What Value Does an Outside General Counsel Add to a Closely Held Company?

This morning I came across an article on Forbes by Raj Ramanan titled, “What Value Do Consulting Firms Like McKinsey, Bain, Et Al. Really Add To An Operation?” It is an interesting piece that brakes down the value provided by outside consulting firms and it got me thinking, why not look at the same issue on the legal side?  A lot of his points apply in that context as well and you can find a link that article here.

In the meantime, let’s take a look at the value an outside general counsel adds to a company borrowing from Mr. Ramanan’s list.

The real value an outside general counsel provides is:

  1. Political Leverage:  Closely held companies often have a small number of managers and a larger number of investors who are not involved in the day to day operations.  Bringing in an outside legal opinion from someone who knows the company can provide support to recommend a risky or unpopular decision.  In any high level decision, there may be very good operational reasons that are countered by concerns from investors.  The legal risks and benefits associated with one side or the other may well provide the impetus to decide in their favor.
  2. Pooling knowledge across functions and levels:  When outside counsel are involved in addressing an issue or problem facing the company on routine issues, they inevitably work with managers and employees at varying levels and different segments of the company.  Managers are often shocked to find problems have arisen simply because one group does not talk to another or third parties are hearing two different stories from within the company.  Outside counsel may identify important operational issues while providing routine legal services which can prevent bigger problems down the road.
  3. Deep focus on one problem:  As Mr. Ramanan puts it, “you have a dedicated team of pretty smart people who are generally unbiased that can focus deeply on one particular problem.”
  4. Weight off your shoulders:  Your job as a CEO/manager/decision-maker is not to deal with every little legal issue affecting your company.  Your job is to run the company and make a profit.  The single biggest benefit an outside general counsel provides is shouldering the legal load and allowing you to focus on running your business.
  5. Efficiency:  Whenever there arises a “big deal” or significant litigation, a significant portion of the legal fees is inevitably associated with work done purely to “get up to speed.”  If a company has outside counsel on hand, then the attorney(s) are already familiar with the company, its operations, and its people.  This provides both productivity efficiencies as well as monetary efficiencies that could save thousands of dollars in fees.
David B. Willis

David B. Willis

David Bryan Willis is a Tyler area business lawyer providing legal services to private companies, startups, and small businesses across Texas.
David B. Willis

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