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Why business proximity is essential to lawyers‘ value contribution
Dominique, you have served for 15 years as Group General Counsel and Board Secretary with Firmenich, the second largest company in the fragrances and flavour industry. How did the Legal function develop during this time?
Dominique Graz: Well, I joined the company some 20 years ago as the one-and-only in- house lawyer at the company. When I recently left the legal team consisted of a team with 25 people (HSE and Product Safety Compliance not included). Today you would say that this clearly reflects two trends: the increasing responsibilities of legal departments and the tendency to resourcing work of critical functions.
What has been your driving line in managing the legal function throughout those years?
The passion for the business has been my permanent driver in leading the legal team. If you want the legal team to contribute to the company strategy and performance, you need to connect the legal function with the other driving forces of the company. It is very important to be close to the business, to understand the suppliers‘ and clients‘ dynamics, and to know the own products.
This requires in addition to a solid legal background and strong management skills, to have a deep interest into the business itself, to take time with your business colleagues to get acquainted with the products, to invest time in understanding the company innovation and last but not least to visit local markets.
As for other functions, the success of a legal team will also depend on making the right choices and to set priorities, as you can’t do everything. Being close to the business, it will be easier to understand the urgencies and to contribute value to the company in focussing the own support on high impact and higher risk activities.
Let’s talk about the relevance of knowing local markets. During your position as General Counsel in a multinational environment, you were based in Geneva, however, you have also worked 2 years in the U.S. and 4 years in Shanghai. What was the reason for you as a General Counsel to physically dislocate in the markets outside of the company HQ for such a long time?
In both cases, the main reason to move into the local markets was to learn more about the day to day business in order to better support the company’s future development when the respective U.S. and China markets were entering into a critical growth path. The purpose was also to expand the legal team locally during the time I was participating as a member of the local management team. This was a two-way exercise. First, knowing the needs and challenges of the local business helps to address and answer them accordingly, provide to-the-point support and actions and to liaise with the right persons. Second, it was a leadership role, especially during my position in Shanghai, to contribute within the local management team in bringing the corporate values and culture into our Chinese business and in return to feedback with a Chinese market insight to corporate management and strategic discussions. Not always an easy task, when managing by influence is critical versus a more usual Chinese vertical organisation. Remaining connected with the day to day business activity also makes you closer to your entire team’s regular working environment and further supports a leadership style driven by example.
On the other side, there is as always a flip-side as well. While being abroad you need to remain well connected with your executive colleagues and your team at the corporate HQ. This form of leading a team is less natural than if you are physically at the HQ. But remote management and decentralised management is a growing trend anyway.
You mentioned that during your time your legal team has been steadily growing. Didn’t you have any cost restrictions? Other legal departments are regularly complaining about annual cost-cutting exercises. What was the objectives to develop the legal function and what relevance played the fact to know the business of your internal customers?
The business environment and the underlying legal playing field are in constant evolution. Growing needs for legal risk management made necessary to develop more robust tools, systems and processes to cope with more contracts, more complexity, and more compliance within a growing business. Legal has to cope with the combined pressure of a business extended into new frontiers and rapid expansion of necessary compliance programs to support the company in complying with complex regulations in trade compliance, workplace behaviours, AML or anti-trust to name a few, and – certainly also with us – a constant pressure on cost and efficiencies.
Let me make another example: in the fragrance and flavor B2B industry, many clients are expecting today to deal with very detailed and complex contractual documentations, which are requiring better systems and robust negotiation skills to support in a timely and efficient manner. Here again, a broad and in depth connection with the business will help in anticipating the needs to support commercial strategies in growing the business with the expected risk management organisation.
All of these growing or new requirements obviously need resources in terms of people, processes, tools and systems. Regular rebalancing in-house and outside spending together with investing in new legal technology is necessary. The budget for a support function like Legal will always be a matter of defending the value contributed to the company, whether in terms of direct value creation or expensive reputation risk or litigation cost avoidance.
We know that due to the ‘up-or-out‘ policy applied in big law firms lawyers move in- house into a legal department. You have recently chosen the other direction. What have you already noticed sitting now on the other side of the table?
Actually my move to a law firm allows me to share the experience gained as in-house counsel with other companies looking for such „outside-inside knowledge“. I always expected from outside counsel to know the actual needs of companies, and with my background I think to better know from the inside what is needed and expected. Outside law firms tend to be too far from the actual business and have a different risk profile to defend. Nevertheless, I consider both in-house and outside counsel as very complimentary, with the latter being critical when outside legal opinions or when highly technical skills are needed, in particular when dealing with complex compliance issues or securities markets dealings. Advising through detailed and lengthy legal memos with many qualifications, „whereas“, notes and disclaimers is not sufficient anymore and not really customer-friendly. A strategic understanding and readiness to be prepared to express clear and synthetic opinions and recommendations are key to answer today’s needs. In this fast changing world, counsels combining first class legal knowledge and solid customer knowledge will better serve their clients‘ needs.
Is there anything you noticed is crucial for lawyers when delivering legal services, and I mean regardless whether you are an in-house lawyer or an outside counsel?
The focus of legal services is changing. From a transactional and litigation function like legal, since years a deep wave has been moving priorities towards compliance. Knowing better the business of your (internal) customer is particularly important to pick up where big risks may develop and what the large business opportunities are to support. Legal services must adapt to this new world and shift priorities and resources towards a robust legal risk management role and be a key contributor to the company’s strategy and its desired corporate risk profile. In this respect, a successful counsel will have to combine the following competences: be a global business leader, a strategic thinker, a trusted advisor and excel in execution as a changing agent.
Can you make an example why and how this could be important for a company and what benefit this had in terms of delivering your services?
Let me take as an example the roll out of a legal compliance program. Managers in the U.S. will immediately understand the need to issue a code of business ethics and train employees on appropriate behaviours in the workplace. It will be, however, more challenging to convince managers in emerging markets to enforce trade compliance rules and to roll out a robust anti-corruption code, possibly acting against local practices, and which may be (wrongly) perceived as a resistance to sales growth. Direct connections with local leaders, root knowledge of the local business and the local market thrusts will nurture your leadership in getting the necessary acceptance of such program as a full part of the toolkit to do business. I have involved myself personally in presentations and training together with the top management as part of „walking the talk“ and this has clearly been successful in raising the bar throughout the entire organisation. Now you see how a long-term stay of a General Counsel in the local country, like four years in China in my case, can directly create benefits to a company.
You have seen and learnt the company’s business on site in the U.S., in China and of course also in Switzerland. Looking back, what does it mean for lawyers in these countries when referring to the requirement of „knowing the business“? Have you seen any differences in terms of relevance or approach?
Actually the notion of „knowing the business“ won’t be different at all, I mean any lawyer should know what the needs of his customer are. But the business and its playing field are certainly different, the business opportunities are not the same, the critical risks to manage and to protect the company from may differ, and of course people and cultures are specific. The lawyer needs to get all its facts and circumstances in hand in order to provide a constructive legal analysis and to build business propositions. At the same time they must be compliant with corporate culture and policies as well as applicable in the particular local case. It looks simple but based upon my experience in China it is difficult, time consuming and requires a lot of personal engagement!
Dominique Graz was for more than 15 years Group General Counsel and Secretary to the Board of the Firmenich Group, the largest family owned Fragrance and Flavor Company in the world, where he hold positions based in the USA and China in addition to Geneva. He has a PhD/Dr Jur from the University of Lausanne and is admitted to the Swiss bar. Recently, Dominique joined the Swiss law firm PYTHON (formerly Python & Peter) as Counsel and also serves as non-executive Director in a Hong Kong based company operating a social enterprise in the Tibetan Mountains in China.