Peter Ban, Head of Legal and Compliance at E.ON Hungary, reflects on the value for GCs of immersing themselves in their company’s business.
Members of the legal profession are often being portrayed as complicated and difficult to deal with. These traits do not make us popular. It certainly does not help if we are called “nuclear warheads,” used only to create a large mess like Danny DeVito in Other People’s Money. Against the backdrop of this traditional view, we are experiencing an indisputable evolution of legal services with new solutions, digitalization, and a shifting emphasis towards in-house teams. This evolution opened up a Pandora’s Box, challenging the why and how lawyers work within a business organization. This change may help us reverse the view – at least among the people we work with – that lawyers exist to make life more difficult.
In the 1990s, I embarked on the journey of studying a traditional law curriculum focused on digesting vast amounts of information. Fresh graduates had little clue what being a lawyer actually meant. If one was lucky to work for a good firm after graduation, he or she was shown the ropes – the basics of the trade: precision, work ethics, and how to draft a good contract (which is not an easy task). If you managed to advance in the ranks, new challenges emerged: dealing with easy and difficult client relationships, pitches, and marketing. At this point, most people realized that, in order to excel, it is not enough to be technically competent. The best lawyers are those who understand business and are able to manage expectations and relationships and are able to build a good team.
During the course of my career, I was lucky to work on both sides of the fence. When I moved in-house, my friends commented that I was lucky to be able to get rid of the marketing duties. Reality showed that being in-house did not mean that I could forget about client relationships. In fact, it turned out to be rather the opposite: in-house you are often expected to do much more of it as you live and breathe the business.
In theory, a business organization does not need to have an in-house service as there are specialists who can be engaged at any point to address a problem. This is an existing belief in the market and could work well for smaller companies. For a major organization, where the business is faced with complex, ever-changing regulations, disruptions from competitors, and technology and digitization, the need to engage with different stakeholders on a strategic level is ever-present. Add to this mix the internal complexity of a major organization, meaning lawyers need to assist the decision-making process while following internal rules, and the need to have a new breed of business lawyers is created.
Traditionally the principal role of lawyers was to handle litigation. Legal support was reactive – lawyers dealt with cases where something went wrong. A reactive role meant that the in-house team was mainly interested in avoiding negative outcomes, earning the reputation of “business blockers.” Due to this perception, the business side was often reluctant to involve legal. I often heard the line: “Do I need to clear this? If I go to him, he will kill it immediately.” This lack of cooperation created a downward spiral in the relationship. On one hand, the legal team had a narrow definition of what they wanted to do: focused on litigation, and dealing with after-the-fact issues. On the other hand, the business side formulated a view on a wide range of topics perceived as a pure business task. We know that there is little black and white – there are no real pure legal or pure business considerations. This created a hotbed of misunderstanding and a source of constant conflicts. We are probably all familiar with receiving an e-mail with “just a simple question,” which does not feel right – where the context is missing. E-mails like this that are answered without first learning the business background always lead to finger-pointing and unnecessary conflicts down the line.
This setup meant that, irrespective of how well you are doing your job, ultimately, you are destined to fail. Irrespective of time and place, if you take the time to ask your colleagues for additional information, this approach is a source of frustration to everyone involved. It is like a relationship when both the wife and husband are unhappy, but nobody wants a divorce. This meant that we need to build a relationship that works for both parties.
This sounds simple enough, but “simple” does not mean easy. We are part of a greater business organization and our reason to exist must be connected with the goals of the business. I generalize here, of course, but it basically means that we need to help the organization to survive, develop, and maintain profitability. The basic function of legal, as a risk-management function, is to ensure survival. A business organization that does not develop and which is not profitable will not survive for long. As such, it is not enough to make sure the commercial teams do not mess up. A good business lawyer has to add value day-by-day in order to ensure the success of the organization, thus generating a positive outcome. One, therefore, has to find a balance between risk-management and value-added work. My second tenet is that value can only be created if there is trust – a partnership where the business side sees a benefit in engaging with you.
Imagine this internal structure as a pyramid (akin to Maslow’s pyramid). The aim should be to create an environment where lawyers can add value by actively engaging in the business processes, product development, complex projects, transactions, and lead negotiations. If you want to reach higher tiers of this imaginary pyramid, an organization has to be set up supporting the aim of becoming a business enabler, while, at the same time, staying true to the risk management function and ensuring that commercial teams do not mess up. I have gathered a few building blocks that can be used in the process. The list is by no means a guaranteed recipe, as every business is different, and therefore these can be tailored and adjusted if needed:
Build consensus on the way forward. Every team needs to have a common set of values and provide an answer as to why we go to work every day. Buy-in from your team is essential. If your team cannot agree on the why and what, you cannot deliver.
Establish regular communication with the business. This can be invaluable to show that you care, are trying to understand their goals, and are building a channel where eventual conflicts can be resolved quickly. This can spare unnecessary escalation that can turn any relationship sour.
Foster a culture of dialogue and share best practices. Show practical examples, discuss, and create materials and templates that can help your team. Staff needs to be encouraged to engage directly with the business, which also means that they should not be micro-managed.
Create ways to monitor and obtain feedback on performance. It is a good health check to see if things go in the right direction and to identify points for improvement.
Encourage members of the team to expand their knowledge and business acumen to understand connections and overlaps and the impact decisions across business segments. Building up business knowledge is essential to create solutions. This should improve creativity and the flow of ideas.
Find ways to build trust within the organization. Trust is essential to create a willingness among the business people to consider commercial judgment made from the legal function and a willingness of those within the legal function to move outside their comfort zone and express views on and make commercial judgments. Value creation is made possible if you have the ability to link business goals with the core legal risk management. If you have to say no, offer alternative solutions, and engage in a dialogue to find a common ground, if possible.
Make sure that the team performs the bread and butter tasks well, on time, and provides clear business-oriented advice. Work on communication as lawyers tend to draft complicated messages, which is not productive.