In a recent report by BarkerGilmore and Chief Executive Group, 70% of CEOs described their ideal GC as one who acts as a strategic business partner and is a valued member of the leadership team. However, although the GC role is viewed in most cases as an integral member of the executive leadership team, a majority of CEOs surveyed feel their GCs are falling short when it comes to their actually being a contributing strategic business partner. The report’s findings indicate that CEOs want their GCs to step up, raise their game, and add greater value to the senior management team dynamic.
So how can acting GCs utilize these findings to their advantage? We asked A.B. Cruz III, Senior Advisor with BarkerGilmore, who has served as Chief Legal Officer and General Counsel within numerous, highly-regulated industries, including biotech, pharma, telecommunications, media/entertainment, financial services, oil & gas, and education.
How has the role of the GC evolved over the last decade? What factors do you believe have contributed to this change?
I would like to first say that the findings of this report do not come as a big surprise. However, when you see it in writing – in black and white – it really stands out as a wake-up call, or a call to action, for General Counsel. Especially in today’s rapid-changing world, particularly in light of COVID-19, these findings call upon not only GCs, but everybody in the C-suite, to flex what talents and skills they have, to be firing on all cylinders, and to add value on multiple fronts at every turn. This also provides a great opportunity for GCs to really increase their role and their value to the organization. The role of GC has been evolving for some years now, so, I wouldn’t necessarily view these recent findings as signaling yet another change in the GC’s role, but rather areas that GCs should pay particularly close attention to. Bottom line: Gone are the days when GCs were seen simply as legal risk managers and providers of legal services. Today, CEOs are expecting their GCs to be providers of strategic advice, top-level decision-makers, allies in advancing the business, and standard bearers when it comes to enhancing the culture and reputation of the organization.
Business strategy is the top area where CEOs say their GC could improve to further add value to the team. Second and third are new market expansion and industry knowledge. In your opinion, how crucial is it for the GC to “understand the business”? What steps can a GC take to improve their business acumen?
It’s absolutely essential! Today’s GCs need to become acutely familiar with, and readily conversant on, their companies’ products, services, business support operations, and the like, and then know how all that fits or feeds into the relevant business and financial models. Equally as important is understanding the larger landscape of the industry within which the company competes, and what forces, factors, and risks are at play across the industry. Indeed, being truly knowledgeable about the business, understanding the underlying economics, and grasping the industry “big picture,” optimizes your presence at the C-suite table by positioning you to comfortably contribute as the strategic advisor, decision-maker, and business problem-solver your CEO and other members of senior management are expecting you to be.
So, how can GCs learn the business? There are several ways. For one, becoming intimately familiar with the company’s strategic plan, or, better yet, being involved in the company’s strategic planning process. Participating in the process provides a great opportunity for the GC to engage in a very in-depth and involved process that, at its essence, is about assessing where a company is situated today and where it wants to be looking ahead along a 3-5 year horizon. Numerous groups and functions across the company typically feed into the planning process and are then often ultimately responsible for executing the operational tasks that become designated “line items” within a strategic plan. So, no matter where a company is along its strategic planning-execution continuum, the strategic plan is a good place for GCs to begin to understand the company’s planned business journey.
Another avenue to better understand the business side of things is to develop a fuller appreciation of the various transactions, deals, acquisitions, mergers, partnerships, and the like being considered –especially those that are still in the early stages of evaluation and haven’t yet been presented to senior management. GCs may want to spend meaningful time with the company’s business development teams to gain insight into the type and nature of business deals and opportunities being explored and evaluated. You can learn so much about the broader industry, competitors, possible synergies, and develop a truer understanding of your company’s own strengths and weaknesses. It’s been my own experience that business development team members get really excited about what they do, and they love to share their excitement with those curious enough to ask: “What are y’all up too?” In fact, at the companies where I was the GC, “bizdev” was always a great group to spend time with, because they were always thinking about the next potential deal and how it might make our company better or more competitive.
Of course, when it comes to those significant transactions, like a major acquisition or merger, that the company ultimately decides to pursue, this is where GCs can really shine and demonstrate tremendous value to the organization. This is optimally achieved by, not only adeptly managing the legal responsibilities attendant to the deal, but by leading or helping to lead your company’s cross-functional deal team throughout the deal process through closing. This level of involvement and leadership by the GC serves not only to increase their value to the organization, but also to enhance their profile, presence, and standing within the C-suite and beyond.
Finally, a more obvious and recurrent opportunity for GCs to demonstrate meaningful value is in the successful mitigation and/or navigation of risk that then allows the company to pursue a business goal or objective. GCs spend a good part of their at-work existence identifying and quantifying risk – not just legal and regulatory, but all types – and they are often in an ideal position to proactively and innovatively figure out how to mitigate or navigate those risks and thereby carve out a potential path forward for the company. Indeed, the best GCs are the ones who routinely transcend the “naysay lawyer” label by coming up with ways to reduce the risks to acceptable levels, so that business goals and objectives can still be achieved.
96% of public company GCs are on the executive management team, but only 57% of private company GCs. What can a GC of a private company do to become more strategically involved?
Again, these results are not necessarily surprising, although I would certainly hope the percentage on the private company side is on the increase. The almost universal percentage on the public company side is most likely attributable to the extensive SEC reporting regulations and related requirements applicable to public companies, the responsibility of which falls principally on the GC. But I also think current public company governance best practices, and expectations around those best practices, have the GC firmly placed as a key member of the C-suite.
Now, when I see the 57% for private companies, I immediately wonder if the other 43% who are not members of their company’s executive management team are also not reporting directly to the CEO, which is probably a safe assumption. Regardless, I do find this statistic particularly disconcerting in that it’s fundamentally important and optimal for any company – public or private – that the GC report directly to the CEO and also be a member of the senior leadership team. The more typical GC-CEO relationship of today is one that is necessarily dynamic and close, taking into account that, among other things, a GC’s ultimate client is the company and good governance practices have the GC regularly reporting into and interfacing with the company’s non-executive board members. So, heightened transparency and alignment between the CEO and GC are a must. Furthermore, astute CEOs recognize the great value of having their GCs at the C-suite table. Someone who brings a different perspective to the conversation can readily apply well-honed judgment and analytical skills to problem-solving and serve as the “voice of reason” or “conscience of the company” when it comes to matters involving the reputation or culture of the company.
So, if you’re one of those private company GCs not currently reporting to the CEO and/or not a member of the senior management team, it’s imperative that you seize upon every opportunity to demonstrate your value by displaying the array of skills highlighted previously and by showing how your bringing to bear those skills is materially advantageous to the board, the CEO, the entire C-suite, and the company as a whole. Obviously, the foregoing effort will need to be accompanied by regular, frank, and honest discussions up your “chain of command” and ultimately with the CEO directly.
One CEO noted, “some GCs are great businesspeople, and others are great lawyers.” What is the key to being both?
Certainly in the corporate setting, the GC most definitely needs to be both a sound lawyer and a savvy businessperson. Of the many GCs I have known over the years, those who can seamlessly interchange wearing the various “hats” GCs are expected to don these days have been the most successful by far. The key is knowing when you’re expected to put on your business hat and contribute in other ways beyond providing simply legal advice and guidance. Although many in-house legal practitioners understandably subscribe to the belief that GCs should never take off their legal hat, there are certainly times when the conversation at the C-suite table has nothing to do with legal and it’s all about business. In those instances, the GC can’t just sit back, relax, and listen to the discussions. If they do, they aren’t adding any value. But if the GC has done his/her homework, knows the business, and understands the underlying economics, and other factors involved, chances are s/he can weigh in with good thoughts and ideas of their own.
Coaching and Advising from A.B. Cruz III
A visionary leader of the highest character who has developed and implemented many value- and brand-building initiatives, A.B. Cruz is a well-respected and credible thought leader. If you are looking for a strategic advisor like A.B., with decades of experience and invaluable insight to share, contact us today to discuss our coaching and advising services.