As a non-lawyer near the top of the hierarchy at a Fortune 1000 legal department, Peter Gavrushenko is an odd duck–at least in the European Union.

Indeed, when Lausanne-based Philip Morris International (PMI) installed Gavrushenko as director of legal services in October with strategic responsibility for budget, planning, training and technology, a European legal magazine hailed the appointment as an “innovative new model” for in-house legal teams.

“It makes business sense to let lawyers focus on the law and have a non-lawyer manage the legal group's business affairs,” says Gavrushenko, an MBA who has worked at PMI for 12 years, most recently in the corporate-affairs group.

Gavrushenko reports to General Counsel Martin Barrington and is his right-hand man in operational matters. The position is equivalent to being the chief operating officer of the in-house department. In other words, we're not talking about an office manager here.

According to Caren Gordon, managing director of the Washington, D.C.-based Executive Board's General Counsel Roundtable, installing non-lawyers in COO positions has been gaining popularity with large U.S. corporations for more than two decades. But in Europe, only Barclays Bank, the U.K.-based financial-services conglomerate, preceded PMI by appointing a non-lawyer to the job in the late 1990s.

It should be no surprise that the impetus for Gavrushensko's appointment can be traced back to Altria Group Inc., PMI's New-York based parent.

Exporting The Role

Altria also is the parent of Philip Morris USA Inc., Kraft Foods Inc. and Philip Morris Capital Corp. The group employs 157,000 people in 39 countries. Each company has its own legal department, although Altria provides some central services to the operating companies. The combined legal departments employ 266 attorneys among a staff of 568; of this number PMI boasts 109 lawyers and a staff of 174 spread across 31 countries in Europe, Latin America and Asia Pacific.

Since 1990 Colleen Flinn, a former paralegal who joined Altria's predecessor 22 years ago, has been the director of legal administration and assistant secretary at the parent company.

“My position and Peter's position are equivalent to the job of managing partner in a law firm,” says Flinn, who reports to Altria's general counsel, Charles Wall. “They are strategic roles.”

Flinn's responsibilities involve general operations, finance and technology.

“On the finance side, I am responsible for the department's purchasing power,” she says. “I examine how to use law firms efficiently and how best to structure financial arrangements in areas such as research, technology, general operations and travel.”

For example, Flinn recently completed a two-year study examining the costs of document collection and production for the company's U.S. litigation. As a result, the company has moved these functions in-house and realized considerable savings.

One of Flinn's colleagues on the senior management team for Altria's legal department was Barrington, who moved from New York to Lausanne in 2003 to become PMI's general counsel. Before Barrington left, Flinn urged him to seek non-legal strategic help in his new job.

At the time, the only non-legal assistance available to PMI's general counsel was a junior finance person. Flinn believed what Barrington needed was a senior person who not only could focus on planning and strategy, but also could help him navigate the vagaries of the European legal market.

“Sometimes European law firms look at the practices of American in-house counsel as if they are some strange beast with 15 heads,” Flinn says. For example, written policies covering things such as conflicts, budgets, reporting and information security are rare in European law departments.

“Many European firms don't know what these policies are or why we have them,” Flinn says. As it turned out, Barrington didn't have to go beyond PMI to bridge the gap necessary to bring core head-office values to the Swiss company.

Taking The Reins

Gavrushenko had spent the past three years of his tenure at PMI with the corporate-affairs group. Before that he had broad experience in the company, including a stint working in M&A.

“Peter is someone who knows the company, the business and our department, ” says James Jackson, vice president and associate general counsel at PMI. “ It's particularly helpful to have someone in our group who's been on the client side.”

Barrington brought Gavrushenko in as director of legal services to lead the way on planning and budgeting; benchmark PMI's relationships with outside counsel; keep intranet content and technology current; and conduct training and development. In his first month on the job, Gavrushenko set up the Philip Morris Law Skills School, aimed at improving lawyers' non-legal abilities in such areas as communication, presentation and counseling. The school's first session drew 14 PMI attorneys from 14 countries.

“Before Peter came along, these were the types of things we were trying to do–with varying degrees of success–through a number of working groups populated by lawyers,” Jackson says. “In the six weeks he's been here, our lives have become much easier. Our senior lawyers have noticed the difference most, but so have the junior lawyers and the support staff.”

Bjarnie Anderson, who has a masters degree in management science and communications, had a similar impact at Barclays Bank when he was appointed legal operations director in 2001, a post he held for three years before leaving to seek other opportunities in the legal market. Indeed, he was the first non-lawyer to achieve the equivalent of COO status in a major European legal department.

“The individual who preceded me at Barclays was a lawyer, and when he left, the Bank was looking for a way to do things that would not divert the attention of its lawyers from their core competency,” Anderson says.

At Barclays, Anderson spearheaded budget and financing initiatives, managed relationships with law firms and the panel process, oversaw the IT systems–including the department's knowledge and matter-management systems and computer networks–dealt with recruitment and staffing, and was responsible for media relations.

“I also supervised client relations and client surveys, and fought the good fight with corporate to let them know when legal had special needs,” he says.

Ironically, failure to understand the special needs of legal departments is the criticism leveled most frequently at the idea of a non-legal COO.

“The problem with a non-legal person at a high level is always whether they understand enough about the work lawyers do, the way they work and what is expected of them,” says Tony Williams, formerly worldwide managing partner at both Clifford Chance and Andersen Legal, and now a principal with Jomati Ltd., a London-based legal consultancy.

But having worked with PMI's in-house department both in his corporate affairs role and in previous positions with M&A responsibilities, Gavrushenko doesn't see that as a problem.

“I have a comfort level working with lawyers,” he says. “People have greeted me with open arms. They realize I'm doing things they spent their time on in the past, freeing them up to practice law and serve their clients.”

What remains to be seen is whether the Barclays and PMI model will catch on elsewhere in the European Union. A recent study suggests it will.

Cost Management

The General Counsel Roundtable–whose membership comprises more than 500 senior legal executives from the world's largest corporations–conducted a survey in 2004 that concluded that in-house departments with “business managers” have lower legal costs and handle 10 percent to 15 percent more legal work than departments without business managers.

The study, “Role of the Legal Department Business Manager,” profiles the increasing popularity of the position, associated responsibilities, key skills, experience, compensation and effectiveness. It also contains assorted case studies.

According to the study, 30 percent of in-house departments of varying sizes across all industry sectors have business managers. “But they typically perform their duties within larger legal departments,” Gordon says.

These managers have different titles and can come from a legal background, from elsewhere in the company or from the outside. But they share specialized skills in some combination of financial management, information technology and human resources.

“European in-house departments, however, have been behind the Americans in this regard,” Williams says.

The reasons seem to be that European departments are smaller than their American counterparts, their budgets constitute a smaller proportion of companies' overall expenses, and cost-cutting hasn't been under the spotlight in Europe until recently.

But as European companies look to get more value from their in-house lawyers, legal departments are becoming more sophisticated in their operations. Besides, general counsel and other senior lawyers don't have the time to spend on operations anymore.

“Governance issues alone, which used to take only about 10 percent of general counsel's time, now can take up to 30 percent,” Gordon says. “So any large legal department that wants to perform up to the standards expected nowadays is going to have to look at non-legal help to achieve that goal.”