Leadership Insight | Autumn 2016
In 2012 the MBA degree established itself as the most popular subject of postgraduate education in the US, accounting for more than a quarter of all enrolments according to the US Department of Education. Along with the usual diet of macroeconomics, management theory and financial accounting, MBA programmes have ensured that those who seek to carve out a corporate career focus on one quality above all others: leadership.
To say that there is now a full-blown leadership industry would put it mildly: over 30,000 books on the subject are listed on Amazon and, according to Neil Hamilton, professor of law at the University of St Thomas in Minnesota, there are more than 1,500 definitions of leadership and dozens of distinct theories of how to lead, each with their own champions.
Yet there is still little on the subject specifically for lawyers, and the literature and training that exists tends to focus on private practice. While the leadership industry has seemingly passed in-house counsel by, it is not for lack of appetite on their part. As Penny Dudley, general counsel of Bupa, points out: ‘Most in-house lawyers would love some sort of programme that addresses the issues they will face as they become more senior.’
Despite a lack of leadership theory for lawyers, a number of books highlighting the importance of broad skills in the GC role have appeared in recent years, most notably former General Electric GC Ben Heineman’s The Inside Counsel Revolution, which argues GCs will find themselves working increasingly at the intersection of law, politics and a range of other areas that require non-legal skills, while the legal and evaluative skills of GCs will become more important to large businesses.
Learning how to delegate is the first thing I would teach any senior counsel who doesn’t want to be drinking from the fire hose.
Tamara Box, Reed Smith
The need for legal skills at senior management level is underlined by the appearance of executive programmes teaching the fundamentals of law to other business leaders. MIT Sloan Executive Education now offers ‘Essential Law for Executives’, a course that familiarises members of the c-suite with the legal and regulatory issues they will increasingly encounter, while in mid-2016 Columbia Law School announced it would begin offering similar courses to non-lawyers. If executives are discovering they need elementary legal grounding, the premium on GCs with executive training is surely set to rise in the next decade.
Another reason why the absence of leadership training for senior counsel is surprising is that, as Tamara Box, Reed Smith’s managing partner for Europe and the Middle East, puts it: ‘Lawyers like leadership. If you listen to any junior lawyer you’ll note how excited they are when they become the lead on a transaction. It’s a natural component of lawyering, but it doesn’t come naturally to everyone and law schools don’t prepare you for what it will take to become a partner or to go in-house and rise up through a department.’
But what does leadership mean for in-house legal? And why has such a core element in the modern lawyer’s skillset been overlooked?
For this Insight report we teamed up with Reed Smith to ask GCs and in-house legal counsel what skills the GCs of tomorrow will need to lead and what the future holds for in-house leadership training.
|The syllabus: leadership courses for in-house lawyers at a glance|
|Provider||Course||What it offers||Duration||Cost|
|Harvard Law School||Leadership in Corporate Counsel||Run as part of Harvard Law School’s executive education programme, the intensive course covers macroeconomics, interpersonal and managerial skills and expert-led workshops. The course is designed to make delegates aware of the trade-offs involved in any managerial structure.||Four days (three full days’ education). The course runs once a year with 30-40 GCs attending. The audience is typically global in nature, with GCs from 15 different countries attending last year.||$12,500|
|Association of Corporate Counsel||Mini-MBA for In-House Counsel||A short programme covering business skills for in-house counsel. The course includes modules on accounting, finance, strategy and organisational behaviour.||Two-and-a-half days.||$2,290 for ACC members/$2,625 for non-members.|
|Rotterdam School of Management, Erasmus University, and General Counsel Netherlands||General Counsel Executive Programme||Launched in January with 15 people enrolled, the course covers MBA topics, including c-suite strategic management, corporate development and growth and reputation management. Later modules cover tailored in-house content such as legal team management. A further component is the field trip, and in late September 2016 delegates travelled to California to attend Stanford’s legal technology initiative CodeX.||Run as six three-day modules spread over one-and-a-half years, this is the most systematic available executive programme aimed at GCs.||€25,000 (around half the cost of an MBA in the Netherlands).|
|Canadian Corporate Counsel Association (CCCA) and Rotman School of Management, University of Toronto||Business Leadership Programme for In-House Counsel||Launched in 2013, the mini-MBA course is distinguished by conferring on those who complete it the status of ‘Certified In-House Counsel – Canada’. Aimed at both junior counsel and senior counsel below GC-level, the course teaches organisational structures, managerial development, and leadership skills.||A nine-day intensive programme consisting of three three-day modules with an online component.||C$9,100|
‘Managers rise to the level of their incompetence.’ So states the oft-cited Peter Principle, formulated in the 1960s by organisational theorist Laurence Peter. As Peter’s now infamous case studies showed, institutions reward staff for successful performance by promoting them into roles that require skills not previously demonstrated. The upshot is that staff spend less time doing the job that got them promoted while senior positions end up filled by people not cut out for them (at which point they will be deemed to have reached their level of incompetence and rise no further).
The rise of the MBA and formal leadership training has made the principle less relevant in major corporates, but the technical professions – medicine, engineering and, especially, law – have yet to fully grasp its significance.
When I started, we had to fight to get onto leadership programmes. Now I am as able to put my stars from legal forward as anyone else.
Suzanne Wise, Network Rail
As Manfred Kets de Vries, professor of leadership development and organisational change at INSEAD, points out: ‘The most common cause of failure in a human capital business like law is micromanagement, which is the most difficult cause of failure for lawyers to overcome. Leadership is a completely different ball game and lawyers are not very good at it because they never got trained in it.’
Coping with the shift from a technical role to a general leadership brief is a problem that has not been lost on GCs themselves. Louise Pentland, GC of PayPal and former GC of Nokia, has seen the Peter Principle affect a lot of her peers. ‘What got you to that senior position was your abilities as a lawyer, then you go through this weird period where you do less of that and more people management. For a lot of lawyers, focusing on the technical side of things is a good defence when they are asked to perform a role they have never been trained in.’
While self-teaching has historically helped GCs learn to lead, boards are increasingly expecting their lawyers to take up senior roles with these skills already in place. Joost Maes, principal at Egon Zehnder, created the executive search firm’s legal, regulatory and compliance practice group ten years ago and has since overseen hundreds of senior in-house appointments. He says there has been a big change in the level of leadership skills and communication skills boards are looking for in a GC. However, the statistics do not paint a positive picture of senior counsel’s preparedness for the top role.
‘In almost 50% of cases, the in-house team will contain no viable candidate to assume a leadership role.’
Maes believes the lack of executive training among in-house lawyers is now playing a big part in the decision to recruit externally.
It is getting difficult to recruit lawyers who truly get what the in-house role involves and who can operate at a multi-faceted level.
Misha Patel, KPMG
If this trend is concerning for GCs, for more junior lawyers it should represent a wake-up call. John Amer, who runs the Legal Center of Expertise at executive search firm Korn Ferry, puts it bluntly: ‘When a new GC joins they replace the majority of their team within three years. Likely it is because they are brought in to create a certain culture that requires people to demonstrate competencies they did not learn at law school. There is a premium on well-rounded in-house lawyers and they tend to rise very quickly in their companies.’
Misha Patel, assistant GC at KPMG, has seen this same change at the front line. ‘It is getting difficult to recruit lawyers who truly get what the in-house role involves and who can operate at a multi-faceted level with the right skillset. That is why there is so much of a need for training courses teaching it in the market now.’
A moot point: general counsel as senior executives
Evidence of change in the general counsel role is emphasised by the small but growing number of GCs granted profit and loss responsibility within their organisations. In the UK, developments including BT Law and Carillion Advice Services (CAS) have led the way, while in the US, Microsoft’s legal office-originated Matter Centre stands out, helping GC Brad Smith to earn a promotion to company president.
Further evidence of the growing executive clout of senior in-house legal counsel comes from the relatively recent phenomenon of GCs rising to the role of chief executive. Prominent examples include Accenture’s chief executive Julie Sweet; Ken Frazier, chair and chief executive of Merck; and Jeff Kindler, the former GC of Pfizer who went on to become chief executive. While the number of such GC-to-chief executive transitions is both small and weighted toward heavily regulated sectors, the mere existence of the phenomenon – almost unheard of just ten years ago – is striking.
However, Mari Sako, professor of management studies at Oxford’s Saïd Business School, says the case for GCs rising to board level has been overstated. ‘Most statistics show GCs are not really executives on the board. They may be company secretaries or executive committee members and a large number of them now hold an executive title, but a very small number have an actual presence on the board itself, and the numbers that do are not really growing all that rapidly.’
But, says David Wilkins, professor and faculty director of the Center on the Legal Profession at Harvard Law School, whether we will see more GCs rise to board level, or the introduction of an established path from GC to chief executive, is not the main issue. ‘The fact that we see some of this sort of movement is itself telling about the role of the GC today, and the more important development moves in the opposite direction, with GCs subsuming business functions under their role as head of legal. Line functions like human rights, government relations, environmental policies, corporate and social responsibility and so on are all falling under the GC’s remit and that means leadership skills are becoming central to the role.’
Learning to lead
Overcoming the psychological barriers facing technical specialists is just one challenge in-house lawyers face. Another obstacle is finding a course that teaches the right skills in the first place. Universities have, until recently, paid almost no attention to the likely career paths of their legal graduates. Even fundamentals like the difference between working in-house and in private practice have fallen outside the scope of most courses. However, things are slowly changing.
The appearance of leadership training as a fitting subject for law schools began in earnest with the publication of a 2007 report by the Carnegie Foundation for the Advancement of Teaching. The report noted the ‘increasingly urgent need to bridge the gap between analytical and practical knowledge’ in legal education and called for schools to commit to building non-technical competencies in their graduates. In November 2006, acting on his own initiative, Heineman spoke on law and leadership at Yale Law School (Heineman has since taught courses on the subject at a number of law schools).
In response to the Carnegie report, the University of Maryland School of Law received $1.6m in funding from the Fetzer Institute in 2008 to launch its Law, Leadership and Professionalism Initiative. The initiative canvassed the profession to establish which core practical competencies lawyers would need from a formal programme of study.
From these ventures arose a handful of elective courses in leadership at US law schools. In 2012 Colorado Law began a series of round tables looking at the organisational and leadership challenges its graduates would encounter and, in 2013, launched an action plan to address the role of teaching in meeting these challenges. Leading law schools such as Yale, Harvard, Georgetown and Stanford have since introduced electives with leadership components to help their graduates develop executive and managerial skills, though efforts to broaden the curriculum are still in their infancy.
A tangible appreciation of financial performance distinguishes GCs now. They are expected to take leadership of performance versus budget.
Sandy Thomas, Reed Smith
According to Deborah Rhode, professor of law and director of the Center on the Legal Profession at Stanford University, US professors were due to discuss steps to ‘jumpstart the field’ of executive education for lawyers at the Association of American Law Schools’ annual meeting in October 2016. Rhode, whose 2013 book Lawyers as Leaders was one of the first systematic studies of legal leadership, also notes that leadership is the subject of this year’s Stanford Law Review symposium as evidence of the subject’s steady rise into the mainstream of legal education. However, she acknowledges that law schools have been slow to act. ‘Clearly, we’ve come late to the parade. This is a $45bn industry and very few law schools have any systematic curricular coverage of these issues.’
Perspectives: Peter Wexler, Schneider Electric
French energy management company Schneider Electric has been on a buying spree lately, most recently with its £3.4bn acquisition of Invensys, completed in 2014. These deals have seen the number of lawyers at the company rise to nearly 300, leading Peter Wexler, Schneider’s US-based group general counsel, to reflect on what it means to lead and train a legal function.
‘One of the key things about leadership is how you develop your talent,’ says Wexler. ‘I want to be around good people and smart people, so I personally interview most if not all who join this department. I tell them this: “If you make a decision and it’s wrong we’ll fix it, and if it’s well reasoned and in the best interests of the company then I will support you even if it ends up being a catastrophe because I don’t want you to be afraid of making decisions.”’
It is an approach Wexler has developed through experience. ‘Never be afraid to make a decision. That’s a rare thing in a legal department but sometimes you have to make a leap of faith.’
This same experience, Wexler believes, is essential to training in-house staff. ‘You can only teach or succeed in leadership by example. A good leader can get people to do things in a very amenable way because he or she has a track record of success. As GC you have to be able to jump in there and roll in the dirt with the rest of them, but you need to have that track record of success [to be credible]. Your biggest strength is yourself. You have to walk your talk. Authenticity equals consistency.’
The key to refining legal leadership and decision-making skills, Wexler believes, is to get as much non-legal experience as possible. ‘To make a decision you have to understand the broader context and if you can think outside the law you are three quarters of the way there. Working outside your core competencies is key. Heads of finance get put in charge of operating line functions, why shouldn’t heads of legal? Lawyers are smart people but unless they step outside the law companies will continue to miss out on a really smart talent pool.’
For those already in practice, the options are more varied. A number of law schools now run short executive education programmes for private practice and in-house lawyers – essentially, mini-MBAs – and, according to those we spoke to, a number of new programmes will launch in the coming year. As part of its continuing education programme, the Association of Corporate Counsel (ACC) has also run its own mini-MBA at the Boston University School of Management since 2010.
One of the most developed offerings is Harvard’s Leadership in Corporate Counsel course, which David Wilkins, professor of law and faculty director of the Center on the Legal Profession at Harvard Law School, says is a response to the current gap in legal training. He comments: ‘We found GCs were going to business schools to learn leadership skills because they weren’t getting it from the law schools, but that didn’t seem to work, because lawyers are a unique animal in terms of their relationship to the organisation.’
The costs of attending these courses are generally low as far as executive education programmes go. Even at the upper end of the spectrum the cost is around that of mini-leadership programmes at leading business schools, which typically range from $9,000 to $15,000 for a week-long course.
Outside the US, leadership training for in-house counsel is also starting to take off. Perhaps the most substantive recent attempt to address the issue has been the General Counsel Executive Programme, launched in January 2016 as a partnership between the Rotterdam School of Management at Erasmus University and General Counsel Netherlands (GCN).
The UK market for in-house training has traditionally been led by consultants rather than law firms or universities, though the tendency to partner with academic providers and law firm sponsors is growing. Winmark, which has been running a chief legal officer network for around 15 years, recently cut a deal with London’s Queen Mary University, while the Global Leaders in Law network now runs a mini-MBA at Somerville College, Oxford and LBC Wise Counsel, one of the more respected in-house networks, has been running LBCambridge at Queen’s College, Cambridge since 2006.
Perspectives: Louise Pentland, PayPal
As GC of Nokia during the complex carve-out and sale of its handsets division to Microsoft, Louise Pentland refined her leadership skills at the sharp end. An early exposure to a formal in-house training programme was, she says, vital preparation for a senior role. ‘I was lucky because I joined Nokia at a very early stage in my career and their internal training is all around being the best you can be, developing networks, and getting results without trampling on people.’
Since that time, says Pentland, a growing skills gap between in-house and private practice has made structured training even more necessary. ‘Companies are more flexible in their understanding of the role of corporate counsel and lawyers are more willing to step across boundaries. It’s a far better situation from a career development and employee retention point of view but it means in-house lawyers need leadership skills and GCs need to ensure staff have those skills.’
Although now responsible for a team of over 100 lawyers at PayPal, and a small team in corporate security, Pentland says the nature of the industry can make it difficult to build a hierarchy. ‘In the tech world it’s a little harder to build legal teams because you don’t get large volumes of repeat work, and even less complicated pieces like non-disclosure agreements will typically contain some very onerous IP clauses. Decisions get escalated to GC level all the time and you need to be hands-on and make sure you’re there to check things.’
This need for flexibility reinforces Pentland’s view that legal training is no longer sufficient preparation for in-house. ‘The high-potential people in my team are able to work in parts of the business that call on skills in which they’ve had no prior training. My head of IP at Nokia wasn’t even a lawyer, he was a McKinsey guy but no one could tell the difference. He knew as much about litigation, patent prosecutions and the nuances of patent families as anyone who had spent their entire career doing it. The sort of people who have that high learning aptitude are exactly what you’re looking for as GC.’
This, argues Pentland, means the way in which lawyers are trained needs to change. ‘People coming out of law schools are taught to be highly independent, focus on their own targets and be very competitive. Those characteristics are reinforced at a firm. Moving in-house is a massive transition and most fail to adapt because they just don’t have a lot of the skills you need to lead a function. Both schools and law firms have a big responsibility here. When I work with firms I look for those that are an extension of my culture and I can’t have that with a group of people I’d hate to have embedded in my team.’
A growing number of law firms are also moving to offer training for GCs, generally partnering with business schools. Reed Smith has also developed a number of sector-specific offerings aimed at in-house counsel just below GC level. For example, its Executive Essentials leadership programme developed with the University of Cambridge’s Møller PSF Group offers executive training to GC-nominated senior counsel in the media and entertainment sector.
Reed Smith’s global director of learning and development Nigel Spencer says the decision to focus on senior counsel rather than GCs was a response to client demand for more rounded teams. ‘GCs tend to be in charge of such wide remits that they really need the team underneath them to develop and take ownership of more non-legal work. Even before they reach the level of GC, counsel are now working with all areas of their business, including the board.’
A big incentive many of these courses offer attendees is continuing professional development (CPD) accreditation. As KPMG’s Patel comments: ‘A lot of providers have cottoned on to the fact that mandatory continuing legal education is better directed to the non-legal skills that in-house counsel are in search of, which is why many of the firms are now offering some form of leadership course with CPD credits.’
The appearance of leadership training for in-house lawyers over the last few years has been accompanied by a parallel shift within internal learning and development functions. Access to internal training used to be severely limited for in-house lawyers, mainly because many such programmes were closed to support functions.
This too is starting to change. As Suzanne Wise, group GC and company secretary of Network Rail, notes: ‘When I started as an in-house lawyer, we had to fight to get onto big company leadership programmes because it was seen as a waste of a place to have a lawyer on the course. Now I am just as able to put my bright stars from the legal team forward as anyone else.’
Perspectives: Penny Dudley, Bupa
When Penny Dudley, former legal director of Bupa’s international health insurance division, was asked to move into the chief legal officer role earlier this year, it was an opportunity to reflect on the importance of non-legal skills. ‘We have a strong focus on leadership at Bupa at all senior levels, but it’s a big step when you go from one part of a business to overseeing the entire group. It brought it home that you need to make sure in-house lawyers have these skills at an early stage. It’s a bit late to start investing in leadership once you’ve put someone on the executive committee.’
The need for leadership skills is also playing a big part in the in-house recruitment process. ‘If I’m looking for someone to step into a senior role then I’m much more focused on their leadership skills and the interview process is designed to find out whether a candidate has those skills. From having a candidate speak to various business teams to working with consultants and conducting psychological profiling, the process we use is the same one they would go through for any other senior management role.’
The growing focus on people management and influencing skills has exposed the scarcity of bespoke training aimed at in-house lawyers. However, says Dudley, the responsibility for developing the right mindset ultimately falls on the GC. ‘Lawyers like the idea of external training because it resonates with the view that there’s a right approach, which you can sit down and learn, but for me leadership is much more about being able to work in an environment where nothing is defined. The biggest thing lawyers struggle with in-house is that there is very often not a right answer.’
By definition, not everyone can be a leader in a flat hierarchy. ‘We need to have a broader view of leadership in law, particularly in-house. We don’t think of it in terms of the number of people a lawyer has reporting in to them but whether they are able to show initiative and take on a project on their own. Leadership is about being willing to make a decision in an area where you’re not a subject-matter expert.’
For lawyers looking to develop these skills, Dudley has a simple piece of advice. ‘Be open to a sideways move into another part of the business where you’ll get profit and loss responsibility. I was responsible for corporate affairs at Bupa Global and it taught me that you don’t always need to be the recognised expert to make good leadership calls. The GC role is one where you have to manage a large number of stakeholders and get the best out of your team, none of which requires subject-matter expertise.’
The skills gap
With the leadership industry waking up to the opportunities available for in-house training, the question is: what skills do GCs need to become effective leaders? Here the answer is likely to be a mix of operational skills and people-influencing skills, with a slight emphasis on the latter.
First, the expectations of technical competence placed on GCs will likely get more demanding in line with growing corporate complexity. While legal heads at major companies themselves often take it as a given that anyone who has risen to a senior position in-house will have absorbed the necessary technical training, mastery of even these skills is becoming more of a challenge. Reed Smith’s Box says: ‘You can’t know everything as a GC anymore, and if you try to do it all yourself you will drown. Learning how to delegate effectively and implement sound processes are the first things I would teach any senior counsel who doesn’t want to be drinking from the fire hose all the time.’
There is also likely to be a growing board-level emphasis on recruiting GCs with high levels of financial literacy. Reed Smith global managing partner Sandy Thomas, who has worked with many high-profile GCs, has seen a big change in boards’ expectations. ‘A more tangible appreciation of the financial performance of the department is used to distinguish GCs now,’ he says. ‘That is a relatively new phenomenon but it is certainly the case that GCs are expected to take ownership and leadership of their department’s performance versus budget and gain efficiencies in their use of outside counsel.’
While board-level demands for GCs with more refined finance skills will continue to grow, the so-called soft skills are likely to be of more use to those seeking promotion. ‘There are a number of dimensions of leadership recruiters look at when evaluating a candidate,’ says Maes, ‘but the most common thing that holds candidates back from a GC role is a lack of people-leadership skills.’
But, as Kets de Vries argues, at a certain level of professional development the distinction between hard and soft skills may no longer be useful. ‘The hardest skills for senior leaders to master are the softest skills: how to get the best out of people, how to run great teams and have a strong culture and how to forget your own hubris and see the way you come across to others.’
Does this define leadership in the GC role? According to Harvard’s Wilkins, the search for a definitive answer is futile. ‘I could give a hundred plausible definitions of GC leadership, but there is no good concise definition apart from the common sense one: you need people who can direct increasingly complex global businesses and you need to be able to integrate what you’re doing with what the business wants.’
It’s a simple but important lesson for GCs. Korn Ferry’s Amer has an even simpler one: ‘Learn to lead or get stuck where you are in the corporate hierarchy.’