As up-and-coming technology companies begin to scale their businesses, CEOs must look to weather the storm of corporate adolescence by building a core executive team to help lead their company into the future. Along the way, many leaders will inevitably find the “mo’ money mo’ problems” adage is a normal part of a growing business. The number of conversations with lawyers steadily increases to the point where one might wonder if those hours could be better spent building the business rather than protecting the business. It doesn’t take long to conclude that someone else should really be managing the company’s legal affairs on a full-time basis.
But the best and brightest executives don’t merely seek reprieve from having to directly manage legal issues as they arise. Instead, they seek to establish a fully-functioning legal department within the company to handle legal matters reactively — but more importantly, to strategically partner with the rest of the organization to ensure that the company is pro-actively managing legal risk across all facets of the business. And not just as the business exists today, but perhaps more importantly, as the executive envisions it will exist in the mid-term future (3-5 years out).
Building a high-functioning legal department starts by hiring the right man or woman as the first lawyer on your executive team. For purposes of this article, I don’t care whether you title them as Chief Legal Officer, VP Legal Affairs or General Counsel — but I do like the word “general” in “General Counsel” because it connotes the right mentality the first lawyer within a fast growing technology company must have in order to succeed.
By contrast, most lawyers in a reasonably-sized law firm are specialists by nature with focused expertise in practice areas like: corporate/securities, mergers & acquisitions, labor & employment, technology transactions/licensing, tax or some sort of litigation. While general-ist counsels typically start their careers in one of those practice area boxes, they ultimately come to enjoy the challenge of becoming proficient (but perhaps, not fluent) in a variety of practice areas. Successful generalists are able to make up the gulf between proficiency and fluency by being extraordinarily resourceful and/or by building great teams around them with complementary skill sets.
In addition to creating a web of internal and external resources, a GC must also be able to work with a more hierarchically diverse workforce. Outside counsel typically works with other lawyers and senior executives to complete specific engagements, whereas, a GC at a growing technology company – especially within a small legal department – must be ready, willing and able to interface with everyone from the board of directors down to the rank and file employees (even those working in a less visible satellite office!).
After having been asked by many VCs and executives as to what are the most important qualities they should look for in a GC candidate, I sat down to organize my thoughts and came up with these 5 traits:
- Integrity. This quality is a binary prerequisite and the most important trait you will find in a legal executive who will hopefully become your most trusted advisor. Executives need an honest partner to identify and accurately portray the risks associated with any major decision that the company faces and to advise on the best way forward for the company. This is THE lawyer mantra: Everything with integrity. Similarly, you must always be honest and forthright with your GC or else she will not be able to provide you with the best advice based on all available information.
- Cultural Fit. As with any executive, the head lawyer must be a good cultural fit within the organization. A technically capable lawyer will not succeed if they don’t know how to communicate and play well with others on the team. Your company’s strategic process and appetite for risk are a good place to start. For example, does the company have an open/democratic decision-making process, or do executives meet behind closed doors and communicate downward? When calculating risks, does the company prefer to dot i’s and cross t’s before launching a new product/service, or do they prefer to “move fast and break things”? Even within the legal role, CEOs should think about the personality type they are expecting (i.e. an aggressive bulldog type or a “getting to yes” type). Not surprisingly, companies with an established set of values will find it easier to weed out bad cultural fits amongst legal candidates.
- Service Oriented. Even though the GC will no longer need to track billable hours, the service-orientation aspect of the legal profession should carry forward to the in-house role. Instead of different company clients, the GC should approach each department as a new client. Whether it’s finance, marketing, engineering, sales, customer service, operations or human resources, the in-house lawyer should demonstrate a desire to understand all aspects of the business and the unique legal issues presented to these constituencies. Successful GC’s build client service relationships in all departments and at all levels.These relationships pay-it-forward when the GC becomes a company keystone and an active player at the intersection of all of the company’s critical initiatives. It is never a waste of time for a GC to seemingly merely “get to know” anyone at the company. One never knows when that person may have the smoking gun (or know who does.)
- Versatile and Resourceful. The in-house role demands versatility (and multitasking for that matter). A GC should be capable of handling or delegating and managing ALL legal matters. For tech companies, your GC must be capable of scaling up to grow a team to keep up with the added complexities that come with hyper-growth. The best GCs have built a network they can rely on for recruiting, staying abreast of evolving legal issues and finding subject matter experts and other in-house lawyer sounding boards to lean on in order to dispatch legal advice and establish processes efficiently. Here is a quick exercise: close your eyes and think about this candidate as your manager of the following legal issues: corporate financing, class-action litigation, business strategy, insurance company claim dispute, IT consultation on data privacy and cybersecurity, adversarial meeting with a government official, investor/board member relations or worse, press media relations. Do you think this candidate can handle it or find the right resource to handle it? If not, keep looking.
- Steady Hand. When major issues arise (and they always do; see Murphy’s law), the GC becomes a “Chief Crisis Manager.” This is what lawyers are trained to do. But, a true steady hand understands the difference between (A) a bona fide “hair-is-on-fire” crisis and (B) a garden variety legal matter. For the former, she must know it’s time to “wake the captain” and quickly assemble a briefing with response recommendations. After analyzing the issue and concluding its not a fire drill, she must establish a thoughtful and strategic plan and communicate it at the right time to the right audience. When a lawyer is adept at discerning the difference between A and B, they earn the trust of the board and the executive team.
While assessing these qualities through the hiring process can be challenging, executives should make sure a healthy cross-section of executives and board members interview and interact with the GC candidate. References are also excellent ways to uncover a GC candidate’s management style and overall capabilities. The effort is finally rewarded when you find the right lawyer, equipped with right tools and the right demeanor, to successfully manage your company’s risk profile. Good luck out there!