The GC lens
If only Charles Dickens could see us now. “It was the best of times, yet the worst of times, a clash of wisdom and foolishness, of hope and despair”, to paraphrase what he wrote of 1859 in The Tale of Two Cities.
On the tail end of 2022, things are looking similarly turbulent for all of us too; no less for those individuals charged with heading an organisation or leading a legal team while the world churns.
In this current maelstrom of economic and geopolitical volatility, C-suite members and GCs have been twin tasked with not only guiding organisations to weather the storms, but also to thrive. There’s no playbook for those in charge to rely on right now: few leaders will have experience in dealing with the kind of geopolitical instability that rages, or with what it means to endure the UK’s highest inflation in 40 years, rising rates, the energy and cost-of-living crisis, the war in Ukraine, and all else that cascades from this level of instability.
Business activity has lessened overall while the legal sector battles with the need for fundamental change as traditional skillsets and lagging norms are tested and fall short.
How can an organisation be resilient in such turbulent times, and how can those in charge meet the myriad challenges ahead? What does this look like specifically for a legal team, and what can GCs take from a broad CEO mindset when looking to build up their own function to support the evolving needs of their business.
CEO Outlook 2022 report KPMG’s global and UK CEO Outlook reports, released in October 2022, draws on perspectives of 1,325 global CEOs across 11 markets, providing insight into their three-year outlook on business and economic landscapes. The report is clear that those in leadership have been relearning on the job. They’ve had to navigate the digital transformation of the workplace, accelerated so dramatically throughout the pandemic, and adapt to geopolitical and economic climate upheaval while unravelling supply chain disruptions.
Technology, offering both unimaginable change as well as increasing risk, has expanded to become its own strategic function, while the well-being of employees – once an afterthought, if a thought at all – has become paramount. ESG principles are interweaving throughout the business, and stakeholders are learning to use their voice for change, and for good.
The good news A top takeaway from the report is that, despite these enormous challenges, there is optimism in the C-suite ranks. The CEOs surveyed were overwhelmingly confident in their companies’ resilience and relatively optimistic in their own growth prospects over the next three years.
Despite the looming recession, those surveyed were undergoing planning and limbering up for an agile response, and some were clear that the undeniable challenges we are facing now could be reframed as longer-term opportunities through the levers of technology, talent, and ESG. Preparation is certainly key: from scenario planning, a clear growth strategy, good crisis and risk management, and embedded ESG initiatives, there is proactive work to be done.
Legal leaders can take comfort from the level of optimism shown in the report and equally should look to emulate the preparedness and forward-thinking plans of those in the C-suite. While 86 percent of CEOs surveyed believe a recession is likely, three out of five (58 percent) think it will be both a mild and short one. Impressively, 76 percent have plans in place to deal with the recession when it hits, and 73 percent were positive when it came to anticipating the overall resilience of the global economy over the next six months.
The report highlights three top steps CEOs will take to future-proofing their business. These include:
reconsidering digital transformation
boosting productivity
managing costs.
The CEOs surveyed agreed on strategies for achieving organisational growth over the next three years, which include:
strategic alliances with third parties
organic growth (innovation, capital investments, R&D, new products and recruitment)
management of geopolitical risks
M&A activity
joint ventures
outsourcing.
GCs can borrow from the CEO mindset by focusing on three critical levers – of technology, talent, and ESG – to ensure short-term survival and longer-term success.
While 86 percent of CEOs surveyed believe a recession is likely, three out of five think it will be both a mild and short one.
Technology, the emerging and disruptive kind, was seen as a topmost risk by CEOs to organisational growth, with operational issues, regulatory concerns, environmental and climate change, and reputational risk also ranked highly.
As an antidote to tech threats, GCs should prioritise digital investment with an aggressive first-mover or fast-follower status. Advancing digitisation leads to efficiencies and connectivity across an organisation – an operational priority tied to growth – and is an imperative for a robust legal department.
Digital strategy brings awareness to cybersecurity risks, while embracing tech such as integrated machine learning, CRM tools, and the standardisation of documents allows legal departments to elevate their offerings from routine tasks to innovative client-centric solutions.
While the recession may push some businesses to reconsider digital investment in its entirety, the legal function should prioritise and invest in the digital areas that drive growth and pause or slow investment on areas which are not critical to strategic goals and value creation.
Advancing digitisation leads to efficiencies and connectivity across an organisation – an operational priority tied to growth – and is an imperative for a robust legal department.
Digital transformation and overall growth overlaps with investment in people. Successful implementation of digital tools springs from meaningful adoption, engagement, and change management strategies that enable a team to be brought along on the new tech journey. It also aids talent attraction and retention, specifically regarding flexible working arrangements.
Start by having clear conversations with team members. Use active listening, empathetic communications, and leverage data analytics to find the right balance over the long term. Articulate and understand the culture, values and purpose of the business, making sure these are more than ‘words on a wall’. Help create a legal department where people feel valued, where the work plays to individual strengths, and where the ‘social’ elements of ESG principles are authentically met.
There’s an undeniable war out there for the right people with the best skills. Two thirds of the CEOs surveyed (71 percent) agreed that the ability to retain talent with the pressures of the cost-of-living crisis are top of mind, and the legal department will be no different in this regard. Culturally and societally things have changed: the well-being of the workforce is an operational priority and employee and stakeholder expectations of what constitutes a safe and healthy place of work has been overhauled. GCs who do not recognise and respond to this will fail to attract employees and face losing the ones it has.
This is a time to experiment with different ways of working. GCs should consider our current state of post-pandemic flux as an opportunity to reflect upon remote working, which has had a positive impact on hiring, collaboration, and productivity over the past two years. However, as 60 percent of CEOs see in-office as the go-to office environment over the next three years, the future of remote and hybrid working remains unclear. GCs must seek to strike the balance between understanding and meeting the expectations and needs of employees, and those of the business.
As 60 percent of CEOs see in-office as the go-to office environment over the next three years, the future of remote and hybrid working remains unclear.
ESG is at the heart of growth for businesses and legal departments alike, encompassing the environmental, societal and governance responsibilities that will sink or swim an organisation. GCs who are mindful of the direction of travel will already have an embedded ESG strategy. These must be transparent but equally open to change as regulations emerge and ‘soft law’ guidance constantly shifts.
Just under half of CEOs in the report agreed that, along with being the right thing to do, an ESG agenda improves financial performance and is tied to organisational growth as it relates to securing of talent, the strengthening of employee value proposition, attracting loyal customers and raising capital. CEOs are increasingly seeing reporting and transparency as important to their ESG goals and this includes insight into their broader supply chain. GCs must similarly understand the organisation’s supply chain, using technology and real-time end-to-end analytics to help identify where issues exist and to improve visibility across the entire value chain.
Inclusion, diversity, and social equity (IDSE) is an important and integral long- and short-term consideration for the legal function. GCs should actively set the tone from the top by meeting targets, ensuring diversity of gender, ethnicity, social mobility, disability, experience, and thought across the legal function. There should be a strategic plan for ensuring a diverse talent pipeline, and metrics in place that track the IDSE spread beyond legal and into the organisation. The organisation’s culture must engender safety for those who wish to speak up and challenge where all areas of the business are not meeting ESG goals.
Scrutiny of an organisation’s ESG agenda is only likely to be on the increase from investors, stakeholders, clients, and employees, and as such it is imperative that companies and their CEOs and GCs act with integrity and transparency. Reputational risk is a clear and present danger and greenwashing, whether inadvertent or accidental, has serious consequences.
With challenge, comes opportunity – Dickens’ ‘best and worst’. Legal and C-suite leaders have a rare chance right now to reinvent departments, building robust functions that can withstand uncertainty and adapt to whatever the future will bring. Through taking up the opportunities offered by tech, talent, and ESG, and experimenting to see what works and what lasts, CEOs and GCs both can take charge and optimise growth as never before.
