Lawyers: Can’t Live with Them, Can’t Live without Them?

I’ve been thinking about the global economy, outsourcing, lawyers and trust lately, and no, that is not as crazy-making or schizophrenic as it may sound.

I often talk about the mindset changes that Vested Outsourcing brings to the forefront in the world of business and outsourcing. For many companies the Five Rules require huge changes in corporate ecosystems and the way they have traditionally operated. Suddenly collaboration, innovation, communication, openness and trust are major bywords of a business relationship. That’s a big step! But it still has to be ethical and legal.

Then I read a post this week from Tim Cummins’ excellent “Commitment Matters” blog on how in a global economy, “it is the lawyers who must change.” That really got my attention because Tim is the founder of the International Association for Contract & Commercial Management, and that notion coincidentally was part of a brief discussion I had recently with colleagues as we work on the second Vested Outsourcing book, The Vested Outsourcing Manual, which is scheduled for publication next September.

That discussion centered on the need to re-think traditional approaches when it comes to outsourcing agreements. Maybe it’s more of a recalibration, but naturally the subject of lawyers came up.

In his post Tim referred to recent research among senior in-house lawyers that focuses on three major areas of interest, namely: global compliance; contracting and contract management automation; and corporate governance and crisis management.

“These do not necessarily represent the areas of peak workload or required expertise for in-house counsel,” he writes.

The in-house legal team is in danger of becoming a roadblock unless it can find new and more efficient methods to deal with the complexities of today’s business, Tim continued.

One aspect of the problem is the nature of lawyering. “By and large, it is not a profession for risk-takers. Sometimes, this can lead to over-cautious attitudes and in particular a resistance to change. There is a tendency to create a centralized ‘command and control’ culture, rather than think about ways to empower better decision-making. In the words of Mark Chandler, General Counsel at Cisco, lawyers often want to be gatekeepers, rather than to build gateways.”

Rather than standing aside and offering independent judgment on specific policies or actions, the increased accountability of lawyers today “places them right at the heart of decision-taking by the business. Yet they cannot be involved in every decision.”

Tim’s conclusion is that if lawyers “try to remain a traditional ‘fount of knowledge’ around which the rest of the business must revolve, they will fail. Lawyers must become far more integrated into the fabric of the organization and its related business processes.”

Good points to be sure, but let’s hear from a lawyer on this one. Jeanette Nyden, colleague, friend and author of Negotiation Rules! A Practical Approach to Big Deal Negotiations (on sale at Amazon). She is also a co-author with me of the Manual.

She says she “only somewhat” agrees with what Tim is saying because lawyers “have to be risk-averse on behalf of their clients.

“Businesses are moving very fast in an international market. They are moving faster than society can ethically legislate. U.S. lawyers and accountants are legally required to stop and report legislated ethical lapses. It is precisely because Enron’s accountants did not act more responsibly that Arthur Anderson Accounting collapsed, Enron collapsed and thousands of good employees lost their jobs and their retirement.”

Her point is that good corporate decisions will not necessarily come as a result of lawyers being less risk-averse.

“They will only come as business people willingly take on the responsibility to know the law and act within the bounds of the law without a lawyer telling them to!”

All of which leads me to the conclusion that a Vested Outsourcing approach—which in its own way is risky because it’s not the norm (at least not yet!)—must include the collaboration, cooperation and buy-in of a company’s entire corporate structure, including those risk-averse legal teams.

Rather than acting to avoid losing, getting to the win-win might just entail rethinking the nature of risk.

Comments

  1. Kate, thanks for picking up on my blog.

    A point of clarification, if I may.

    My comment about lawyers tending to be risk-averse was not a criticism. It was an observation about the nature of the role they must play. I was not advocating that they become more accepting of risk; I was suggesting that they must instead find new and better ways to manage it.

    Those better ways include the need for more automated sources of risk data collection; better insights into what is really happening in the business; a re-think of some of the risk tools and methods, including the terms of contract.

    As you well know, we can often hide behind traditional methods and supposed ‘risk barriers’ when in fact our approach is either blinding us to the real risks, or creating counter-risks. At Enron and in the financial, crisis, there were plenty of contracts in place – but the belief that these gave substantive protection against defaults etc was mistaken. The basic market and deal structure was flawed.

  2. Kate, thanks for picking up on my blog.

    A point of clarification, if I may.

    My comment about lawyers tending to be risk-averse was not a criticism. It was an observation about the nature of the role they must play. I was not advocating that they become more accepting of risk; I was suggesting that they must instead find new and better ways to manage it.

    Those better ways include the need for more automated sources of risk data collection; better insights into what is really happening in the business; a re-think of some of the risk tools and methods, including the terms of contract.

    As you well know, we can often hide behind traditional methods and supposed ‘risk barriers’ when in fact our approach is either blinding us to the real risks, or creating counter-risks. At Enron and in the financial, crisis, there were plenty of contracts in place – but the belief that these gave substantive protection against defaults etc was mistaken. The basic market and deal structure was flawed.

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