Unlike a Rose By Any Other Name, Conservation Development Does Not Always Smell Sweet.

One of conservation development advocates’ core claims is that utilization of the land development technique results in a more environmentally-friendly finished product when compared to conventional land development techniques.  Such a claim is typically true.  It is true because conventional development land use laws do not require the identification and protection of the natural resources of the land to be developed.  However, just because conservation development is typically more environmentally friendly than conventional land development does not mean that its end-result environmental protection sufficiently maintains biodiversity by protecting, cornerstones of biodiversity, such as conserving essential habitat areas or ecosystem functions.  To put it in basic logic terms: just because option A is better than option B does not mean option A is adequate to achieve an objective.  The pertinent question is whether the substance of conservation development land use laws and ordinances adopted by a local jurisdiction leads to the actual maintenance of biodiversity.

Biodiversity is ecosystem focused.  Biodiversity can be succinctly defined as the “variability among living organisms on the earth, including the variability within and between species and within and between ecosystems.”  I recently read a 2012 article titled Do subdivisions designed for conservation actually help wildlife published in the always insightful High Country News.  The article touched on the issue of how effective are conservation development projects at maintaining biodiversity.

The answer to the question is, it depends.  Many conservation development projects built in the last decade have helped preserve biodiversity (including projects discussed in 2012 article).  However, many projects have not lived up to the label “conservation development” as commonly understood by ecologists.  Scientific research has revealed that the end result of many so-called conservation development projects is a natural landscape that has been left ecologically degraded and impaired without meaningful differences to historic checkerboard conventional developments.  For conservation development projects to successfully satisfy its underlying objectives post-completion, maintaining biodiversity can be broken up into three steps.

Step 1: An Ecological Site Analysis of the Ecological Attributes of the Proposed Project’s Land

As correctly explained by Armando Carbonell of the Lincoln Institute of Land Policy, private sector land developers and public sector local land planners must “understand both the ecosystem context and the ecological consequences of their actions.”  The prerequisite to such collaborative understanding is a thorough site analysis of the ecological characteristics of the proposed development project’s land.  The ecological site analysis must assess the four main ecological characteristics of land that are necessary to maintain biodiversity, or as I prefer for land development projects, its “ecological integrity”:

(a) composition,

(b) structure,

(c) function, and

(d) ecological processes.

Land is said to have ecological integrity/biodiversity when the four primary ecological characteristics exist within their natural ranges of variation and can withstand and recover from most perturbations that result from natural environmental dynamics or human disruptions.

Accordingly, as step one, local land use laws and ordinances must mandate a pre-design, site analysis of the ecological attributes of the proposed project’s land.  It cannot be optional.  The entire project must be surveyed to identify such features as the land’s essential ecosystem functions, its critical wildlife habitat, and the indispensable wildlife corridors between habitat areas.  Disappointingly, a 2014 study co-authored by Sarah Reed, an associate conservation scientist with the Wildlife Conservation Society and a leading researched in the field, found only thirteen percent of adopted conservation development laws required an ecological site analysis prior to a development’s design and planning.

Step 2: Project Design and Planning Around Critical Habitat and Ecological Functions

Once the ecological site analysis is completed, development must be designed and planned around the site analysis’ results.  Mr. Carbonell correctly emphasizes that “[i]ts important (for planners and developers) to start interacting before a design gets finalized.  In the absence of understanding how watersheds work, or how an ecosystem works, you can get development patterns that are not terribly functional.”

At the same time, it is vital to recognize that there is no single way to design a conservation development project.  A conservation development’s design is site-dependent, as well as dependent on the larger scale natural areas in which the site resides.

For meaningful biodiversity protection to occur in a conservation development project requires ecosystem-level protection at a sufficiently large scale.  Therefore, the best designs set aside large areas of high-quality natural open space, strategically connecting the set-aside land across the project’s landscape and, to the fullest extent possible, to any adjacent national forests, state parks, local nature preserves, and conservation easements.  Preexisting wildlife movement corridors must also be retained.  The internal project layout of the housing lots and infrastructure must then be laid out around the preceding requirements.  By doing so should minimize the fragmentation of ecosystems prevalent in conventional land developments, and, unfortunately, present in too many projects labeled as conservation development projects.

Step 3: Ongoing Stewardship of the Land

The final step to maintaining biodiversity is for the development, once completed, to be subject to a long-term stewardship plan.  At a procedural level, such a plan must be enforceable and not mere guidelines or aspirations.  At the substantive level, the stewardship plan must focus on what is necessary to preserve biodiversity post-project completion.  That requires ongoing monitoring of the set-aside lands’ ecological characteristics.  Whenever identified, action must be taken to avoid the introduction of invasive plant species and to restore habitat if any disturbance, natural or human-caused, detrimentally alters the ecosystem.

Key Takeaways

  • When a thorough ecological attribute study is not conducted, a collaborative understanding between private sector developers and public sector planners (as well as third party stakeholders) will not be reached concerning the proposed land development project’s ecosystem context and the ecological consequences of the proposal.
  • Where such a collaborative understanding does not occur, the physical manifestation of a conservation development’s open space will almost certainly not help maintain the developed land’s biodiversity.
  • The term “open space” used in conservation development laws and ordinances is often not synonymous with the conservation of ecosystem functions. The term “open space” is too commonly used to describe human-designed and “made green” spaces, such as pocket parks, soccer fields, and open fields that – although often well-meaning – are nothing more than extremely large lawns.  None of those “open spaces” provide meaningful biodiversity protection and are hardly an improvement over golf courses.
  • Ecologists must have an ongoing role during all of the above-described three steps. Doing so will best ensure that a locality obtains the scientific input necessary to realize the environmental objectives conservation development is intended to achieve.

An insightful academic article on this topic, which is one among many and on which this post relied, is Liba Pejchar et al., Evaluating the Potential for Conservation Development: Biophysical, Economic, and Institutional Perspectives, 21 Conservation Biology 69 (2007).

Since this blog’s focus is on land development principles and practices labeled “conservation development,” it is important for readers to know what conservation development is not.  Generally speaking, true conservation development connects land development to land conservation — in a manner that assures meaningful natural resource protection.

The Label “Conservation Development” Is Often Misused

Not every development project labeled a conservation development project is a conservation development project (e.g., one that provides for meaningful natural resource protection).  The primary reason for the mislabeling of land development projects as conservation development projects is the variation in requirements local jurisdictions require for a project to be considered a conservation development project under local land use laws.

For example, reducing the quality of the developed land’s functioning ecosystem and biodiversity and replacing it with a patchwork of green lawns for outdoor recreation does not serve the essential objective of conservation development.  Hence, the key determinative factor of whether a land development project is a true conservation development project is twofold:

  • First, the project’s design must significantly outperform conventional subdivisions and baseline scenarios in terms of protecting biodiversity and associated ecosystem functions.
  • Second, the project’s design must not reduce biodiversity and concomitant ecosystem functions below what they would be if the land is not developed.

Conservation Development is not Incompatible with Private Developer Profit Motives

Far from limiting profitability, conservation development projects provide a development approach through which developers can generate financial returns competitive with, and oftentimes above, financial returns that would be generated if a traditional land development approach was.  Not widely discussed in academic literature on the subject, the ability of conservation development to align with the profit making objectives of developers is a strong means by which sustainable development can be achieved with the help of the private sector.  On the project revenue side, homebuyers are willing to pay a premium to live in a more natural environment with a higher amount of intact natural green space and uninhibited local wildlife.  On the project cost side, capital costs can be lower than conventional land development for traditional new infrastructure such as roads, as well as green infrastructure — to protect against environmental hazards such as flooding and water pollution.

Conservation Development Is Not a Device that Stops Growth

The exurban and rural landscape continues to see rapid growth.  Conservation development will not stop growth from occurring.  Both natural condition land, as well as working lands such as large agriculture plots and forest districts, will be altered by conservation development projects.  As is the case with all development forms, conservation development is about how to develop the land.  As Kris Larson of the Minnesota Land Trust put it, conservation development does not save all land, “but it’s a great tool in the right circumstances.”  What true conservation development can do is prevent unnecessary destruction of — and negative impacts on — the ecosystem and “ecosystem services”on the land where development occurs.

Conservation Development is not Green Building

Green building focuses on the planning, design, construction, and operations of the vertical aspects of a development project’s built environment.  The central concerns are energy efficiency, water use, indoor environmental quality such as air quality, use of natural light, waste reduction, reuse, and recycling, and the use of environmentally sustainable materials.  Conservation development focuses on the horizontal aspects of a development project’s site.  The central concerns are ecological mapping at the outset and identification of ecological resources to be preserved, site planning and design around the area’s ecosystem (and other corresponding land planning actions).  The good news is that conservation development and green building standards are not mutually exclusive and indeed often complement one another in a mutually beneficial way.  This is because green building recognizes and is premised upon the vertical built environment having profound effects, both positive and negative, on the natural environment.

Conservation Development is not Mandatory Low Density Development

Conservation development is far too often mistakenly viewed as synonymous with low density development.  While low density conservation development projects occur, where they occur is typically a function of the preexisting landscape in which the conservation development is built.  A typical example is rural areas where the land had previously been subdivided into large farms or ranches.

Conservation Development is not “Cluster” Development

Conservation development and cluster development are commonly misperceived as synonymous.  They are not, although conservation developments can incorporate clustering concepts and occasionally do.  Cluster development congregates residential units into abutting smaller lots in one area (or just a few areas) of a development footprint, which significantly reduces the residential dwelling development footprint.  Cluster development then designates the now more expansive non-lot areas for recreation, common open space, or as natural areas.  It typically connects such areas with pedestrian paths, which can help minimize the infrastructure needs of the development.  However, cluster development does not require the preservation of the development area’s functioning ecosystem and biodiversity, or even site planning and design that preserves some of the area’s natural resources.

Conservation Development is not for only High-Income Homebuyers

Conservation development design principles apply to a wide range of development projects.  This includes projects targeted at middle-income homebuyers.  Also, conservation development projects are increasingly incorporating housing set-asides for lower-income households.  One noteworthy example is Beacon Hill Lane on Block Island, Rhode Island, where seven affordable single-family homes were built for year-round residents next to a natural open space that was permanently preserved.

The recent case of Williamson County, Tennessee, provides useful insight into how even well-meaning conservation development laws run the risk of unintended consequences if the land use planning focus is too myopic.  Focusing on the size of the pieces and creating artificial development boundaries in contrast to planning across the entire landscape– increases the likelihood of a distorted development footprint, thereby minimizing the benefits local jurisdictions can obtain by adding conservation development principles to its planning toolbox.

Williamson County, Tennessee – A Historical Rural County Facing Spillover Development Pressures from Nashville’s Booming Economy

Williamson County, Tennessee, sits just south of Nashville, Tennessee, as is part of the Nashville metropolitan area.  From 2015-2019, the Nashville metropolitan area had the fifth-highest population growth in the United States — at 9.6%.  It is expected that this trend will continue, especially with both Amazon and Facebook in the process of establishing a significant presence in the area.  Facebook is believed to be making a $750 million investment in a data center on the outskirts of Nashville.  Amazon is in the process of building two corporate office towers to house its Operations Center of Excellence, which is expected to create 5,000 new jobs in the area in what is the largest jobs deal in Tennessee’s history.  Williamson County currently has 226,000 residents, but due to the metropolitan area’s economic growth, its population is anticipated to add another 100,000 residents in just the next ten years.

Williamson County’s Land Use Plan’s Unintended Consequences

Unintended development patterns have arisen in Williamson County, notwithstanding the adoption of a land-use plan with the concept of conservation development a critical component.  In 2007, the county adopted a comprehensive land-use plan update.  As a quick refresher, comprehensive land use plans are formal policy documents adopted by local jurisdictions but implemented through zoning regulations, and other ordinances, laws, and actions.

A primary goal of Williamson County’s 2007 plan update was to encourage higher-density growth in suburban infill within a municipal growth boundary (MGB) while boosting conservation development projects outside of the MGB.  The 2007 plan update explicitly stated that “[g]rowth will generally be directed toward existing or planned service areas and pushed away from rural areas with rural levels of services.”

The 2007 plan update had two core tenets that revolved around the sprawl-inducing aspects of decentralized sewer systems:

  • No development could occur inside the MGB that utilized an alternative sewer system unless the land had been annexed into a city, and the development project is subject to the additional requirements of the city’s planning and land use regulation system.
  • Conservation development projects outside the MGB could utilize alternative sewer systems.

The 2007 plan update concurrently approved higher rural zoning density in unincorporated portions of one residential dwelling unit per acre instead of one residential dwelling unit per five acres — as initially proposed.  The combination of the preceding factors led to the unintended consequences of disproportionate growth in the rural area.  This occurred because developers skipped over undeveloped land within the MGB and instead focused on development projects in unincorporated rural areas they had previously not been able to develop using conservation design principles.

Recent Adoption of a new Comprehensive Land Use Plan was a Missed Opportunity

On March 12, 2020, Williamson County adopted a new land-use plan where the debate was cast in the far too common, but mistaken, “rural character preservation versus maximizing land value” dichotomy.  The county decided to down-zone the rural areas from one home per acre zoning to one home per five acres zoning.  Williamson County Planning Director Mike Matteson best captured the sentiment behind the change.  Matteson stated that the 2007 land use plan conflicted with the county’s vision for rural preservation because there was a “disconnect between the [2007] plan and the county’s ability to implement the plan’s central theme of preserving rural character.”  The down-zoning debate sharply divided local citizens.  Those in favor of retaining the current one residence per acre zoning argued that down-zoning would decrease rural property owners’ land values because of the lower density allowance for new homes.  Those in favor of the down-zoning argued it was necessary to control growth and preserve the rural character of the impacted areas.

Rural Preservation vs. Land Value is not a Zero-Sum Game

My critique of Williamson County’s approach to updating its comprehensive plan is that it approached the unintended consequences of the 2007 approval of one dwelling per acre incorrectly.  The debate should not have been between five acres and one acre.  Instead, the discussion should have focused on larger-scale comprehensive conservation planning on private lands that identifies the best natural resource areas to protect and then envision the best spatial configuration to accommodate future growth.  Once that is determined, strategic placement of housing developments and well-coordinated open space stewardship can occur where both the preserved open space and the housing development serve as complementary functional parts of protected area networks.  The appropriate housing density, be it one dwelling per acre, one dwelling per five acres, something in between, or a combination of the preceding, would then be based on how the pieces best configured with the strategically set and coordinated large-scale landscape-based plan.  Such an approach, if done correctly, can enhance land values in the long-term, while also preserving the natural and rural character of areas like Williamson County.  An informative academic article on the concept of strategic placement of housing developments and the coordination and stewardship of open spaces is a 2015 article in Landscape and Urban Planning entitled “Balancing housing growth and land conservation: Conservation development preserves private lands near protected areas.”

A Recent USC Lusk Perspectives Online Discussion

On July 14, 2020, the weekly Lusk Perspectives hosted an online discussion that, likely unbeknownst to the presenter, provided indirect but sound support for my newfound professional conviction.  This conviction is that there is growing consumer demand for residential homes at the exurban fringe built according to real estate development principles that better preserve the land area’s surrounding ecosystems and natural environment.  Such conviction was the topic of my LL.M. thesis, completed in 2018.

The guest presenter was Bird Anderson, the Executive Vice President, Homebuilder Banking, Well Fargo Commercial Real Estate.  The discussion’s primary focus was on the United States homebuilding market since the COVID-19 outbreak, specifically looking at what’s changed and what’s here to stay.  A key market observation of the presenter is one that is now widely accepted: that business shutdowns are permanently altering the ability for buyers to consider residential markets further out from urban office hubs.  This is due to the work from home phenomenon, which is becoming commonly known as merely WFH.  Workers across the income and job spectrum now believe that significant “work from home” structures are here to stay.  This outlook for the future significantly alters the opportunity cost equation that home buyers will now consider due to WFH’s reduction or even elimination of long commutes from further out exurbs.

Home Buyers Now Want Wide-Open Spaces

Urban vs Rural / Exurbs ContrastThe combination of the WFH phenomenon combined with the two other COVID-19 major everyday living disruptions (sudden consumer goods shortages and the need for social distancing) has sharply increased the desire of home buyers to live in wide-open spaces.  Almost by definition, wide-open spaces means those exurban areas that preserve their wildland character, which is best done by preserving the large-scale ecosystem in which the exurban area exists.  Mere cosmetically landscaped “open spaces” or “green spaces” commonly found in master-planned suburban communities will no longer suffice.

Opportunity for More Ecologically-Based Land Use Laws

Looking ahead, the increased demand for housing at the exurban fringe provides an unintended opportunity for both private sector developers and local public agencies and officials to reboot their local land use laws to capture the benefits that can come with this increased consumer demand.  To be successful, the reboot of local land use laws must integrate the consideration of ecosystem-level conservation into the entire land use process, from comprehensive planning by the local decision-makers to the specific subdivision design plans pursued by developers.

Unknown Dangers of Housing Density in COVID19 Transmissions May Provide a Catalyst for Exurban Migration

There is also a proverbial large unknown elephant in the room.  The migration of WFH workers out of urban areas, even suburban areas, to the exurbs — will rapidly accelerate if future research reveals that higher housing density had a correlation to the spread of the highly contagious infectious disease that the current coronavirus is.

New York Governor Andrew Cuomo tweeted on March 22, 2020 that “[t]here is a density level in NYC that is destructive.”  Researchers at Children’s Hospital of Philadelphia and the University of Pennsylvania developed a model, known as COVID-Lab: Mapping COVID-19 in Your Community, which supports the notion that population density is one of the two most important factors driving the spread of the coronavirus.  Currently, there is insufficient scientific studies to definitively support the proposition that housing density is a significant factor in the spread of the coronavirus.  However, given the scientific uncertainty, it is no surprise that recent articles from the largest newspapers in the United States’ two largest cities – New York and Los Angeles – each raised such a prospect.

High-Density Developments May Fall Victim to Concerns about Future Pandemics

On April 26, 2020, the L.A. Times ran an article “Building dense cities was California’s cure for the housing crisis. Then came coronavirus.”  Two weeks later, the New York Times ran a similarly themed article “Coronavirus Crisis Threatens Push for Denser Housing.”  Across the United States a large portion of the population is already fearful of being vulnerable to another pandemic occurring in the near future.  If it turns out to be the case that higher housing density led to a disproportionate greater number of coronavirus infections, then the decades-long push for higher density housing in urban — and more recently suburban – areas, faces an unknown and potentially dark future.  At the same time, the exurbs will face the flip-side of that problem in the form of an imposing opportunity for positive change.

“What you see and hear depends a good deal on where you are standing”

-C.S. Lewis, The Magician’s Nephew

This post might seem a little “off topic” from the declared focus of this blog — “Insight & Commentary On Complex Business &Financial Law Topics.”  But I believe no matter how much “insight” we download as professionals, if we become too overwhelmed in life, both our professional excellence and personal lives will suffer.

So the proposition I put forward here is that professional excellence does not have to be sacrificed on the altar of the very amorphous concept of “work-life” balance.  Further, for those professionals that want to make being a “super professional” a priority in life, they can do so while also having a “balanced life.”  But that involves identifying priorities and making difficult choices as no one can have it all (indeed, the acceptance in professional circles over the past few decades that we can have it all is what has caused all the imbalance that exists — usually unknowingly — in many professional’s lives).

Before proceeding, I want to make clear I believe that there are truly different strokes for different folks.  Therefore, there is nothing wrong with those that choose to make their professional career the primary focus of their life …. as long as it does not come at the expense of others who never signed up for that.

Launching Point

The launching point for the discussion below is that all professionals must step back and start with the question: what is truly meant by the commonly used phrase “work-life balance”?

As the eminent Jack Welch stated a few years ago:

There’s no such thing as work-life balance. There are work-life choices, and you make them, and they have consequences.”

I agree (with it equally applying to both men and women professionals)

In pondering this post over the last 24 hours, I came across numerous spot-on pieces written from personal experience who discuss the need to make choices, such as:

Then, as you will learn below, last fall @rashkenas Ron Ashkenas wrote a thoughtful article “Forget Work-Life Balance: It’s Time for Work-Life Blend” where he touched on many truths that I revisited first-hand just yesterday and which propelled me to write this piece:

“The reality for many of us these days is that our professional lives bleed into our personal lives. The boundaries are increasingly permeable and movable. We check our emails in the evenings and weekends. We delay or miss family events because we can’t leave the office. And when we do, we take our communications devices with us so that we can stay connected to work.”

I assume most of you reading this have “been there, done that.”  However, just becauseit is a commonly accepted practice to let our professional lives bleed into our personal lives does not make it right.  I think what often happens is that many professionals convince themselves for the sake of survival in an overly “marginless” world that letting our professional and personal lives bleed together is OK.  Yes, there are times and places where that will occur.  But it should be the exception – it is not a fait accompli.

My Personal Mea Culpa

So all of the above leads up to the following: yesterday, May 23, 2013, was my son’s yearly “Cardinal Field Day” at St. John’s Episcopal School, which is a day of fun-focused track and field events in a carnival atmosphere.  The school is split up between yellow, blue and red teams.  Parents and other adult family members are not only welcome, but encouraged to come and enjoy the spirited atmosphere.  As with years past and most of his school events, I made sure to attend.  But this year’s Cardinal Field Day was different for all the right reasons.

Last year, I was 100% physically present at Cardinal Field Day but sadly, in retrospect, spent most of the time trying to “balance” watching my son participate from just far enough away that the noise coming from the field would not be heard on the concurrent multi-party conference call I was participating on via my cell phone.  At the time that seemed like a perfect equilibrium since my son was definitely more interested in hanging out with his friends just far enough away from “Dad”.  But later that night it was emotionally divulged to me by him of how he interpreted things, specifically that to him “all I did was talk on the phone.”  The message was loud and clear: I might have been physically present, but I was not really “there” as he wanted me to be.

My first reaction, as if pulling from some “Better Something Than Nothing” handbook for lawyers, was a “IRAC”, legalist and presumably logically response to my son: “most dads do not attend Cardinal Field Day; … I was there watching you all the time.”  In my mind, the easy justification for that response was “work like this pays for you to attend St. Johns.”  However, that response was truly an “exercise in missing the point,” even if factually accurate.

What mattered was that my son had hit on the foundational point raised in a very enlightening post by @Ju_Summerhayes entitled “The Minimalist Lawyer”, which is that “[e]verthing has its place.”  For my son, my cell phone did not have a place during those 90 minutes of Cardinal Field Day.

That experience caused me to revisit the difficult question: even though I was a name partner at a small law firm I help found and thus controlled where I was for my conference call, was my perceived “equilibrium” really a work-life balance?  I thought it was and in most respects I feel that I have identified the right priorities and made the right choices with respect to balancing the professional excellence I seek to deliver with the personal life that I cherish.  But like so many things in life, and what is especially true for attorneys like me who spent most of their formative years in “Big Firm” environments (which can still haunt us even long after we left the halls of “Big Firm” life), is staying on top of:

  • what is meant by “everything has its place” for me and my family, each day as well as in the long run, and
  • once that is figured out, how do we put that into practice with respect to my professional life (as well as my wife’s professional life) and our family and personal lives?

Undoubtedly, these questions are very dynamic, perpetually changing moment to moment.  Fortunately, this year at Cardinal Field Day I 100% “got it” by putting away the cell-phone other than to take a few pictures of my son and post them to Facebook, like the one below. …. And I still was able to complete my legal work at the standard of “professional excellence” I set for myself.

As put bluntly by Kevin O’Keefe, an expert in the legal marketing field, a lot has changed since he graduated from law school 30 years ago.  A recent post by John Grimley of International Business Development accurately assessed the current reality that “law firms need to end the internal culture of seeing clients as purely a source of revenue, and instead … align their services to advance the commercial objectives of clients – one of which is to reduce their clients legal fees” (If you have not been reading John Grimley’s posts on this subject matter, you really must start).

How to best align professional legal services with companies’ business objectives goes to the heart of the inside‐outside relationship “crossroads” law firms and in-house legal departments face:

  • What is the division of professional legal services as between in-house legal departments and outside law firm?; and
  • How is the professional legal services predominately managed (i.e. project management)?

As general background, I use the title “Chief Legal Officer” in this post as opposed to “General Counsel” because I believe that title more accurately describes the role discussed in this post, but many in-house attorneys with the title “General Counsel” have also taken on the same substantive role.

THE SOPHISTICATED CHIEF LEGAL OFFICER’S NEW MANDATE

This new reality for law firms is being significantly impacted by a concurrent development that has also evolved since Mr. O’Keefe and Mr. Grimley graduated law school: the emergence of sophisticated and empowered Chief Legal Officers with in-house legal teams who far more often have skills equal to their peers in outside law firms than they historically have had.  I believe the empowered Chief Legal Officer trend has been accelerating these past few years and is not only here to stay, but is an advantageous development for the legal profession meeting the needs of businesses.  As put in an excellent “Blue Paper” titled “The General Counsel As Lawyer-Statesman,” “in the course of a generation, General Counsels’ prestige, status, compensation, power and position at the core of major transnational corporations have been transformed.”  The author also aptly characterized the growing role of the sophisticated and empowered Chief Legal Officer and other in-house lawyers as “extremely broad, involving three distinct functions: acute technical lawyer, wise counselor and lawyer as leader.”  The end result is that Chief Legal Officers are not only being authorized to do so, but are being directed as one of their “Key Result Areas” to manage the direction of a wider range of sophisticated legal and business matters as well as perform and execute upon a greater share of the company’s substantive legal service needs.  This development is one that law firms need to understand and respond by adjusting their business model and “marketing” approach.

PERSONAL CONFIRMATION: MY BARCLAYS NORTH, INC. EXPERIENCE

I became convinced of the wide-ranging value of an “inner circle” Chief Legal Officer during my experience in 2007-2008 when I left a “Big Firm” job to serve one client — real estate developer Barclays North, Inc. — as its Interim General Counsel and Chief Restructuring Advisor during the real estate crisis.  I experienced firsthand the contrast in the value-added proposition that sophisticated in-house legal counsel can create when it comes to furthering a company’s business objectives, as compared to outside counsel (especially when it came to the delegation and execution of legal tasks that involved ongoing third-party business relationships).  This is because by being a part of the inner circle of the company and its day-to-day business flow, the empowered and sophisticated Chief Legal Officer has a “constant pulse” on a company’s rhythms and peculiarities.  This is turn results in superior legal guidance, more effective management of and practical solutions to complex business and legal situations.

The lessons from my Barclays North experience hold true even more today: at a time many law firms are undertaking internal “survival tactics”, as a result of being empowered by the above-described three distinct functions, forward-looking Chief Legal Officers are driving a redefinition of the role outside law firms play and how a company’s legal affairs are handled.  By doing so, new structures of true strategic partnerships are taking shape.

THE HISTORICAL BIFURCATION OF THE ROLES OF IN-HOUSE COUNSEL AND OUTSIDE LAW FIRMS

The rise of the empowered Chief Legal Officer has been and continues to be driven by many factors.  The most significant factor is the “Work-Role” Gap that has led far-to-often to an inefficient over-bifurcation in the delivery of professional legal services between the:

  • In-house “company attorney”, whose primary role became farming out the challenging and complex legal work to outside counsel while focusing on internal legal risk management instead of first and foremost being a strategic “business law advisor” to the company; and
  • Law firm “situation-specific attorney”, who in the over-specialized legal world has taken on the role of delivering myopic deal-specific documents or taking near full-ownership of litigation matters, without in either situation providing the long-term “big picture” legal guidance that a properly empowered strategic “business law advisor” should continuously delivering.

The ideal situation is one where the Chief Legal Officer can serve both sides of the “business law advisor” and “situation-specific attorney” equation for a company, delegating and managing internally what can best be performed in-house, with outside counsel serving as a supplemental or situational-specific resource when appropriate.

BEYOND LEGAL COST REDUCTIONS: INCREASED LEGAL AND INTERNAL BUSINESS OPERATING PERFORMANCE

Surely the pre-recession hourly rate “bubble” driven by the increased focus on “Profits Per Partner” caused many companies to re-evaluate the budgetary impact of the over-bifurcation of inside-outside roles.  But the impact of this over-bifurcation goes beyond mere budgetary costs and instead gave a major boost to the new Chief Legal Officer legal paradigm, whereby:

  1. The CLO is now more often the “go-to” legal strategic advisor to a company’s top management instead of a senior partner at the company’s historic outside law firm;
  2. The CLO is a core member of senior leadership and helps shape the debate and has a voice as to the company’s current and future business affairs; and
  3. The CLO has the power (and financial leverage) to redefine the company’s relationship with preferred outside counsel by addressing the “Work-Role” gap.

In many ways, the rise of the empowered Chief Legal Officer and its legal team may most accurately viewed as simply a market-driven corrective response that serves the company’s best business and budgetary interests.  Whatever the reasons and driving factors, the rise of the empowered in-house legal counsel was long overdue.  This is because the business value of a strong in-house legal team working closely with top management has been an underutilized source of tangible and intangible operating efficiencies, beyond just substituting cheaper inside legal resources for what had become increasingly expensive outside legal services.  If properly utilized, the result is that a company’s legal needs are delivered:

  1. More cost-effectively; and
  2. With the same or greater level of high-performance that top law firms claim only they can always provide.

Achieving one of the above does not have to come at the expense of the other (this is where better project management of an entire legal project comes into play by the Chief Legal Officer and its team leveraging the most appropriate professional resource for a particular project task or undertaking).  Moreover, the risk of unexpected legal troubles can be better planned for and – if and when they arise – can be addressed earlier and more effectively managed in a way that usually reduces higher litigation costs down the road.  This does not mean that outside law firms will no longer provide ongoing and substantial professional legal services for companies — as that need will continue, albeit with new dynamics.

FINAL TAKE-WAY

The end result for in-house legal teams, if led by an empowered and sophisticated Chief Legal Officer, is the opportunity for that team to add value in more ways to their company’s distinctive business objectives than historically has been the case.  Law firms, as businesses that also operate in a market system, who fail to adjust to this trend will find themselves truly left on the outside.