Article: “Consider Outsourcing Legal Services to Protect Bottom Line”

As reprinted from Steve’s article in Fairfield County Business Journal, from more than a decade ago:

“CONSIDER OUTSOURCING LEGAL SERVICES TO PROTECT BOTTOM LINE”

By Stephen Ganis

For owners of growth companies,hiring a full-time general counsel in-house to keep legal expenses at a minimum and protect the bottom line is a good concept; the only trouble is, many such companies can’t afford it.  One option is to outsource the general counsel role to get the benefits of in-house representation without making the full-time commitment.

First, it’s important to recap the role of the in-house counsel.  There’s a difference in the way in-house and outside counsels approach the legal function.  An in-house lawyer is a business lawyer who is on the management team.  He makes proactive business decisions and is attuned to the need for business transactions to be conducted efficiently and timely.  He will attempt to do as much as the company’s legal work as possible, but will also serve as liaison with the outside full-service law firm.  In that liaison role, the in-house counsel is expected to supervise and keep the billings of the outside law firm efficient.

Most growth companies have a need for such a service, since the owners are often the operators of the business, and the chief financial officer or outside accountant usually fulfills the role of contract management and legal supervision.  The CFO will usually not want the company to absorb an additional layer of legal costs.  For that reason, the concept of the outsourced in-house counsel includes the idea that all legal services are performed on a flat monthly retainer, with some work done on a time and materials basis.  Also, the part-time in-house counsel is on site at the company for at least one day a week, which is essential to the role of business advisor.

This concept has been in effect for some time in regions where there are growth companies in such areas as technology, health care, and financial services.  As John Doerr, a partner in the venture capital firm Kleiner Perkins Caufield Byers writes: “In the new economy, there are entrepreneurs; in the old economy, there were managers.”  With so much being said and done about companies emphasizing ownership and options, risk-taking, life-long learning and change, it may be wise for growth companies to examine their legal relationships and consider part-time general counsel.

(Reprinted from January 1998 Fairfield County Business Journal….just to show that some good ideas stay current).