By: Levi Williams, Esq.
FT. LAUDERDALE – What keeps most CEOs up at night? It is not the boogeyman. It is not the thing under the bed. Unfortunately, it is those business challenges that most CEOs know are just waiting to rape them of their livelihood and threaten the business that they have sacrificed so much to build.
In hard economic times CEOs make concessions that appear to be beneficial cost savings measures; but are truly things of business and legal nightmares.
During difficult economic times many CEOs opt to eliminate marketing and legal expenses from their budgets as cost saving measures. The elimination of these two items from the costs ledger may alleviate the fiscal pressure in the short term; but the long term costs to a business could result in catastrophic erosion of market share and/or a deluge of suits and legal costs, resulting in the extinction of the corporate entity.
A CEO can indeed enjoy the benefits of costs reduction while maintaining the critical marketing and legal presences needed to weather the storm by restructuring the deliverables from and costs of the corporation’s marketing and legal investments.
Below are some suggestions for your consideration as you evaluate or re-evaluate your marketing and legal arsenals.
THE MARKETING BOOGEYMAN:
The lifeline of any business is its clientele or customer base. During a period of global economic crisis, such as this, it becomes even more imperative that a business maintains the presence of its name, brand, product, and/or services before a diverse mix of potential customers.
The elimination of your marketing budget may save on expenses but that only works if your existing customer base is solid and can provide the revenue stream to maintain your business operations and profit margins at its current or at least break-even level.
Unfortunately, as we have all learned, if your industry is suffering, chances are good that all industries will experience some level of economic pain. The “knee-jerk reaction” to economic pain is to eliminate cost items and reduce operations to maintain the core integrity of a business.
Unfortunately, that also means your current customer base will more than likely shrink and/or reduce their volume of business as they also attempt to survive.
To avoid this nightmare, most businesses should be proactive and avoid the “knee-jerk reaction” by formulating a “two-minute warning” game plan and a long term economic recovery marketing plan. This plan should include analysis of the following considerations:
1. Review and/or update your corporate mission, goals, and/or vision statements;
2. Are there previous endeavors, initiatives, or ideas that we should now revisit;
3. Analysis of your current marketing goals;
4. What are ours and our customers’ likely budgetary constraints;
5. Can we partner with our clients and/or suppliers to reduce redundancies and/or duplication of efforts;
6. What needs can we serve at a reduced rate;
7. Can we make financing more attractive;
8. Are there any additional services or product lines that we can offer to increase our customers’ successes in their target markets while hedging against risks of market erosion;
9. How can we deliver a greater outcome for less by changing our operational design (i.e. automation, part-time or contract workers versus full-time, extending payment terms on larger volumes of orders, implementing just-in-time delivery services, and/or educating your customer base on the advantages of bulking their orders to save on costs);
10. Design a message to your customer base describing how you are going to assist them in saving money while maintaining their competitive edge;
11. Utilize the medium and time slots for greatest reach and frequency;
12. Prepare your corporate internal infrastructure to respond to new customers and answer the likely questions to be asked;
13. Deliver the outcomes promised.
Through these strategies your corporation will be able to survive the economic downturn by diversifying its customer base, while maintaining the business and goodwill of current customers, and building a stronger, leaner and more responsive customer centered infrastructure.
Essentially, you have taken advantage of a crisis to be more competitive, efficient, and to increase your market niche now and into the future.
Now your marketing is preserved and your infrastructure adjusted to meet the same or a new corporate mission in a more efficient manner…what are you still missing…your General Counsel.
THE LEGAL MONSTER UNDER THE BED:
Many CEOs in the current economic environment are facing the reality, inevitability, or the potential of a law suit against and/or on behalf of their companies. A majority of these suits are for one or more of the following reasons:
• collections and/or contract claims;
• labor law and/or employment law claims;
• overtime/unpaid wage claims;
• FMLA and/or worker’s compensation claims;
• business dissolution and/or mergers and acquisitions; and/or
• insurance and/or warranty claims.
Even though the exposure to great liability has always existed, the position of General Counsel in most businesses with at least $3 million in gross annual revenue either never existed or has been terminated as a cost saving measure. Why? Some entrepreneurs and CEOs view legal services as needed only when necessary. Others view attorneys as deal breakers versus deal makers.
Still others view legal representation outside of actual litigation as a nuisance and an extra step of inconvenience. If these perceptions ring true for you as well, keep reading.
A corporation with premises traversed by employees and customers, operating under multiple contracts, and having ten or more employees cannot afford not to have a General Counsel. The three basic functions of a General Counsel include: (1) being a general resource to the client; (2) providing the client with legal advice, direction, and legal products to prevent or mitigate loss of profits and valuable relationships with customers and employees; and (3) providing legally sound litigation strategies to cost effectively resolve litigation and/or administrative matters.
Every business model is built upon relationships of one form or another. While the CEO or business manager is responsible for building these relationships, the position of General Counsel is responsible for making sure that the foundation (the contracts, work orders, invoices) work to the benefit of the corporation should the relationship go south for any reason.
The general advisory component can aid the CEO and/or business managers in negotiating from a position of strength and transparency from the very beginning to avoid misstatements, inadvertent warranties, and unrealistic or unbeneficial expectations on the part of the potential customer or client. If the terms are important enough to be put in writing, they are important enough for you to discuss with your General Counsel.
Having an ongoing working relationship with your General Counsel will help prevent and/or mitigate legal conflicts that will certainly deplete any profits earned or cost savings realized. At the first sign of trouble, the prudent CEO should communicate with his or her General Counsel to review the legal landscape so as to maximize the outcome; besides, it is very likely that the other side has probably already done so.
The risk you take in not doing so may result in a decision or communication being made that may adversely affect the integrity of available legal defenses should suit ensue.
Additionally, your General Counsel can be of great assistance in navigating the treacherous waters of a corporate reorganization. There are many pitfalls facing the CEO and/or business manager from an employment and labor perspective during this period of change.
The General Counsel can assist in preparing personnel policies, employee handbooks, and job descriptions to assist in the difficulties associated with downsizing a workforce and/or increasing human asset efficiencies or the consolidation of positions.
Finally, when all else fails and suit is the only option or you are facing one from another party, your General Counsel is your advocate. The strategy is always to win, but what does that mean?
Winning often times involve the weighing of the potential exposure and cost of litigation against the benefits of settlement and minimizing business interruption. Your General Counsel can provide you the requisite information and guidance for you to make the best business decision possible for the protection of your corporation and its continued prosperity.
Some of you are acknowledging the need for a General Counsel but are asking what are the costs associated with this invaluable member of your team? Some corporations may have the financial wherewithal to build an in-house General Counsel position.
This approach involves a moderate investment in infrastructure, support personnel, and a General Counsel base salary ranging from $75,000 to approximately $250,000, depending on industry and volume of work. Prior to this economic crisis, some corporations enjoyed General Counsel services from a private firm with hourly rates ranging from $250 to $600, resulting in unanticipated periods of higher costs than others.
Today’s business and economic environments have caused many legal providers to redesign their service offerings to meet the changing needs of the new corporate client.
I, like some of my colleagues, have reinvented the role of the General Counsel so that the client can budget for legal services on an annual basis based on a known monthly cost. The CEO can now secure quality legal services for the corporation’s daily needs for a monthly flat fee.
This fee is based on factors including but not limited to an analysis of the anticipated amount of use, complexity of the assignments, the business category of the client, and any other expectations that the client may have. However, it is important to note that these annual flat fee agreements do not include the costs and fees associated with actual litigation, but the terms can be negotiated at the time the flat fee retainer is entered into by the parties.
While a flat fee agreement necessarily anticipates the General Counsel investing more time than compensated for most months; it is balanced out by the guaranteed monthly stream of income from the annual retainer. This balancing act makes it beneficial to both sides but limits the number of corporate clients I or any other attorney offering this service can take on at any given time necessitating a “first come first serve” policy.
In closing, every business’ longevity depends on the adherence to the principles of securing a Return on Investment (ROI). Unfortunately, legal services just do not neatly fit into any ledger column to show a clear ROI. However, every experienced CEO and business manager can attest to the intrinsic and realizable ROI associated with amicably resolving a business or employment dispute, settling a liability for a fraction of the exposure, collecting upon the uncollectible, and engaging in “green” litigation strategies to mitigate losses and increase outcomes. Besides, some economic and political prognosticators estimate two to five more years of this economic turmoil; so why would you allow yourself or your corporation to traverse the current business landscape without your legal gladiator by your side?
Levi Williams, Esq. is a Partner with the law offices of Fertig & Gramling and practices in the areas of employment, corporate, and governmental law litigation and defense. Attorney Williams can be reached at 954-763-5020 for comments on this article.
