Structuring IP and Legal Teams in Conglomerates: Missteps and Masterstrokes

“A house divided against itself cannot stand.” – Abraham Lincoln

A conglomerate—a large enterprise comprising multiple discrete companies, divisions, or business units—may come into being organically or inorganically, due to business growth, expansion into new markets, internal restructuring, or a merger, acquisition, or joint venture.

Regardless of a conglomerate’s origin story, its leaders face a fundamental question: How should they structure the intellectual property or legal function to optimally serve the needs and interests of the divisions and the conglomerate at large?

Various models or structures are available, each presenting pros and cons in the abstract and as applied to a particular enterprise. Leaders who approach the structuring question at too high a level, without deeper consideration of organizational or human factors at play, risk choosing a model unwisely or sabotaging a suitable model’s efficacy during implementation. Conversely, those who take a holistic, realistic, and proactive approach can position IP and legal teams for maximal positive impact.

Types of Team Models

Models for structuring conglomerate IP or legal teams range from fully decentralized to fully centralized. Each conglomerate may customize its approach in pursuit of optimization. Thus, the following typology is neither definitive nor exhaustive.

• Fully Decentralized. In this model, the IP or legal functions of each division exist as independent and autonomous functions vis-à-vis sister divisions and their corporate parent entity or entities. Each IP or legal department has its own budget, objectives, and priorities. Entirely localized, it receives no material governance mandates from outside its division, provides or procures its own operational and technology infrastructure, and enjoys essentially total self-determination in strategy formation and tactical execution.
• Fully Centralized. In diametric contrast, in a fully centralized model, IP or legal personnel serve respective divisions, but functionally, if not organizationally, are members of a combined team in which authority and governance flow from a parent entity and associated leaders, such as a global chief IP counsel, general counsel, or chief legal officer. Team members may be entrusted with a high degree of independence and latitude to address day-to-day issues and division-specific imperatives, but overriding control rests in a central authority. The most rigid embodiment of a fully centralized IP or legal team typically features a leader or leaders with command-and-control leadership styles.

Between the above extremes are hybrid models that place respective IP or legal teams at both the conglomerate’s divisional level and its corporate parent or group-wide level. For such models, authority, governance, and responsibilities can be allocated in a multitude of ways that favor, disfavor, or are neutral to the respective teams. The umbrella term federated is often employed to describe these models, analogous to the allocation of power and duties between and among the United States federal government and individual states of the Union.

• Federated / Shared Services. In this model, a parent or corporate IP or legal team provides complementary support or services to divisional IP or legal teams, but on a coequal or subordinate basis. For instance, a corporate IP team may comprise trademark attorneys or legal operations experts to address ongoing needs of divisional IP or legal departments and their internal clients. Similarly, a corporate IP function may employ team members to orchestrate foreign filings for business units’ patent applications, manage software infrastructure for business units, provide analytics capabilities to support offensive or defensive needs, or assist with monetizing IP assets at the behest of the divisions or business units.
• Federated / Corporate Governance. Like the preceding model, this model commonly offers corporate-managed shared services to divisional IP or legal teams. However, it gets closer to a fully centralized structure by vesting ultimate authority and governance in a parent or corporate IP or legal executive, for at least a subset of relevant overarching issues. Exemplary issues include IP governance and compliance, data classification, AI usage, IP monetization, employee retention, and leadership or professional development.

The above models and variations thereof map to different management philosophies.

Adherents of fully decentralized models often argue that decentralization maximizes teams’ alignment with, and responsiveness to, their respective divisions. Detractors point to their potential to duplicate efforts, perform inconsistently across strategic and tactical matters, and foster counterproductive friction and competition among sister divisions.

Proponents of fully centralized models tout centralization as ensuring high performance, consistency, and harmony across the enterprise. Critics voice concerns that such models institutionalize top-down edicts, bureaucratic red tape, and ivory-tower grandstanding to the detriment of business units’ core missions.

Promoters of federated models posit that such models harness the best attributes of decentralized and centralized models while mitigating their extremes. These hybrid models are viewed as offering balance and optionality to solve for an array of complex challenges facing conglomerate IP and legal teams.

Besides selecting models or structures for IP and legal departments, enterprise leaders also must decide on staffing approaches for their chosen models, such as fielding lean teams or building in capacity and redundancy.

Common Missteps in Model Selection and Implementation

In a general sense, none of the above IP or legal team models is inherently superior or inferior relative to others. However, enterprises sometimes choose a model that is misaligned with the specific realities of their business and organization. Others may choose the right model—or a right model—but then stumble in implementing or maintaining it.

Even highly sophisticated conglomerates may make missteps like the following:

1. Not Clearly Defining the Value Sought

A conglomerate’s choice of a model, whether intentional (e.g., part of a planned restructuring) or incidental (e.g., acceptance of the status quo), may be inapt from the outset.

Leaders may not precisely articulate what value their IP and legal teams are currently delivering or are supposed to deliver going forward. Instead, they may trumpet broad goals such as reducing outside spend, getting closer to the business, leveraging AI, and being more responsive or innovative.

Without careful preparatory work, including pinpointing quantifiable measures of value where possible, leaders may select a model haphazardly. For instance, leaders of a conglomerate that has launched an enterprise-wide simplification initiative may gravitate toward a fully decentralized model without taking a nuanced look at other available models. Similarly, leaders of an organization chasing nebulous goals of significant cost savings may presume that a fully centralized model will enable stricter fiscal management, without thoroughly comparing models.

2. Not Assessing a Model’s Suitability in Context

Organizational architects also may fail to realistically evaluate whether a proposed IP or legal team model truly is compatible with the enterprise and its personnel.

Optimism bias may drive the selection process toward an imprudent outcome. Quick decisions may be requested by senior business leaders with little time for research and deliberation. Managers may have limited experience or insight into model design or implementation or how organizational or human factors may impede the realization of high hopes and aspirations.

Take the example of a conglomerate whose legacy sister divisions operate substantially as they did before acquisition by their parent company. Years after the acquisitions, marked cultural differences persist among the divisions. Incumbent personnel within the IP or legal departments of those divisions remain fiercely independent and suspicious of new ideas or external influences.

In such a setting, implementing a fully centralized model, a federated / shared services model, or a federated / corporate governance model may backfire due to internal resistance.

Conversely, such models stand a much greater chance of implementation success in organizations whose leaders and team members embrace change and openness.

Asking tough questions and applying related learnings can help organizations choose models that are most congruent with their unique context.

3. Not Precisely Defining and Enforcing Roles and Responsibilities

Assume that leaders have judiciously selected an IP or legal team organizational model for their unique organization. Yet, over time, the model doesn’t deliver on its promised benefits.

This gap may stem from an unstructured or hands-off approach to managing the IP or legal organization, including actions taken and not taken to implement and maintain the model.

Particularly in federated / shared services or federated / corporate governance models, roles and responsibilities are distributed across a conglomerate’s divisions and corporate parent entity. Frictionless execution and harmonious team performance flow from fundamentals including a shared—and accepted—understanding of who is responsible for what, who has authority for what, and how team members are expected to cooperate and collaborate across the enterprise.

Failing to delineate these fundamentals, design and execute a change management strategy, and ensure that everyone across the organization acts in line with the fundamentals is a recipe for dysfunction. Often, three factors combine to produce an unhealthy cocktail: lack of clarity, insufficient attention by management, and failure to acknowledge and confront team members’ resistance and resentment.

No matter the model, leaders outside and inside the IP or legal organization should actively monitor the performance and culture of the organization and step in when warranted to make course corrections. To that end, business leaders should abandon prevailing management approaches that apply limited oversight to IP and legal teams relative to other company functions.

4. Thinking Rigidly, Not Holistically

Some enterprises limit their potential by adopting a rigid, mechanistic approach to designing the IP or legal function.

This may manifest as permitting individual insecurities and preferences to drive model selection. For example, decision-makers weighed down by a scarcity mindset may be attracted to extremes—a fully decentralized or fully centralized model—rather than federated models that provide more balance.

A scarcity-minded decision-maker within a division may prize a fully decentralized model as a vehicle to preserve autonomy and forestall oversight and intervention by outsiders, who in the decision-maker’s mind pose a threat.

A scarcity-minded decision-maker who sits within the corporate parent or holding company may lean heavily toward a fully centralized model as the perfect embodiment to realize his or her ambitions to exert control over perceived weaker, wayward team members across company divisions.

Another manifestation of rigid team design is unnecessarily replicating, in the IP or legal function, the same highly matrixed or layered organizational structures used by the wider business. Yet another is taking a conventional approach to inter-division or inter-entity collaboration rather than exploiting AI and other advanced tools that can enhance collaboration across the enterprise.

Ultimately, such self-interested or unimaginative approaches may cap the group and individual potential of the IP and legal function. They should be replaced by holistic, creative design processes grounded in an abundance mindset.

5. Allowing Kingdom Building

Over the short and long term, an especially destructive misstep related to selecting and implementing IP and legal department models is letting kingdom building take root and reign supreme.

Irrespective of the model, this misstep often consists of building internal teams that are unduly lean, large, or complex—in a conglomerate’s divisions, corporate parent entity, or both—without disciplined stewardship and strategic planning that seek strong alignment between the departmental footprint, business needs, and utilization of available resources.

In some settings, kingdom building may go undetected and unchecked for years. When finally discovered, leaders may feel compelled to take aggressive remedial actions. Such actions may have a highly destabilizing effect on the organization and the team members who trusted the architects responsible for the flawed structure.

Consider a Hybrid Model, But Solve for the Missteps

Structuring an IP or legal department in a large enterprise is a consequential undertaking that merits careful consideration and sustained action.

As noted, federated models may provide a conglomerate with a welcome balance between localized agency on the one hand and centralized control and administration on the other. Additionally, such hybrid models can enable increased operational efficiencies, optimized cost savings, smarter scaling, and proportionate focus on both tactical matters and broader strategies.

But as with any potential model, leaders should take proactive steps to avoid missteps such as those described above.

Masterstrokes for structuring IP and legal teams in a conglomerate or growing company include delving into relevant value questions and contextual details when evaluating models at the outset, thoroughly scoping a design, actively monitoring implementation, intervening when needed, and thinking creatively.

Likewise, decision-makers can’t afford to overlook human factors that might derail team success, including insecurities that may manifest as resistance to change, guidance, and authority or as efforts to build departmental kingdoms that prove more destructive than productive.

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