How can GCs make a strong case for legal headcount? Relativity's CLO, Karen Klein, walks us through her process of figuring out how, when, and why to scale the legal function.
Karen Klein is the CLO at Relativity. This is a chapter from The Bundle: issue #1. Download now.
Scaleups may double or triple their headcount in a short amount of time, but if you’re the first lawyer at a high-growth business, chances are your legal team won’t grow in proportion. Work might be manageable in the earlier stages, but as commercial headcount grows, the sole counsel could find themselves facing even more legal admin that they don’t have time for.
Your options are fairly simple - outsource work to external counsel (or alternative providers), which may get costly; or request another hire to help manage the workload.
I’ve been through the experience of scaling legal teams several times, at businesses like Orbitz and Kayak. Over time, I’ve managed to hone in on how, when, and why to ask for headcount. Asking leadership to devote finite resources towards hiring lawyers isn’t always easy - it all depends on how you frame your approach. Saying that you’re “busy and you need more people” won’t cut it - after all, who in a high-growth tech company isn’t busy and stretched?
To scale successfully, you need more than that. Here are a few tips I picked up along the way.
1. Start with a business case 💪
Any significant investment for the company will require a robust business case - and lawyers are expensive. Your stakeholders need to understand why the current situation is unsustainable before they’ll pay to change it.
Make sure you prepare and do your research before approaching the leadership team with a request, and make sure it’s too compelling to reject. You could include:
A detailed overview of the challenge - to make sure leadership is on your level
Metrics and examples where possible - so stakeholders understand that your requests are aligned with business priorities
A look at financial and non-financial benefits - how will a legal hire benefit other teams in the business, as well as top-line goals like revenue?
A positive case for a new hire is much more likely to be well received than a negative complaint about workload.
“Understand how your business is planning to grow, and how legal plays a role in this - not just now, but months and years from now”
2. Listen 👂
Aside from what you think you need, it’s important to understand how growth in other teams will affect the demands placed on legal. How does the scaling of other teams affect the way the legal function works? Make sure you understand business goals and priorities, and align your thinking with the direction of travel.
If the sales team is doubling, how does that affect legal, and the way legal works? For example, more sales reps means more deals, and more deals will mean more legal review of contracts.
What kind of bottleneck would this create without more bandwidth in legal? If you remain the sole counsel, will you inevitably slow deals down, losing momentum and negatively impacting business growth?
Interact with the management team, and try to get an understanding of what they expect from you, how they want legal to deliver, and the metrics they consider high-priority for a legal function. But expand further than this - understand how your business is planning to grow, what they want to build, and how legal plays a role in this not just now, but months and years from now.
3. Lean on the data 📊
Outside spend is a powerful and often dizzying metric to help secure additional headcount. Look at how much the business is spending on legal resources for major projects - like a funding round, acquisition, regulatory approval, or a similar company milestone.
Tracking things from day one can make your life so much easier, as you’ll have data to hand when it comes to asking for a legal hire. The metrics you measure are important, and vary from business to business. ‘Legal budget’ is often a black hole of uncertainty, but you can make it tangible by tying it back to metrics that impact commercial revenue, like annual recurring revenue (ARR) against your headcount, for example.
Being able to say that legal supported X amount of ARR with Y lawyers will make a huge difference when the calculations change.
"If hiring another lawyer will help the business to scale and succeed at a faster rate, make these growth metrics part of your story"
4.Don’t go negative 🙅
The likelihood of you convincing leadership of the value legal added by avoiding risks is slim - proving a negative isn’t easy, and it’s difficult to quantify a narrowly-missed commercial disaster! Instead, focus on the positive elements of the value you plan to add with extra headcount. Demonstrate how a bigger legal team will positively impact revenue growth.
You can do this by explaining the impact more firepower will have on your ability to take on high-value projects, for example. A bigger team means the business has more resource to dedicate towards areas that need it most - especially important during a high-pressure project, like a massive deal, funding round or IPO.
5.Be ready to answer three key questions 💬
Above all, you need a clear narrative to make your business case irresistible. When making the case for scaling, make sure you can answer three fundamental questions:
How is our legal headcount affected by our industry? Certain industries, like fintech, are heavily regulated. Navigating this regulatory environment is likely too much for one lawyer to handle alongside daily work, which is why fintech scaleups may hire a regulatory specialist. If your industry is a special case, make sure you make this clear.
How is our legal headcount tied to the growth of the company? If hiring another lawyer will help the business to scale and succeed at a faster rate, make these growth metrics part of your story. Having a paralegal manage day-to-day legal requests, for example, frees the GC up for high-value tasks and long-term strategic work.
How will legal be a partner in that growth? ‘We’re really busy so we need more people’ isn’t good enough - everyone at a scaleup is busy. Instead, lawyers should prove their value as a partner to the business’ growth, and find a way to showcase the commercial benefits of hiring another lawyer. Legal’s role in the company’s growth plan needs to be made explicit.
If hiring another lawyer will help the business to scale and succeed at a faster rate, make these growth metrics part of your story. Having a solid answer to each of these questions will help lawyers create the foundation for sign-off on their hiring goals - and by focusing on the wider business, lawyers can grow a legal team that is set up from day one to add value as a strategic function.
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