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MetLife GC: Lawyers Should Learn to Talk Business

May 18, 2015, 4:43 PM

Lawyers are so famously fluent in their own jargon that the rest of the world has furrowed its brow and given this language its own name— legalese. But Ricardo Anzaldua, Executive Vice President and General Counsel at MetLife , says the language of the corporate world is different, more practical, and firm lawyers are too often illiterate.

“I require of my own lawyers an ability to communicate — in crisp and clear ways, in business friendly language — a digest of complex legal issues into actionable business prose,” Anzaldua said. “I really don’t find enough of that in the outside counsel.”

Anzaldua’s need for clear, simple advice is as great as ever. MetLife faces problems that strike at the core of its business model. In 2014, the Financial Stability Oversight Council (FSOC) designated MetLife a “systemically important financial institution” (SIFI), a tag which comes with increased pressure from federal regulators.

MetLife has challenged the SIFI designation in federal court, and the outcome could fundamentally change the way MetLife does business. The burdens of a SIFI designation have also been felt by General Electric, which said it would sell off its finance unit in April, and analysts have speculated that, should the SIFI label stick, MetLife may take a page from GE’s playbook and restructure.

Anzaldua said he’s hopeful for a favorable ruling, but added that, “All the options will be on the table.”

A graduate of Brown University and Harvard Law, and a long-time partner at Cleary Gottlieb Steen & Hamilton , Anzaldua has been at MetLife since December 2012. He recently spoke to Big Law Business about the regulatory challenges facing his company, the lack of diversity in law firm leadership, and a recent real estate purchase.

Part I Excerpts:

There will still be opportunities for outside firms to run the legal function for start-up companies, for companies that haven’t yet staffed up, but as corporate entities grow and become part of larger organizations I think the tendency will be to hire their own in-house staff.

That’s really what the outside counsel need to understand — their advice to the company is introduced into a matrix of stakeholders. The firms who are most successful are the ones who understand the entire matrix.

Law firms, in my experience, tend to be very atomized collections of individual lawyers. The individual lawyers, to some extent, feel like their ability to know [a particular client’s business] is a competitive advantage against their peers. I think that’s really a recipe for failure.

[Secondments are] more like an attempt to create an individual relationship, and not so much about how to understand the client better. If firms really thought of it that way, they would be sending junior partners instead of junior associates.

Below is an edited transcript of the first installment of the interview.

[caption id="attachment_2163" align="alignleft” width="350"][Image “Courtesy of MetLife” (src=https://bol.bna.com/wp-content/uploads/2015/05/Anzaldua.png)]Courtesy of MetLife[/caption]

Big Law Business: Before you went to law school you worked as publications director and senior editor at the Center for U.S.-Mexican Studies . How did you get involved with the organization?

Anzaldua: I was really interested in economic development in the very poorest countries. That’s what I studied as an undergrad at Brown. I did Latin American studies with a concentration in economics.

I was interested in economic development, and went to grad school in San Diego with that focus. I eventually ended up being the publications director there, which focused on economic development issues in Mexico and Latin America.

Big Law Business: Are you still involved with economic development in any capacity?

Anzaldua: As GC at a public company, I don’t really have any space for advising foreign governments about anything, but I have maintained an interest in economic development issues.

For the past 13 years I’ve been the pro bono GC of a non-profit that operates internationally to advance community development in the poorest countries, The International Institute of Rural Reconstruction . Now I’m a member of the board of trustees as well.

Big Law Business: How did you get involved with that organization?

Anzaldua: It actually has a connection with the law firm that I worked for. The International Institute of Rural Reconstruction has been a pro bono client of Cleary Gottlieb for about 55 years now.

Big Law Business: What did you learn at Cleary Gottlieb that you carried in-house?

Anzaldua: I learned a lot of the basic tool kit skills and competencies that made me into the professional I am today, competencies like analytic precision, communication, the need to project confidence, and the ability to lead teams and manage large, complex matters.

And I learned to be a responsive and responsible professional. It was a great training. I was there for 17 years, as a partner for the last nine.

Big Law Business: You mentioned projecting confidence. Some say the role of a GC has evolved and now requires a skill set like that of other executives, including the ability to be the face of the company. Do you agree?

Anzaldua: I strongly agree. At MetLife, the GC is an equal partner with the rest of the C-Suite executives. A great deal of my time is spent thinking through strategic issues for the enterprise, and not merely the legal aspects of the company’s activities.

Big Law Business: Was that something you had to learn on the job, or did you feel prepared for that leaving Cleary Gottlieb?

Anzaldua: I left Cleary Gottlieb in 2007 and joined The Hartford Financial Services Group as Associate General Counsel. I evolved into that business advisory role while I was at The Hartford, principally because I had a key role to play in helping the company manage the financial crisis. I had quite a few years of experience being a strategic business advisor and thought partner from my time at The Hartford.

Big Law Business: What were the biggest lessons you learned from the financial crisis?

Anzaldua: It was really an extraordinary opportunity to develop as a leader, to help guide an organization through an extremely stressful period, to figure out solutions to complex financial challenges, and to learn how to reorganize and restructure a big, complex organization so it could survive.

A great deal of our effort was centered around raising the capital necessary to stabilize the company during a period of financial stress while making sure we also inspired confidence in the employees, making sure people felt reassured.

So there was an aspect of it that was technical, transactional work — financial work to help the company survive — but also an aspect of it that was more about corporate leadership.

Big Law Business: What 3-5 big firms does MetLife do the most work with?

Anzaldua: We actually work with over 700 firms in the United States, and several hundred more outside the United States. I’d hate to mention 3-5, because we have huge relationships with dozens of firms.

Big Law Business: It seems most companies have a handful of firms they turn to for the really important, high stakes work. Would you say MetLife farms out work to a more diverse array of firms than other companies?

Anzaldua: We’re more diverse because we have different activities where the work is distributed to outside counsel that are quite different in profile.

An insurance company is made up of several different pockets of activity. One of them is the actual issuance of insurance products, so we have insurance regulatory counsel. There are probably 10 firms we use in that area.

The insurance company also takes in a massive amount of premiums, which become part of the insurance company’s balance sheet. An essential part of the insurance company’s business is to take those assets and invest them. So we have an investments department that engages another couple of dozen very important firms that advise us on investments.

Then, because of our relationships with customers, counterparties, regulators, and shareholders, we have a big litigation exposure. That’s another area where we engage a big group of outside counsel.

Big Law Business: What are the big changes you’ve seen in the relationship between in-house and outside counsel?

Anzaldua: The main change I would cite is the disappearance of the go-to firm as the ongoing, general outside counsel to a company. I think that kind of relationship is pretty much gone. I don’t know of any big corporations that continue to have a single, big outside counsel that handles most everything.

I think that’s in part a result of something that happened in the market. Outside counsel experienced a significant increase in the level of fees in the 1980s and 90s. Relative to the cost of hiring lawyers, outside counsel became very expensive.

In MetLife’s case, for example, we now have an enormous in-house department. I have 300 lawyers in the United States and another 100 outside the United States that handle much of our work internally. When we’re engaging outside counsel we’re doing it either because they have a special expertise we don’t have in-house, or because we just don’t have the bandwidth to handle a matter internally.

Many, many of the transactions and litigations we actually handle entirely with our in-house team.

Big Law Business: Do you have a sense for where this trend is, in terms of its life span?

Anzaldua: I think it’s a trend that’s here to stay, and if anything it’s likely to build. There will still be opportunities for outside firms to run the legal function for start-up companies, for companies that haven’t yet staffed up, but as corporate entities grow and become part of larger organizations I think the tendency will be to hire their own in-house staff.

In fact, in the market for legal talent, the outside counsel have found it difficult to grow, meanwhile the law schools continue to graduate pretty much the same number of lawyers as they have in the past. There’s been a little bit of a down-tick recently, but the upshot in the market is there is a lot of legal talent that has found it difficult to find jobs.

That’s a good market for an in-house law department to tap into. The challenge is to figure out how to train lawyers at a level of expertise and experience that the in-house departments are not accustomed to.

But I think that’s where the market is trending — for in house law departments to run their own talent development activities, as opposed to drawing them from the outside counsel as they have in the past.

Big Law Business: Are there specific efforts you’ve made since you’ve been at MetLife to grow the legal department, or was that growth already running on its own energy when you got there?

Anzaldua: It’s actually something we’ve paid a lot of attention to. We’ve done a great deal of work to make our organization a talent incubator, and structure it so that we have a valuable quid pro quo with the professionals we hire.

We’ve been looking for talent that’s earlier in a career, with a lot of growth potential. We offer our talent career and professional development opportunities, and especially — and I think this is the innovation — the opportunity to develop as corporate leaders.

So we do lots of training on leadership, lots of training on how to make yourself successful beyond just being a successful attorney. I think that’s the opportunity that’s presented itself for us, and that’s what we’re seizing upon as a way of creating a talent pipeline, a leadership pipeline.

It’s also an opportunity to improve the diversity of our organization, and of the profession, in terms of gender, people of color, LGBT, disability, and all the diversity criteria.

Big Law Business: Large law firms that excel in the next decade will do what successfully?

Anzaldua: They’ll excel at understanding the business of their client from the inside out, and how their advice impacts the stakeholders of the business, including internal stakeholders, customers, regulators, and investors.

That’s really what the outside counsel need to understand—their advice to the company is introduced into a matrix of stakeholders. The firms who are most successful are the ones who understand the entire matrix, not just the internal decision maker, and certainly not just the legal issue.

Big Law Business: We hear this response — that firms need to better understand the business context in which legal decisions are made — all the time. What are some practical things firms can do to improve their understanding?

Anzaldua: You know, I don’t really know that very many law firms understand how their clients operate. I had a couple of colleagues when I was a partner at Cleary Gottlieb who seemed to be insightful about the internal workings of the client — how decisions were being made, how the internal stakeholders in the corporation related to each other — but there really wasn’t very much knowledge transfer within the firm.

So investing some time in understanding how the entity functions internally — as a matter of how decisions get made and how internal stakeholders relate to each other — is one important piece.

Another important piece is understanding exactly what the business model is. How does this entity deliver services to its customers? What is its competitive imperative? What is the business doing to improve its competitive situation in the market?

Firms generally don’t spend enough time trying to understand that, trying to learn it and then transferring that knowledge about clients within the firms.

Law firms, in my experience, tend to be very atomized collections of individual lawyers. The individual lawyers, to some extent, feel like their ability to know this stuff is a competitive advantage against their peers.

I think that’s really a recipe for failure. The firm needs to act more like a corporate entity, with the lawyers within the firm sharing information with each other, and acting more as a team, more collaboratively, if they really want to succeed over the long term.

Big Law Business: Are secondments an answer to the lack of knowledge about the business context? Is that something MetLife does?

Anzaldua: It isn’t something we’re currently doing, but I do think it’s a very interesting idea.

In my experience, secondments tend to involve sending a junior lawyer over to give him or her some experience, without much of a strategic view about how that secondment is going to turn into knowledge and a strategic position for the firm.

It’s more like an attempt to create an individual relationship, and not so much about how to understand the client better. If firms really thought of it that way, they would be sending junior partners instead of junior associates.

Big Law Business: Do you think that’s a viable option?

Anzaldua: I think it is. If a firm wants to learn about MetLife, and to make the investment of sending a relatively experienced lawyer over to work with us for some time — so that that lawyer can really get a feel for how the organization works, and then take that information back and cascade it through the firm — that would be a worthwhile way to invest resources.

Big Law Business: What does and doesn’t work with you, in terms of law firm marketing?

Anzaldua: In terms of what law firms think of as their marketing materials, what really works with me are well done, succinct summaries of breaking issues. Long, draw-out memos that go into detail on new legislation are not very effective.

What I really need are briefings that demonstrate deep subject matter expertise by the ability to take complex, breaking legal issues, and digest them into straightforward, succinct pieces of advice, so that I’m persuaded I’m dealing with an institution that really has command over the issues they’re talking about.

Another aspect I think about, which maybe firms don’t, is the way attorneys carry themselves and communicate, not only with my legal team, but also with our business partners. That’s a very important part of marketing.

I require of my own lawyers an ability to communicate — in crisp and clear ways, in business friendly language — a digest of complex legal issues into actionable business prose, whether it’s spoken or written. And I really don’t find enough of that in the outside counsel. That’s one dimension of style where I think law firms could do a lot better.

Another dimension where law firms could do a lot better is diversity. In many cases, I don’t see diverse teams.

And there’s really not enough diversity up the ranks, which tells me that firms, whatever they may say, really haven’t been making sure they’re retaining and promoting diverse lawyers within their organizations. That’s a very important criterion for me when I select firms.

Part II of the Ricardo Anzaldua series will include: Anzaldua’s thoughts on MetLife’s challenge of the SIFI designation, how to force firms to retain and promote diverse talent, and sharing the real estate market with R&B singer Babyface.

Updated: This post has been corrected to reflect the fact that MetLife is a public company and was designated a SIFI in 2014.