IN-HOUSE TOM: Chapter 1.1 What is an IN-HOUSE TOM?

I’m writing a book with the working title: IN-HOUSE TOM: a new target operating model for law departments – initially as a series of blogs.

You can follow the full index of blogs as they build here: IN-HOUSE TOM: INDEX

What is a target operating model?

A target operating model (TOM) links needs, resources and processes to create a model to execute a commercial organisation’s strategy to achieve its purpose.

An IN-HOUSE TOM links the legal counsel and process needs of the organisation with the resources and processes of the legal department to create a model to meet those needs to execute a commercial organisation’s strategy to achieve its purpose.

So far, so simple.

How does a TOM relate to Legal?

The problem is that each of the terms in the definition is currently unclear, subject to debate and questioning within each organisation:

  • What is the purpose of any commercial organisation?
  • What is the purpose of your organisation?
  • What is your organisation’s strategy?
  • What are the legal counsel and process needs of your organisation?
  • Who decides?
  • What is the purpose of any law department?
  • What should the strategy of any law department be?
  • What are its strategic resources?
  • What are its strategic processes to apply the resources to achieve the needs?

Here’s one set of answers, based on my 15 years’ experience working with law departments, which some readers may recognise:

  • The purpose of any commercial organisation is to make money for its shareholders
  • The purpose of our organisation is to make loads of money
  • Our organisation’s strategy is (say) growth through aggressive global acquisition
  • Our organisation needs Legal to anticipate risks and sort legal process, fast and cheaply
  • Our CEO decides, everything.
  • The purpose of any law department is to help make loads of money for the organisation without anyone going to jail
  • The strategic resources are very bright lawyers
  • The strategic processes can be boiled down to “the diving catch” by lawyers to get stuff done because “that’s what we’re trained to do”

Is this familiar?

The future

The purpose of your organisation drives its strategy which, in turn, drives how Legal responds in target operating model terms to enable that strategy.

In many organisations that response is driven by a wish to please the CEO and “the business”.

What if?

  • what if the legal profession were to help shape the purpose of any commercial organisation post-Global Financial Crash (2008) and post Covid-19 (2020)?
  • what if the law department told, not asked, the CEO what legal counsel and processes the business needed to achieve its strategy?
  • what if law departments were run like internal break-even businesses with the appropriate target operating models?

I believe that if these three “what ifs” happened then society, business and lawyers would be better served.

This book sets out how.

Ciarán Fenton

IN-HOUSE TOM: INDEX

I’m writing a book with the working title: IN-HOUSE TOM: a new model for the law department, law firm and C-Suite relationship – initially as a series of blogs.

You can follow the index as it builds here:

INTRODUCTION

SECTION 1.1 What is an IN-HOUSE TOM?

SECTION 1.2 Cinderellas of the boardroom & denial

SECTION 1.3 In-house independence is a contradiction in terms

SECTION 1.4 Ethical pressure, chilling fear & breathtaking acquiescence

SECTION 1.5 Litigators at heart, omertàesque silence & no #lawyersbacks

SECTION 1.6 Legal business leadership is not billable by the hour; ergo it’s not rated & not taught at law school

SECTION 1.7 More for less, ten things for seven dollars & the diving catch

SECTION 1.8 Mind the gaps between law firms, law departments and the C-Suite”

SECTION 2.1 Step 1 – Agree the current purpose, strategy and behaviour (PSB) of “the business”

SECTION 2.2 Step 2 – Decide, don’t ask, what “the business” needs from Legal

SECTION 2.3 Step 3 Set up a Legal Operating Board to run Legal as a business, not like one

SECTION 2.4 Step 4 Sell to your Board the purpose of Legal; be ready to walk away en masse & don’t bluff

SECTION 2.5 Step 5 Invest cash in innovative providers to help close the C-Suite gap & end the in/out myth

SECTION 2.6 Step 6 Negotiate a business plan which meets business needs but honours Legal’s purpose

SECTION 2.7 Step 7 Defy law school training; use the F-word; accept the GC as CEO of Legal

SECTION 3.1 Trend 1 #ESG: Lawyers will be required to enable the relaunch of capitalism, whether they like it or not

SECTION 3.2 Trend 2 Law firm hubris: no incentives to change; gleeful at the disruption desert but “airline-type” big bang looms

SECTION 3.3 Trend 3 #Legaltech “disruption” hopes fading; “Ryanair” moment rising; state intervention hovering; purpose of law needs fixing, first

SECTION 3.4 Trend 4 Regulation: pressure for change is growing, albeit slowly

SECTION 3.5 Trend 5 The “turf war” between Compliance and Legal is escalating, especially in rapid growth businesses

SECTION 3.6 Trend 6 The well-being of lawyers remains a low priority; society pays a high price

SECTION 3.7 Trend 7 #lawyersbacks: a growing minority of lawyers are starting to, counter-intuitively, “have each others backs”

Ciarán Fenton

IN-HOUSE TOM: a new target operating model for law departments – INTRODUCTION

I’m writing a book with the working title: IN-HOUSE TOM: a new target operating model for law departments – initially as a series of blogs.

Definition of terms

In-house

In-house lawyers are employed by businesses and not-for-profit organisations, as opposed to being employed by “out-of-house” law firms.

No other function in an organisation uses this in/out nomenclature.

For example, accountants don’t call themselves “in-house accountants” nor do they refer to accounting firms “as-out-of-house” either.

I will explain in the book how this curiosity has evolved, how the uncut umbilical cord connecting “in and out of house” has developed, who’s the “mother” and what could happen next.

TOM

A target operating model is a blueprint for an organisation linking three components:

⁃ a market (client) need

⁃ strategic resources

⁃ strategic processes to apply the resources to meet that need

New

The current IN-HOUSE TOM isn’t working well enough for all stakeholders for reasons I will explain in detail but the headlines are:

  • Society is poorly served because in-house lawyers can’t/don’t act independently as required by regulation which is also so light touch as to be hands-off
  • Business is poorly served because in-house lawyers can’t/don’t report directly to their boards which is their client under law but to the CEO, or worse, to the CFO who is their “boss”. This means that instead of “telling” the business what it needs in relation to its strategy, it must “ask”. This flies in the face of the asymmetrical knowledge nature of the relationship
  • Lawyers are poorly served because they are not trained to lead in commercial contexts in law school nor in their legal training in law firms; they are frequently subjected to ethical pressure by “the business” and are constantly having to justify their existence evidenced by their regular conferences debating “how to have a seat at the table”. No other function, apart from HR, is stuck in this organisational hamster wheel.

This book is about how lawyers in-house and out working with the “C-Suite” can come together to sort this mess out for the good of society, business and lawyers.

It’s time to change the status quo.

It’s time for a new IN-HOUSE TOM.

Ciarán Fenton

small change: Parent-Adult-Child behaviour on your board

CiaranLinkedIn

small change
by
Ciarán Fenton
How small changes in your behaviour have a big impact on how you work, lead and follow.
That’s the working title of a book I’m writing, initially as a series of short blogs.
You can see the full blog index here as it builds.
Blog 50 small change: Parent-Adult-Child behaviour on your board
•When I say “board” I mean: main & operating boards, ExCos, and management teams
parent adult child behavour
Your board is like a family.
“Mine bloody well isn’t”, I hear you say.
But it is, at a psychological level.
Eric Berne created Transactional Analysis in the late 1950s. The model is used widely in a range of contexts today.
I have seen his three ego states in action, and close up, in my work with boards:
  • Parent
  • Adult
  • Child

 

Since he also said that our interactions are “transactions” I believe that this concept can be applied to boardroom relationships by negotiating,  what I call, “soft contracts” between board members:

For example: “I will micromanage less, if you manage more. Agreed?”
That’s an example of an Adult-Adult transaction.
Frequently I find that board members “parent-alise” their organisations i.e. speak of them of as if they are “people” in charge, and with ultimate power.
Once I worked with an operating board and during the first session, it became clear, from the language they used that they didn’t feel in control of the business.
I said “You’re speaking of the business as if it were a powerful person outside this room. Why?”
They looked baffled.
I asked if they realised that they, largely, controlled what the business did and how it did it on a day-to-day basis?
Again, bemusement.
Their reaction is understandable. Society has created organisational power structures which are dominated by shareholders in private companies and bureaucracies in public organizations.
It’s no wonder therefore that board members feel or behave as if they have no control.
Even NEDs, in my experience, say “we have influence, but no power”, despite the fact that the Companies Acts give them explicit power.
The parent-alisation of organisations plays out badly at times of crisis.
On the publication of the report of the Savile Inquiry into sexual abuse at the BBC The Guardian reported on 25 February 2016:

Savile report: key points of Janet Smith’s independent inquiry

Main findings of inquiry into Jimmy Savile’s decades of sexual abuse include ‘serious failings’ at the BBC:

  • Some members of BBC staff – junior and middle-ranking – were aware of Savile’s inappropriate sexual conduct in connection with his work for the BBC but there was no evidence that any senior member of staff was aware of Savile’s conduct.
  • No evidence that the BBC as a corporate body was aware of Savile’s conduct.
  • An atmosphere of fear still exists today in the BBC, possibly because obtaining work in the BBC is highly competitive and many people no longer have the security on an employment contract.

Using the “corporate body” fig-leaf in these cases perpetuates the infantilisation of employees and Parent-Child behaviour on boards.

No one ever has to take responsibility.

So what can your board do to mitigate the business and legal risks caused by Parent-Child behaviour?

  1. Acknowledge that these systemic problems exist in all organisations
  2. Read the academic research (just Google it)
  3. Make time to discuss it openly at your board meetings
  4. Adopt a policy of Adult-Adult behaviour in the boardroom and outside it
  5. Articulate clearly your feelings, what you need and options to meet those needs (Feel/Nee/Do)
  6. Agree “soft contracts”
  7. Legislate for their breach

On an individual basis, you can monitor your own ego state:

Which mode am I in now?

  • Parent?
  • Adult?
  • Child?

 

Yes, which?

 

Ciarán Fenton

 

small change: a crisis is an emotional intelligence (EQ) test for your board

CiaranLinkedIn

small change
by
Ciarán Fenton
How small changes in your behaviour have a big impact on how you work, lead and follow.
That’s the working title of a book I’m writing, initially as a series of short blogs.
You can see the full blog index here as it builds.
Blog 49 small change: a crisis is an emotional intelligence (EQ) test for your board
•When I say “board” I mean: main & operating boards, ExCos, and management teams
EQ Test for boards
Your board can experience a crisis at any time.
It could result from any number of “risk events”: pandemic, terrorism, weather, conduct, financial, hostile bid or data leak.
All of these present existential risks to your organisation.
The response of your board can make or break your organisation. This response will come from your board or from the most powerful people, or person, in the organisation.
It follows that the quality of the decision-making process in response to the risk event is key.
That quality is determined, largely, by behaviour.
Behaviour can be measured, roughly, using some of the core components of emotional intelligence.
In my work, I focus on three EQ components especially at times of crisis:
  • Self-awareness:  how aware am I of my own behaviour patterns, particularly under stress?
  • Empathy: to what extent can I understand how another might be feeling, especially under stress?
  • Ability to meet needs productively: to what extent can I get my needs met productively, especially at times of crisis?

I have designed a rough EQ Test for Boards – main and operating – ExCos and management teams – see grid above.

The “fantasy board” scores above come from my memory of a broad range of characters in those key roles that I have encountered in my corporate and consulting career since I started work in 1982. Some of the scores are an amalgam of characters. That said, the scores are not untypical of many boards in my experience.

The fantasy board above scored 160 over 330 or 48% on my rough scoreboard. If the entire board were involved in a decsion-making process during a crisis I would be concerned.

If, say, during a crisis the CEO (Score 63%) and the CFO (Score 53%) made the key decisions –  the outcomes could be seriously damaging for the organisation.

If in truth, the Chair (Score 33%) holds all the power then, the organisation above could, as we say where I come from, be totally fecked in a crisis.

So how can any organisation mitigate the risk of taking poor or disastrous decisions during a crisis?

  • Hold full and formal meetings of all members of your board or boards. Do not succumb to the dangers of “sofa decision-making” famously criticised in The Chilcot Report:
  • “Tony Blair’s “sheer psychological dominance” played a key role in the run-up to the Iraq war, and meant that flawed evidence justifying the 2003 invasion was never challenged, Sir John Chilcot told MPs on Wednesday. Giving evidence to a parliamentary committee, Chilcot said “sofa government”, in which ministers were not consulted on crucial decisions, reached a high point under Blair. This reflected Blair’s personal preferences, he said. He said that on several occasions between 2002 and 2007 “things were decided without reference to cabinet”. They included the legal basis on which the UK went to war in 2003 as part of a US-led coalition and the decision, once Saddam Hussein had been toppled, for Britain to take over the administration of four of Iraq’s southern provinces. Referring to the evidence given to his inquiry, Chilcot said he recalled asking the then foreign secretary, Jack Straw, why the cabinet had not “provided more of a challenge” to Blair or demanded more information. “The answer that came back was that Tony Blair had, as leader of the opposition and in government, rescued his party from a dire predicament. I had the sense from Straw’s answer that he had achieved a personal and political dominance, a sheer psychological dominance.” (The Guardian 3 November 2016)
  • Have the courage to do an internal oral (NB unwritten) EQ Test on each other to determine the risks.  Had The Blair Cabinet had a modicum of introspection it might have avoided many of the problems highlighted in the report. It is notable that earlier in his term, Mr Blair had taken a different and more inclusive decision-making approach during the negotiation of The Good Friday Agreement. So,  if your board considered seriously the prospect of the damage it might do to the organisation by not improving its EQ during a crisis then it might be incentivised to do so.
  • If you are on a board, then study mindfulness processes. Simply become aware of the extent to which you are self-aware or not, empathetic or not, can negotiate your needs productively or not. Initially don’t try to change anything. Simply notice your own behaviour as in: “now I’m aware that I am terrified of this situation but afraid to show it/I despise him/her for feeling terrified in this crisis/why can’t they shut-the-f**k-up and just do what I say!!!”

If you start by simply noticing your behaviour you will soon start to change it, voluntarily.

Small changes for sure.

But that’s all it takes, especially in a crisis.

Ciarán Fenton

small change: a decision-making grid for boards

CiaranLinkedIn

small change
by
Ciarán Fenton
How small changes in your behaviour have a big impact on how you work, lead and follow.
That’s the working title of a book I’m writing, initially as a series of short blogs.
You can see the full blog index here as it builds.
Blog 48 small change: a decision-making grid for boards
•When I say “board” I mean: main & operating boards, ExCos, and management teams
decsion-making grid for boards

 

How many key decisions did your main or operating board or function team make in last year?

How many were good?

How many bad?

How can your board avoid repeating the errors of last year?

Can you all agree on what constitutes a good or bad decision?

If your board decided to fire X, hire Y, spend A, not spend B or launch C are you sure you know who on your board agreed with those decisions and who didn’t?

Did you all vote? Did the CEO decide? Did the Chair hold sway? Did the CFO nobble the CEO? Did the GC even get a look-in? Might any of last years’ decisions land your organisation in legal trouble or onto the front pages next year?

Against what benchmark were those decisions judged? Short, medium or long-term? Were the decisions based on financial criteria only?

Were environment, society and governance (ESG) issues taken into account?

Who on your board is holding a silent and bitter grudge against a decision taken last year?

Who has left your business who could damage it later? Do you know? If not why not?

Even if the most forceful personality on your board took the decisions and you were too scared to speak up, does that person have anything approaching a decision-making process?

How might your main or operating board, ExCo or function team make better decisions:

Step 1: Agree a decision-making process before taking any decision

If your board doesn’t act as a board in the collective decision-making sense, what’s the point of it?

Agreeing a decision-making process can take the heat out of the meeting and shed much light. Old fashioned “standing orders” have their place: speaking through the Chair; proposing, seconding and voting. On big issues don’t forget to vote even if it’s not a formal or “legal” vote. This stops people hiding and prevents decisions being driven through.

Step 2: Agree on a purpose, strategy and behaviour (PSB) plan against which your board will judge its decisions

If the purpose of your organisation is to maximise profits and screw everyone else, at least admit that, take responsibility for it, take and judge your decisions against that benchmark.

If on the other hand, you want to balance profit with the environment, society and governance issues then don’t pay lip service to those issues – agree, upfront to what extent, ESG will figure in your decisions.

Are you all clear on your organisation’s purpose? In my work with boards, the lack of a shared purpose statement is at the root of many poor decisions.

Step 3: Appoint a Devil’s Advocate by rotation at each meeting

How many meetings did you attend last year during which you remained silent about an issue or behaviour on which you felt strongly?

How many times did you stand by and watch a colleague being bullied or wronged and didn’t speak up?

How many times did you witness hard work go uncelebrated and failed to call it out?

Which business decisions did you disagree with, but didn’t feel able to fight?

A simple way of alleviating this problem is to appoint a Devil’s Advocate by rotation at each meeting who has permission to call out whatever he or she likes about whomever he or she likes, or not.

No chance, I hear you say, on your board.

If true, then expect next year’s decisions on your board to be as good or as bad as last year’s.

Nothing will change unless you make it happen.

I hope my decision-making grid helps.

Key Decision-Making Grid: 7 Steps

  1. One member of the executive team formally proposes a key decision.
  2. They must make an explicit link between their proposal and the shared organisational purpose, strategy and behaviour (PSB) assuming this has been shared and agreed previously. If it hasn’t, now would be a very good time to agree your PSB or all your decisions will carry a significant risk of failure.
  3. The Devil’s Advocate for that meeting gives three reasons why the decision is a bad one.
  4.  Legal and HR give their views.
  5. The rest of the Executive Team give their views. Around the table, No hiding. No silences. Everyone must give a view a.k.a a vote.
  6.  The impact of the decision is tracked over the year or years.
  7. A post- mortem is held at the appropriate time on the decision. Fix, don’t point fingers.

What big decision is looming for your board?

How will you decide?

Ciarán Fenton

small change: all boards – listed, private, family, even golf clubs and especially law firms – should apply the FRC Code. ‘Tis a work of “art”…

CiaranLinkedIn

small change
by
Ciarán Fenton
How small changes in your behaviour have a big impact on how you work, lead and follow.
That’s the working title of a book I’m writing, initially as a series of short blogs.
You can see the full blog index here as it builds.
Blog 47 small change: all boards – listed, private, family, even golf clubs and especially law firms – should apply the FRC Code. ‘Tis a work of “art”…
•When I say “board” I mean: main & operating boards, ExCos, and management teams
the frc code is a woek of art
If your board wants to avoid, what lawyers euphemistically term “serious risk events” then it should apply the FRC UK Corporate Governance Code 2018 and follow the accompanying Guidance on Board Effectiveness 2018, whether it has to or not.
Your board should  not feel that it is too small or “unimportant” or be in any way daunted by the Code, for ’tis a work of “art” for three reasons:
  • it’s short: only 15 pages
  • it’s clear: simple English used throughout
  • it focuses on the “art” of good govenrnace, not the science

In addition, the accompanying FRC Guidance on Board Effectiveness 2018 is excellent because:

  • it’s also short, for a guide: only 45 pages
  • it’s also clear: simple English used throughout
  • it contains lists of great questions under each section: what I call “questions a curious Martian might ask”

The “best bits” of the Code for me if, like a good book, a Code can have “best bits”, are these, with keywords in bold:

  • A successful company is led by an effective and entrepreneurial board, whose role is to promote the long-term sustainable success of the company, generating value for shareholders and contributing to wider society. (Section 1; Principle A)
  • The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture. (Section 1; Principle B)
  • An “annual evaluation of the board should consider…how effectively members work together to achieve objectives”. (Section 3; Principle L)

The Guidance also contains gems:

Section 116  states: “The chair is responsible for making sure the board gets the most from an externally-facilitated board evaluation and should ensure it is not approached as a compliance exercise. The chair is likely to find the board evaluation process more valuable if:

  • its recommendations are constructive, meaningful and forward-looking;
  • there is a clear set of recommendations and actions, and a time-period for review of progress against agreed outcomes by the evaluator with the board;
  • it includes views from beyond the boardroom, e.g. shareholders, senior executives who regularly interact with the board, auditors and other advisors, and the workforce;
  • it includes peer reviews of directors and the chair plus feedback on each director;
  • good practice observed in other companies is shared;
  • the evaluator observes the interaction between directors and between the chief executive and chair;
  • there is a robust analysis of the quality of information provided to the board;
  • feedback is provided to each individual board member;
  • and the board is challenged on composition, diversity, skills gaps, refreshment and succession.

What’s not to like?

In addition, it’s divided into five logical and useful sections:

  1. Board Leadership and Company Purpose
  2. Division of Responsibilities
  3. Composition, Succession and Evaluation
  4. Audit, Riks & Internal Control
  5. Remuneration

In my facilitation work with boards, my key focus is on the interdependence between the personal purpose, strategy (PSB) of board members, the PSB of the organisation and the PSB of the board.

Frequently I find that the systemic weakness on a board is a lack of shared purpose at a personal, organisational and board level.

If there is no clear shared purpose then it follows that strategy and behaviour will be inconsistent.

This leads to poor decision-making, the main purpose of any board.

The FRC Guidance asks good Martian-type questions on this issue (page 13):

“Questions for boards

• Have relevant members of the executive team been invited to explain the issues at the earlier stages, enabling all directors to share concerns or challenge assumptions well before the point of decision?

• Does the board have a clear idea of the success criteria related to a particular decision?

• What are we doing to test key decisions for alignment with values? Can we give examples and explain how this was considered?

• What are the risks that the decision could encourage undesirable behaviours or send the wrong message?

• Can we explain how the impact on key stakeholders has been taken into account?” (Guidance on Board Effectiveness, Page 13)

Reflection for you based on the Guidance:

  • Think about the last three key decisions your board – main, operating, ExCo or management team – took
  • What process did it use?
  • Had it used the process above, how different would the decisions have been?

 

A question of mine:

To what extent did one individual’s behaviour play a part in the decision?

 

Ciarán Fenton