In-House Salaries – A Different Value Proposition
Updated: Aug 22, 2018
What is a good In-House role worth to you?
Earlier in the year I placed a lawyer with circa 20 years in-house experience gained in several legal jurisdictions across diverse industry sectors. She had led and managed large legal teams within publicly listed companies both in Australia and in the UK. She was a consummate professional and commercially savvy. And she absolutely loved being an in-house lawyer. Her energy and enthusiasm for what she did was quite inspiring. She accepted the role for $210,000. She told me during our negotiations she’d have happily taken $200,000. She had previously been earning circa $330,000.
That’s the in-house market for you. Competition for good in-house roles can be fierce. The fact that two of the other candidates on my shortlist to the client had only between 9 and 12 yrs pa experience and were bullishly asking for a minimum of $200,000 made it an interesting ROI decision for our client. When making this hiring decision, all other things being equal, how does a client possibly compare the value that a 20 year experienced, tried and tested high performer would bring to a senior in-house role with that of a 10 year lawyer from Private Practice, when both are asking for a $200,000 salary. Admittedly this is an extreme example but it is genuinely reflective of how experienced in-house lawyers value being in-house and will “meet the market” to ensure they remain on their preferred in-house career path.
I am constantly managing the salary expectations of lawyers when I recruit for my in-house corporate clients. This is particularly the case for those lawyers looking to transition from private practice. The reality is that a lawyer’s value proposition to a law firm employer is very different from what it is to a corporate client for an in-house role. To a law firm a lawyer is a fee earning, profit making entity whilst to an in-house client a lawyer is generally viewed as a cost centre, an overhead. This obviously affects the perceived “worth” of a lawyer to an organisation. This is a significant paradigm shift for any aspiring in-house lawyer to fundamentally grasp, regardless of their level of seniority.
A law firm will value its profit making lawyers relative to their own individual (and as a Partner, that of their teams) contribution to overall firm revenue/profit. This leads to some lawyers potentially earning big money, circa $1.5m+ in some cases. Those same lawyers, if looking for a lateral career move in-house, would not be guaranteed to earn ¼ of that remuneration even if they were lucky. Some companies would barely pay them $200,000 to be their General Counsel.
This fact is simply a function of the different business models and how an individual’s role within it is valued financially. And unlike the relatively homogenous law firms with their rigid salary banding, titles and linear career paths all of these things can vary dramatically in-house from company to company, often very much depending simply upon how management views the importance of the legal function. I’ve seen 10 year qualified “General Counsel” earning $120,000 and I’ve seen 10 year Legal Counsel earning $250,000.
So it is very important to clearly understand that the in-house market is a very different beast because many lawyers coming from private practice do not always appreciate this and continue to have an inflated idea about their market value, unfortunately to their own career detriment.
The Golden $ Handcuffs
I have had this discussion with innumerable senior private practice lawyers over the years and several have reacted negatively and been offended at the thought of their diminution in value on a prospective move in-house. To me this is proof positive that they just don’t “get it” and as such would rarely be successful in an in-house role with such an un-commercial, naive attitude.
And so it is frequently the case that the “Golden $ Handcuffs” of fee generating private practice lawyers curtails their in-house career ambitions. I know a number of those same lawyers are still plying their trade in private practice today, many years down the track, some happy enough, others not. In other words, some lawyers are paid too well in private practice and they will not, for whatever reason, consider going (even initially) backwards in salary for a new, different type of career path which can offer them many personal and professional rewards. Fair enough. But some of the best strategic career moves I have been involved in have been where the candidate understands the value bubble of a law firm and approaches the in-house recruitment process with a flexible, mature, commercial approach to salary and takes a long term career view.
This is why the vast majority of my in-house clients when recruiting for mid-level or senior roles will always prefer to hire someone who has a proven track record of performance in-house. This is simply because those lawyers have successfully made the transition from a private firm (some don’t) and have learnt, often the hard way, that they actually don’t know what they don’t know about being of real value as an in-house lawyer.
But it is not only private practice lawyers who are often overvaluing their worth in this market. The mining & resources industry in years gone by has seen some inflated in-house salaries thrown around. This was somewhat of a supply/demand spike which, as we now know, didn't last forever. There were a large number of in-house lawyers from these industry sectors who had to deal with a very different in-house recruitment market, post downturn . It was not uncommon for these lawyers to be taking, at the very least, a $20,000 - $70,000 pay cut just to secure their next role – often having to return to private practice in doing so.
Be Smart, Not Naïve
So, to put it simply, if you aspire to be an in-house lawyer don’t necessarily expect to earn the same amount of money that you might otherwise have earned in private practice because generally you won’t. And if you are currently (or most recently have been) an in-house lawyer, get some advice on where your salary fits in today’s in-house market. Don’t be naïve about your value and then get blind-sided by the very competitive market.
So here’s a tip to finish with. In the next 6 months or so if you see an in-house role advertised that you are really interested in and it reads “Salary circa $200,000” why don’t you ask your recruiter where they think you should be pitching your salary so as to give you the best chance of securing the role against the competition. You can then decide how much YOU value the opportunity given your own life/career scenario.
After challenging him to do so, I had this very discussion with another senior in-house candidate recently. He got the job. Lucky him. There were 98 other formal applicants for the role. It was all about value at the end of the day. He pitched himself at $30,000 less than what he had been earning and $10,000 less than what the job had been advertised for. He’ll get that $30K back very quickly. It was a great role to get and he gets to stay in-house and enjoy the other benefits this career path brings. Win/Win.