general counsel

Lawyers as Strategic Advisors in the Trucking Industry

The transportation industry is an unpredictable environment in which to do business. The trucking industry is a heavily regulated industry that involves many pitfalls and hurdles. Advisors to the transportation industry know that the best way to handle this challenge is to plan for it. Transportation entrepreneurs often need a full range of services to complement their management team. Such services often include crafting alternate carrier practices, creative planning, utilizing innovative information technology solutions and the implementation of best business practices.

Businesses today don’t need armchair philosophizers; they need business-savvy “real life” counselors who can help guide their company to success. Those in the trucking and logistics segments of the transportation industry often need advisors who can focus on business issues such as carrier profit improvement, enhancing margins, gaining efficiencies and driving down operating costs. Consultants often provide a thorough analysis of the current business operations and identify issues that need improvement. But an outside consultant usually lacks the trust of the leaders of a company and does not often grant them a seat at the decision-making table

Succeeding in the trucking industry requires allocating time and resources to the areas that your business will most benefit your bottom line. Beyond developing your services to target the market, transportation entities most often need advisors who have the heart and soul of your business in mind. The most accomplished lawyers are those that become "trusted advisors" to their transportation clients. This means that their counsel is sought not only for discrete cases, but also on an enterprise level- and not just for "legal" matters. The trusted advisor has a profound understanding of the clients’ business, the industry the client works in and can provide professional judgment, emotional intelligence, candor and experience tailored to the client’s risk tolerance and enterprise objectives. The trusted advisor must be more than just someone who knows the law or who can handle a case. The trusted advisor must be a part of the company's DNA.

Business leaders in the transportation industry today expect their lawyers to counsel them on legal matters, but not all realize that a lawyer who is knowledgeable in the business of transportation can contribute to the success of their business by serving as strategic advisors. While everyone ultimately seeks to earn a seat at the table and be considered a strategic advisor, many lawyers fall short. Nothing is more frustrating for the business team and the lawyer when this relationship doesn’t exist.

A lawyer can only be viewed as a strategic advisor to a transportation entity if they know the industry and the specific business well enough to selflessly contribute to the issues facing the company. Moreover, if the lawyer views their role as to only weigh in on legal issues or the legal implications of issues instead of the business implications, they will be viewed as a legal advisor and will not be thought of as being able to add value beyond that. The business lawyer is the one who leaders want to invite to participate in meetings which are viewed as strategic. Oftentimes, legal issues are raised in the typical “non-legal” meetings and, if a lawyer is not present, decisions may be made that need to be undone or modified in the future. A lawyer will be viewed as a strategic advisor when they are not just available, but are solution-oriented and well-respected by their peers in the company

The job of the strategic lawyer is to provide advice to the business decision makers regarding the legal risks of the various courses of action, devise practical legal and compliant solutions that get management and the company where they need to go to achieve the company’s goals, and objectives and aid the CEO, COO and Board in making those hard decisions. The strategic lawyer communicates his or her understanding of that role and who the proper decision makers. Too many lawyers think that they should be making the decisions. That’s fatal. Of course, the lawyer needs to always urge compliance with applicable laws and regulations and reports up the chain of command. The strategic advisor lawyer must be focused almost entirely on the company’s business and not just on the competitors of the company. They must be the innovator disruptors in the industry, focusing on executing plans and making the competition irrelevant.

The main reason lawyers fail at being strategic advisors is risk tolerance. Most lawyers are programmed to be risk adverse. How many attorneys have you heard of that won’t make decisions when there is a risk involved in the decision? I know a lot. While I subscribe to the general principle that corporate attorneys are advisors and not usually decision makers for business operations, corporate attorneys in the transportation field need to be ready to help the leaders make decisions and then support those decisions even when those decisions present risks. The best strategic advisors identify the risks for the business and then assist the business to mitigate and manage the risks. If the risks are extreme, a good strategic advisor will highlight those to the business as completely as possible which may include “what if” scenarios and case examples of other companies or other decisions AND if available, alternate decisions that may accomplish the same or similar purpose. A strong lawyer strategic advisor will have to work against the way he or she is programmed to avoid all risk and instead will have to consider the best interest of the company in advising management or the Board. If decisions are made by the company with the right information available and the right approach to manage the known and potential risks, the lawyer has done his or her job.

Lawyers succeed as strategic advisors by being appropriately balanced regarding risk and exercising good judgment. An excellent strategic advisor needs to constantly strive to find the right balance between supporting the business’s operational and strategic objectives and mitigating legal, regulatory, and reputational risk. The calls at either end of the spectrum are easy. The calls in the middle are typically far more nuanced and require good judgement in balancing multiple, often competing, considerations. The other way they fail is by not providing actionable advice or recommendations. A lawyer who simply describes the risks and opportunities of various options without providing a clear recommendation on which option the business ought to pursue is unlikely to be viewed as a good strategic advisor. A good strategic advisor will listen, truly understand, speak up and adapt to the changing needs of the business organization.

Properly serving the company as a trusted advisor means you have to be proactive with your business owner clients. Most lawyers who are serving business owners focus on incorporation or agreement review, intellectual property, trademarks, copyrights – things that are reactive. So they wait until one of their business owner clients comes to them with an issue and then they handle it. If there’s business litigation that’s needed, they handle it.

But what very few lawyers do – and I’m suggesting that transportation clients need – is to create a more proactive advisory relationship with your counsel.

The first thing that proactive counsel is going to do is to really get to know your clients’ business model. How do they earn their money? What types of customers do they have? How can you help them to collect payment and close deals more easily? This is one of the areas that the lawyer as trust counsel can provide, but is often overlooked by business owners. As a corporate trusted advisor, one of the things that counsel can and should do that will help the client make money (more money) right away is to help them to be able to close their deals more quickly and easily. The attorney as trusted advisor has a direct influence on this by how agreements are drafted and how counsel suggests that the agreement be signed. The Council as trusted advisor to a business owner must proactively meet with them at least one time per week. Speaking with the client on a regular basis empowers the trusted advisor to proactively make recommendations and be working on matters that will help to grow the business and secure the perimeter of the business.

The trust advisor must also meet with the company's leadership and financial team. This is one way that the trusted advisor can make a huge impact on their bottom line, by making sure that their financial systems and their financial controls are being maintained properly.

That also allows counsel to support them in getting in place a strong asset protection plan

Once you get involved in coordination and quarterbacking, transportation clients begin to see their counsel as the trusted advisor they can turn to when anything happens in their business and sometimes in their personal life. In the heavily regulated and dangerous field of trucking and transportation, there is simply too much at stake to rely upon old-school methods of business operations. Business leaders in the transportation world are always worried about disruption. Some high-tech rival might, after all, do to their sector what smartphones did to the photography industry, what e-commerce is doing to retail, and what financial technology (fintech) is threatening to do to consumer banking. 

When disruption does affect a company, it is frequently because the enterprise was already vulnerable in some fundamental way; moreover, many incumbent companies accelerate their decline through their efforts to forestall it. Panic-driven efforts to avoid or combat disruption can easily lead to hasty, reactive, short-term-oriented decisions that move a company in many directions at once, distracting its management and squandering its resources. The fear of disruption can thus be worse for a company than the actual disruption itself.

Of course, complacency or inaction can be just as problematic. Technological changes in the transportation industry, and other external competitive forces, affect many business realities in the transportation world. Proactive measures are often needed. But they should be well thought out. The best means to be proactive is to look to your trusted advisor. While many transportation entities these days have counsel to turn to when there is a problem, many do not have an attorney as a trusted advisor who can be proactive and beneficial in many more ways than the legal industry has traditionally provided service to their clients.

The disruption in the transportation, and in other industries, has also caused a disruption in the traditional modes in which business leaders seek advice. The best means to proceed with a business decision or a corporate transaction is not to seek counseling after the fact, but to receive proactive advice from someone. That someone is increasingly becoming the attorney as trusted advisor. But this type of relationship between the attorney of trusted advisor in the business owner and/or CEO does not develop overnight. Sometimes it takes many years to find a counselor as trusted advisor. This is partly due to the fact that it takes time to find someone who a business leader can share their deepest darkest secrets as well as their confidential business plans. It is also partly due to the fact that not all attorneys see themselves as the person who should be providing proactive counseling to a company.

In my experience over the past 20 years, the businesses who succeed the most and are prepared to deal with the worst-case scenario are the ones who have an attorney as their trusted advisor in the corner to help deal with all aspects of the operations of the company. The transportation industry is changing right before our very eyes. The trucking industry is in a state of flux. The peer to peer car sharing industry has provided a means by which to revolutionize the trucking industry. To stay ahead of the curve in the trucking industry you must not only have a trusted advisor, but such trusted advisor must be able to be proactive for the day-to-day operations while keeping their eye on the horizon for changes and developments in the industry. The failure to do so can lead to disastrous consequences. Remember what happened the Kodak?

 

The New General Corporate Counsel (The Outside General Counsel Solution)

In order pressure for corporations to properly react to increased pressure to be as effective and cost-efficient as possible, CEO’s are not just bringing legal work in-house, but are retaining a lawyer who acts as general counsel to the company without the company having to pay a salary and benefits associated with a full-time employee. The days of relying 100% on outside counsel are over. It is just not efficient or cost effective to do so anymore. Companies are taking the alternate route of retaining a lawyer with not only specific legal talents, but also specialized knowledge of the industry the company works in. This is the trend because a company is not just getting a lawyer, but also getting someone who knows your business intimately. CEO’s are starting to recognize that when you retain a lawyer to act as in-house counsel (outside general counsel), they start to understand the business more. To be most effective, outside general counsel should not only have a full understanding of the organization’s business and office culture, but short and long term goals as well.

In the American business environment, every company will need a lawyer at one point or another, but just how to find and retain that legal counsel can be source of debate.We all know that one person, or perhaps you are that person, who started a company from nothing and grew it into a successful business. Start-up companies often need assistance with basic contract review or understanding compliance procedures. As the company grows from a start-up into a profitable corporation, many executives take the next step of either retaining outside counsel in the form of a law firm or the company may instead pick the in-house counsel route. Both options can be very expensive. The alternative is to retain a lawyer who is not an employee of the company, but a retained lawyer who acts as outside general counsel. A sort of in-house counsel that is an independent contractor, but devotes a large portion of their time to the company and its needs.

For many companies, consideration of this outside general counsel arrangement is a worthwhile step. Not only may there be potential legal cost savings, but bringing someone onboard and inside the executive team may also help ensure the company’s vision is maintained. When searching for such counsel, a company will also be wise to select a candidate who actively maintains social connections and ties to local legal counsel and law firms. This is important because, as many companies fail to anticipate, hiring outside general counsel does not necessarily eliminate the need to retain outside counsel for specific projects or actions. Thus, the ideal outside general counsel will be able to easily access and coordinate with appropriate outside counsel.

When a legal matter is sent outside the company, the outside general counsel serves not only to select the best outside firms for specific case types, but serves as a watchdog on those cases, ensuring that the company is not being over-billed and that matters are being handled properly. A company needs to understand that rather than being a hired gun brought in to consult on individual problems after the fact, an outside general counsel is, or should be, part of the team before, during and after company projects. The outside general counsel should be able to understand the company’s long-term objectives in order to tailor advice to the best interests of the company. A good outside general counsel working in a proactive manner instead of reactive will help a company anticipate and prevent legal problems before they arise, while maintaining company values.To foster this working environment, a company should encourage its executives to keep outside general counsel in the loop by discussing and brainstorming plans and strategies with them regularly. This has the potential to reduce future legal expenses, which most companies should cite as a goal.

The right outside general counsel does not just bring experience to the table. Once they are part of your staff, they bring peace of mind. Having immediate access to a licensed attorney who is focused on your business is truly unbeatable. It can also be the difference between success and failure on not just a given deal, but the difference between success and failure of the business itself.

 

Time for Companies to Utilize the Outside General Counsel.

The concept behind “general counsel outsourcing” is that a business organization may not need to hire a full time in-house lawyer to perform the services and functions performed by a general counsel. Some business organizations may be able to contract outside the organization, resulting in improved efficiencies and profit.

The concept of outsourcing certain business and services functions is not new. It has been used for years. For example, most companies do not maintain their own payroll function, they outsource it – there are specialists outside contractors who can manage the function more cost-effectively. For the same reason, many companies outsource most non-strategic functions – the annual report preparation; staff recruitment; insurance; public relations; advertising; internal audit; staff training; and information services.

Outsourcing of legal counsel has become a major response to the profit pressures on many businesses. In the past, companies have outsourced mostly functions considered non-strategic to the company, such as some of those listed above. However, due to increased pressures on profits and accountability issues with respect to corporate governance, regulatory compliance and risk management, there is a trend towards outsourcing “strategic” functions of business organizations, such as the general counsel.

The concept goes beyond the legal realm and also into the operational realm of a business as well. It involves the belief that services and functions typically performed by someone in upper level management should be performed by a general counsel and such functions includes legal analysis of business decisions, planning and other input that needs to go into the strategic planning process. Legal counsel along with the operational planning and review process can be outsourced to a lawyer who understands the company’s business and culture who, in essence, becomes a part-time extension of the company’s senior management team.

Most companies recognize that they need legal resources at a senior level to perform this strategic legal function to ensure that the company’s major assets and rights are suitably protected and its major exposures and obligations are suitably managed. In practical terms, this involves an on-going legal risk and opportunities audit, and an ongoing legal compliance program. Small to middle market companies must make tough decisions when addressing such strategic legal resources. Such companies are constantly seeking ways to obtain the strategic legal resources that their business requires while at the same time trying to save money and increase efficiency. Many such companies find that traditional methods of retaining counsel are not cost effective because traditional law firm overhead costs, for office space and support staff, limit a firm’s flexibility in fee-setting. When outside counsel fees climb, emerging companies consider hiring an inside counsel as an employee. With all the benefits that employee status entails, hiring someone to be an inside counsel can also be costly; such companies simply may not have the justification or the resources to hire a full-time in-house general counsel.

Outsourced general counsel services offer an attractive option to many companies. For a specified and agreed upon monthly fee, the company contracts with an experienced and well qualified attorney to provide strategic in-house counsel legal services. The outsourced general counsel is an independent contractor, not an employee. He or she may periodically work at the company’s site in order to provide the same high quality, high level of service of law firms or employee counsel. The outsourced general counsel becomes an extension of the company’s senior management team.

In no event, should any company buy the idea that the outsourcing of general counsel legal services decision is an all or nothing choice. Certainly, some legal services are best delivered externally, from law firms that offer specialized legal services. However, other legal services such as certain employment law and labor issues, legal day-to-day corporate governance issues and strategic functions, can be performed effectively by the company with the help of an outsourced general counsel who understands the company’s business.

As in most things, it is a matter of balance and the result of informed and objective analyses. The key issue of determining whether outsourced general counsel services are proper for a company is a question of balancing the delivery of the company’s needs for such services to ensure an ultimate advantage for the company against the cost of an outsourced general counsel. 

Most companies who I represent have addressed this question would agree with many of the following:

  • the ability to operate at a senior level in the company’s organization;
  • a close understanding of the company’s policies, strategies and objectives;
  • a close understanding of the company’s operating methods, processes, products, suppliers and customers;
  • the ability to manage legal risk, to analyze the company’s strategies and in order to identify legal issues, and to develop plans and programs to manage and, if possible, to avoid legal problems that arise;
  • the timely delivery of work of high technical quality that also provides practical solutions which meet the company’s business goals;
  • the ability to work closely and co-operatively with company personnel, suppliers and customers as may be required;
  • the ability to add value to the company whether this is by saving money, avoiding losses, solving problems, achieving their business objectives, by using knowledge and skills to improve the way the company manages its legal risks and pursues its legal rights and opportunities; and
  • the ability to manage external legal services for extraordinary legal issues that arise (e.g., litigation; public/private securities offerings; bankruptcy) in a cost-effective way that achieves optimum benefits for the company

Almost by definition, these qualities can only be performed by someone inside the company, who has absorbed the company’s culture and become part of the way the company does business. An outsourced general counsel can provide this level of service and resources for the company.

We have done this many times in the past and fortunately with great success for the companies we have and continue to represent. It is an alternative to hourly billing. It is an alternative to the lawyer as the enemy. It gives you a reason to call your lawyer without fear of being charged for every 6 minutes of time. Most of all, it give the business and its owners peace of mind that the company is in good hands.