Clipping the Wings of the Legal Eagle – The Inexorable Rise of the Commercial Director

August 16, 2006

There was a time when contract managers knew their place in the corporate pecking order.  Perhaps not quite studious enough to qualify as solicitors, they were the ones with the cheap suits and a chip on both shoulders.  Like Finchie from The Office, they had been educated in the University of Life.  Their ‘legal eagle’ colleagues drove better company cars and got paid more.  They also had the ear of the Chief Executive. 


How times have changed.  Man at C&A has been replaced by Paul Smith and Armani.  Nearly all significant IT and BPO service providers now have commercial directors at Board level, responsible for formulating and managing commercial policy and process.  IBM, EDS, Cable & Wireless, Fujitsu, LogicaCMG, Capita, Vertex, Accenture, Serco and many others all have commercial directors in very powerful positions.  In many of those organisations, the commercial directors play a far more prominent role in negotiations than the lawyers, who may be viewed somewhat unfairly as ‘sales prevention officers’.   


This shift in the balance of power from lawyer to commercial director will have a number of profound effects for lawyers:


·         lawyers being marginalised on deals so that they just advise on strictly ‘legal’ matters such as intellectual property, and warranties and indemnities – this can become a vicious circle as there will be fewer and fewer opportunities for lawyers to demonstrate that they are ‘adding value’


·         the outbreak of ‘turf wars’ between lawyers and commercial directors, with the former seeking to show that they can do much more than give technical legal advice, and the latter jealous of any encroachment onto their commercial territory


·         greater pressure on in-house lawyers to justify their existence, leading to less work being sent out to external law firms


·         in-house legal departments shrinking and commercial departments growing


·         commercial directors being paid more than legal directors


·         lawyers reporting to commercial directors.



But it’s not all bad news for lawyers.  Lawyers in private practice will find that they are selling to a new customer – the commercial director.  Commercial directors are less enamoured by the magic of the legal brand, and more interested in results (and value for money), creating healthy competition between established firms in the market and newer entrants.  The sales pitch is also different – commercial expertise is valued more highly than legal expertise, which is simply taken for granted.  This needs to be tempered by the realisation that no client wants to be shown up by their advisers.    


There will still be opportunities for advice on deal-related pensions, HR and property issues, and there will be little or no impact on litigation, corporate or tax work, which are still seen as premium services.  


For lawyers in industry, there is an opportunity to re-invent themselves as rounded commercial advisers, with some going the whole hog and becoming commercial directors themselves. 


And finally (and the most fun of all), there’s the chance to see City lawyers sucking up to people that they might secretly regard as their social inferiors, after decades of ignoring them.


John Yates is a Partner at Beachcrofts: