Liam: Yes, that’s really interesting. We actually have in our company a distinction, we have some groups that are, for example, our global leadership team is different from our business management team. Our business management team of people who are business unit general managers, and they have a whole bunch of roles, responsibilities, outcomes that they are responsible for.
So, the leadership team as an example, to your point, they are the social leaders, the ambassador leaders. They are – and they could be anyone in the business. That’s an interesting distinction.
Did you ever see yourself with a legal background as having a future as a legal leader?
Karen: So, first, I think it differs if you’re in a law firm versus in a company. For me, it’s part of what interested me and attracted me to in-house. When people ask me about being in-house and how you’re effective and how you rise to be a GC, I think there is a different trajectory to be successful in-house than at a law firm. At a law firm, it’s pretty hierarchical, it’s pretty clear stepping stones, you generate business and you build a book of business and you do all these things, and you become a partner, and that’s I guess seen as a leader.
Whereas in-house, having that influence is not just within the legal team, it is across the business, right? And it really is about being a value-add part of the business, and an ability to be a trusted partner to the business people.
So, I think while your primary role is to give legal advice, the way you truly add value is to really learn the business, and that was the part that I found the most interesting. Learn how the products and services that your company offers work, and frankly how they make money. Understand the risk tolerance of your CEO and your CFO. Because I think the closer you are to the actual business, the more you can put your advice in context, and the more valuable of an advisor you become.
I actually have a pretty strict rule that it is almost never the case that the answer should be no. It really is about influencing and providing alternatives for how does the business accomplish their goals in a way that manages risk consistent with what we as a management team want to get done. How much risk are we willing to take, and if we do that, what are the likely outcomes? What is the downside? What is the potential upside?
And I’m more naturally averse to risk, I think that’s probably why I’m a lawyer and not an entrepreneur or a founder. But making sure you’re providing that balanced view to management, influencing them through not only your knowledge of the law but your knowledge of the business in that context, so that they can make the best-informed decisions.
Liam: And with that, how do you think about that role of the lawyer leader in the business, as part of the business, with the stakeholders or the people in the organization? I’ll say the management of the organization, and I mean that in its broader sense – and then there is the board of the organization. How do you synthesize and move between all three of those? Do they have the same requirements? Do they vary?
Karen: I’ll start with internal to a company and the executive team versus management. I think that first of all, there is a macro level challenge that exists for any in-house legal department, and that is how are you viewed and that is the perception of the executive team toward a legal function. You’re building this yourself through those relationship. Very different than if you arrive somewhere and there is a preconceived notion of legal as this barrier to get over; we have to do this to get it past legal, as opposed to legal is a value add and they have a seat at the table and are important to our overall view.
In a best-case situation, you have that true partnership with the other executives. That’s where you want to be, right? Because the truth is, legal is not a revenue producing function, and there’s always the challenge of demonstrating the value you provided, when the value you provided might have been avoiding risk. Avoiding a cost that is very hard to demonstrate.
Then there’s the management level, and throughout the organization, for them, it really is about helping them achieve their goals. Knowing throughout the organization, what is the sales team trying to accomplish? They need to get – their goal for the year is they have to get this much new revenue in, or these many contracts. We are structuring our legal team to partner with them to make sure that we’re getting their work done in order to help them achieve their goals. Blocking and tackling is logistical, and how do we get it done, how do we get the work done, what tools do we use to be efficient, what positions do we take.
When you move up a level to the executive team, it’s more strategic. So, your advice is more of the overall strategy. What are the very high-level strategic things the company is trying to achieve? How are we gonna get there as a company, and what role does managing risk play in that?
For a board, because they’re not involved in the day to day, it is both a function of making sure all of just the good corporate governance is happening, and that they have a confidence that the company is doing things in ways that are compliant, that we’re complying with regulations, all of the things that we’re required to do. But then it’s also being a resource for the board.
I’ve had different situations, I’ve had VC backed companies, they would call me in advance of meetings and ask how the founders were doing, how was it going. There’s this relationship of trust with the lawyers. Or there should be.
And then I’ve had boards where it was more, they were looking just for that high-level advice at the larger events of a company. So, you really have to gauge and get to know your board and what their profile is, what they’re looking for from management, and it can also have a lot to do with what their relationship is with a founder or a CEO and how much more they need you in part of those conversations versus just a bit more in the background, and always being sensitive to that.
It’s important for a general counsel, you ultimately serve the company, not an individual. So, that can be tricky sometimes and is something to keep in mind and can differ based on the ownership structure of a company and who ultimately is the company. But particularly for a public company, it becomes then a whole different issue.
Liam: Yes. That whole topic is an area that I have a lot of interest in, for obvious reasons. On that note, what I heard you say there as well was not only did you have these different constituencies or different stakeholders, but you’ve also had to understand and nuance your relationship with them based upon the interplay between them.
Because you’re absolutely right, I know that some of our independent board directors will call our general counsel to get a bit of a read or a pulse, or our CFO to get a bit of a read or a pulse on our executive team, or my thoughts about something. And I think you’re right, being able to actually have that conversation in a way that is trusted by all parties, you know you can imagine if you’re the founder of a business and you’re hearing about the conversation that one of your directors or your investor has with your general counsel or CFO or other executives, that can be trust eroding.
So, but it also can be just fabulously trust building and consensus building.
Karen: And the intricacies of how you handle that are important, right? I’m big on transparency. If there’s something I’m going to tell a board member or discuss with them, it’s no secret. I’ll let them know, hey, I think we should bring this to the board. I’ve never really had a situation, fortunately, where I’ve had a founder or a board member on either side say, “Well, then I don’t want you to say this.” Maybe I’m lucky, but I believe in that transparency because I think it is necessary to have that level of trust.
Liam: It’s also clear to me, the obligation that you have as general counsel.
Karen: When people talk about, from the employment perspective and employees being terminated for cause, people get very wrapped up in what constitutes cause. And the truth is, in 28 years, I’ve only seen someone terminated for cause twice. Once was a violent situation. The other was actually insider trading, and that is a bright line. There is absolutely no question. The answer is, you will be fired. I don’t care if it is the CEO. And again, I count myself lucky that in all those years, it’s only happened twice in my career. Yes, there are some bright lines.
Liam: But you do have to know yourself, don’t you, because there’s always this sort of in the background, where are the lawyers in the business? And I think that if the lawyers in the business, if the only time you see them is when there is this real kind of bright line problem, then in their defense, they’re just not embedded and engaged in the business.
If, on the other hand, you see them in the business – yesterday we had a very thorny discussion with a potentially significant new customer. People come to our company from different places, and this relatively new salesperson I could tell was concerned about bringing the general counsel to that contract negotiation. But the fact that the GC participated, everyone’s shoulders went down because the GC, to your point, understands what the businesspeople are trying to achieve, etc.
Today we had the fabulous news that we’ve won this new piece of business, so everyone’s really happy, but more significantly, our legal team is actually present in the business. And not only present in the business when there’s a problem, but actually present in the business during the kind of ordinary course of events. Helping actually achieve the whole purpose of the company.
And I think that I get that from you as well, that these different stakeholders that you’ve mentioned, they provide you an opportunity or a vehicle to advance, if I can use that term, the influence or the role of legal across the whole company.
Karen: Yes, I think it really is the ideal situation for both management for a GC to have that relationship and to have that ability to be part of the conversation, and not be seen as something to get over. When you have that level of trust, it also allows you to give advice in a way where you don’t feel compelled to have the CYA. “I advised against that.”
When you have that relationship of trust where it’s okay, we’ve made a decision as a management team that this is how much risk we want to take, it may go wrong, and if it does, it’s not gonna be, “Well, how did legal let us do that?” Right?
When you have that relationship with your executives and the answer is, “Okay, we thought this was a risk, it now happened, what are we gonna do to fix it? We made this decision together.”
And that’s the environment in which I want to work, and that’s what I’ve sought out in my career, and what I want to build for the teams who work for me as well because that is certainly a more pleasant environment in which to work.
Liam: That’s also something I imagine that you would say if you’re thinking about a GC role or a senior lawyer role inside any business. You want to know the CEO’s behavior and the team’s behavior. Is it a culture of we as a team, we stand or fall as a team? Or, to your point there, is it a culture of 18 months later, “Well, that new JV falls apart. Well, how could the business leader have made that decision?”
So, you’ve got to somehow assess that when you think about joining a team.
Karen: I’ll be honest, I was not looking to change jobs, and a big part of my coming here was that the management team at Relativity, the people I met, it very much seemed like a team that was still building and coalescing around one another. There are a number of new members. It was really built around not a lot of ego, a lot of wanting the best for the company to build something lasting, and to have that view.
And that starts at the top. It starts with the founder, Andrew, and with the CEO, Mike. They really are very open to hearing people’s ideas, to wanting the input and the expertise of the others in the room. They want diverse voices in the room. And all of that came across loud and clear when I was interviewing.
And then I did my own diligence, and I got very consistent responses.
Liam: When you get a signal that’s in conflict with most of the other data that’s coming to you, how do you process that?
Karen: Surprisingly for a lawyer, I’ve learned to be more data driven. So, if I’m seeing something that just doesn’t seem right, it doesn’t seem consistent with what we’re seeing, I do think the key is to ask for more data. If something seems off, I’ll ask the questions. I’ll frequently seek out whoever is more of the expert in that area and say, “What am I missing here? It appears this way to me. Are you seeing that, or is there something I’m missing?”
And not just to try to elicit agreement with me, but to truly learn and understand is there something I didn’t get that maybe explains why this seems off to me? If I continue to feel like no, this is off and I’m seeing more of it, hopefully at that point others are seeing the same thing and you’re expressing it. But the worst that could happen is you raise it, and people convince you otherwise, and you’re using your logic and your brain and working through it, and realizing, okay, I’ve raised it, it’s been answered, or maybe there’s more risk here than I would take, but people have thought about it.
I really do think you have to challenge your own conventional wisdom sometimes.
Liam: Are there any traits of winners and losers that you think are applicable to the profession?
Karen: A willingness to look hard at your business and how you are claiming success, right? So, one example I will give, looking back, after 9/11, I was at Orbitz when 9/11 happened. I had been there about six weeks. The airlines told us it’s been nice knowing you. Nobody expected Orbitz to survive 9/11, because the travel industry as a whole obviously suffered dramatically, and we were a startup funded by airlines who were now hemorrhaging money, and nobody thought we would survive.
And you know, there were some decisions made by management coming out of that that some may have questioned, and may have said, “Was that the right decision? Should we do that?” One of them was starting to charge a fee, which up until that point we did not. And that willingness to take a risk, to do it, again, with data, with research, with understanding what impact it would have.
I think that same willingness to look at your cost structure, to make the hard decisions, there are some fundamental things that any business needs to do well. You need to continually look at your cost structure. Is it the most efficient cost structure for what you’re doing? And that doesn’t just mean cut. There may be times, and this pandemic is one, where there may be companies that need to cut back. There may be others who see it as an opportunity to double down. Tough decisions, and they’re scary decisions because if you get it wrong, what does it mean for the business.
So, I think when I was in consumer facing companies that obviously travel and the live events industry are and were hit incredibly hard by this pandemic. There are things you cannot control and things that you can. Focus on those things you can control within your company on cost structure, on whether you’re doing things efficiently, on where you think growth is going to come from.
Are you managing to profitability in a company by just cutting costs, or are you growing the company? Are you growing and coming up with adjacent things in your industry? Are you thinking of other ways to drive growth? Is it organic growth or inorganic growth?
And really, the fundamentals of how you build a business plan continue to apply, even at later stages of a company’s maturity, maybe even more so.
Liam: How do you approach scary decisions? What is your recommendation to the people around you?
Karen: First, I think in any crisis, there’s opportunity, and there’s the opportunity to really step up and be leaders. When those scary decisions are facing a company or scary times, like we’ve had in the last few months, I think a sense of calm and a sense of honesty and truth to your employees, and being just really upfront and transparent. This is tough, and we don’t have all the answers, and we might get some of it a bit wrong.
I think the same has been true of the racial injustice issues going on right now. I think a lot of people have been afraid to speak up under the, “I’m going to say something wrong,” or “I’m going to make the wrong statement, and maybe it would just be better to say nothing.” Or, making a lot of statements but taking no actual action.
So, I think it is about having a plan and communicating it clearly and following through and accepting the fact that we might get some things wrong. But again, willingness to admit if we do make a mistake, move on from it, learn from it, and be transparent with your employees. I think you gain their trust that way. I think that they see we’re all human, and they also might know, okay, it’s okay for me to speak up, or it’s okay for me to make a mistake.
As far as making the really scary decisions, I’ll admit it’s why I’m the lawyer and again, not the founder or an entrepreneur, because I am probably less risk-tolerant than they are. But my role to them is really being that consistent voice of balance in explaining the potential downsides, but not being alarmist.
Again, few instances where there’s a reason to pound the table or be alarmist or say, “This is gonna be the worst thing ever.” It is being balanced and providing that stability and that view of here’s what could happen, but here’s how we can best manage this risk.
Liam: We’ve talked about leadership. The sentence I’m going to ask you answer, and you can think about it for a moment, is “Leadership in tough times requires…”
And given the experience that you’ve had through some different recessions, through 9/11, through industry transitions, how you’d answer that. Leadership in tough times requires…
How would you end that sentence?
Karen: I think leadership in tough times requires honesty, consistency, and transparency.
Liam: That’s come true. You have gone a very long way to reassure me that there are leaders in law who can go even further. I really think that there are many people with legal training who don’t feel comfortable stepping into this leadership role, and I think just hearing you talk today, all the things that you’ve spoken about are all things that as I say, these are all the same things that I worry about, and you can imagine your colleagues worry about.
It’d be great to be able to look back in 20 years and actually say this was a time when many lawyers actually saw and gained confidence from the people around them, like you, who actually stepped forward, there is almost a sort of imposter syndrome. I hear the businesses are embracing their legal teams more and more and more right now, so it just feels like this is a moment, a potential moment for lawyers in leadership to step forward.