|
Selected Legal Opportunities l Legal News Is the Grass Really Greener - Making the Switch from Law Firm to Financial Institution Overview As headhunters and career advisers, we speak with law firm associates almost every day. At some point these conversations invariably turn to "in-house" opportunities in banks and financial institutions. Most candidates cite more predictable working hours and more involvement with the business side as reasons for wanting to make the switch. Is this romantic nonsense or is there something to the perception that investment banks and financial institutions provide a key to the professional satisfaction that eludes so many private practitioners? To find out, we surveyed over 30 lawyers in Hong Kong, Singapore, Japan, Korea and the PRC who have made the switch from private practice to in-house lawyer in a bank or financial institution. Their responses provided compelling reasons for making the move, yet also revealed a darker side to the "in-house" experience. Lawyers looking for an uplift in quality of life and an environment where his or her legal expertise is unique might find that going "in-house" is the ticket. Those lawyers who have their eye on the big bucks (and believe that they have a shot at partnership) should think long and hard before making the switch. This article reports the results of the survey. First, we asked participants to describe the major differences between the law firm and the in-house environments. We then asked participants to rank the key differences as positive or negative. Each participant was then asked to quantify his or her change in job satisfaction, and finally to quantify changes in compensation. This article ranks the responses for major, positive and negative differences in descending order of frequency given. It then reports responses related to changes in professional satisfaction and compensation. It concludes with tips from leading in-house practitioners about how to make the most of the in-house legal experience.
1. Decision
Making and Responsibility for Institutional Risk 1. Decision Making and Responsibility for Institutional Risk. Law firm lawyers identify, analyze and advise clients on potential risks that might arise in pursuing a business strategy. Their role is to provide a "two-handed" risk assessment, while leaving the ultimate business decision to the client. An in-house lawyer has "direct responsibility" for making risk-related decisions. He or she must balance the benefits of an action proposed by the business clients within the organization against the liability to the institution that might flow from it, and then make a "one-handed" judgment call. As one participant phrased it, the in-house counsel acts as "final gatekeeper" to manage the institution's risk exposure. Most participants cited this change as a positive factor leading to increased professional satisfaction. While no participant cited increased responsibility and autonomy in decision making as a negative, a downside did emerge in discussions about the change from revenue generator to cost of doing business. (See "Change from Fee Generator to Cost Center" below). 2. Quality of Life. Running a close second in the poll is improvement in quality of life. This does not mean set 9-5 working hours or Friday afternoons on the golf course. Rather, it means participants have generally found that the demands made on their time are "more reasonable" and thus, provide more certainty in planning family and social activities. Participants attribute the increase in stability in life outside of work to the fact that their clients are also colleagues with whom they interact on a daily basis. This close face-to-face social interaction makes it less likely that a colleague will make unreasonable demands on the lawyer's evenings or weekends. And when unreasonable demands are made, the in-house counsel, unlike their private practice counterparts, "can challenge urgency." There is another reason for the reported decrease in pressure on in-house attorney time. Banks generate revenue by getting the deal done. Law firms generate revenue by billing attorney time. Absent billing pressure, in-house counsel need work only as many hours as it takes to close their transactions. There are times when in-house counsel must burn the midnight oil and spend an occasional weekend in the office to get the job done. However, most participants agree, that unlike in a law firm, the in-house work schedule is not driven by unreasonable or unrealistic client expectations and demands. Nor is it driven by pressure to bill. Thus, in-house counsel can expect to enjoy more weekends and guilt-free holidays and vacations than their private practice counterparts. 3. Change from Fee Generator to Cost Center. The good news here is "good-bye billable hours and pressure to develop business!" However, it's not surprising that almost all participants cited the change to cost center as a negative. It has wide-ranging implications that can affect every aspect of life as in-house counsel. Participants tell us that being a cost center has adversely impacted relationships with colleagues, resulted in lack of recognition and reward at bonus time, and produced under-staffed and unsupported legal departments. In-house lawyers do not generate revenue. The legal advice they provide is a cost to the businesses they serve. In the worst case, in-counsel must assume the role of a "cop" in taking decisions that minimize institutional risk at the perceived expense of the business. To many colleagues, legal advice is a necessary evil that slows business down, at best, and in the worst case, kills revenue-generating activity. Combine this "Dr. No" perception of the legal function with the high salaries that lawyers command and it's not surprising that interaction with business teams can get intense. More than one in-house counsel reported receiving a bouquet of "blood" flowers from business colleagues following an "unpopular" judgment call. Not only do in-house lawyers cost a lot. They hire other lawyers who cost a lot more. For many in-house lawyers, a major part of the day-to-day role is to hire outside counsel to structure complex transactions, draft deal documents and give expert advice on complex or novel issues. In addition to supervising the work of outside lawyers, they are also responsible for managing the fees. This creates a tension between taking decisions supported by appropriate levels of outside legal advice and keeping costs low in an increasingly competitive business environment. And after all that, the lawyers want a share of the bonus! Participants lamented that the system is not set up to measure and reward cost savings which result from minimizing losses and avoiding regulatory disasters. Many participants consider it unfair that in-house lawyers are not recognized for real but unquantified contributions they have made to the business in the form of cost savings and prevention when bonus time rolls around. Many participants told us that their legal department is "very leanly staffed" and almost all complained about the lack of administrative support. Despite overwhelming agreement that the in-house role provides for more free time than private practice, a few participants found it troublesome that "there is no one to pick up the slack" at vacation time. For some, this has put a damper on the quality of life upgrade he or she expected to enjoy. 4. Quantity vs. Quality. Participants reported superficial involvement levels in the transactions they manage and most regard this as a negative. This is likely to be a big let down for those transactional lawyers who derive satisfaction from working on a deal from start to completion. In contrast, in-house counsel deals with a large volume of questions that relate to discrete parts of the deals or transactions in their portfolio. Some find this commercial focus provides "less intellectual stimulation" and some described it as "routine" or "mundane." However, participants report that the bright spot here is the form of response required. Business people want answers that are short, concise and to the point. Detailed memos are "out" - bullet points are "in." 5. Document Intensity. Despite the expressed lack of depth in the work, virtually all participants are quite happy to leave the heavy drafting to law firm associates. No one misses those seemingly endless nights spent revising documents after a drafting session ends at 6:30 pm. As one participant described it, "there is less execution responsibility and more focus on internal policy compliance." 6. Proximity to Business. Participants ranked interaction with management and being close to commercial decision making as high on the positive scale, providing a "dynamism" not present in the daily life of a law firm associate. A few participants found gratification in getting a deal done that generates profit for the house. However, it's not all positive here. Some participants told us that being part of the business is somewhat illusionary. As one participant put it, "in-house counsel is not a revenue producer and as such, is not at the front and center of the business." 7. Diversity of Colleagues and Environment. Having lots of colleagues who are not lawyers made the Top 5 in the list of positives. The move in-house removes the lawyer from the pack and positions him or her as a professional with specialized knowledge which colleagues need and appreciate. Despite issues arising out of the cost vs. revenue dilemma, participants otherwise enjoy interacting with "highly motivated" professionals with diverse academic backgrounds and areas of expertise. Participants generally find their banking colleagues get the "big picture" and have more interesting perspectives to share. 8. Intensity. Say goodbye to flexibility to start drafting that agreement at 11 pm. Although working hours tend to be shorter and more predictable, the flow of work is relentless during weekday business hours. 9. Immediacy. Closely related to the intensity of the work is the short turn-around time for responding to clients. In-house clients need sign-off from in-house counsel to keep things moving forward. They expect same day answers served up in unequivocal terms. 10. More Bureaucracy and Politics. Participants tell us that the competitive nature of their "over-achiever" colleagues and the number of people in the reporting chain creates a charged political environment. Factions form, disputes break-out and in-house counsel can count on getting caught in the middle. This politicized environment can be very uncomfortable for lawyers who prefer to stick to legal issues. Positives - Top Five 1. Quality of
Life Negatives - Top Four 1. Change from
Fee Earner to Cost Center Professional Satisfaction Virtually all of the participants told us that he or she experienced an increase in professional satisfaction in going in-house. But by how much? The responses take the shape of a bell curve with the range being from 30-100%. Only one participant did not experience an increase in professional satisfaction and cited going in-house "too early" in their career as the pitfall. Compensation In order to attract top talent, banks and financial institutions offer compensation packages that match law firm salaries. This has held true in the face of intense downward pressure on industry fees during the recent economic downturn. The relative weight of the components of compensation - base salary, guaranteed and discretionary bonus and housing, club memberships and other perks - varies among institutions. But, participants report that their total starting compensation package matched, and in some cases, exceeded his or her total compensation in the law firm. In-house counsel cannot expect to receive the automatic annual increase in compensation given by law firms. Seasoned veterans tell us that their salaries have remained flat over time. As one veteran in-house counsel told us, "you will never make as much as a partner in a law firm." Tips for Succeeding "In-house" Steep Learning Curve - More than one general counsel told us that senior associates frequently underestimate the steepness of the learning curve when moving "in-house". By the 5th or 6th year, senior associates have developed substantive expertise and many who make the switch are "super-stars" in the law firm environment. Potential in-house counsel should be aware that substantive knowledge and technical expertise alone do not guarantee immediate success as in-house counsel. Adapting to the new environment requires a myriad of other skills including an ability to communicate in clear concise language, to see the big picture in terms of how risk-management decisions affect business goals, and to work collaboratively to keep both "clients" and regulators happy. Political Support - How does one navigate the new environment? One general counsel advises new hires to "find support in London or New York." The learning curve is steep and the "grace period" is short, so having a seasoned in-house counsel who knows the politics as an ally can be invaluable as you learn the ropes. Career Track - Unlike in a law firm, banks and financial institutions do not offer a clear career path. As in a law firm where partnership eludes most, very few in-house lawyers will move to the top of the organization as a Regional or General Counsel. There are not very many of these positions available and internal competition is fierce. Senior law firm partners and top lawyers from other institutions also vie for the plum positions. Returning to private practice after a stint in-house can prove difficult unless the lawyer can guarantee to bring business from the bank along. As one insightful general counsel told us, in-house lawyers can become frustrated that there is no path to advancement after 4-5 years. He advises them to start thinking about the next step in their career early on, and to be pro-active in creating their next opportunity. For most, in-house counsel is a stop on the professional journey, and it is up to each lawyer to figure out how to maximize the experience and move to the next stop. Conclusion - The lawyers we interviewed overwhelmingly agree that moving in-house has increased their professional satisfaction and improved their quality of life. However, for those law firm associates who believe they have a shot at partnership, these improvements likely come at the sacrifice of a defined career path and the potential to lead the pack in terms of salary. Survey Demographics:
Huthart Group welcomes feedback and inquiries at office@huthart.com.
|
