When to hire your first in-house counsel, and what to outsource anyway

At some point in a company's growth, the question lands on the management agenda: should we hire our own lawyer? It rarely arrives in the abstract. It arrives as a contract backlog the sales team complains about, a legal bill that made the CFO look twice, or a financing round where nobody inside the company could hold the pen. The instinct is to treat it as a yes-or-no decision. It is more useful to treat it as a sorting exercise: which legal work belongs inside the company, and which never will.

Three tests: volume, recurrence, strategic weight

Volume is the obvious test, but the crudest. Annual external spend is a starting point, yet a single dispute or acquisition can dominate a year's bill without saying anything about the baseline. The better question: is there enough legal work, week after week, to occupy a good generalist, not in a peak month, but in an ordinary one?

Recurrence matters more. If the work is the same in kind (sales contracts, procurement terms, NDAs, employment questions, the occasional data-protection query) it rewards someone who learns the business once and applies that knowledge daily. If instead it is a sequence of one-offs in different fields, an in-house generalist will spend their time briefing external specialists anyway.

Strategic weight is the test most often missed. Where legal judgment shapes decisions (market entry, pricing models, partnerships, the relationship with a regulator) you want that judgment in the room early, not in a memo afterwards. A company negotiating its future in regulated territory needs a legal voice at the table; a company with heavy but routine contract flow may not.

If two of the three tests point inside, a first hire usually makes sense. If only volume does, a structured external setup is often the better answer.

What a first in-house counsel does well

The first hire's real product is context. Someone who knows the product, the deal flow and the company's actual risk appetite can turn a review that took a week externally into a same-day answer, because they are not reconstructing the business each time.

Just as important is triage: knowing which contracts deserve negotiation and which can be signed as they are, which complaint is noise and which is the start of a dispute. Add playbooks, templates and an orderly contract archive: institutional memory that belongs to the company. And a good in-house counsel becomes an intelligent buyer of external work: defining scope precisely, comparing offers, refusing open-ended mandates.

What stays external anyway

Three categories of work do not move in-house, however good the hire.

One structural point sits underneath all three. The strong professional secrecy in Art. 13 FMLA, and the right to refuse to produce documents that rests on it (Art. 163 CPC), attaches to the registered attorney rather than to the legal function. The revised Civil Procedure Code has improved the position of in-house teams in civil proceedings, but it did not turn a legal department into an external firm, and foreign authorities apply their own rules. Where a matter may end up in a proceeding, that difference decides where the sensitive analysis should be written.

• Specialist depth. Tax, financial-markets regulation, merger control, IP disputes: no generalist stays current in all of them, and pretending otherwise is how expensive mistakes happen.
• Contentious matters. Litigation and arbitration are a craft of their own, and they benefit from distance, an advocate who is not also a colleague of the people whose decisions are being defended.
• Peak load. Acquisitions, financings, internal investigations and restructurings arrive as spikes. Sizing a permanent team for the spike means paying for idle capacity the rest of the year; sizing it for the baseline means the spike goes external by design.

There is a quieter fourth: the second opinion. A single counsel, however capable, has no one to test their view against. On decisions that will matter for years, an external challenge is worth its cost.

Making the hybrid work

Hiring in-house does not end outsourcing; done well, it upgrades it. The counsel becomes a demanding customer: fixed scope and price where the work is definable, agreed turnaround, findings that can be checked against their source rather than taken on faith, and reporting that shows what was done. If external legal work becomes less structured after your first hire rather than more, something has gone wrong.

If you are not ready to hire

Whether the hire pays off depends on your facts, and the honest answer is often: not yet. The intermediate model is an external firm that behaves like a legal department on the recurring layer (known turnaround, playbooks agreed with you, predictable cost) while keeping specialist and peak-load work in the same hands. That is the model we run: systems do the structured reading and drafting, and a named lawyer challenges the analysis and answers for the result. If you are weighing your first legal hire, we are happy to think it through with you.