January 21, 2013
Advantages and Disadvantages of Taking an In-House Counsel Job
[This blog post holds my personal record for gestation of a blog post. The outline for this post traces back to a student talk I gave at Marquette University in 2004. I first started working on the post some time in 2005 or 2006. 7+ years later, I'm finally sharing it with the world. Sadly, I don't think the post is noticeably better for all of its incubation.]
This post provides my perspectives on the pros and cons of practicing law as in-house counsel versus at a law firm. Although my perspective is hardly unique, I am one of the comparatively few people who actually preferred practicing at a large law firm over in-house. When I tell people this, they almost always express surprise. My experiences may be colored by practicing in a start-up environment, with its advantages and disadvantages, and my conclusion may reflect my particular personality idiosyncrasies. Nevertheless, this post will provide my insider's view on life as in-house counsel.
Advantages of In-House Practice
The Lawyer Can Become a Business Decision-Maker. In-house lawyers take on business responsibility in several ways. First, to the extent the lawyer supervises outside counsel, the lawyer usually handles those vendor relationships. Second, the in-house lawyer often gap-fills any business decisions that aren’t owned by other people within the company. Finally, the in-house lawyer may share in making business decisions with the “business” people. Often, the in-house counsel’s co-workers prize the lawyer’s business input as much as his/her legal analysis.
The Lawyer Becomes Part of the Team. Most outside counsel have a “hired gun” relationship with their clients. The outside counsel is responsible for providing the best service possible, but then that lawyer flips his/her advice “over the wall” and leaves the implementation to someone else. In contrast, in-house counsel often become part of the execution team. Because in-house counsel are part of the team, they can be much more proactive than the outside lawyers. They can raise issues early and see the issues through to resolution.
i>In-House Counsel’s Interests Better Align with Corporate Objectives. Even with innovations in alternative billing and long-term multi-iteration relationships between companies and firms, usually an outside counsel’s interests do not align very well with the client’s. After all, the law firm has its own profits to manage, and doing so inevitably diverges with the client’s profit maximization. This is endemic to any customer/vendor relationship. Certainly hours-based billing creates numerous potential conflicts of interest between firm and client.
In-house counsel’s economic interests align much more closely with the client’s. There will never be perfect alignment, but the combination of being an employee plus possibly an equity interest makes a huge difference.
As an added bonus, usually in-house counsel don’t keep timesheets and don’t have billable quotas. This is often the #1 advantage cited by new in-house lawyers. However, this isn’t always the case. Some companies use a chargeback method to divisions/departments that requires keeping track of expenses; and companies may view in-house counsel as substitutes for outside counsel, which makes their goal to squeeze as much value out of the in-house counsel as possible.
Greater Ownership of Outcomes. It’s often easier for in-house counsel to point to specific favorable outcomes for the company and claim credit/ownership of those outcomes. A product counsel can point to a new successful product they guided through the development process and feel a sense of responsibility; a litigator achieving a favorable case outcome can have the same feeling.
Easier Prioritization. In-house counsel can often prioritize conflicting time demands easier because, after all, the requests are all coming from the same company and they can be prioritized based on profitability or the company’s strategic objectives. In contrast, outside counsel have a tough time prioritizing conflicting requests. Naturally, every client wants to be #1 but inevitability priority choices must be made, and telling a client that they aren’t #1 isn’t a path towards long-term client happiness.
On the other hand, it can be even harder for in-house counsel to tell a co-worker that they are not at the top of the priority list. So although it may be easier to prioritize tasks, it may be more painful to say no to people you have to work with the next day.
Better Work/Life Balance. The stereotype is that in-house counsel have a better work/life balance. I wonder about this in practice. Sure, in-house counsel can call up outside counsel and dump a project on them on Friday at 5pm while the in-house counsel goes on to enjoy the weekend. However, to the extent that in-house counsel are cost centers and the company is trying to maximize value out of a cost center, inevitably there will be significant pressure placed on the in-house counsel to do more and work harder. In the end, I think this is very specific to the company and the legal department. Some employers are going to provide better work/life balance than others.
Cons of In-House Counsel
You’re Answerable to a Boss. Some of you may find this an odd “con.” Doesn’t everyone have a boss? The answer, of course, is yes unless you’re self-employed. Even a CEO is answerable to the board or investors.
However, at some law firms, the supervisor/supervisee relationship can be quite attenuated. In firms with a power-partner model, the associate’s power partner is the boss; but at firms with a free-agency model for assigning new projects, it’s possible that no one partner views him/herself “responsible” for an associate. As it turns out, that was the situation I had when I was at the law firm. Although I had partners who nominally were accountable for my time, in practice I had a significant degree of autonomy. Partners have even more independence.
In-house, the lawyer will have a boss in the classic sense. The boss will conduct your performance evaluations, and your success will depend on doing what the boss wants you to do and keeping your boss happy. If the boss isn’t a lawyer but second-guesses your legal advice, that can get especially awkward.
Because bosses can change—they can leave the company or the position can be reorganized (a fairly common occurrence)—the job can change unexpectedly. Even if you love your current boss, your next boss may be a jerk. With a change in supervisors, a good job can become a terrible job overnight. There is almost nothing in-house counsel can do to avoid this risk.
Furthermore, job advancement in-house often requires a boss who will champion for your cause. Sadly, many bosses are not very good at being advocates for their supervisees, in which case in-house lawyers can get stuck in their career progression.
You’re Expected to Know the Answers. In-house, your clients expect you to know the law cold. Occasionally it’s acceptable to request some research time, but most of the time it’s not. In some cases, your clients will think you’re an idiot if you don’t know the answer off the top of your head. In particular, in-house can be a difficult place for newly graduated JDs because usually there’s no training.
Lawyers who start in-house face the added problem that the business clients don’t prize legal accuracy as much as they prize good business counseling. If anything, clients hate legally accurate answers that conflict with their business objectives. As a result, lawyers who start in-house, over time, often become more skilled at business counseling than legal counseling; they don’t necessarily know all of the relevant legal doctrine, and the clients don’t value that extra legal expertise. But in-house counsel are socialized to give clients what they want, which is that they want “yes,” not “no.” As a result, in-house counsel are constantly under pressure to distort their legal analysis to support a business conclusion of “yes.”
Finally, because in-house counsel often are viewed as more skilled at business counseling than legal analysis, their clients sometimes value outside counsel’s advice more than in-house counsel’s. (This is true with outside consultants as well, who often are hired to say exactly what someone internally has already said).
In-House Counsel as a Cost Center. As mentioned above, often employers hire in-house counsel to reduce expenditures on outside counsel. This means employers try to maximize the return from each in-house counsel and reduce in-house counsel’s ability to pay for outside counsel. In-house counsel are obvious targets in any layoff, and they are often expendable after an acquisition.
In-House Counsel as Too Generalist and Too Specialist. In terms of future employment opportunities, in-house counsel can end up in a weird squeeze. On the one hand, in-house counsel often are generalists. They handle any legal matters that appear on their desk, especially in companies where the legal department is small. Further, in-house counsel often are expected to keep up with a wide-ranging set of practice areas, making them the master of none. At the same time, in-house counsel can become incredibly specialized; they focus on the legal issues posed by a single company in a single industry, and thus they may lack the practice diversity across industries and competitors that outside counsel can develop.
Thin Infrastructure. Often, in-house legal departments provide light resources for attorneys. For example, secretarial staff may be spread thin or non-existent. The company may not subscribe to helpful publications or databases.
Consequences of Internal Conflicts. Inevitably, your clients will want to skirt the law, even if the company is fundamentally trying to be ethical. There are too many laws, too many stupid laws, too many laws that impose unreasonable compliance costs, and too many grey areas. In-house counsel have few good choices in these circumstances, especially if the lawyer advised the client on one course of action and the client rejected the advice. If the lawyer feels like he/she needs to “withdraw” from the representation because of the client’s now-possibly-shady behavior or because of the implicit vote of no confidence due to the client ignoring the lawyer’s advice, the lawyer’s options are limited. The lawyer can simply walk away from the job, immediately cutting off the salary (and foregoing any equity upside) and burning bridges with the remaining co-workers; or the lawyer can slowly try to find alternative employment, a time-consuming and costly transition. A standard “best practice” for law firms is to not become too dependent on any single client because it will create pressures to do unethical things. In-house counsel, by the very nature of the position, violate that best practice.
For more thoughts, see The Conglomerate.