Opinion | 21-08-19

Should you go in-house?

The landscape of the Chinese legal market is changing fast. It now has the highest concentration of international law firms in a single market and we are seeing overseas firms starting to build their local practice, expanding their legal service by incorporating local talent.

At the same time, local firms are competing head to head with the more established international players. In order to secure more outbound business from their Chinese clients, they are expanding overseas by merging with US firms, or setting up their own overseas branch offices by hiring local lawyers. As a result, their lawyers are getting more exposure and developing specialised skills in different areas.

With private practice offering so many new opportunities, why are so many excellent lawyers deciding to make the move to in-house roles?

In-house roles used to be regarded as the destination for associates who didn’t have the passion to make partner, but this is no longer the case. We are seeing more and more top notch lawyers joining reputable global companies, or start-ups with unique business models. If you are thinking of this, making the right choice for your skillset is vital. You need to be well informed about the market to be able to assess the opportunities. This is where it really helps to access the market knowledge and professional advice that an experienced career consultant is able to offer.

Timing

It is important to make your in-house move at the right time:

4 to 6 years: Associates with 4 to 6 years’ experience have usually developed broad corporate experience, as well as some other core practice areas such as capital markets/IP/M&A/compliance. These areas are usually relatively adaptable, and valuable to most in-house environments. At this level of qualification a role as an associate counsel may be appropriate.

6 to 8 years: By now you will have developed sharper negotiation skills and more advanced business sense. Just the sort of skills that in-house hiring managers are looking for to develop as senior counsel. For this sort of position you will need to be a quick learner, able to work under minimum supervision, with a good understanding of their company’s needs and able to provide legal solutions as a business partner.

8 to 10 years: At this level of seniority, you would be expected to have developed project leader qualities. This is a good time to consider a sole counsel role at a smaller corporation/investment firm, or senior legal counsel/director position at a larger corporation.

Reasons for the move

The desire to move from partner to in-house counsel may be a reaction against the high billable hour demands, the never-ending pressure to bring in potential business, client development plans and conflicts, and limits on opportunity for promotion.

A good in-house roles may feel much less precarious. They are also usually more stable than other internal positions within companies. Due to the slowdown of the Chinese economy and the less favourable policies for foreign companies doing business in China, there are significant numbers of corporations reorganising their business. As a result, companies or business units may spin off, merge with other companies, or even close down their operations resulting in a number of senior leadership roles being restructured or taken away. Many companies are playing safe with lesser investment, or green field investments in China, where the level of operational complexity may be less of a challenge compared to starting their investment from scratch. However, we are still seeing double digit growth for some of the most reputable companies with a long history in China, with legal teams under staffed and in-house lawyers often (understandably) the last to go. There is no lack of legal opportunities but you may need to be selective in relation to platform and industry. This is where the advice of a well-informed career consultant is invaluable.

Working in-house enables you to build an intimate working relationship with what is, in effect, a single client and its executive team. You understand the business, its strategy and its needs. You know where the value lies and what risks need managing. You get to manage external counsel from a first party perspective as their client, have major impact on business decisions, recruit and train your own legal team, develop your leadership experience, build your expertise and, last but not least, you may even have the potential career to switch from a business lawyer to a business leader.

The story doesn’t end there, we also see senior in-house lawyers (General Counsel, Head of IP, Chief Compliance Officer) rejoining private practice to utilise their expertise to focus on the same industry, so moving in-house doesn’t have to be a one-way street and a range of opportunities may still lie ahead.

What kind of new skills do you need and develop?

All lawyers need sharp legal skills but there are other soft skills you need to develop before you want to make a move in-house. Your new role will require excellent verbal and written communication skills. You need to be a good listener and have strong negotiating skills (not only for making deals across the table, but also to advocate your recommendations within the company). You will be required to interface with non-lawyers at all levels of the organisation, from board members and executives to line workers, and everyone in between.

What obstacles are you likely to face?

It can be hard to find the ideal in-house opportunity. He companies are looking for someone with initiative as opposed to just a good learner. Common requirements would usually be a combination of solid law firm and in-house experience, strong communication skills, and a good personality. The ideal in-house candidate needs to be a people person with good business sense, someone comfortable working with all levels. In-house lawyers to tend not to work in back rooms, isolated from the rest of the business, they share office space and ideas, interacting with people on a daily basis.

This is where it can be difficult to transition, as a certain level of social networking skills are required at a big organisation. Candidates need to be proactive, resolving any potential risk before the business is even aware of it. The art of balancing the pros and cons is not easy for a new in-house lawyer which is why a company may often hire those with previous in-house experience. Having said that, they know that lawyers from reputable law firms can grow into excellent in-house lawyers.

What about the money?

The immediate disadvantage of moving at an early stage in your career can be a direct pay cut and slower annual salary increase, particularly if you stay with the same company for a long period of time. Anticipate, therefore, a certain degree of job movement once you reach certain levels (in China, approximately 3 years can be a good time frame for a strategic move) to offer better exposure, salary and job content.

Major law firm associates or partners are rewarded by higher guaranteed pay with a discretionary bonus. In-house counsel usually have a lower base, plus discretionary bonus or shares (expect a target bonus rate of 15% to 30% percent or more). In younger start-up companies, lawyers might expect to receive share options in lieu of a large base. These may prove very valuable but they carry a degree of risk. Not everyone will see substantial gains from their options, so make sure that the base supports the standard of living that you need (base pay is usually around 70% of the normal base of a corporation GC).

What if you change your mind in a few years’ time?

Moving back to a law firm once you go in-house can sometimes be difficult. If you are a mid to senior level with less than 1 year of in-house experience, it is less of an issue compared to say, 2-3 years of in-house experience. That said, if you have long term in-house experience with a leadership position, some law firms might be interested in what potential business you can develop by leveraging your industry networks.

Who is hiring?

About 10-15 years ago, most in-house positions were offered by multinational corporations, and they were mostly interested in overseas talent. This was when major investment was pouring into China – greenfield, M&A, operational projects and traditional manufacturing companies were the big spenders when it came to building large in-house legal teams. In recent years, they are still the major employer in the market, adding more specialised in-house lawyers but their hiring needs are very different from a few years ago. Multinational corporation compensation levels are usually the highest (overall) and are generally used as the in-house salary bench mark in China.

In the last 5 to 10 years, Chinese companies have been investing heavily in R&D and special business models to compete with foreign players. There has been much innovation and a stronger connection to the local market and government authorities, as well as recruitment of the best business and technical executives and staff from around the world. We are seeing more and more legal talent leaving multinationals and law firms to join fast growing Chinese companies. However, there can still be quite a culture shock and candidates need to be flexible in an ever-changing working environment.

Start-up companies have become a major hiring force in recent years. They usually have a very fast paced working environment similar to law firms, overtime is usually a must, and sometimes you might not get as much time off as in the more established in-house positions. As discussed, the compensation can be lower, but you should receive some kind of stock options as an exchange for your pay cut and long hours and, if successful, it can offer serious rewards.

Investment firms are often considered the most suitable and easiest option for law firm associates. You could be hired directly by your clients because of previous work and, while the hours can be long, the salary can be more comparable with a standard law firm.

The above are only a few common factors to be considered in relation to an in-house career, and there are far too many subjective factors to make a decision without seeking expert advice. It is always a good idea to talk to your recruiter and devise a strategy for your new career focus and future development plan. Please feel free to contact our in-house consultant, Frank Yuen on [email protected] for further market insights.