How In-House Legal Teams Are Helping Law Firms Stay Competitive

There is part of the legal market seeing tangible growth for in-house legal teams. And surprisingly it’s private practice law firms.

So, what’s driving this growing trend? Why is it becoming more important for law firms to establish their own legal team?

The seeds were sown when the Legal Services Act came into force and every law firm needed to have a Compliance Officer for Legal Practice (COLP) and a Compliance Officer for Finance and Administration (COFA). That changed the dynamic. Some firms already had General Counsel (GCs) but it was often one of the partners taking on the role of trusted advisor to the firm. When every firm suddenly needed an official ‘in-houser’ it caused people to stop and think about what the role really involved.  Initially, GCs in law firms dealt with conflicts, complaints against the firm, litigation, professional indemnity, the insurance program of the firm as well as looking at partnership issues and structure. This all felt relatively technical and a lot of the in-house lawyers I was talking to at the time asked “Why would I want to go and be a lawyer to other lawyers?” Why make a move from a law firm to go in-house and end up back at a law firm?

What changed in legal to make law firms invest in recruiting their own legal teams?

But as we know, over the last ten years, the landscape changed. Law firms have become bigger and more complex businesses. There's been expansion in the international legal market and legal businesses and law firms have added consultancy services to the mix and become much broader offerings.

The SRA regulatory regime has also evolved vastly and increased the need for experts in law firm risk and compliance. Firms that have grown and become more complex naturally have more challenges. Being GC to a law firm is like being GC to any other major corporate or business because you're not only looking at issues that are specific to the business of law, but also at issues like cyber risk, IT, sanctions, anti-money laundering and general good “corporate” governance.

Now that law firms are able to float and introduce external capital, you may also have the big commercial issues and transactional work to deal with. Growth also brings commercial and corporate legal work. Adding another business line or opening a new office in a new location is all part of the day job for the law firm in-house GC and their team these days.  

What are the advantages of a law firm having its own in-house legal team?

Growing a dedicated legal team for your own firm means that there is now an expert or team of experts who can provide a modern fit-for-purpose risk and compliance and in-house legal function that really understands the firm. Your in-house legal team can take a proactive solution-driven approach rather than trying to fit the demands of the role around urgent client or internal matters. In-house legal teams can see the whole risk picture, take time to scan the horizon and be more alive to risks and opportunities.  

A team of in-house lawyers focused on supporting a law firm can really get to know the firm from every angle and they bring all the benefits of any good in-house lawyer. They know the risk appetite of the firm, they understand the culture, build strong relationships with the leadership and are in a much better position to advise the firm.

You don’t immediately think of a law firm having its own legal issues, but of course they do and always have done. Any firm full of people and doing business with external clients will have challenges and issues to manage.

What makes the perfect in-house legal team for a law firm?

Law firms need to establish what they want from the risk and compliance and in-house function, including from the GC. That’s often where recruitment experts with experience can help and advise.

Sometimes someone who comes from commerce and industry rather than from another law firm can bring something different into the mix - a different perspective on corporate governance, risk and compliance and how an in-house team works.

In other examples, a partner may want to keep or to step into the trusted adviser role for their firm because that's what the leadership is comfortable with; someone who really knows the firm and its partners and has established relationships. This can be complimented by recruiting a senior lawyer who's more technical to manage regulatory requirements, financial crime and sanctions and so on, as well as other subject matters experts. Just as major corporates often have a GC who's on the board and offers strategic advice working with a head of legal who operationally runs the legal function, a similar structure can work well for law firms as well.  

As with all investment in senior recruitment there are the decisions to be made first; do you want someone who is going to be part of the senior leadership team and getting involved in the future direction of the firm or is it more of a technical appointment, someone who’s focusing on making the team work well operationally rather than thinking about the wider issues?

Size is a major factor in terms of the make-up of in-house legal teams. Even medium to small firms will still need someone to manage conflicts or risk analysis. Perhaps a General Counsel isn’t required but they will still have a Director/Head of Risk and Compliance.

In bigger firms, there tends to be a more fully formed team which is often structured more vertically, for example having teams dedicated to conflicts, anti-money laundering or business intake.  

The role of a law firm GC in driving ESG

One of the really positive things about the in-house function of a law firm is that they have so many touchstones across the firm so it makes sense for them to have a role to play in advising on efficiency or on other issues like the firm's position on ESG.

There are two sides of the ESG coin: the opportunity it represents for any business, but also the risks and regulations, making sure you're compliant and doing things properly. Many think ESG sits best with the GC of a company because of their ability to influence and work across the whole business.

With increased transparency across the business world and employees and stakeholders asking more questions about what businesses are doing to become more ethical and sustainable, there is a role for GCs to play as the conscience of a business or firm. They stand back and take a more independent view and challenge leadership more objectively. The question has become not only is it legal, but is it right? Could our reputation be damaged by making certain decisions however compliant they are?

Do people simply ‘fall into” working in-house for law firms?

In a lot of conversations with people about their risk and compliance careers within the legal sector, there are many who have simply fallen into it in the early days, for example by taking a contract, but then found that they really enjoyed it. They like the ‘best of all worlds’ element to it where you are an in-house lawyer using your legal skills but within the context of a private practice law firm.

For some the appeal is the private practice environment because they’re surrounded by intelligent people doing high quality work and they enjoy being in that environment.

One of the biggest challenges at the moment is a shortage of legal talent, as there are still relatively few people who choose to go and work in-house at a law firm, especially not in the earlier stages of their careers. However, I think more people are waking up to how good a role it can be.

For example, I recently worked with an upper mid-tier law firm that was looking for someone to do corporate and commercial work in-house. They were open to talking to someone from a commerce and industry background, but who was interested in this opportunity. The successful candidate hadn’t considered it as their next move but has totally embraced the role and now considers it as a great career path for someone with in-house skills.

The opportunity for promotion is there as well. You might come in as the equivalent of a junior or mid-tier associate to do general risk and compliance work but because these departments are growing, a career path is developing which could lead to becoming a GC in the future.  

What does a good legal team in a law firm look like? And what are the career benefits of working in-house for a law firm?

There are lots of firms with very well set up legal and risk and compliance teams. The best ones include vertical expertise, strength and depth in different areas, but also experts in the corporate and commercial side of things, and are well structured. Many of the mid-tier firms seeing significant growth are becoming more active in recruiting for their teams as they’re increasingly conscious of the need to make sure that their risk and compliance function is fit for purpose and well enough resourced to support a modern law firm and its fee-earners properly.

The benefits of this alternative career path are clear, particularly for people in the early or mid-part of their career, as you can be doing really interesting work and become very involved with people at all levels across the firm; the in-house function of a law firm really is at its heard. A lot of lawyers have previously made the move in-house because they wanted to focus on one business and they didn't want to pursue partnership. It's a genuinely appealing alternative to work in-house for a law firm if you’re someone who enjoys the private practice environment but don’t see fee earning and partnership as your long-term goal.

At Cyan Partners, we have a growing specialism in recruiting General Counsel, Heads of Legal and senior lawyers for legal teams in law firms. If you are a law firm looking to grow or develop your legal team or a lawyer looking to make a move to this exciting new area, we would love to chat. Contact chris@cyan.partners or michelle@cyan.partners

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