Zurich GC Cathy Manolios speaks with ALB and how to build a strong in-house team and controlling external costs.

Partnership at Mallesons may be the dream destination for many lawyers, but Cathy Manolios felt that it wasn’t quite the right fit for her.  As a senior lawyer at Mallesons, she was invited to join the partnership but she instead  opted to head in-house and took up the GC position at Zurich.  That was nearly ten years ago and Manolios remains confident that she made the right decision. “It sounds trite these days, because most people say the same thing but I decided there was more to the practice of law than just turning out advice,” she says.  “There is a lot to be said for forming your own view on what the legal issues are and then actually making it work.”

Building a team
The modern in-house legal team is, at least relatively speaking, a fairly recent concept and like many GCs who commenced in the role in the 1990s and early 2000s, Manolios found herself with the task of having to develop the team that she wanted almost from scratch. “It’s hard to say this without sounding condescending to the previous people, but when I arrived nine years ago, the legal department was fairly unsophisticated,” she says.  “It was under-resourced and buried so far down in the corporate hierarchy people didn’t even know it existed. Fortunately, I came in with the imprimatur of the CEO to make changes.” Those changes included recruiting top tier lawyers from Mallesons,  Blake Dawson and Clayton Utz, among others. It must have been an expensive exercise, but quality has always come at a premium. “They all had that large law firm pedigree which helped create that professional ‘let’s do it properly culture,’” explains Manolios. 

There was also the question of infrastructure. “We don’t have the infrastructure of a law firm, where you push a button and a precedent pops out -  we don’t have librarians who do case research for us,” says Manolios. “But in terms of doing the job on a day to day basis, we built a fairly good matter management system. We have a state of the art contract management system which records details and salient points and also then sends reminders to the business if something needs to be done in relation to each contract.”

Building a corporate governance framework has been a matter of keen interest for the team. Ironically, that framework will now need to be revised in light of a recent management restructure at Zurich which saw the adoption of dual CEO roles. Manolios says that this illustrates one of the key lessons she has learned about maintaining a corporate governance framework: “Revisit it regularly –  don’t assume it’s okay because you built it five years ago,” she says. “Ideas change and the company changes around you.”

Reducing external legal spend
About 70% of legal work in Manolios’ teams is done in-house, compared to the industry benchmark of around 40%.  Conservative estimates are that this 30% difference alone results in a saving of about A$1.5m per annum.

There are several steps which have underpinned these savings. Rather than the wholesale delegation of work to firms, it is common for the team to restrict the role of external advisor to providing a general “steer” on a particular aspect of the work in question. “For example, we’ll primarily run a transaction in-house but take external advice on the sale agreement, for instance,” says Manolios.  “They’ll give us a base document and then we’ll work from that.”

Manolios says that firms have been supportive of this approach. “Fortunately our firms still value relationships even though we’re not currently spending a lot with them,” she says. “So they’re more than amenable to just provide directional advice over the phone – sometimes  free of change, but certainly for no more than about $2000  to give us a steer which enables us to go do the work ourselves.”

Another change has been introducing more intermediate level and junior level lawyers to the team, which allows work which was unsuitable for senior lawyers to remain in-house. However, Manolios is not convinced that this is an adequate long term solution. “The model doesn’t work brilliantly,” she admits. “We don’t have the infrastructure that law firms have to develop junior lawyers. We now think we need to move back to the model of having intermediate and senior lawyers – we really can’t develop junior lawyers and it’s not fair to them to bring them on board.”

Like many GCs who have spent time in a law firm, Manolios sees value in retaining these private practice relationships. “I brief several firms, but I like to use Mallesons because I think it’s a great firm - I had really good relationships with many of the key partners because I had been there for so many years,” she says. “They have been very amenable to working with me in the way I asked them to work – for example, giving directional advice.” Minter Ellison and Turks Legal are two other key advisors, although there are many other firms who have also performed work for the team.

While there is much talk about the benefits that international firms such as Allen & Overy can bring to Australian businesses, Manolios says that ultimately it is the relationships that count – which explains why she is inclined to use Mallesons when overseas work, such as Asia-related work, arises. “I know the firm, there is that reassurance of having used them,” she explains. “I wouldn’t use an international firm simply because they had an international reach – it’s the relationship that counts.”

Advice for an in-house career
One of the more interesting debates in in-house practice is whether aspiring GCs should be spending time in private practice in order to round out their professional experience.  Manolios says that in her view, it is “very important” for prospective GCs to earn their stripes in a strong law firm.

“I would have thought more than five years experience is necessary,” she says.  “ I had in excess of ten years when I left Mallesons –  eight to ten sounds about right. Certainly by five to seven years you’re a fairly independently functioning lawyer - but I’d suggest eight to ten.” As Manolios notes, there is great diversity in GC roles and salaries, which range from from A$200,000 to in excess of a million and the experience required would vary accordingly.

For those contemplating a move in-house, Manolios says that a honest reflection on the nature of the role is necessary. “As a  GC you do have to be able to make sure your clients come to you and you have to be out and about and keeping your ear to the ground to identify legal issues,” she observes. “You really need to want to do that.”