May 2003

 POWER PLAY

Now's Your Chance to Crack the Inner Circle

By Steven Andersen

 

Either you're in the loop or you're out.  Call it what you want—power, influence, mojo—it's the key to effectiveness for any general counsel, and not everybody has it.

    The dirty little secret everyone knows is that while some general counsel made great strides toward business partnership and real influence during the past two decades, many others were left behind.  Large numbers of general counsel, perhaps even the majority, still operate in the old school mode.  They're still just "legal," the deal breakers, the people who say no.

    In-house counsel who aren't part of their company's inner circle are relics of an era when lawyers viewed in-house practice as the province of washouts and has-beens.  Corporate leaders see them as staff, technicians or—in the words of one law department expert—plumbers with law degrees.  This phenomenon is rarely discussed openly.  And when it is, it's in the context of a lost cause.  Old habits die hard, the reasoning goes.  Once you're in a position of weakness, it's all but impossible to change.

    Not so.

    Cracking your company's inner circle is difficult, but it can be done.  And today's overwhelming focus on corporate governance can help.  "The current moment affords general counsel real opportunity," says Paul Bonavia, president of the energy markets division of Xcel Energy Inc. in Denver and a former in-house lawyer.  "Sarbanes-Oxley and the heightened focus on compliance is a watershed.  It changes the nature of the relationship."

    Even in companies with deeply entrenched old school attitudes, executives and directors are listening.  Whether out of fear for their company or their own butts, they are turning to the general counsel and asking, "What does all this really mean?"

    That combination of focus and uncertainty opens a window of opportunity for motivated general counsel.  It won't last long, but while all eyes are on them, in-house lawyers who want a seat at the table have the chance to step up and redefine their role.

The Outsiders   

"You'd be surprised by how many attorneys aren't on the executive suite floor, says Aaron Williams, president of Aaron Consulting, Inc., a national search firm based in St. Louis.  "Even at the billion-dollar level, many GCs don't have a vice president title."

    Just how many GCs remain outside the inner circle is impossible to say with precision, but estimates from several experts provide a thumbnail sketch.

    In general, the larger the corporation the more likely the general counsel is in the loop.  Roughly two-thirds to three-quarters of large-cap companies have truly influential GCs.  That percentage drops to about half for midcap companies and slides toward a quarter in small companies.  There are exceptions on both ends of the spectrum:  small businesses with visionary general counsel and Fortune 100 companies where the top lawyer is outside looking in.

    Although measuring influence is a soft science, there are some objective ways to gauge a general counsel's standing.  Things such as compensation, title and even prominence of the GC's name on the company web site reflect status and value.

    Perhaps most important is the proximity of the general counsel's office to the CEO, a sure sign of access and inclusion.  If your CEO is right next door, you probably have his or her ear.  If you're in another building, good luck getting an appointment.

    But let's face it, you already know if you have clout.  If you have all the tools you need and your CEO includes you in strategy meetings, turn the page.  This story is for those who want in.

Step Up

Your effectiveness is a combination of personal attributes and the structure you operate within.  Being a good lawyer is merely the table stakes.  You have to be smart and have good judgment, as well as the authority and access to make that judgment heard.  You also need the subtlety and tact to deliver your expertise in a form that stirs others to action, instead of leaving them confused or alienated.

    In some cases, the general counsel's participation in executive affairs is limited by outmoded executives who, quite simply, don't like lawyers.  If the CEO is dead set against you and believes the legal function is a formality, there's not a lot you can do.  But just as frequently, the opposite is the case.

    "Often the CEO wants the general counsel to be more of a player and business partner," says Catherine Nathan, a co-leader of the legal executive search practice at Spencer Stuart in New York.

    "CEOs finally understand the true importance of the role," she adds.  "It's not a staff level job.  It's one of the three critical assignments on the executive team.  It needs to be someone with very sound legal and business skills.  It needs to be someone who will take a position."

    If you have a management team that's the least bit open to change, and if you and your department have the aptitude and vision to step up to the next level, the time is ripe.

    "All of these new rules and sensitivity about compliance issues give you an opportunity," Bonavia says.  "You'd like to elevate the stature of yourself and your group.  To do that, you need to put together a marketing plan.  After all, you are selling something."

    Bonavia has a rare perspective on this transformation.  For 16 years he was a litigator in Miami.  He also worked as an outside general counsel and an in-house GC before becoming president of Xcel's energy market division.  He's seen the power dynamic from all sides and says general counsel's fates are largely in their own hands.

    "If a general counsel doesn't really want the greater exposure, visibility and responsibility, it's not going to be thrust on them," he says.  "It's a choice people make, but not a conscious one in most cases.  You have to step up.  How else do you get that higher profile besides earning it? And earning it means giving your customer what they want."

    That necessitates making accurate assessment of your current position and ability, then laying out a game plan.  You will have to make deliberate and sometimes difficult changes to your style and approach, and a bid for true inclusion isn't without risk.  But the rewards are well worth it for those who have what it takes.

Taking Control

As you design your plan of attack, one of the most tangible changes you can make is to the structure of the legal department.  This includes everything from office geography to hiring authority.  If you want an office closer to the CEO, ask for it.  If you want in on strategy meetings, find a way to make your attendance mandatory through policy changes.  If you don't have the legal team you need, seek broader discretion in hiring.

    Easier said than done, you say?  Wrong.  The current state of heightened sensitivity to governance issues offers you a window of opportunity to make these adjustments.  Governance concerns have already made the general counsel a more important player, and the smart counsel will find a way to exploit them.

        As you go about the task of explaining the spate of new regulations and their ramifications, take the analysis a step further to suggest structural changes that establish both best practices and systems in which you and your team can be involved early.  You also can use the opportunity to adjust the type and quality of work your legal department is performing.

    "This is not just reorganizing the deck chairs on the Titanic," says Joel Henning, senior vice president and general counsel of Hildebrandt International, a Chicago-based legal business consulting service.  "It's strategically reorganizing what inside counsel is doing and what outside counsel is doing.  As much as possible you want to farm out the commodity work and tactical work, but hire people who can do a significant amount of the strategic work in-house."

    Expect resistance to proposed changes and be prepared to back up your case with legitimate business reasons.  If you want to retain more mission-critical work, you need to demonstrate ways in which the department's institutional expertise makes it better for the job.  If you want in on planning sessions, show the efficiency of integrating legal strategy early.  Sometimes you may have to push your way in, but you may be surprised to find that the officers and board have been waiting for you.

Being There

"I know one CEO who is currently evaluating his general counsel," says Roger Fransecky, president of The Apogee Group, a management-consulting firm in New York.  "This guy, unfortunately, doesn't get it.  He can't read the board of the CEO's needs."

    Fransecky is a psychologist who works with management teams of large companies to uncover behavioral flaws and improve performance.  In this case, the general counsel is a bright lawyer—smart about choosing outside counsel and good at handling litigation, but doesn't seem to understand the urgency of requests from the board or CEO.

    "For example, the general counsel recently took off on vacation during a major board retreat," he says.  "The board was shocked.  The CEO wants to know, 'How do I make this guy understand that his behavior is not appropriate and his career is in trouble?'  It was said with compassion.  This is a really good guy who doesn't understand the expectation."

    If you want to be the trusted advisor, you have to be around.  Visibility is among the most significant ingredients of leadership.  It's not enough to do a good job—you have to be seen doing a good job.  In other words, don't stay squirreled away in your office.  Yes, you're busy, but find reasons to spend a few minutes in conversation with executive officers.  If you're physically distant from the seat of power, find ways to make more appearances, even if it means crossing the street to hand-deliver documents and memos.  And definitely take a personal lead in compliance training.

    "Be very visible in providing first-rate training for the senior executives on Sarbanes-Oxley and other governance issues," Henning says.  "Make it clear to the top people in the company that you're available 24 hours a day to proved that counsel.  Make the consequences clear.  Not just the economic consequences, but also the risk of going to the slammer.  You have to get their ear and provide explanations of how the world has changed."

    Finally, it's important to think about when to make yourself visible and to whom.  The idea is to be there to provide the missing piece of the puzzle when the CFO has that key concern or the president is pondering a big decision.  Ask yourself where the sources of power and influence are.  Who wields them and how?  Who do you most want to have a strong relationship with?  Then you must anticipate when they'll need you most.  And that requires a nuanced understanding that not everyone has.

    "If you don't understand how the business actually works, you'll never make it to the inner circle where the real business policy decisions are made," says Charles Morgan, executive vice president and general counsel of BellSouth Corp. in Atlanta.  "To me it's like being one of those AWACS planes.  If you're a director, you want a general counsel who's looking over the landscape for dangers.  You want a general counsel who not only does their job, but protects you and helps you in your job."

Speaking Out

If there is one thing that perpetually undermines general counsel in their effort to be heard, it's their style of communication.

    "There is a tendency for general counsel to be a little arrogant in their communication style.  That's off-putting to CEOs," says William P. Brittain, a management psychologist and founder of Brittain Klein Inc., an organizational consulting firm based in Chesapeake, Va.

    "Like most very smart, verbally facile people, lawyers tend to assume that people understand things better than they do and—as a consequence—are glib and impatient when the other person doesn't catch on quickly," he says.  "There's also the tendency to express what you know as gospel."

    Lawyers are trained from law school to think conditionally, provide a high degree of detail and hedge uncertainty with alternatives—all of which run counter to the way businesspeople want to receive advice.

    Moreover, many lawyers are horribly inept at the small talk and pleasantries that are the lubricant of the business world.  They're often reticent to pick up the phone or engage in conversation if they don't have a specific piece of data they believe is worthwhile.

    "Establishing a trusted adviser position starts with a mutual sense of respect," Brittain says.  "It's also just being able to engage in small talk and working the room.  It's the casual conversation that establishes the relationship, not the hardcore expertise."

    That means having conversations with senior officers whenever possible and picking up the phone instead of firing off an e-mail.  You may not think it's as efficient, but the personal contact is ultimately more productive.  Things as simple as the way lawyers carry themselves can work against them.  A furrowed brow and stern expression can ward off friendly conversation like garlic breath.

    "The general counsel who can express a point of view colorfully and memorably will find himself or herself asked to do it again," Bonavia says.  "Now you're in the loop.  If you have a board presentation you could either bore them to death with a lot of jargon about collateral estoppel or some drivel, or you can tell them a story.  But that kind of skill isn't part of the everyday training of people who practice law."

    Bonavia suggests that counsel try to think like reporters:  Keep it simple and focus on the who, what, why and when.  Assume that the point has to leap right off the page or it's going to be lost.

    "Use active language, vivid verbs and colorful nouns," he says.  "Don't come in and drone.  If you don't connect with people, you are wasting your time."

Simplify, Synthesize

More important than the mode of communication, of course, is content.  The classic businessperson's beef with lawyers is that they complicate things instead of making them simpler.  Some lawyers even view it as their value-added to make simple things complex.

    But the key to winning your CEOs confidence is to make his or her job easier.  The bottom line is that the CEO wants your best guess, not a half-dozen options.  You have to do the math, stick your neck out and suggest a solution.

    "Tell them why they should care," Bonavia says.  "Give them a recommendation.  Tell them what you think they ought to do.  Tell them what you would do."

    In other words, connect the dots yourself.  The most important thing a general counsel can do is clarify the linkages between business and legal issues.

    "You need to be in the meaning business," Fransecky says.  "In every conversation you should have a mental template that not only provides advice from a legal perspective, but also reveals the business implications."

    Most general counsel are introverts, Fransecky says.  "They drive for an immense amount of details before making decisions, and in many cases they're risk avers.  None of those are traits of people who are ready to step up and take more responsibility."

    In the end, risk is what the inner circle is all about.  There are consequences for every decision made, even more so these days.  The general counsel who's willing, risks aside, to take their expertise one step further and provide meaning and answers, has a place in the inner circle.  The general counsel who doesn't remains the technician—the legal plumber.  It's a dirty job, but hey...