It's as inevitable as death and taxes, but may help you avoid the latter. Sooner or later in a company's life cycle, it's going to need a lawyer. The smart executive brings in the corporate counsel before trouble strikes, in order to set legal strategy and avoid possible pitfalls. Assuming there is time to make a thoughtful decision, one of the bigger questions needing an answer is "outside or inside?"

The answer is determined by the needs of the business. Microsoft Corp., for example, employs more than 250 "legal advisers," yet also retains an army of lawyers at outside law firms. Of course, a corporate behemoth such as Microsoft has myriad intricate legal issues with enormous, global consequences, such as the landmark antitrust suit and related cases that have occupied more than a decade of the company's existence. But even small companies cannot avoid working with lawyers, because there just is no substitute.

"Most small companies who rely on business executives to make legal decisions and set legal strategy make that mistake only one time," says Jeff Christianson, executive committee chair of the Washington State Bar Association's corporate law department. "After they have cleaned up the litigation, regulatory, contractual or other financial messes created by these 'lay lawyers,' the company turns to qualified in-house or outside counsel for all future legal advice and guidance."

The trend these days is toward bringing an attorney on staff, according to a survey of 200 corporate attorneys and top executives from Fortune 1000 companies. In BTI Consulting Group's sixth annual survey, "How Clients Hire, Fire, and Spend: Landing the World's Best Client," only 32 percent of surveyed executives said they would recommend firms that worked for them, and 70 percent reported being dissatisfied with their primary law firms. Those findings worry Carole Haugen, a former in-house counsel for Spokane Valley-based General Dynamics Itronix Corp., who now has her own private practice advising corporate clients in transactional matters.

"Essentially, what BTI found was that CEOs are not happy with the outside attorney for three reasons: The law firms aren't able to keep up with their larger clients' changing needs, they aren't able to articulate the value they deliver, and they don't communicate effectively."

"Communication, communication. From experience, I can tell you that the primary disadvantage to working outside the company rather than in-house is that the opportunities for dialogue aren't as ready," Haugen says. "The challenge then is for both the attorney and the corporate client to keep those lines of communication open."

By way of illustration, she points out a common scenario: "A client designs a very creative sales or reseller program. Outside counsel then reviews it and identifies potential antitrust issues with the contract or program details. The client put together the program in good faith and is very eager - or may have even started - to implement it, but the suggested changes disrupt the entire program. An in-house lawyer could have been involved in the early discussion of business goals and program design and would have proposed changes to address the potential antitrust issue with little disruption to the program and still achieve the client's business objectives."

But before running out and hiring an attorney, a company needs to consider several factors, of which expense and the attorney-candidate's area of expertise are just two.

"You need to have a good fit, because the attorney is part of the management team," Haugen says, adding that a good in-house attorney knows how to walk that fine line between being a colleague with a vested interest in the business and serving as a trusted, objective adviser.