Editor’s Note: This article is the latest installment in a recurring series in which Cravath partner David R. Marriott will write on topics of interest to in-house and outside counsel in partnership with a GC co-author.
Most corporate law departments play the steady Eddy role, priding themselves on managing each day’s crisis quickly, calmly and effectively. Few look beyond the crisis of the day to anticipate and avoid issues before they arise. This failure arises not from any principled objection to what the academics call “preventative law” — a proactive approach that resolves legal issues long before they become legal problems — but rather from the practical difficulties in seeing around corners and getting the solution right before the problem presents itself. Notwithstanding the great rewards that come with success, there are plenty of disincentives to attempting to practice law proactively. As a result, corporate law departments mostly remain in a reactive, “diagnose and cure” mode. Here are a few thoughts about how to move to a more preventative model.
The preventative model depends, at bottom, on the ability to predict accurately what legal problems are most likely to arise in the future. Prophecy resides in the “hard to do” category, but law departments can greatly improve their skills of prognostication in three ways.
First, form a team to first look at all the signposts — business plans; pending legislation and regulation; political movements; enforcement trends and resource allocation; media and social media focal points — and then collectively assess what risks are most likely to materialize. Second, make sure that the legal team collaborates with the business folks who are undoubtedly working through the same process. Business depends on constant advance planning for future contingencies, and that business planning (operational and financial) can be folded right back into the legal team’s exercise. Finally, add rigor to the process by using an iterative model that tracks the basis for prediction, the prediction itself and the outcome, in order to see what the best predictors are.
Of course, it isn’t enough to identify future risks: prevention also requires immediate prophylaxis. And that is often the biggest obstacle to implementing a program of preventative law. Promoting the work of volunteer fire departments, Benjamin Franklin famously remarked, “An ounce of prevention is worth a pound of cure.” What he ignored is that while everyone loves the fireman, the fire marshal has few friends. When law departments take on the role of internal police, trying to prevent problems by imposing compliance regimes, they risk losing the trust and candor essential to any client relationship. So renounce the enforcement model. Instead, provide education and promote collaboration, always with the goal of bringing the legal approach into harmony with the client’s business objectives. And when problems do arise, demonstrate that the legal team remains committed to zealous representation without recrimination.
The good will engendered by fostering a team-oriented approach to preventative law will help with another problem: getting a preventative law budget. Preventative law is expensive, and the cost seldom ties directly to an immediate benefit. But you can and should keep score retrospectively: identify pitfalls avoided, assign pro forma costs avoided and compare those to the costs of the prevention. Treat the whole approach as an ongoing experiment that will be continued only so long as the value is demonstrable.
In anticipating problems and applying prophylaxis, a preventative approach to law proves to be far more process driven than the reactive approach in solving legal problems as they arise. The analytic techniques developed in manufacturing for continuous process improvement — e.g., Lean Six Sigma — can further enhance a preventative approach to law with a rigorous framework for developing, implementing, and evaluating the initiative.
Moving from the “diagnose and cure” model to a preventative approach may seem daunting, but with a bit of forward thinking, an iterative evaluation process and a continued focus on teamwork and relationship-building, corporate law departments have an opportunity to enhance preparedness for the legal issues that may be lurking around the next corner.
Gregory S. Gallopoulos* is Senior Vice President and General Counsel of General Dynamics Corporation. David R. Marriott is a partner in the Litigation Department of Cravath, Swaine & Moore LLP.
*Views expressed in this article are those of Mr. Gallopoulos and do not necessarily reflect the views of General Dynamics Corporation.
This column does not necessarily reflect the opinion of the editors at Big Law Business or its parent owners, Bloomberg BNA and Bloomberg LP.