In-house: The alternative to partnership?

"After so many years of doing major project work as a lawyer in a law firm, I became frustrated that you work for a year or two intensively with people and then you get the financial close and they all disappear out of your life. You don't have any continuity with what happens with the business that you've been working on," he says.

It is a sentiment shared by many private practitioners who have made the switch to an in-house career; the desire to be part of an organisation in which you can see projects from start to finish is an important motivator to leave the confines of a law firm.

Amanda Parshall, general counsel of HSBC Bank Australia, worked for nine years with Clifford Chance in London, Paris and Hong Kong before jumping the private practice ship.
"In a law firm, there's a certain amount of repetition in what you do, especially in the larger firms, because you're specialised. You don't see anything from the beginning to the end, whereas in the position where I am now, anything can hit my desk on any day and I see the issue managed from source to resolution or conception," she says.

Push factors

Greater exposure to the commercial aspects of transactions is an important pull factor for lawyers who consider making the switch in-house. But in recent years more push factors to leave the private practice have added to the attractions of an in-house career. For example, there is an increasing emphasis on work-life balance and fewer people are prepared to dedicate the number of hours it takes to run a legal practice.

To become a partner in a firm means having many additional responsibilities. Providing proper technical legal advice is not enough; partners also have obligations in areas such as business development, mentoring of junior lawyers and administration. Not everybody welcomes these extra tasks.

Additional pressure is coming from a black hole called "London." The huge numbers of lawyers going overseas for a few years has led to a sharp increase in salaries for mid-level lawyers, especially those with three to six years' PQE.

Law firms have had to continuously up the remuneration packages and this has narrowed the gap between salaries of senior associates and those of salaried partners. As a result, increasing numbers of lawyers do not see the benefit of going the extra mile, a development reflected in the creation of special counsel roles, which recognise seniority but do not come with all the additional responsibilities that partners have.

Secondments spark interest

The changing attitude of lawyers towards the partnership and the increasing awareness of opportunities are almost certainly of benefit to the in-house industry. And although no data is available to support the notion that more lawyers see a career in-house as a viable alternative to the partnership route, legal recruitment firms believe this is the case.

"I think that's an accurate comment," says Shelley Cater of Laurence Simons. "As the in-house route becomes more and more prestigious, it becomes a more viable option for good senior lawyers."

Bill Panourgias, consultant with Naiman Clarke, agrees. "I definitely have seen an increase in lawyers making that change in that area. The road from senior associateship to partnership is becoming harder," he says.

In the past, in-house roles were not always viewed in the best light by private practitioners; but the rapid expansion of teams in the last decade and the increased recognition of their work within corporations – especially in the US where increasing numbers of general counsel are being promoted to CEO roles – have given in-house positions more prestige.

Secondments to corporations have also helped to raise the profile of the in-house industry, says Amanda Parshall. "Although it's less so now because firms are struggling to find people, more people go on secondments and see what it's like in-house. I have two lawyers here who do come from secondments and I also had secondees that I didn't offer a role to, but who moved in-house shortly after they finished here."

"I've got a group of very able lawyers, who come from big firms," she adds. "They were high flyers in those firms and have chosen the in-house route as their career path. In that regard, you do benefit as general counsel; perhaps 15 to 20 years ago those lawyers wouldn't have seen in-house as a viable alternative."

Adam Liberman, general counsel of science agency CSIRO, had been a partner with Freehills for 15 years and made the switch in-house in August 2006. He says that the addition of in-house experience is increasingly valued as an addition to private practice experience.

"I think the in-house option these days is viewed in a much more favourable light, because you obtain a more direct sense of the client's perspective. That sort of experience makes you a better lawyer," he says. "When I started as a lawyer, in-house lawyers were viewed as mere administrators. I don't think that's the case now. They're viewed genuinely as 'counsel', akin to the American view of a value-add role."

Lifestyle choice?

Robert Holtsbaum says more female lawyers than male lawyers are attracted to in-house roles. "My experience at Minter Ellison – and that's two-and-a-half years ago, but I suspect it hasn't changed that much – is that particularly the female lawyers were happy to remain something below partnership level, because they never regarded a major law firm as offering the work-life balance for their long-term career. They were always candidates to move somewhere else before they were 30 years. This has certainly been of benefit to corporations, because they get good lawyers who aren't interested in becoming a partner, but want work-life balance.

"A career in-house is still often seen as a choice for lifestyle, but this is only true to a certain extent," says Shelley Cater. "The corporate environment might be more flexible but it certainly doesn't mean less hours," she says.

Panourgias agrees and says the choice for in-house is often a choice for a particular focus on legal services rather than a choice for shorter days.

"On a pure work satisfaction level – which is the least considered element in work-life balance – in-house lawyers can tend to focus on their work rather than the myriad of factors that can come into play in private practice. On the hours side of things, essentially it can depend on the type of in-house team that you're joining," he says.

Wider responsibilities

As in-house lawyers gain more recognition for their contribution to an organisation, their responsibilities also increase. More general counsel are taking on managerial roles and are joining executive committees to discuss strategic and commercial aspects of the business.

"I suppose I wear two hats," says Parshall, who is a member of HSBC's executive and operational risk committees in Australia. "You're there as general counsel – you're there to provide the executive with information about legal risks and compliance issues. At the same time, you're there as an executive of the bank in the same way as any other member of the executive team. The team looks at strategy and business planning, among other things."

Nowhere was the value recognition of general counsel more apparent then at BHP Billiton, where former general counsel John Fast was not only head of legal but also a member of the organisation's executive board. Fast resigned from BHP Billiton mid last year and Freehills' Ferraro has since been installed in the top legal position.

"My principal role was being part of that executive team and what we did there was essentially make the decisions about the strategy and the future of the company and the direction," Fast says.

His many responsibilities included membership of the company's investment review committee and, on several occasions, he was the acting chair of that committee.

"This was the committee which you had to go through to have capital approved and we were reviewing investment decisions. Sure, I was a senior manager; it just happened that everybody had their own responsibilities – some people had operational responsibilities, some had functional responsibilities and mine were legal, government, asset protection and at one time company secretarial as well."

Fast says that the trend of more general counsel becoming involved in managerial roles is a logical extension of their skills gained while in private practice. He points to the US where many CEOs of the top companies have a background in law.

"One of the most successful CEOs of the last era has been Jack Welsh of General Electric. He said that 50-60 per cent of his time was about people; that's what he regarded [as] his principal job. If you think about it, lawyers – particularly those who come out of private practice – are very, very good with people. The reason is because success in the law is about building teams, about keeping teams together."

"Never trust a lawyer"

Holtsbaum says that the reason lawyers do not naturally progress into senior management roles in Australia is that Australians distrust lawyers.

"I think in Australia people are wary of dealing with lawyers in a general commercial environment," he says. "There's suspicion of dealing with lawyers without also having their lawyers there at the same time. It can be a challenge for in-house lawyers, even though they have a totally different title and they're not actually exercising a legal function. That has an impact on where commercial people see lawyers move in a management career."

Contrary to Fast, Holtsbaum does not believe that lawyers with extensive experience as private practitioners make good CEOs. "In general, lawyers who have practised as lawyers don't make good CEOs. I think they become focused on the start and finish of projects and the management of files, while general management never has an end. It's a long piece of string," he says.

"Lawyers who have practised for a long time find it difficult to make that transition into an activity that has no start and no finish. There's no reason why somebody who has a law degree can't be a good manager, but then they haven't been tainted by practising as a lawyer.

"Australia has not seen a top chief executive with a private practice background yet, but the trend in the US has already found resonance in the UK, and that could mean its introduction in Australia is not far off. This certainly would drive more junior lawyers away from the private practice and into the arms of the corporate world."

www.australasianlegalbusiness.com