What is important to GCs

We listed various responsibilities and asked GCs which were important parts of their role

How important do you think are the following areas for success in your role?

Their responses showed a wide range of involvement in key corporate activity – more so, in some areas, than we have seen in other parts of the world.

For example, strategic business planning is very important or essential for 77% of our Latin American GCs, as opposed to 45% of the GCs we recently surveyed in Singapore and 46% of those we surveyed a few years ago in the UK.

Conversely, legal solutions for common commercial issues are very important or essential for only 69% of our Latin American GCs, as opposed to 80% in Singapore and 81% in the UK.

In other cases, the numbers are more similar e.g. the negotiation of significant contracts and deals is very important or essential for 85% of the Latin American GCs we surveyed, 81% of the UK GCs and 80% of the Singapore GCs.

Some of these differences may reflect sectoral differences between the regions (e.g. over a quarter of the Latin American GCs we surveyed work in Oil & Gas or the extractive industries – a proportion far greater than in the UK or Singapore). But it also appears to be the case that the Latin American GCs we surveyed are – on average – operating at a more senior level. To some extent this may reflect the proportion who work for large international companies. It is a topic we will return to below, when discussing the GC Value Pyramid.

Ethics and compliance

By far the most striking result shown in our chart is the 92% of Latin American GCs for whom ethics and compliance are very important or essential. This is a number significantly in excess of what we have found elsewhere. And if we look at the number (77%) of Latin American GCs for whom this is essential, it is clearly the most ‘collectively essential’ area by a very wide margin (being followed in second place by risk management on 49%).

This may reflect both major corporate governance scandals in the region, such as the Panama Papers and Operation Car Wash, and recent anti-corruption drives in countries as diverse as Costa Rica and Peru. And, once again, it may partly be due to the proportion of GCs who work in major international businesses.

Whatever the drivers for it, though, it is of a piece with the greater emphasis on ethics and compliance that we have been seeing around the world in recent years – initially with a growth in compliance requirements in the wake of events such as the introduction of Sarbanes-Oxley and, in particular, the global financial crash of 2008, but also in more recent years with an increasing focus on ethics.

For some commentators, the increase in compliance requirements has been the principal driver behind the massive growth in the international in-house legal profession in recent years, as well as the increasing status of many GCs, and their expanding roles and responsibilities. (Only 17% of the GCs in our survey had not assumed additional responsibilities since taking up their current post, and in many cases those new responsibilities relate to regulatory matters and compliance.) The current stronger emphasis on ethical scrutiny can only continue that trend.

Gonzalo Smith
When they write an agreement, they shape conduct. When they perform an ethics role, they shape conduct within the organisation. When they do compliance work, they shape conduct. That’s all we do, day in, day out. Nothing else.
Gonzalo Smith Ferrer, Falabella SA

Influence

A successful GC, in the eyes of most of the GCs we talked to, has to be influential. Their voice has to be heard, both formally and informally, at the highest levels of the company. They should aim to be seen not merely as someone with the same strategic ambition as other executives, but as someone whose advice is essential to the achievement of corporate strategy.

The ultimate expression of that aim is for the GC not just to influence management but to determine the direction, values and culture of the business alongside, or as part of, management. If the company is a ship and the CEO is its captain, deciding its destination, then the GC should aspire to be the navigator, familiar with the shoals and tides, and the capabilities of the ship and its crew, and able to plot a course that reflects the risks and rewards ahead.

Some GCs find this easier to achieve than others, not least because different corporate models tend to be conducive to different degrees of influence. At the simplest and most obvious level, GCs who work in an empowering corporate structure or culture have an advantage over those who do not.

Whatever the corporate structure, though, this ambition requires the CEO and the rest of the company’s senior management to accept the GC in that role and to allow them – whether formally or otherwise, consciously or not – that degree of influence. GCs need to be aware of boardroom and executive politics and of where power is concentrated.

It would be wrong to assume that one corporate model is necessarily better than another in this respect. There will always be variance between individual companies. Establishing best practice in different, complex corporate structures – with different business models in different sectors – is not straightforward.

But in any model, a virtuous circle exists. If a GC who has built strong relationship foundations with senior management is able to use their influence to deal effectively with significant challenges, or to realise opportunities, then their influence grows. And as their influence grows it is increasingly easy to perform that proactive role. It’s a virtuous circle of proactivity and influence.

There is also, of course, the risk that a GC may find themselves in a non-virtuous circle of decline. If a GC establishes a degree of influence that is not backed up by their ability to deliver successfully (perhaps because of a lack of other skills), then that degree of influence will tend to be diminished over time. And the more it is diminished, the harder it will be for them to deliver successful outcomes.

In one sense these charts tell a positive story, with just over half of GCs enjoying more influence than they did when they took on their current role (or five years ago, for those who have been in post for longer).

Furthermore, most of the GCs in our survey believe they have strong influence at senior levels of their business. Looked at in a different way, though, the numbers suggest some weaknesses. More than one in eight of the GCs we surveyed believe their influence has actually decreased. And over one-third of GCs have retained their level of influence but have not been able to increase it. In a few cases (7%) that was because it was already at the highest level – but that still leaves over 40% of GCs who feel their influence at senior levels has either failed to increase or has diminished.

 

 

Perhaps the single most revealing chart in this report is the one showing that a massive 85% of Latin American GCs believe they could do their job better if they developed their influencing skills. So even most of the GCs who have been successful in increasing their influence feel that they still have scope for improvement.

And since an even greater percentage of them (92%) believe that the ability to influence can be taught, it is hard to avoid the conclusion that booking some influencing training or mentoring should be near the top of most GCs’ to-do lists.

Some of these GCs might also consider arranging something similar for their in-house teams. Despite general acceptance that influencing skills can be taught, one-third of GCs don’t provide such teaching for the in-house legal department, even though it would almost certainly improve the department’s effectiveness.

It is interesting that the survey of UK GCs that we ran a few years ago for our Influential GC report had very similar findings, with 82% of GCs believing that they would be more effective in their jobs with better influencing skills. (Even more – 88% – felt that having better influencing skills would make them more effective in their long term careers.) As we wrote then, the key thing for GCs is to engage with the issue, even though it may sometimes be uncomfortable and is often difficult for busy GCs to make time for. “No-one ever got more influential by doing nothing.”

Our Influential GC report, which takes a much deeper dive into the whole question of influence, is still available here.

Leadership

As well as being legal leaders, the GCs we surveyed are mostly (73%) on the boards or in the executive teams of their organisations – although in some cases this is a national team within a multinational organisation.

For many of the GCs we’ve talked to, this ‘seat at the table’ is also reflected in their changing remit, and what they see as fundamentally important in what they and their teams do.

Leadership of the in-house legal function, however, requires a different combination of skills from leadership within an executive team.

The key difference is that this is an area in which the GC is not part of a group of decision-making equals. It is an area in which the GC is the boss. The decisions are theirs, as are many other aspects of the job, such as the requirement to strategise, the necessity to recruit and develop the right team, and the need to energise and inspire that team. All these require particular leadership skills. They also require time – something that many GCs, particularly those who are still heavily involved in doing hands-on legal work, find difficult.

These various demands – and many others – are something many GCs still struggle with, particularly if they are in their first management role. The most effective GCs are often those who have the confidence to delegate many legal and management functions to team members they know they can trust. They know when to step back and when to intervene.

As illustrated by the findings above, the management of individuals in the in-house team was categorised as very important or essential by 83% of the GCs in our survey. This echoes thoughts from GCs in the UK, who often cite leadership of the legal team as the area where they need the most development – but also as an area where they feel they can bring the most value to their company, by building an empowered legal team that is fully equipped to meet the needs of their business.

Performance measurement

Three-quarters of the GCs in our survey have formal performance measurement mechanisms, such as key performance indicators (KPIs), in place for their teams. As the chart shows, most of them have found those mechanisms to be at least reasonably effective – although there is clearly room to improve their effectiveness in many cases.

The 75% figure for usage of KPIs or other performance measurement systems is the highest we have found in any survey of GCs. How do we account for such a big number? There are several possible answers. Leaving aside the margin of error inherent in polls, we believe the two most significant factors are, first, that KPI usage is simply becoming more common and, secondly, the larger relative prominence of multinational companies in the community of Latin American GCs. These large, complex organisations are more likely than smaller or more local companies to use KPIs as business-wide management tools.

Many of the 25% of GCs who do not use formal performance measurement mechanisms still feel it is important to be able to demonstrate the value of the legal team to the wider business. Indeed, some of them have decided that they should introduce KPIs, or are looking into doing so – in one case working with an external consultant, in another exploring how to introduce software which might help to measure their lawyers’ performance.

There are still GCs who complain that it is hard to find objective quantitative criteria for metrics, and that qualitative criteria are subjective. That is by definition true, but ignores the fact that if qualitative data is handled properly it can still provide something close to an objective evaluation. To use an analogy: the winners of Olympic track or field events can be identified in purely quantitative terms. They are the ones who ran fastest or jumped farthest. But the gymnasts and synchronised swimmers who compete in the Olympics are judged by other systems. These systems have significant elements of subjectivity but are nevertheless valid.

GCs also tend to feel – probably rightly – that performance metrics for the top level are virtually impossible. A GC who is really an integral part of the senior management team is very unlikely to find the CEO assessing them with KPIs. Both parties would probably deem it inappropriate. But even a GC in that happy position will need ways of monitoring the performance of the legal team as a whole – and the ability to measure and demonstrate value remains an important asset for GCs as they climb towards those heights.

As we wrote in our very first report, “GCs who use KPIs successfully feel they help with the overall perception of commitment to value they deliver to the business.” Most GCs who want to get to the top in a modern company will probably find KPIs in one form or another indispensable, even when those KPIs cease to apply to them personally.

Our first two GC reports, which are still available here, contain a lot more about KPIs and performance measurement. We would also be very happy to discuss the topic with you if you’d like to know more.