Five requirements of corporate culture for building an effective in-house legal function

In my nearly 20 years of corporate legal experience, I have built in-house legal functions, helped lead large, existing functions and yet also advised in-house lawyers as outside counsel. During this time, I have observed that the success of an in-house function will depend not just on the ability of the in-house legal professionals
running it (which is obvious), but also on the cultural receptivity to legal in the "host company."  As a result I have come to believe that there are five very important guidelines - prerequisites even - to ensure a corporate legal function's success.

The first is being very specific with respect to your job specification in terms of both qualifications and personality type.  Stick to that with conviction.  Is industry experience required?  What substantive areas of law are really arising on a regular basis?  That should be aligned with the ideal candidate's background. As far as personality type is concerned, consider that a spectrum exists with "forceful change agents" and "peacemaking cooperators" at the extremes - what type is best for your organization?  When ready to go find that right person, make sure you understand the difference between hunting and hiring.  It will drive the recruiting approach and likely determine whether you end up with a superstar or somebody who just needed a job.

The second requirement is to be very explicit, internally and externally, about what kind of role is being created when the legal department is launched. This is all part of good human resources practices in providing a candidate with a realistic job preview. There are basically two types of legal functions that get created with the first hire.  There is the best practices function and the...well, not best practices function.  In a best practices function, the candidate will have either a Chief Legal Officer or General Counsel title, will be a named executive officer and paid accordingly, will officially be part of the most senior executive team, will participate in all board meetings, will act as the company's lead decision maker on legal issues, will report directly to an engaged CEO and will have the authority to hire and fire outside legal vendors.  It is possible to create a legal function where these practices are not present. However, it's important to make sure that the candidate is acutely aware of the landscape so that expectations are not mismatched.  A great deal of confusion can be created when legal departments are established with some good practices but not all - this can create tension as the function tries to develop.

The third cultural requirement is to appreciate the need for a legal function to play a major role in developing a risk management philosophy for the entire corporation.  Many corporations evolve without any kind of risk management philosophy. This results in those companies being very aggressive in certain situations but skittish in others, without there being any rhyme or reason for these approaches.  This leads to unpredictable behavior that can frustrate investors, partners and employees.  An effective legal function will help the company develop a consistent and rational risk management approach that fits with the company's point in the corporate lifecycle.  Allow, encourage and expect your legal function to play this role.

The fourth need is to understand the impact that cynicism about the legal profession has on corporate America. Some of that cynicism is warranted. But some of it is not. The reluctance to engage "pricey and pedantic" transactional lawyers, for example, can create problems down the road when poor contracts turn into conflicts. This has a draining effect on the ability to maintain a cost effective and proactive function.  What's more, it can create a vicious cycle.  Companies that ignore or don't seek out legal advice because "those crazy lawyers are so cautious and expensive," will often end up only spending more money on legal services to reactively clean up messes.  Make sure your organization is really open to legal advice.

The fifth point is to ensure adequate resources and in fact require immediate hiring where the volume demands it. This also helps avoid chicken and egg situations.  For instance, a legal function won't have any internal credibility if it can't responsively review commercial contracts.  But, it can't be responsive if it's not adequately staffed.

Spin only making Yahoo's bad new policy worse

Yahoo's latest move to try to shake itself out of the doldrums is an edict that bans telecommuting.  The new policy and the memo that dictates it to employees are both pretty bad.

The memo says, "Speed and quality are often sacrificed when we work from home."  The solution is not working smarter, harder, more efficiently or with better use of technology, but rather just being "physically together."  No data is provided as to how being "present in our offices" will solve anything.  No explanation of the pros and cons of telecommuting is given.  The memo is a superficial collection of flowery phrases offered up in the hope that they will be accepted as fact.

What's really needed in these situations is policy that recognizes the modern way in which global technology work gets done and finds the right balance among a wide variety of activities.  Technology company leaders should want to encourage people to put in the hours necessary to do great work, wherever they might be.  In-office or out-of-office is a secondary outcome.  In-office work can help in collaboration, team building and communication-related activities.  Out-of-office work, away from meetings and other office attractions (food, ping pong and friends), can facilitate efficient consideration of product strategy, long term planning and development of...well, better core human resources policies.

But where the "no working from home" policy goes from bad to just plain weird is some of the spin that has accompanied it.  One recent report provided extensive justifications on the new policy from someone close to the issue, presumably an insider.   This source suggests that the policy came about because some employees were poor performers and "not productive."  These people will theoretically quit rather than comply with the new policy, which would be a good thing for the organization.  So, the source suggests, CEO Marissa Mayer sees this as "a layoff that's not a layoff."

For this, the source suggests that Mayer "turned out to have a lot of courage.  She's dealing with problems no one wanted to deal with before."

This makes no sense.  Yahoo seems to be having a problem with productivity and with management.  If some remote employees are not productive and yet it takes a complete ban on remote work as the solution, then it's clear that those employees and their managers were poor performers.  What's more, there is nothing courageous about using a broad and rigid policy to achieve "a layoff that's not a layoff."  It's much more passive-aggressive than courageous.  And more passive-aggressive leadership is the last thing corporate America needs.

Insider PSA: "You're shady and self-dealing"

Venture investor Chamath Palihapitiya recently wrote a critical e-mail to the founder of Airbnb.  Palihapitiya passed on the opportunity to invest in Airbnb's latest financing round.  His criticism focused on a controversial and unusual element of the transaction.  In a nutshell, a dividend to common stockholders was being used to provide cash to founders to the disadvantage of other employees.  The e-mail raised many valid points and some good coaching, including the sentence, "Treat your employees the same as you'd treat yourself."


So what's the problem?


The problem is that the e-mail was somehow leaked to a reporter.  Given the amount of confidential information Palihapitiya was given, this amounted to a credible insider public service announcement that the founder could be considered, as the e-mail put it, "shady and self-dealing."  I don't believe that Palihapitiya intentionally leaked the e-mail, but the disclosure was embarrassing to all involved.


It's also symptomatic of a couple challenges in Silicon Valley's business culture.  


We have become too reliant on e-mail to communicate in detail about sensitive topics.  Coaching and constructive criticism are valuable, but e-mail is often an unhelpful channel for it.  


In addition, Silicon Valley is sometimes too open.  We have open office spaces.  Many investors refuse to sign non-disclosure agreements.  Some companies sign NDAs without reading or thinking about them - a very risky practice given that I have actually seen proposed "NDAs" in the last few years that assigned all intellectual property created in the business relationship to one party.  Every thought is posted on Twitter.  The "confidential" footnote is not inserted in the first place or ignored.


It's a good time to revisit the value of 1:1 verbal communication and confidentiality.  Not everything is meant for public dissemination.


If Palihapitiya's email "really was just an attempt to give (the founder of Airbnb) private feedback," he should have picked up the phone.

"Please just tell me I'm great."

This post was co-authored with human resources guru Lisa Youngdahl, SPHR, HCS.

The Atlantic recently published an interesting piece by psychotherapist Lori Gottlieb.  In it, she contends that the cult of self-esteem is dooming our kids to unhappy adulthoods.   The idea is that as parents we are trying so hard to make our kids feel happy and seem successful, regardless of the reality around them, that we are not preparing them for life’s ups and downs.  The Atlantic’s cover art summarizes the idea perfectly – a trophy adorned with a soccer player completely missing a kick with the tag “good try.”

This trend has been going on in corporate America as well.   Employees are sometimes so sensitive about feedback that we either sugar coat or just hold back key data to avoid hurting feelings.  The worry is that the employee might leave at an inconvenient time (“I must get this next release over the finish line before I talk to Sally”).  The informal office network is powerful and we wouldn't want to harm morale.

Management doesn’t necessarily fare any better.  The dying art of the exit interview is the proof in the pudding.   Companies will often throw out softball questions and lap up the pleasant answers from departing employees who don’t want to burn any bridges.  “I loved it here but just got a surprise opportunity that I didn’t feel I could pass up.”   Yawn.

It’s almost as if we all want to be lied to for the sake of keeping a smile on every face.  “Please just tell me I’m great.” 

How do we solve for this?  Valuable resources include Fournies' Coaching for Improved Work Performance and Patterson's Crucial Confrontations: Tools for Resolving Broken Promises, Violated Expectations and Bad Behavior.

Some refreshing honesty and self-awareness every once in a while probably wouldn’t hurt.  Take some time to be frank with yourself about strengths and weaknesses.  Strengthen your company’s exit interview process so that you’re asking hard, probing questions and reporting the blunt answers anonymously to management.  Tell a subordinate what they could have done better on the last assignment.  It doesn’t have to be cruel, rude or loud, but direct communication is ultimately…well, great therapy.