Did you know that 93% of General Counsel are members of the executive management team, which represents a 10% increase from just 10 years ago? The Association of Corporate Counsel’s recent survey shows that virtually all Chief Legal Officers (CLOs) in Fortune 500 companies also have a direct reporting line to the CEO.
What does that mean for you? It means that General Counsel are increasingly becoming the go-to successor when companies are looking for their next CEO. This is a relatively recent trend. Yet, it makes a great deal of sense because the work of an attorney allows you to develop and hone a very important skill – the ability maintain a 30,000-foot view of an issue while also being able to navigate every minute detail.
That, however, is not the only skill that matters. General Counsel need a panoply of competencies that will increase the chances that they can move up to the CEO position. In this article, we will discuss a few ways in which you, as a General Counsel, can focus your energies so you are in a position to take advantage of this GC-to-CEO trend.
Risk Management . . . Plus
This current pandemic has highlighted just how important risk management is to a company’s stability. Accordingly, well-oiled corporate legal teams have been able to expand their priorities and capabilities to manage the crisis, advise executive management, and keep the business running in a volatile economic climate.
With an understanding of the emergency COVID legislation from Congress meant to keep companies afloat – as well as the EEOC and CDC guidelines meant to keep the workplace safe and virus free – General Counsel have been critical players in the ongoing functioning of business over the last seven months, General Counsel, then, should be able to take the current risk management challenges and ensure that their legal departments’ efforts also support the overall strategy of the corporation. In that way, this “risk management plus” style will demonstrate how a General Counsel could transition into an overall business-leader role. Indeed, the ability to provide practical solutions focused advice and effective problem solving (as opposed to merely sounding the alarm about problems) should position General Counsel for advancement into the executive ranks.
Pandemic risk management is not the only area in which General Counsel are able to show their CEO potential. The average Fortune 1000 company has between 20,000 and 40,000 active contracts. That is a massive number of contracts that come with a proportional share of risk, which no legal department can manage alone. General Counsel, therefore, need corporate-level solutions to manage such a volume, and effectively predict risk and compliance across all agreements. It is that kind of high-level management that is a transferable skill for more business-centered leadership.
Becoming a Trusted Advisor
General Counsel, and their legal departments, have a choice on what tone to take. On the one hand, a legal department can be the quiet wing of the office that focuses on compliance issues, document review, and the infrequent employee matter. It can be the legal stamp of approval once the business deal is done. On the other hand, General Counsel can take a more active role in managing risk and advising on legal strategy as the business deal is being negotiated. The General Counsel, who is a key advisor, will, therefore, take on the role of chief risk officer during the process, rather than just try to make sure a business decision works within the law after the fact.
According to the International Association for Contract & Commercial Management, companies do not see about 10% of revenue each year because their contracts are not managed well. Thus, a General Counsel of a company that has annual sales of $100 million will be a champion to shareholders if he or she can avoid a $10 million loss in annual revenue, just by centralizing the contract process and actively managing the contracts as they are made.
A Business Leader with a Legal Perspective
The more a General Counsel is perceived as a business leader with a legal background, rather than as an attorney who supports a business, the more the General Counsel will be primed for greater responsibility in the organization. Indeed, it comes down to a matter of approach and perception. If General Counsel provide sound, reliable advice on business strategy that goes beyond the parameters of any relevant legal requirements, then they begin to present themselves as people who are business-focused and who can effectively move senior management’s strategy forward.
A great deal of legal compliance has to do with how a company manages its agreements. Consequently, General Counsel can use effective contract management to minimize losses, generate greater revenue, and show their commitment to the company’s overall business strategy. It is that business-minded General Counsel who will become a leader in the business center of a company, rather than just in the legal center.
It makes complete sense that a person who understands the law can be an effective leader of a company overall. General Counsel can anticipate legal bumps in the road as a deal is being done or a business strategy is proposed, rather than have to clean up compliance matters after the fact. That skill of managing legal issues upfront and offering solutions means less expense and problems on the back end, which is better for the company’s bottom line.
In sum, General Counsel need to use the processes in their control, such as risk management, to demonstrate their business-focused work ethic. They also need to add business value when advising on legal matters. The General Counsel’s role is growing. The more a General Counsel is a business partner, the more the General Counsel can be a viable candidate for CEO.