Considering Hiring Your First GC?

Clients often will ask us questions about hiring their first internal general counsel (GC) – for example, whether it’s the right time for the company to hire a GC, what qualities to look for in a GC or what to ask a GC candidate in an interview. This can be a complicated discussion, because the GC role itself can take many different shapes, depending on the company’s stage of development and legal needs, and the personality and skill set of the individual GC – and management, board members and GC candidates may all have different pictures of the role in mind.

For all these reasons, we find it useful to step back and try to identify the specific issues or functions your company is looking to address by hiring a GC. By clearly understanding and defining the goals for the position, you will set the stage for a more productive conversation.

Below are a few key purposes and underlying value propositions for companies to consider when they’re thinking about bringing in a chief in-house lawyer. This list is meant as a starting point, as many GCs will combine several of the following functions and attributes, as well as others.

Managing legal costs

Sometimes, the decision to hire a GC is largely economic – the company wants to make its overall legal spend lower and more predictable by having legal matters handled by an internal lawyer who is on the payroll, rather than by outside counsel billing at hourly rates. If the desire for cost savings is the primary driver of your interest in hiring a GC, you will want to think carefully about the current and expected legal needs of your company, and what portion can be effectively “in-sourced.”

Typical legal advice for a startup covers areas such as corporate law, equity compensation, labor and employment, commercial contracting, intellectual property, and data privacy law. In most cases, it won’t be practical to hire a GC with outside counsel-level knowledge in all the legal areas relevant to your business. In our experience, if a company looking to save money on legal fees by hiring a GC doesn’t realistically assess its legal needs and/or doesn’t hire exactly the right GC, then either the company’s total legal spend goes up because it still requires substantial support from outside counsel, or the total legal spend goes down, but the company creates exposure for itself by not addressing legal issues that are outside of the GC’s core competencies. With that in mind, you’ll want to make sure that the GC you hire is able to handle a critical mass of these legal needs to meet your cost-saving goals, while also being able to spot issues and make judgment calls on when to get advice from outside counsel.

GC owning a key function (including IPO counsel)

Sometimes companies will hire a GC with a specific primary function in mind. A company in a highly regulated space (for example, medical devices or telecommunications) may hire a GC with knowledge in that area of law. Or, a company that negotiates a high volume of agreements of a particular type (for example, outbound software licensing agreements) might hire a GC with experience handling similar types of contracts and familiarity with the underlying legal issues. For this type of GC, the business case is that the GC would not only be able to help lower legal expenses (by reducing the need for outside counsel on these matters), but also deliver additional value as a full-time employee of the company with deep familiarity with the company’s business goals, products and services, operations, and areas of risk.

One special type of a “key function” GC is one who helps lead a company through an initial public offering – this often would be a securities lawyer or a member of a legal team that has gone through an IPO. Almost all companies we work with on IPOs will have a GC, although companies vary as to how far in advance of a potential IPO they will seek to hire one. If your primary reason for hiring a GC is to help prepare your company for this type of transaction, you’ll want to make sure the GC has the right type and amount of experience to provide that kind of support.

GC in a strategic counsel/executive role

Some companies hire a GC who functions as a member of senior management, helping to strategically balance the needs of the business with risk mitigation and compliance. This GC may be less involved in day-to-day legal work, but might oversee large transactions or projects, while managing others in the legal department and the company’s relationship with outside counsel. Candidates for this version of the GC position tend to be more senior lawyers, with strong judgment and organizational skills.

Insights from outside counsel

As you’re considering whether to hire a GC (or moving forward with the hiring process), don’t hesitate to reach out to your company’s outside counsel for advice. They will have a sense of your company’s legal needs and also will likely have worked with many GCs over their career. In addition to being able to provide insight on the question of whether to hire a GC and how to think about the position in your company, outside counsel may be able to refer or participate in interviewing candidates, helping to ensure that any GC you ultimately hire is the best possible fit for your company.