Business/Hiring Advice

Q:  I am ideally looking for a company which is trying to hire its first inside counsel, but unsure how to identify those opportunities.  Any insight or advice?

A:  This is an excellent area of opportunity in the current market.  Many companies are on the cusp of hiring their first in-house counsel for a variety of reasons, including cost-savings, but also because they are getting to a certain size where it just makes overall business sense.  The three questions you want to ask when you are looking to identify a company which could be on the verge of hiring an in-house attorney are:  1)  What is the company's revenue?  It is hard to state a specific trigger point, because there are certainly other factors, but a minimum of $50M is probably a good place to start ($75M+ might even be a safer bet); 2)  Is the company's industry legal intensive?  For example, any highly-regulated industry is going to have numerous legal needs (healthcare; medical device; energy; etc.); and 3)  What is the background of the decision-making team (Board/Senior Management) in terms of their view of legal?  Do they see a value in having a legal person (or group) in-house, or do they view legal as more of an adversary?  If you can find answers to these questions, then you have a good start in identifying potential opportunities for a company's first in-house counsel role.  A great sample profile would be:  A growing $80M medical device company with a CFO who came from a company where she partnered successfully with her legal department. 

Q:  I am a CFO at a $80M private supply chain company in Minneapolis, and we are on track to grow our revenues 25% year over year (our fiscal ends Sept '11).  I am contemplating hiring an in-house attorney, since our outside legal fees are heading upwards toward $600k this year.  I can see an obvious cost-savings argument, but what are some additional advantages to bringing someone from the outside into the company to handle our legal needs?

A:  First of all, congratulations on your excellent growth in a year which has seen many companies take a loss.  For a company on the verge of growing to $100M, it makes a lot of sense to bring an attorney (or several) in-house, depending on what your needs are.  Cost, as you noted, is enough of a justification to bring in at least one attorney (and you can get an experienced, effective lawyer for less than $150k in the Twin Cities).  The second reason, and likely more important, is that of control.  Having an in-house lawyer allows you to have more control over the flow of legal information in and out of the company (whether it is critical data or decisions which effect your business from a contract/transactional basis, etc.).  Having the ability, as the CFO, to walk down the hall and have a discussion with your legal counsel about business strategy allows for business synergy and efficiency, as well as effective communication and control of the company's confidential information, internal issues (legal and non-legal) and strategy execution.  Additionally, and many companies do not want to think about it like this, working with outside counsel can be a conflict of interest when it comes to getting straight-forward legal advice.  A law firm is motivated to keep their clients and bill hours, so they are not apt to push back on legal issues as much as a company might need them to; an in-house legal advisor will not have that conflict, and can be more objective (and unafraid) to state things candidly.  The importance of being able to elicit sound legal advice without conflict or ulterior motives is critical to a growing business.  And finally, as you mentioned in your initial question, do not underestimate the cost-savings aspect of hiring in-house.  LawgicSearch recently met with a mid-sized company which added an in-house counsel in '09, and subsequently hired two additional attorneys in the next 12 months.  Within that time frame, their outside counsel bills were reduced from $4M to $2M.  That is significant (and almost instant) savings.  I argue, how can you afford NOT to hire in-house? 

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