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In A Global Economy, It Is The Lawyers Who Must Change

December 15, 2010

Recent research among senior in-house lawyers has resulted in three areas of major interest for 2011. These are:

  • Global compliance
  • Contracting and contract management automation
  • Corporate governance and crisis management

These do not necessarily represent the areas of peak workload or required expertise for in-house counsel. The research was exploring the topics on which the legal community would most value more information, in order to grow their competence and capabilities.

These results therefore point to areas where many in-house groups today feel exposed. In some areas, such as contracting, this sense of exposure is in some respects caused by the challenges of rapidly increasing workload and inadequate staffing levels. Legal is in danger of becoming a roadblock unless it can find new and more efficient methods to deal with the complexities of today’s business.

There are many aspects to these problems. In part, it is the traditional approach to legal training, still largely based on jurisdictional knowledge and with limited acknowledgement of the needs of a lawyer in the world of business. This failing was recently highlighted in The Economist, in an article that was especially critical of the US law schools.

In part, it is due to the nature of lawyering. By and large, it is not a profession for risk-takers. Sometimes, this can lead to over-cautious attitudes and in particular a resistance to change. There is a tendency to create a centralized ‘command and control’ culture, rather than think about ways to empower better decision-making. In the words of Mark Chandler, General Counsel at Cisco, lawyers often want to be gatekeepers, rather than to build gateways.

This conservatism can reflect in some narrowness of vision. The global networked economy that has given rise to many of the new challenges confronting lawyers also potentially offers the solutions. The growth of new, on-demand information sources is one example. Process-based business applications are another.

Lawyers used to stand aside from the business, offering independent judgment on the legality and enforceability of specific policies or actions. Today, their increased accountability places them right at the heart of decision-taking by the business. Yet they cannot be involved in every decision. Therefore they need better and faster understanding of the implications surrounding proposed actions; and they need to increase their tentacles out to the business, both in terms of influencing decisions and in having visibility into what is going on (and specifically, whether it is compliant).

It is this new business reality that is driving the three areas of interest highlighted by the research. But having identified the problems, the real secret of success will depend on how in-house groups approach their resolution. If they try to remain a traditional ‘fount of knowledge’ around which the rest of the business must revolve, they will fail. Lawyers must become far more integrated into the fabric of the organization and its related business processes.

3 Comments
  1. As a US attorney I only somewhat agree with you. Lawyers have to be risk adverse on behalf of their clients. Businesses are moving very fast in an international market. They are moving faster than society can ethically legislate. US Lawyers and accountants are legally required to stop and report legislated ethical lapses. It is precisely because Enron’s accountants did not act more responsibly that Arthur Anderson Accounting collapsed, Enron collapsed and thousands of good employees lost their jobs and their retirement.

    Yes, business people must be empowered to make good ethically and legally sound business decisions. Lawyers and accountants will always provide a valuable service to society at large. Good decision making will not come as a result of lawyers being less risk adverse. They will only come as business people willingly take on the responsibility to know the law and act within the bounds of the law without a lawyer telling them to! Yes, the US legal education system and the 50 state licensing system needs to change. This change is so monumental though, that it cannot happen overnight.

    • Jeanette,
      Thanks for your comment. I guess the real point is that both lawyers and their clients need ot be clear in their respective expectations and roles. And the lawyers must grasp the point that risk aversion can often create counter-risks. Much of my point, however, is that many lawyers continue to do traditional things in somewhat traditional ways. In these revolutionary times, that is something we must not just question, but must also accept the need for action.

      My comments were also primarily directed at the in-house counsel, whose position is of course somewhat different from that of outside counsel. Indeed, as you probably know, that difference has been made very clear by EU decisions regarding client / attorney privilege.

      Change will happen; it is probably best if the community ensures it is equipped to lead and manage that change, rather than have others thrusting change upon it.

      Tim

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