Category: In-house

Building a successful in-house legal department involves selecting the right people for the right positions, deciding which lawyers to assign to which tasks, instructing and training them, convincing them to work as a cohesive unit rather than a bunch of individuals, and of course addressing and resolving conflicts and crises – all while fulfilling the critical function of legal advisor to the rest of the company. It’s not easy.

A panel of experts at this year’s Balkan GC Summit – all from heavily regulated industries, in which the legal departments are often placed under unusual pressure – provided insight on how they had overcome these challenges, to successfully build and effectively manage productive and efficient in-house legal teams. 

The Interview Process

The size and importance of significant in-house legal teams is clearly growing. According to Miljan Malovic, Head of Business Legal Advisory at Banca Intesa, “experience suggests that having in-house lawyers may be a more adequate solution in the long run since they get to know the very core of the company and the industry.” As a result, he said, “it is crucial for any company to plan ahead and develop each position, with a clear succession plan in place.” 

And a critical element of this process – perhaps the most critical – comes in identifying and hiring the right people. “In an environment as complex as legal you must learn what main tasks and competencies should be taken into account when selecting a candidate,” said Marijana Poznan, the Regional Head of Human Resources and Regional General Counsel for Southeastern and Central Europe at Fresenius. “You pick the person as much as the person picks you. Often times the candidate does not have the chance to learn all the requirements of a position in advance, and so we give them a chance to get proper training and to integrate. We also try to detect pitfalls well in advance before investing in hiring someone.”

How to identify the best candidates is an inexact science, of course, but the specific questions asked during the interview can lead to important information. “Well, there are several key questions,” said Misa Vorotovic, the Senior Councel for Southeastern Europe at Phillip Morris International, “but I think that a good thing to always ask is, at some point, what they believe to be their biggest shortcoming, and why. Honesty can be spotted right here, with this question, and this trait is in and of itself very important, as is the self-awareness that a candidate can demonstrate as well.”

Malovic, by contrast, said that he approaches each interview differently, adapting his questions to the conversation. “I cannot really say that I have questions that I like more,” he said. “I really prefer pressure-free interviews. If you can relax in an interview with a candidate – that’s when you can feel that they are the right candidate.”

“From my experience, the most relevant question is a simple one: ask candidates to describe what they would do, or how would they handle, a conflict situation,” Poznan said, explaining that this question allows candidates to demonstrate a strong personality, as well as offering insight into how they would approach problems. Unfortunately, she admitted, “most candidates simply offer theoretical answers; rarely does anyone dive into the issue head first and really give a good answer.”

Some General Counsel like to pull the rug out from candidates to see how they react under pressure. Gligorije Brajkovic, Head of Legal and Compliance at UniCredit Bank Serbia, for instance, said he relies more on a situational change than a specific question, to try and put the candidate off. “I like to just switch to English at some point during the interview, to see how the candidate reacts and if they pick it up.” he said. This, he believes, allows candidates to demonstrate their ability to react quickly and communicate clearly.

Even with the most thorough interviewing process, not all hiring decisions are successful, of course. Brajkovic recalled a hire who, though an amazing candidate on paper, turned out to be something very different. “This person had a fantastic CV, rocked the HR process, made the whole selection sound like a fairytale – and this was for a senior position,” he said. “A few months later, this proved to be a total disaster. This person was unable to complete simple tasks, which is a huge issue when you work in legal. We realized that we overpaid, and at the end of the day what was done was not on par – not only not with a senior, but not even a very young junior.” Still, even when necessary, terminations are difficult. “It was very hard to expel this person from the team later on,” Brajkovic conceded. “It was difficult for the team, a crash for them for sure. Justifying the call to them was not easy.”

 

“We have not had any hiring failures yet,” Vorotovic said. “All the people we hired at PMI were really good hires, speaking directly for our main legal team.” Which is not to say that everything is always rosy. “We did have some not-as-good experience on alternative forms of employment,” he conceded, referring to “a secondee that underperformed for a year.” Ironically, he said that, in that case, it was obvious to him within the first 15 days that what happened was “a bit underwhelming,” but because the immediate superior to the secondee was “a great colleague and, in this case, a good person willing to help,” they were able to avoid the worst potential consequences.

A Smooth Integration 

Once the candidate is hired, the next step is to integrate him or her into the team. “It’s very important to get people involved and introduce them to the firm, to help them learn whom they’d be communicating and working with most,” Brajkovic said. “We try and let new folks see who they will be sharing most of their time with, while also trying to plug them into team activities.” The frequency of the process can affect its smoothness, of course. “We don’t have frequent hires,” he said, “so the structure of this part of the team assembly process we wing on a little bit.”

Poznan says that, at Fresenius, “the first week can be quite intensive,” but claimed the company’s holistic approach to the hiring process and corporate functions helps make the process more-or-less painless.

Malovic explained how Banca Intesa makes sure its legal hires are performance-ready. “Once the newest addition to the team is on-boarded, we introduce them to team members as well as internal procedures and procedures to help them integrate into the organization,” he said. “After that, they work with their new mentors, their team lead, or me, and then we assign them a challenging task on purpose.” This process, he explained, “allows us to observe the new team member carefully and gain valuable insight into how they behave.”

“The most important thing is to have newcomers get to know the organizational structure and the business itself,” Vorotovic said. “Of course, there are a lot of internal rules and policies that must be processed – we give them a welcome package of sorts, on this – and we also assign a buddy to new people. The new hire follows their buddy, learns who does what, sits where, and what happens next. We have people who will work mostly with locations outside of our HQ travel to those places – say Bosnia, Macedonia, or other parts of Serbia – and get to know the team that works there. The best way to get to know the business is to talk to people from different departments, and this achieves just that.”

Having personnel based in offices abroad can be useful as well. “It may be fruitful to have somebody in a remote location,” Vorotovic said. “For the past few months we have had a colleague abroad who is working directly as a team member in another affiliate management team and it has been rather successful cooperation. That person has helped the other affiliate of PMI and will come back richer for an experience that is not available in the home affiliate.”

Remuneration

And then comes the sensitive and potentially highly disruptive issue of remuneration. “Boy, this can be a tough one,” Brajkovic said. “Sometimes we do bonuses based on evaluations, and people can fall through the cracks here even if they performed admirably. Remuneration ceilings are defined on a curve, so it depends on the rest of the team as well, although we do have some clear indicators, like what time someone punches in and out, how many tasks they completed, and so on.”

Bonuses can be a key part of keeping team members happy as well. “Fresenius has a bonus system in place for all employees,” Poznan said, using “whatever we can quantify via tangible metrics, but considering certain company goals and qualitative goals as well, which are not as precise but are good indicators as to how somebody operates.”

Poznan insisted, though, that success in this regard comes from being clear-eyed and objective in the evaluation. “We try to be as objective as we can,” she said of Fresenius. “We know what people have done, we know what operations they are involved in, and we know what their appropriate bonus system would be like,” she said. “We follow people closely and reward them for the job they do.”

Similarly, Vorotovic reported that PMI has a “very precise reward scheme in place,” under which employees receive awards based on projects they work on if a task is fulfilled and if their personal contribution is worth rewarding. “The most important thing is that employees are adding value to the company,” he says. “The law department awards its people on a project basis, so there are clear windows in which employees are given a chance to shine and step up.”

Running the Team

Finally comes the process of actually managing the team on a day-to-day basis.

Vorotovic says that, in his small team, “the working environment and the atmosphere are really pleasant.” According to him, “with everyone knowing their portfolio and tasks, there is a clear division of duties,” but of course people are willing to pitch in when necessary. “More experienced colleagues in certain areas of work help others when need be, and vice versa.” He added that it is important that members of his team agree that “team spirit takes a more prominent place to individual goals.” 

Vorotovic describes his management syle as being “as natural as possible” while leading by example. “I am always honest with my people and give them feedback straight away when a situation occurs, rather than saving everything for the year-end review,” he said. All the same, he said, “I also learn a lot from my people, and I try not to micromanage them, but rather give them freedom in their work.” He reported that, so far, his style seems to have worked, as his team “reacts positively and responds with professionalism, team spirit, and dedication.”

Malovic reported that he strives to implement an impartial approach in managing his team. “This means that I make no decisions when I’m angry, and I make no promises when I’m happy,” he said. “I try to create an environment which is conducive for a positive feel in our team. I offer to give each member of the team a chance to express themselves, all in an effort to do a more efficient job, but also to make everyone happy.” Ultimately, he said, “team members know that they can always count on me, that I’m always there to listen to them, to help them, and to offer support.”

In Fresenius’ legal team, Poznan feels that the atmosphere is “rather friendly and supportive,” with everyone focusing on teamwork and getting all the gears in motion, working as one. She said that her leadership style is “democratic, actually – I like to be perceived as a source of support for my teammates while striving to identify development opprotunities and chances for everyone.” She proudly described her team as consisting of “exceptionally hard-working and talented people,” and noted that team members “have exposure to unlimited opportunities for personal growth each day, given the regional nature of our work.”

“To maintain a succesful team along a healthy working environment is more challenging than one would expect,” Brajkovic laughed, noting that “permanent empowerment,” most efficiently provided in the form of continual professional development, is required to truly inspire employees. “This builds confidence for people and establishes a strong relationship within the team based on mutual respect and trust.” Ongoing professional education hones not only legal expertise, Brajkovic insisted, but also softer skills, including “strong ethics awareness, good overall business skills, and interest in new technologies.” According to him, “enabling team members to access various sources of knowledge (like training courses and joining associations dealing with regulatory issues) and encouraging the development of soft skills is key to building a strong and a successful team.”

Ultimately, Brojkovic provided a colorful analogy in describing his personal management style. “I see my way of team management as a coach would on a football or a basketball team: I focus on finding the right position for the right player, after conducting a lot of analysis in an effort to define their role precisely.” Although he laughed that some coaches use strong language when dealing with their players, he insisted that a “pleasant atmosphere is key to properly motivate members on a team,” and said that there is no upside to behaving like a drill seargent. Ultimately, he said, respect, honesty, and integrity are key values to be communicated and passed on. “Transferring a spirit of responsibility onto the team, and simultaineously the client, is the main goal.”

This Article was originally published in Issue 6.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In addition to their traditional role guiding companies through legal and regulatory waters and managing disputes, General Counsels are increasingly called upon to provide input on strategic matters. An expert panel at the second annual Balkan GC Summit considered how this change in the nature of the General Counsel role is manifesting itself in the countries of the former Yugoslavia.

The Changing Role of the GC

Milica Milekic, Director Legal Affairs Non-EU at Swixx Biopharma, described a slow but a steady shift over the past ten years in the way people approach her department. According to her, there is now a proactive element to the legal function. “The question we’re getting asked,” she said, “is ‘can we do X so that we are protected legally,’” as opposed to thinking about lawyer involvement as an afterthought. Although she described herself as being “quite happy about this shift,” she noted that it means senior in-house counsel are now required to know a great deal more about their company’s business than before to be able to provide the necessary feedback.

Iva Miscevic Leskovec, Head of Legal & Human Resources at Fructal, agreed that “for the past three years GCs have been bringing more to the table than just legal expertise,” and that being a good “risk manager” is now a critical part of the GC role. As a result, she said, “the first thing a GC needs to learn is ‘how to say ‘no’  to management; how to speak the language of the executives.”

Milekic also suggested that this change meant that soft skills, including the ability to communicate critical legal considerations to non-legal colleagues effectively, were often under-valued. “With many of your colleagues in a big company not coming from a legal background, you need to be able to translate legal to them and communicate clearly,” she said, noting that one benefit of the skill is encouraging non-legal team members to feel comfortable approaching the GC for consultation and advice.

Sonja Kovac, Head of Legal at Heineken Serbia, agreed that “the landscape we’re working in is changing, and changing fast.” According to her, the next generations of legal professionals will be more “spread out, and more fast-paced.” For the time being, however, the fact that new responsibilities are being added to the GC role reflects a lack of consensus about what exactly that role is in the first place. She said that, especially in larger companies, lawyers are “mostly left to themselves to define their own role,” describing that as a particularly challenging element of the job.

Thus, Kovac added, a GC is, properly understood, “by definition much more than a lawyer,” and that professionals in the role need to be both competent and organizationally savvy. “The legal function is being pushed out of the comfort zone, and your role needs to shift to handle both the external counsel and the manager.” 

Are These Changes Welcome?

Miljan Mimic, the General Counsel of Meridian Balkans, insisted that the multi-faceted nature of the GC role is one of its most attractive aspects. “When working in a big law firm you don’t see the business side of it,” he said. “You just focus on the issue at hand and try to find a solution for it.” Working in-house – especially in a smaller company – lawyers can sit down with managers almost daily, he explained, allowing them to provide input on important business decisions ab initio . “You understand way better the drive behind certain business decisions and transactions,” he said, adding that, as it means the company can avoid bringing the lawyers up to speed later and correcting mistakes, ultimately saves significant amounts of both money and time.

Of course, there may be a downside to this expansion as well. “It’s easy to lose perspective because business goals can get ahead of you,” explained Mimic, “which is why credit must be given to external counsel as well for sometimes keeping companies in check.” Still, he insisted that full immersion in the company’s business allows a GC to “better understand a deal or a transaction and guide it in the right direction.”

One of the most difficult elements of the newly-expanded General Counsel role is the occasional need referred to by Leskovic to say “no” to a management board proposal. Sonja Kovac noted that doing this isn’t simple, and is best done by “following up that ‘no’ with a ‘but’ – and providing some reasons and explanations to the board.” Providing sound reasons for your positions adds to the lawyer’s credibility, she said, describing it as a crucial part of “stakeholder management.” 

“From my experience, people don’t always ask the right questions, so you have to understand the reasoning behind their inquiries in order to be able to give them the right answer,” Kovac continued. In this way, she said, a GC is able to “speak the same language as his or her colleagues.”

And while few challenge the idea that lawyers need to be business advisors as well, there should be sensitivity to the occasions where those two come into conflict. Miljan Mimic insisted that “one needs to draw a line between the position of a GC and an advisor.” According to him, “some ethical standards are needed to help you see this line – and you must not cross it,” but he conceded that “finding this line is a difficult task.” 

Milica Milekic noted that “colleagues seem less willing to challenge the opinion of external counsel,” which is why communication skills are so valuable. “It’s a two-way exchange between us and the business, so it’s very important to know how to talk to our colleagues,” she said. 

How the Changes to the GC Role are Felt in the Former Yugoslavia

Of course, with all the regional similarities between ex-Yugoslav countries, the region itself is, in some ways, different from the rest of Europe. Still, Simic Nenezic insisted, while “the transformation of GCs from pure lawyers to business partners happened much earlier in Western countries, in our Adriatic region the role of GC has changed very fast in recent years, especially because there is a need on the market and demand from business in all industries to have agile GCs.”

Miscevic Leskovec agreed that “the role of the GC in the corporate world has become increasingly more important and complex,” and she reported that she “recognized this in the ex-YU countries as well.” The countries in the region, she insisted, “have been strategically focused on the development of a sound legal framework, as well as on the implementation of business standards and best practices,” and said that, rather than focusing simply on one task, “a GC has become a principal member of the management team and helps with broader business issues.” She conceded that the traditional role of the GC may be changing “a bit slower in the ex-YU countries compared to the EU,” but that this does not mean that the region views the role as being any less important.

Sonja Kovac disagreed, insisting that “the position of a GC does not differ in the region, as compared to the EU.” Instead, she said, all  GCs “share the same fate – which could be an advantage when sharing experiences and best practices, as well as tackling the challenges ahead together.” Mimic agreed that the market in the region is very similar to elsewhere in broader SEE, at least, and that any change in the former Yugoslavia is “more or less reflected in all SEE countries.” 

Whatever its pace, there appears little doubt that the role of the General Counsel is changing in the former Yugoslavia as elsewhere in Europe.

This Article was originally published in Issue 6.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Hyprop Investments – South Africa’s largest listed specialist shopping center Real Estate Investment Trust – operates a portfolio of premium shopping centers in South Africa, other countries of sub-Saharan Africa, and Southeastern Europe. Hyprop’s six current investments in SEE include two shopping malls in Zagreb and one each in Sofia, Podgorica, Belgrade, and Skopje. Hyprop is internally managed and headquartered in Johannesburg.

We spoke to Wilhelm Nauta, the Executive Director and Chief Investment Officer of Hyprop, to learn about the company’s interest in and strategy for CEE.

CEELM: Tell us, just in a few sentences, what Hyprop is, and what it does.

Wilhelm: Hyprop is a Real Estate Investment Trust (REIT) that has been listed on the Johannesburg Securities Exchange (JSE) for more than 30 years. A REIT enjoys certain tax benefits for as long as it primarily invests in property, pays out most of its free cash as dividends, and does not exceed certain gearing limits. Hyprop focuses on the retail sector, especially large shopping centers. Hyprop currently has a portfolio of nine large shopping centers in South Africa, six large shopping centers in CEE (valued at EUR 800 million), and four shopping centers in Sub-Saharan Africa (outside South Africa). Hyprop’s stake in the CEE portfolio is held through Hystead, a JV in which Hyprop has a 60% stake.

CEELM: What is your personal background? How did you get to your current position, and what has your interaction with CEE/Eastern Europe been in particular?

Wilhelm: I am a qualified Chartered Accountant and I have worked in investments and related fields for the past 20 years, including the stockbroking, private equity, and unlisted and listed property industries. I was appointed by Hyprop in 2016 following the company’s strategic decisions to expand into CEE, reduce exposure to Africa (outside of South Africa), and divest its non-core assets. I have been integrally involved in changing the geographical and sectoral asset allocation of the group and helping it become a retail specialist, increase exposure to CEE, and, again, reduce exposure to Africa. 

CEELM: How does the legal function at Hyprop work? Where is it based? Do you have a separate team in and for Eastern Europe?

Wilhelm: Hyprop has a legal executive that is based in Johannesburg, but for cross-border transactions Hystead makes use of top legal firms in the respective countries. Hystead has its own asset management and financial teams based in Europe.

CEELM: How does Hystead structure its investment strategy for Eastern Europe? By geography, or sector, or simply on an ad hoc basis, as it learns of good opportunities?

Wilhelm: Hystead’s strategy is to invest in large, dominant shopping centers in Eastern Europe’s main commercial cities. To date, we have mainly invested in the Balkans, but we would consider opportunities in Central Europe at the right price. We find the yields of the more developed countries in CEE to be quite low relative to the funding cost. This is unlike the Balkans, where the spread between funding cost and initial yields are often 350 basis points or more.

CEELM: What does Hystead’s CEE team look like? Where are the representatives based who explore and identify good opportunities, and how many are there?

Wilhelm: Hystead has a chief operating officer and chief financial officer based in the Netherlands and Bulgaria, respectively. They are supported by a financial team in Bulgaria and property management teams on-site at each mall. 

CEELM: How does Hystead identify good opportunities in CEE/Eastern Europe?

Wilhelm: Most of Hyprop’s opportunities come through broker networks or direct contact with potential sellers, by virtue of Hystead becoming known in the market after having acquired six malls in the last three years in the Balkans. 

CEELM: How does Hystead select external counsel for its deals? Is there a panel, or is outside counsel selected on a case-by-case basis? 

Wilhelm: Word of mouth is the only reference used for selecting legal counsel. Hystead has used a legal network called South East Europe Legal Group to good effect. Polenak Law Firm in North Macedonia, Boyanov & Co in Bulgaria, and Divjak, Topic & Bahtijarevic in Croatia have provided good service to Hystead. 

CEELM: Does Hystead have anything exciting going on in CEE now?

Wilhelm: Yes, we do have exciting plans, but sometimes good plans take time to come to fruition. It’s been eighteen months since Hystead’s last acquisition in Eastern Europe but we are definitely still bullish on the region and would look to increase exposure to the region.

CEELM: To finish on a personal note, what’s your favorite memory of CEE?

Wilhelm: One of my best experiences in the region was a night in Old Belgrade. I love Belgrade as it is beautiful and vibrant, with excellent food. A visit to the beautiful Sveti Stefan on the Montenegrin coast also stands out, but unfortunately the prices there are so steep that you can only drink tap water and enjoy the view. To my shame I have never been to Croatia’s beautiful coastal cities, as I only visit our two malls in Zagreb due to a very tight time schedule. A trip through the region on a bicycle one summer is high on the bucket list!

CEE Legal Matters would like to thank Denise Hamer of Kinstellar for introducing us to Wilhelm Nauta.

This Article was originally published in Issue 6.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.