Sonya Olds Som
Chief legal officers continue to keep more work in-house and rely less on law firms, a shift that shows general counsel jobs are not the second-tier career track they once were.
Some 43 percent of CLOs surveyed by Altman Weil last year reported they intend to increase their in-house workforce this year. More than a quarter plan to decrease their use of outside counsel (with only 14 percent planning to increase such use). And 85 percent said they would shift work to in-house legal staff.
As legal departments flex their muscles in the business relationship — often demanding discounts or alternative fees, as opposed to the old days when law firms set the billing agenda — high-profile law firm partners have been moving to in-house jobs.
Susan C. Levy left her position as managing partner of Jenner & Block LLP to become the top lawyer at Northern Trust Corp. Karen P. Layng became general counsel of Scheck Industries last year, leaving Vedder, Price P.C., where she had practiced for more than 20 years and was a member of the management committee.
Sonya Olds Som has a front seat view of this power shift in her role as a managing director in the in-house practice group at legal search firm Major, Lindsey & Africa LLC.
The Daily Law Bulletin spoke with her about it and how legal departments are reacting to it.
Law Bulletin: My first and biggest question: In your eyes, how quickly is power shifting from law firms to legal departments?
Som: My answer is that it has already shifted. It shifted a few years ago, around 2009, and it just continues to take hold and strengthen.
We are definitely seeing an increase in personnel in the legal departments, as much work as possible being driven in-house and new, additional roles being added in-house wherever possible to handle work as opposed to sending work out.
LB: Almost half of the CLOs in an Altman Weil survey said they would add in-house lawyers this year. What type of demand from in-house departments do you see in your practice?
Som: Consistent and robust. They’re definitely increasing their hiring. We continue to be very, very busy. And there was no January lull this year. The hiring and the planning for hiring continues across a wide variety of different functions.
LB: Where do you see the most activity?
Som: We’re definitely seeing an increasing trend toward hiring more specialists. Areas like securities lawyers, litigation managers and intellectual property counsel. We’re definitely seeing some types of work that traditionally may have been sent out to boutiques, for example, being brought in-house.
And specialists are being hired where companies see it’s going to be an increasing need. So while there was a time when most of your in-house lawyers were generalists, now we’re seeing a lot of different specialists.
LB: If these departments continue to get bigger, do you see more people in higher ranks, more management roles in legal departments? Is the structure of the department changing at all?
Som: We’re seeing a trend toward senior operations people being hired. People like Audrey Rubin at Aon and David Cambria at ADM (Archer Daniels Midland). We’re definitely seeing these legal departments being treated like little law firms. Like little businesses that have to have people who are responsible for organizing and managing the operations of the legal department.
We have been doing some recruiting for those kinds of roles. Those operations managers, there’s a lot of things they’re responsible for. Budgets, hiring, training. Obviously technology is huge. Billing, things like that. And running basically what is essentially an internal law firm.
LB: What are the types of skills legal departments are looking for out of those people? Are they all lawyers?
Som: Some are lawyers, a lot are lawyers. They’re not all necessarily lawyers. And what they’re looking for is someone who is very good operationally. Someone who is very well-organized, very good at assessing the business of a legal practice. A lot of people-management skills, budgeting skills, projection skills. Things besides just substantive legal skills.
LB: In recent years, we’ve seen a number of high-profile law firm partners move in-house. Do legal departments actively target those high-profile attorneys at law firms?
Som: It’s interesting. Even with our searches in the last half-year or so, we’re seeing more where law firm partners are not only welcome to apply, but law firm partners are occasionally actually preferred.
What you see is the worlds melding. You see legal departments running themselves more like law firms in some ways. And you see law firms running themselves more like businesses.
We have a practice that recruits business people for law firms. That old mentality that everybody at a law firm is a lawyer is going the way of the dodo bird. You’re seeing a lot more of the firm being treated like a business and having operations people manage the firm the same way companies have (done).
I think that what you see on the reverse side of that is some companies are increasingly looking for law firm partners to work in-house. It’s because in a lot of cases these are law firm partners that have really strong relationships with that company.
The move toward bringing expertise in-house includes at the GC level. And again, (it’s part of the trend of) running a legal department in some ways like a little law firm. And so having a managing partner or the chair of a practice group coming into the legal department can definitely provide that perspective of running that legal department like a business of its own.
LB: Does bringing in partners make it any harder for younger lawyers to move up inside a legal department? And do you ever hear complaints from in-house lawyers about the lack of opportunity to move up within legal departments?
Som: One of the things general counsels talk to us all the time about is: What do you do in a relatively flat organization to keep your people motivated and stimulated and feeling like they’re developing?
As the economy improves, there are a lot more opportunities for experienced in-house counsel, and it can be very competitive to hold on to and properly incentivize your people. And obviously there are a lot of creative things general counsels do in terms of training and motivation.
LB: Are there any good examples? Even if it’s just raises, making new roles or trying to bring people into other departments? What are some things folks have done?
Som: In terms of raises, a lot of times that’s not something that’s necessarily in the general counsel’s control. There are budgets and bands of compensation within an organization. There’s not always a lot people can do. But there are things like giving people speaking opportunities, writing opportunities, the ability to lead projects, giving them the ability to be embedded in business units, etc.
To the extent possible, I think really savvy general counsels who want to keep their people for as long as they can and have that be as productive and rich an experience as they can will definitely give more opportunities to people raising their hand saying, “Give me more.”
And the law firms can or should help a lot with that as well. Providing training opportunities at the outside firm so that it can be a partnership and not an adversarial relationship between the legal department and outside counsel.
They should really be working together because, yes, the work is moving in-house but it can’t all move in-house. Law firms are not going anywhere. ... The question is figuring out what the highest and best use is of the law firm.