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As part of a series of interviews with in-house counsel, Jeff Levinson, vice president, general counsel and secretary of NetScout Systems Inc., recently responded to a series of questions posed by Bloomberg BNA's Michael Greene. Levinson, who is also president of the Association of Corporate Counsel's Northeast Chapter, discusses the hallmarks of an effective outside counsel. He also talks about how firms can provide real value to their corporate clients, especially after a major acquisition.
Could you talk a little bit about how you became General Counsel for NetScout? Was being an in-house counsel always something in your plans?
I've been fortunate to have the opportunities that have come along the way here at NetScout. We grew from about $85 million in revenue when I started, nearly ten years ago, to $450 million last year, and then jumped to over $1 billion as a result of the recent transformative acquisition of the Danaher communications business. At the close of the deal, we also increased from 1,000 employees to over 3,300 employees. We shot the rapids on this deal.
I would say that my professional arc has been to move closer to the business. While I started at a large law firm and then moved to a boutique corporate practice, my next move, in-house, was aimed at getting involved more closely with the business. That is why I also did an evening MBA program, to make sure that I had a solid foundation in business practices. Ending up at a growing technology company with a CEO who has a strong vision for the service assurance industry has been great.
I got to NetScout because someone that I used to work for when I was a commercial counsel for another company recommended me for the job when it came up. As I tell my sons, you just never know when your paths will cross again with someone. My experience prepared me to take on the role, but that introduction was important.
How does the work of being an in-house counsel differ from representing companies while working at an external firm? Could you address the distinct challenges, and perhaps advantages, you might have in each position?
Not surprisingly, a key difference between inside and outside counsel is that I have one client, and I am embedded with that client. I can understand our goals and sensitivities, and, with a seat at the table, I can advise in real time on strategic decisions. As a business lawyer, I apply legal expertise to business questions. Because I know the company's goals, I can provide tailored counsel, legal support as with contracts or M&A negotiations, and appropriate cautions. At the same time I am accountable for my advice. I had heard somewhere, I don't recall the attribution, someone talking about the chalk lines on a playing field, and the idea that we should not raise the dust or disturb the chalk. In my role, I have to identify where the chalk lines are and give advice on how to play the game without crossing those lines.
Another difference is the need to align with the business, while at the same time protecting the company. I think that is a common theme among general counsel. We have a special role, responsible for legal compliance and protecting the company's reputation, though I also believe all leaders share in this responsibility.
Where I put additional emphasis is on two points that flow from that. First, all leaders should take as a touchstone the “high performance with high integrity” approach that former GE general counsel Ben Heinemann articulated and which we put into practice every day. Led by our CEO and with strong managers, we are all on the same page on integrity. Second, when I think about enterprise risk management, I like to view that idea from two angles, to sweep in enterprise “opportunity” management. Business is about taking risks, but we have to take smart risks, squarely within the bounds of the law and ethics, no cutting corners.
Also, one other significant point about the difference between inside and outside counsel reflects the changes in the legal profession. There has been a shift in roles over the past decade or so, in that general counsel are seen more and more as the trusted advisor of the CEO and board, whereas in the past it was often the case that management and directors would go to the senior partner at the company's main law firm for guidance.
I want to be clear, though, that I really value our relationships with outside counsel for all the advice and resources they bring. I get to work with talented, smart, thoughtful firm lawyers. It's great to be able to work with good people. In addition, outside counsel have a perspective across companies and industries. The best outside counsel view our relationship as a partnership, where they bring their expertise to bear, have smart people who can help think through novel problems, have deep resources, and act as a trusted advisor. Outside counsel can and should be a trusted advisor to the general counsel.
Obviously, you work with a lot of external firms. As a general matter, what types of things attract you in looking for potential outside counsel?
The hallmark of good practice for an outside firm is whether the lawyers at the firm are thinking about our company's business. If they are bringing innovative thinking that is tuned to our business, industry, customers, and challenges, then that is how to provide real value to our partnership. If a new regulation comes out, or a law changes, get ahead of that and explain (1) how the change applies to my company, and (2) what concrete steps I should be taking. In turn, I am happy to spend time talking to partners and associates about our business and challenges. I encourage them to call and ask questions or sit down over barbecue and learn more about what we are facing.
For firms, high-quality advice and subject-matter expertise are table stakes. It's how firms differentiate that is at issue. The successful firms are the ones that are thinking about more efficient ways to deliver legal services, whether project management, automated tools, or better billing practices; that are thinking about diversity and inclusion in their staffing; that are thinking about risk management issues. Overall, those leaders are ones that show that they understand what we have done and what we are trying to do and bring to us practices that can help me deliver on my mission.
At the end of the day, I am looking for “value.” This is grounded in technical expertise and experience, and also comprises responsiveness, judgment, work quality and results, cost-effectiveness, project management skills, automation, and training, to name a few.
On the other side, what types of things might turn you away? Is there anything that is an instant disqualifier?
Assuming that the work is of high quality and the firm generally obtains good results, what might get me thinking of shifting our work could be lack of availability or responsiveness, surprising me with a problem or unusual bill or something like that, lack of predictability in fees, unwillingness to give definitive advice, or failure to manage the project or agreed-upon budget. These would be unusual circumstances. Firms we work with are good at avoiding these situations. But we do pay attention to these types of behaviors.
How has the acquisition affected your use of outside legal services?
We have increased the number of firms that we work with because of the support they were providing to the different business units we are operating now. We are early in our integration, and we have not made dramatic changes. However, I also believe that we have an opportunity to work with our firms to solidify our relationships along lines that are modern, efficient, and make sense for both of us. But we need partners who are willing to challenge the old ways within firms. I expect we will be talking to all of our partners about this opportunity.
By the way, what has surprised me is that although some firms have initiated conversations about the opportunity, a few firms we work with have not reached out to me to talk about what they can offer the combined company. I would have thought this would be a huge opportunity to explain how they “get it” and what they can do to help us with our new challenges, whether it is with new technologies, regulations, scale, or geographies.
We have an opportunity to reassess the delivery of legal services, just as many law departments are doing. There is a lot of disruption in the legal industry, especially with the availability of non-traditional providers and different outsource models, as well as more resources through corporate counsel groups and technology. Some firms are further along in understanding this restructuring, understanding how legal departments use firms, how we may go to lower-cost providers or disaggregate the vertical service structure, how we need better thinking on management, cost, and efficiency. I want to emphasize that this is not just about alternative fee arrangements and pricing models, though we do want to get ahead of that. It's how we envision the partnership for the next decade.
Some additional thoughts that might help firms. First, and I think many of my colleagues would agree with this, we are not trying to scrape every last dollar from our bills. We understand that firms have to make a profit. But firms should also be sensitive to our fiscal constraints. Don't send me a letter in January saying that your hourly fees have automatically increased 5 percent. My budget did not automatically increase 5 percent. Second, we understand that firms need to train associates. That has been a challenge, as many in-house counsel resist firms' putting first- or second-year associates on our matters. Firms may have to absorb more training cost or associate hours, with an effect on short-term profitability (but with long-term productivity improvement). Legal departments may have to accept more junior associate support, maybe at reduced rates or in secondment capacities. Finally, if your firm has mastered what I consider the basics, like project management, you will stand out. The bar is not that high.
As a general matter, is there a type of work you believe is better suited to external counsel, as opposed to those you have in-house? What types of work do you typically commission outside counsel to complete?
We look to engage firms where it makes sense, where we get the best value such as on specialized matters like patent prosecution, immigration, and international tax, as well as on non-routine litigation where we need expertise and more resources. Generally, I look for lawyers who can efficiently and cost-effectively provide best-in-class legal services.
At the same time, we assess the work to make sure we are keeping core matters in house, depending on criticality and whether the work contributes to a competitive advantage. If a matter is critical or a key risk, we may have a blend of in-house and outside lawyers, depending on what we need. Even with work we outsource, though, we keep a close watch on and develop the strategy; at the end of the day, I am accountable for our legal work.
Some research has suggested that the use of external firms is falling to historic lows. Is that happening in your company? What would tip the scales, if anything, to using more outside firms?
I expect that, like other companies, we will continue to rely on outside firms for specialized work, large matters for which we are not staffed, and for best practices guidance and up-to-date thinking on new areas of the law. We will also be looking to in-source as much as we can, especially in areas of core competency.
When we consider outside firms, then, how do they differentiate themselves in the market? What is their innovative approach? Do they apply lean techniques? Do they have a set project management approach? To take one example, if a firm came to me and volunteered to handle certain work for a fixed fee, I would like to have that conversation. That would differentiate them, because often I have to initiate that conversation, and when I do I sometimes get bureaucratic resistance. Firms have billing data. Hire a data analyst, ballpark it, and propose an AFA [alternative fee arrangement]. Let's get the fee part fixed, so to speak, and take it off the table, so that we can concentrate on the delivery of legal services.
Many legal departments have ranked ethics and compliance as the highest business priority for this year. Does that compliance work necessarily have to involve external counsel? Generally, what is the ideal set-up for your legal department's compliance efforts, between internal and external work?
On compliance, we have to get this right every day. It is absolutely central to how we do business. We use a mix of approaches. We use outside counsel to review and advise regarding our policies and program, especially if we are facing new issues or need to do a periodic refresh or are in a new jurisdiction. We use outside lawyers heavily for regulatory issues and even to some extent for general advising. Most of the time, in-house counsel owns the resulting implementation of the program, from the policy to the training and certification, along with our business colleagues and HR leaders. Once the compliance program is well-established, it is primarily an in-house responsibility, again with outside counsel advising as to changes in law that we need to comply with or if there were investigations for which we needed support. Compliance questions depend on the need, and there is no set mix. This is a place, though, where the in-house/outside counsel relationship reflects a true partnership.
Jeff Levinson joined NetScout, a leader in network, application, and service assurance solutions, in 2005. In July, NetScout acquired Danaher's communications business in a transformative $2.3 billion transaction.
Levinson authored the Bloomberg/BNA Corporate Practice Series book Managing the Corporate Legal Department: How to Create Plans, Develop Processes, and Lead the In-House Legal Team.
Levinson currently serves as president of the Association of Corporate Counsel's Northeast Chapter, previously served as chair of the ACC Law Department Management Committee (Leadership/Strategy/Operations), and is a member of the programs committee of the National Association of Corporate Directors, New England chapter. He has been named a “Leader in the Law” by Massachusetts Lawyers Weekly and has written articles about rethinking the role of corporate counsel and navigating cross-border mergers and acquisitions. He serves on the board of the Jericho Road Project and stays balanced with family time and Crossfit.
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