GC Leadership Takes a Legal Department from Loathed to Loved
By Jennifer J. Salopek
When Moshe Shalev was hired as VP and General Legal Counsel at Tahal Group B.V., a global engineering design and construction company, he found the legal department every GC fears—a department that was viewed as a roadblock by its internal clients, some of whom referred to the lawyers as the "Deal Breakers." As a result of the department's sluggishness, business leaders hired and managed outside counsel ad hoc, with little to no regard to cost or budget predictability. The internal lawyers did little work themselves, spending their time reviewing the work of the outside firms. During that first year, Tahal spent nearly US$1.5 million with external counsel.
System inefficiencies and lack of process further complicated matters, especially with Tahal's 30 subsidiaries in more than 20 countries, 15 in developing countries. There was no central database containing information on contracts, signatory rights, or even who the subsidiary board members were. Fortunately, Shalev brought an international background gained by working at the United Nations. His negotiation and diplomatic skills would come in handy at Tahal.
"He brought experience in working with developing countries, with a great sense for helping people, with genuine concern for diversity, and with an uncommonly wide point of view due to his international experience," says Alon Pasternack, director of finance.
Ifaat Avital, Moshe Shalev, Ruth Shelsky, Amos Kreiner, Orna Swartz
Shalev met with the various departments inside the Group to understand the types of contracts they needed. "Many were the same, but each law firm and each in-house lawyer had its own template," he notes. "Clients would get confused and would have to review the contract carefully every time."
Shalev undertook a multi-part transformation. First, the legal team worked together to develop their own templates for the commonly used contracts from different types, which they accompanied with training of their internal clients; they also implemented simple solutions to enable effective subsidiary management, as well as knowledge-sharing within the legal department.
Then, Shalev sought to re-assemble and re-motivate the legal team. Avoiding any criticism of the prior state, he encouraged them to be motivated for change. He empowered them to do the work themselves using their own templates, encouraged them to take responsibility, and increased their exposure to top management within the company.
After a few months, Shalev made it official: He would no longer use outside counsel on a permanent basis, but only in special circumstances or for special issues. "We brought 95 percent of the work in-house, cut our costs by 45 to 50 percent, and reduced response time," he says. "It became very clear that there was real change, and we saw increased satisfaction among our clients and Group management."
Remarkably, they brought the majority of the work in-house while adding only one full-time equivalent, decreasing external legal spend to only US$165,000, with total budget predictability, by the end of 2016.
"The outcome was fascinating," his client noted. "Due to the standardization, knowledge retention within the company and the motivated, available in-house lawyers with in-depth knowledge of the company and its needs, the response time became faster, negotiations proceeded more quickly, and the legal cost was dramatically decreased."
As to the subsidiaries, Shalev spent the first three months of his tenure at Tahal visiting them all, from Ecuador and Angola, to Cyprus and Siberia. ("Most of them are missing basic necessities," he notes.) Shalev met with local managers, personally explaining the importance of updated signatory rights, Power of Attorney, management appointment documents and other corporate documents, and took this opportunity to become personally acquainted with them. He collected the active contracts of each subsidiary and reviewed them to identify the main issues and make suggestions on how to move forward. He returned with two massive spreadsheets, that were used to populate new databases that are now housed in the cloud. "The simplicity of the cloud usage encourages people to use it, and with periodic reminders from the team, almost all subsidiaries update their information regularly," Shalev says. He maintains those valuable personal connections through regular Skype calls.
Shalev also launched the Legal Academy, in which one member of the legal team researches a legal issue in depth and makes a presentation to the others. "It forces us to deeply analyze and scrutinize the issue, to speak about it and answer questions, which refine our understanding of the subject," he says.
Shalev's impact on the organization was so profound that something unprecedented happened: It was the CFO who authored Shalev's nomination to be named an ACC Value Champion.
Since the departmental transformation, the team has shifted from passive to proactive, actively sought to bring funds into the Group, and get involved by its internal clients from the very beginning of any transaction. The entire ethos of the department has changed.
"Our in-house team is the best legal resource," says Shalev. "They know the company the best and are expert at what we do. They are available, flexible and committed to the company's success; and are now the first and foremost to handle any legal matter, bringing the utmost value to the company."