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  When Your Company Grows

Author: Richard Stock - Lexpert September 2011, Vol. 12, No. 10

This morning, I read an article suggesting that a number of Canadian firms were planning to increase rates for the next two years. This corroborates my recent experience in Australia, where I learned of planned 6- to 8- percent increases by leading law firms for the next three years. Interesting parallels can be found in a resource-rich country like Australia, one with a well-managed economy and a stable, albeit coalition government.

When it comes to pricing, firms are sensitive to cost pressures from their corporate and institutional clients. Canadian rates stabilized in 2009 and for much of 2010. But law firms are the first to be called when there is significant commercial and regulatory activity. As demand for legal services increases and competition diminishes, rates invariably rise and exceptional discount arrangements become just that – exceptional.

The Canadian business and legal press suggest that there is a significant amount of activity out there in Q3 of 2011. Surveys of legal departments tell us that workloads for inside counsel are unrelenting due to company activity. While pundits may emphasize economic turmoil, demand for legal services tied to business activity will grow steadily over the next three years.

Last night, while watching CNN, I was buoyed by the views of Jack Welch, GE’s still iconic but retired CEO. He was asked why there appeared to be so little manufacturing in North America – were the Chinese taking all the jobs? He said that manufacturing was alive and well, but certain sectors, like textiles, made no sense to produce domestically. Moreover, innovation and entrepreneurship seem to have taken on new life since the recession. Individuals and small business have been stimulated to try something new.

Needless to say, innovation, entrepreneurship and the financing that goes with these are essential to growth. That growth needs management teams with lawyers on board. Inside counsel are closer to the business units and, given the chance, are better positioned to help move the organization from survival to growth.

Happily, this is already starting to happen. More general counsel are now part of the senior executive team. Many also serve as corporate secretaries and attend board and committee meetings. A few legal teams also choose to be “embedded” or co-located with the business, but most are aligned with key business units and with special projects. Overall, the contribution is more strategic.

Participating in business activity over the next few years will require a few things. First, all members of the legal department should know the details of the corporate business plan. Second, the General Counsel should ensure that team members appreciate the type, the timing and the quantity of legal work that will be needed. Third, the legal department needs to introduce a robust plan for personal performance and for acquisition of competencies – such as financial analysis, negotiations and project management – for young and experienced lawyers alike.

Fourth, and finally, legal departments need to get better at understanding their performance. Too many legal teams are not very good at setting priorities and then measuring and communicating the results of their contribution using the language of the business unit. The legal department needs six to eight performance indicators that show their direct contribution to the corporate business plan.

Legal departments should not assume they are too busy to master details of the corporate business plan, align their resources with business units, acquire new competencies and measure the results. As demand for legal services heats up, these capabilities will mean the difference between a department that is strategically involved, and one that is providing operational support.

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