How to make an isolated legal department a core business function

Why Scott Wornow took legal back from outside counsel, and how the change has impacted Atmel’s bottom line

In his first two years at Atmel, chief legal officer Scott Wornow reduced money spent on outside firms by 50 percent. The changes didn’t stop there. Wornow’s new bosses hired him to improve the overall performance of a slow, rigid, and isolated department. And the stakes were high.

The billion-dollar, multinational semiconductor company was in the process of streamlining operations. After the economic downturn of 2008, 2009 had been a rough year. Reduced demand impacted all business units, and the corporation focused on its product portfolio and its tentpole customers. To react to new realities and reposition Atmel for growth, senior leaders moved to focus on core competencies, enhance competitiveness, reduce spending, and improve efficiencies across the board. The economic crisis interrupted a plan already in place since 2007. Atmel had exited 14 noncore business areas, lowered operating expenses, and reduced headcount by 30 percent. Reinventing the legal department—Wornow’s mandate from the board—was the final step in the plan.

“There’s a correlation between reducing external spend and increasing morale because it sends more interesting work back inside the department.”

The Impetus

“The need for a change was pretty obvious on day one. Nearly all activities were handled outside the department and everything was disconnected,” Wornow says. After making partner at a number of large, international firms where he managed risk and performed several duties, Wornow knew Atmel’s lawyers could handle much of the work that was sent out—but they had never been given the opportunity.

The department of 25 had little cohesiveness or collaboration. Many of the lawyers, accustomed to working alone on simple and routine tasks, had grown frustrated by the lack of opportunity and professional development. Morale was low. “My philosophy is that the in-house lawyer is a businessperson with a legal perspective, but the objective remains a business one,” says Wornow. Previously, lawyers mostly worked separately from business people, and if the two did interact, it was only over cut-and-dried legal matters. Atmel’s business people viewed legal either as an obstacle, or a necessary evil.

Despite the challenges that he would inevitably face, Wornow was encouraged because he saw the potential. “Atmel had been through a number of restructurings and was doing workforce reduction and facilities sales in Europe. I knew that if we could improve quickly, I could show my new colleagues how much value the legal department could provide in those areas,” he recalls.

Wornow was right. A legal team working below its potential was indeed hitting Atmel’s bottom line. By relying heavily on others to perform routine work, they were forcing the company to spend millions of dollars ($24 million in 2010) on outside firms. Secondly, Wornow argues that outside partners can rarely understand and serve a complex and evolving organization like Atmel as well as its own in-house team. Additionally, department leaders often complained of legal’s slow response time.

In his previous roles, Wornow had seen large firms and in-house teams perform well. “I knew we had the pieces to take back key jobs and not rely on outside help for day-to-day activities or even larger, more complex legal tasks,” he says. “Most lawyers like a challenge. Most want to develop subject-matter expertise and be trusted to take the lead on something.” He wanted Atmel’s legal team to handle HR issues, license negotiations, workforce reductions, board issues, and other matters. “This should all be in the core competencies of an effective in-house legal department,” he says. Getting there would require a dramatic course correction.

The Plan

Step one was to reset expectations at Atmel, both inside and outside the legal department. Externally, Wornow worked to communicate with other senior leaders, describe the capabilities of a revamped legal team, and get early buy-in. Internally, he led a change in mind-set. Many of Atmel’s seasoned lawyers had been partners or senior associates at firms. Others worked inside major corporations. The skills were there; the expectations needed to shift. “I changed the standards that we hold ourselves to. We set out to do more while relying less on outside counsel and thereby reducing costs at the same time,” Wornow explains.

With the aim clearly communicated, he reviewed Atmel’s outside partners and found the corporation was using more than a dozen firms. He resolved to reduce that number and cut the line item for outside counsel by 50 percent. Wornow knew that severing ties with outside firms would have some associated benefits for his team. “There’s a correlation between reducing external spend and increasing morale because it sends more interesting work back inside the department,” he says. When employees started doing M&A transactions and other items that were once fully outsourced, engagement, quality, and effectiveness all improved. The move allowed in-house attorneys to do the lawyering they had been hungry for while shifting outside firms to a support role. The roles, as Wornow says, had been “somewhat reversed.” At the same time, Atmel aggressively introduced fixed-, alternative-, and success-fee arrangements and initiated requests for proposal for many of its matters, starting in 2011. The move helped bring down costs even more.

The Results

With Wornow’s changes, Atmel’s legal department went from spending $24 million in 2010 to $12 million in 2013 and trending towards $9–10 million for 2015. The corporation also reduced the number of lawyers and support staff in its legal department from 25 to 15. “The lawyers bought-in to the changes, and adopted the mantra of doing more with less. The plan worked because they stepped up to the plate,” says Wornow.

The feedback came almost instantly. Wornow’s colleagues in the finance department noticed a difference in M&A transactions early, saying they were completed with a much better understanding of actual risk. That’s because under the new approach, Wornow had IP lawyers, litigators, and others in his department working collaboratively to assess risk and complete due diligence.

Today, Atmel still sends some work to its outside firms, but the work is more basic and less critical to Atmel’s core business. And Wornow has discovered an added benefit to his plan: quality from outside firms has gone up, too, because they’re less overwhelmed by volume. Atmel now uses about eight main partner firms, and scores each one on a quarterly basis. Those firms receive anonymous peer comparisons and economic incentives and disincentives for performance.

In 2013, Atmel’s legal team started developing online training modules for anticorruption and business standards with internal and cross-disciplinary risk management committees. In 2014, the group chartered a committee to review all standards and educate each business unit on standards bodies that Atmel works with and how these partnerships impact intellectual property. Wornow says these efforts allow for cross-functional information sharing and provide another mechanism for breaking down silos and better integrating legal in the business units and their long-term objectives. In 2015, the NYSE Governance Services’ Governance, Risk, and Compliance Leadership Awards panel named Atmel the best in-house legal team for corporate governance at a small-to-mid-cap company, writing that Atmel met “every legal, ethical, and compliance challenge with exemplary standards of integrity and legal expertise.”

Now, a more responsive legal team at Atmel has a better understanding of the business and is calibrated to meet that business’s needs. Atmel’s products face strict regulations, and the corporation completes large transactions, hires employees, and opens facilities all over the world. Wornow’s department is adding value as legal interacts with research and development engineers and others to evaluate new products and identify potential legal issues. With a transformed legal team at the table, Atmel develops and releases new products faster than before.