Despite several months of economic doldrums, the brisk pace of in-house hiring continues unabated, partly because the costs of expanding legal staffs look increasingly attractive compared to rising outside counsel costs.
“Astronomical numbers of people have moved in-house in recent years, and we see more on the way despite anxiety about potential hiring freezes in the future,” said Linda Kline, managing partner of Boston-based New England Legal Search.
Other recruiters note a record hiring through the final quarter of 2007 and continuing job orders in 2008.
“General counsel put up with rising costs fueled by escalating associate salaries for a long time, but now there is a backlash that is driving staffing decisions in-house,” said Stephen S. Mims, executive director in the Houston office of Prescott Legal Search.
Even litigators, for whom there were few in-house positions in the past, are finding opportunities to move inside, according to Rodney Osborne of Boston, a managing director for the international firm of Major, Lindsey & Africa. “There are many challenged companies, and some are looking for a new sheriff in town to clean things up,” said Osborne, noting that more litigators with U.S. Attorney backgrounds are becoming general counsel.
Also, nascent companies are hiring their first in-house counsel much sooner in their development than in the past. “The perception now is that once you go public, you need in-house counsel right away,” said Marciann Dunnagan of Boston, an executive director with nationwide placement firm, Special Counsel. “[Executives and directors] are more worried about liability, and they want to see someone guarding the store, especially in highly regulated industries.”
Halley E. Gilbert is one of those guardian lawyers who recently accepted a position as vice president of legal affairs and general counsel for Cambridge, Mass.-based biotech upstart Microbia, Inc. She was attracted to the challenge of moving promising gastric and cardiovascular drugs through clinical trials as part of an “executive super-team” composed of veterans from Monsanto, Sepracor, Genzyme and Schering-Plough.
But she cautioned that lawyers must be prepared “to do it all” in small companies. “Adding staff,” Gilbert explained, “is still not easy in newer companies, particularly with corporate executives concerned about controlling head counts in the growth phase.” Nonetheless, practitioners and recruiters agree that both small and large companies are looking at lawyers more as “partners” than “necessary evils,” and more opportunities abound than ever before. In fact, in-house lawyers are increasingly assuming business executive roles. Some are even heading back to private practice.
“The career of in-house counsel has changed a lot since I started practice in 1969,” said Robert Allison, president, CEO and general counsel for Applied Tissue Technologies, a biotech company known for skin grafting and wound treatment applications in the Boston area. “At one time they were not viewed as equals by private practitioners and executives, but that has changed dramatically.”
Hot, hot, hot
Hiring has been hot across many industries and many specialties because it makes economic sense to bring more work in-house, career specialists say.
“General counsel are re-examining budgets and choking on associate raises in recent years,” said Dunnagan. “It is tough for some GCs to see 3rd- and 4th- year associates making more than them.”
Associates moving in-house often take a pay cut with small to mid-sized companies offering just $120,000 to $170,000 in annual salary, even for those with several years of experience.
Kline added: “More companies are realizing that it just makes sense to hire a lawyer who is dedicated to your company, knows the management team, understands your operations and can focus on your specific needs.”
Corporate generalists continue to be in demand, but many companies have started paying extra to bring specialists into the fold. Law firm associates with experience in tax, ERISA, and intellectual property are being lured into the corral with attractive compensation packages.
“Intellectual property hiring is especially big now, and patent lawyers with electrical engineering degrees can almost write their own tickets, especially in the energy sector,” Mims observed.
Osborne agreed, adding, “demand for energy specialists is even strong in the Northeast where companies are looking at wind, solar and alternative energy projects.” In fact, some of the best-performing stocks in the 2007 market were those of renewable energy enterprises, such as First Solar Co.
Increasingly, lawyers are also being hired as specialists in ethics and compliance functions that did not even exist 10 years ago. Companies are so concerned about rule-breaking and reputations that they are even hiring “privacy specialists” who focus on protection of customer identities and information.
Much of this trend is driven by concerns related to Sarbanes-Oxley and U.S. Sentencing Guidelines, as well as enhanced attention by the federal government to the Foreign Corrupt Practices Act as a result of global expansion.
“International experience is in demand now, especially for high-level searches,” said Osborne. “You don’t necessarily have to be an international expert, but it is important or essential to demonstrate your sensitivity to how an international operation works.”
Hiring has not slowed in any industry, and it has been particularly active in technology and health sciences, which often get their funding from private equity, venture capital and non-public sources.
“Private equity groups and hedge funds are also bringing a lot more lawyers in-house recently,” said Osborne, noting they have largely avoided the sub-prime meltdown.
Lawyers coming in-house also have more options now. Not only is the career path from private practice to in-house no longer a one-way street (see sidebar “Going back the other way”), it can lead to many non-traditional roles in the business sector.
“In the health science industry, lawyers often assume a business development role, a project management role or a finance role,” said Gilbert. Lawyers understand the regulatory process of getting a drug or a medical device to market, as well as the process to obtain funding for that work, she noted.
“Over time, more people have realized that lawyers are smart, focused, hard working and can be just as results-oriented,” said Osborne.
Recruiters also say they are starting to see some clients expressing interest in seeing lawyer candidates from the outside who are well-suited for a business role. “I just completed a search for a company that wanted an employment lawyer to handle the employment relations function,” said Kline, offering an example.
This pathway has opened up so much in recent years that “many candidates will turn down jobs if a company is inflexible on the possibility of a move to the business side,” according to the Mims.
He noted examples of risk management and labor lawyers who have moved into HR functions, real estate lawyers who took over development operations, and transactional lawyers who took over strategic planning and acquisitions.
Mims also points to a recent trend in hiring lawyers to command contract negotiation and execution functions once handled by non-lawyers. “If you want to know how the company views its lawyers, it’s a good idea to ask how many lawyers have moved to the business and executive teams,” he advises.
Many lawyers have the skills necessary to do well in a business role, according to Allison, who assumed his first company president role for a global software maker that he counseled as a lawyer
“Often, they have mastered the ability to jump into new areas and difficult situations and get up to speed quickly, and that is something you have to do as an executive,” he said. “Lawyers also need an ability to moderate and mediate among parties in dispute. The smartest employees are often the most obstinate because they have strong opinions. You can’t browbeat them, but you can’t patronize them either.”
The advocacy experience gives lawyers what they need most in an executive position – the ability to influence and persuade others, according to Allison. “You have to figure out what moves people to give their best. Leadership means getting people to understand the company mission and getting people to support it with enthusiasm.”
But he warned that being an effective executive is not about autocratic rules. “It is nothing like being a senior partner who can instruct associates to follow orders.”
Lawyers thinking of a jump to an executive role must be prepared for a mental switch. “Every day you feel the burden on your shoulders of being responsible for your client’s fortunes,” Allison observed. “Lenders, employees, customers and other constituents are counting on you and that is energizing and stimulating, but it is boundless in scope and there is no end to your days.”
Assuming the GC role
Those who covet the general counsel role may have more chances than ever before with more companies hiring in-house counsel sooner, but they should be prepared for greater scrutiny than ever.
“There is more scrutiny of GCs by board members and executives now because the role has greatly expanded,” said Osborne, pointing out that risk management, international issues, labor relations, ethics and compliance matters often fall into the lead lawyer’s basket.
He added that prospective candidates frequently interview with board members and executives who are looking for demonstrated management skills and the ability to work with a wide range of people in different functions.
Osborne also flagged the rising importance of “demonstrating integrity and good judgment because the general counsel is much more than a technician now – [that person] is the protector of the company’s reputation.”
Allison added that “there is no substitute for depth of legal experience.” He likened senior legal judgment to the skill of an operating surgeon. “Statistics show that operations are much safer with surgeons who have performed a procedure hundreds of times because they know how to handle anything that happens during the operation,” he said.
In hiring lawyers in the past, he said he has always valued “the ability to focus on priorities and plan realistically toward completion of actions.”
Gilbert, who has managed the legal function at two different companies, suggested that “lawyers can do well by solidifying their day-to-day working relationships and keeping in touch with people from [their] past.”