is no exception. Be diligent, critical and demand the level of quality and performance that is expected from every other member of the C-suite.
Look for composure in a crisis
A good GC understands that litigation or controversy involving your business is always possible, if not likely. When a company experiences its first lawsuit or major controversy, an air of chaos can often accompany it.
Here’s where a GC with decent experience and a realistic view of how such situations play out can help the business manage a great outcome, and do it in an organized and decisive way. When bringing an attorney in-house, it’s vital to understand the candidate’s prior experience managing legal challenges facing businesses and how they act in a crisis.
Ask the candidate about their experience managing crises or chaotic events associated with the business. Then dig in — ask for specifics about a time the candidate managed a crisis to a successful outcome (or, maybe more valuably, an unsuccessful outcome). How did the candidate work cross-functionally to develop a plan to manage the crisis? What would the candidate do differently if faced with a similar situation?
Try to understand how your candidate will react to chaos, and how they can rise above it to direct the outcome away from the worst-case scenario. You don’t want a lawyer who will panic and create more chaos in an already chaotic environment, and you definitely don’t want the lawyer who presents you and the rest of the management team “the facts” and leaves the decision to you (it’s a “business decision”). A good lawyer presents the facts in a clear, concise way, proposes a course of action, encourages discussion and input from the management, and then takes ownership of managing the situation and accountability for the outcome.
CEOs should try to evaluate how an in-house lawyer can help move the business forward, not how well they can anticipate risks and avoid them. If a lawyer consistently comes back to risk avoidance as a major theme, rather than pushing the business forward first, it tells me they aren’t confident in their ability to manage a situation to a successful outcome. You don’t want to rely on an attorney who is unwilling to take a risk because they lack crisis management skills.
The legal department shouldn’t be the “no” department
At the end of the day, you want in-house legal leadership who can be an expert in building and managing legal functions and making the right legal decisions without hamstringing progress. A report by Gartner revealed that the most effective GCs are 51% better at executing corporate initiatives than their counterparts.
Simply put, the best GCs are the ones who understand the business implications of a potential decision, internalize the pros and cons, and drive the business to that outcome. A legal department that becomes the “no” department is a red flag — and as a CEO, you should expect better.
In a new legal leader, you are looking for a strategic operator who has the chops to push the business forward and run a team that integrates with the business to accomplish its objectives. Anticipating and managing legal matters is table stakes — it’s the business acumen and ability to deliver in high-stress, high-impact situations that set apart the great from the acceptable.