Welcome to our latest episode of Legal.io Community Spotlight, a series in which we highlight the careers and experiences of some of the most impressive legal and legal operations professionals working in-house.

In this episode, we explore the career journey of Bill Novomisle, Director of Legal Operations at Cresco Labs. Bill talks about how bringing his experience as a pricing director at a law firm to legal operations (as well as his imperative of understanding the business first) has helped him best manage and understand a legal department. Pieter and Bill cover:

• Bill's career journey to date
• Key responsibilities in his role as Director of Legal Operations
• Key challenges and lessons learned in his different roles
• How scoping is the only way you can get to an effective flat fee arrangement between a law firm and in-house department

Pieter Gunst

Hi, everyone. My name is Pieter Gunst. It's my pleasure to shine the spotlight today on Bill Novomisle, the Director of  Legal Operations at Cresco Labs. Cresco Labs is a company reinventing the cannabis industry. And Bill is a world traveler. He is a technologist. He is a Director of Legal Operations. And one fun fact that he shares with my father is that he has an original background in chemistry.

Bill, thank you so much for joining us today.

Bill Novomisle

Pleasure's mine. Thank you, Pieter.

Pieter Gunst

Bill, let's dive right in. So Director of Legal Operations at Cresco Labs. Tell me a bit about your journey because I know it's been a very interesting one getting to that seat.

Bill Novomisle

Yeah, absolutely. So in a former life as you mentioned I was a synthetic organic chemist and I did drug discovery at Pfizer. I then went to law school and was really opposed to being pigeonholed as an IP lawyer, because I had a background in science. I ended up becoming a New York City litigator at BigLaw and I litigated securities, commercial, antitrust, busted M&A deals and things like that at both Sherman & Sterling and Paul Hastings.

Then I thought that I would make the move in-house and I figured that I would manage litigation but from an in-house perspective as opposed to being an outside counsel litigator. That is when I came across my first role in legal operations. It was at PepsiCo - a very very new space there where we were all kind of figuring out what the role even meant at that time.

But I took it, and had a great experience there. Then my family decided to go on an expat adventure to Toronto, Shanghai and then Hong Kong which led me to roles as a pricing director at a law firm. So I got to see a little bit of what legal operations looks like but from the sell side as opposed to the buy side.

In Asia, I decided to be an entrepreneur and that is where I founded a consultancy (and then later joined another consultancy) primarily focusing on technology implementation, legal change management and legal innovation. 

But then, between the pandemic, the Chinese National Security Law and the democracy protests in Hong Kong, it was time to repatriate.That's what brought me to Chicago land area. And then when I was conducting a job search, I saw that Cresco Labs was looking for a Head of Legal Operations. I've always been passionate about the cannabis plant. I was very excited about the cannabis space and that is what brought me to apply and ultimately land my role as Head of Legal Operations here at Cresco Labs.

Pieter Gunst

Fascinating. And before we dive into that role, tell me: you mentioned this legal obstacle at PepsiCo which was the first entry that you stumbled upon. Were they advertising it or were they thinking about that role? How does something like that happen so early in the game?

Bill Novomisle

They were advertising that role, but it wasn't coming up in my searches because it wasn't looking for it. It was actually brought to me by a partner at Paul Hastings that was a relationship manager for the PepsiCo account. He said, “Bill look, I know your background is in science. You're very comfortable with spreadsheets. You've always seemed to be very process-oriented. I don't really know what this job means but the job description sounds interesting and really unique” and they forwarded it to me. I read it and I said, “I don't know what this means either but it sounds like fun”. I threw my hat into the ring and me and the General Counsel got along like peas in a pod, and I think that was what ultimately led me there. 

It was exciting because CLOC did not exist, legal operators did not exist. You know, Axiom was kind of brand new on the scene and people still didn't know what the deal was there. You know, I don't even think Ross Artificial intelligence had hit the newswires there. So it was a very interesting and exciting time to get involved in legal operations and both figure out what the role meant and have a bird's eye view to watch the role and the entire field expand over the last 12 years since I took that role at PepsiCo.

Pieter Gunst

Yeah, and then you have that experience on the sell side as well, which of course adds an entire layer of insight in that process and then flash forward 2020: you find yourself in this role of the Director of Legal Operations, [which is] not your first go at this point. So what are your key responsibilities in that role today? What does a day look like for you?

Bill Novomisle

Yeah, you know, I would say that the way that I describe my role at Cresco Labs is the same way that I describe my very first role (to people) at PepsiCo. I'm fundamentally responsible for everything that has to do with running the legal department other than actually providing legal advice. 

But to unpack the role a little bit further and add a little bit more detail. I'm responsible for all finance and budgeting. I'm responsible for the legal supply chain and managing the legal services supply chain. I am responsible for legal process improvement, driving both efficiency and efficacy. I am responsible for legal technology, and that falls into two buckets; legal technology, which are platforms that are really solely for use by the legal department as well as technology that is more enterprise-focused but is ultimately owned or the process is driven by the legal department (contracting being the primary example there). And then finally legal HR. But when I say legal HR. I'm really only responsible for organizational design and organizational effectiveness. I don't do the other more HR functions; performance reviews, hiring, firing, payroll benefits. It's just sort of OD and OE. What the department should look like. Should we be hiring additional headcount? Where should we be putting them? How should we be structured? Things like that.

Pieter Gunst

And within those areas of responsibility, do you feel they break down pretty evenly in terms of your time or are there certain things that take up much more space?

Bill Novomisle

Not at all. I would say that probably finance and budgeting is probably about 40%. I would say legal supply chain and legal process improvement is probably about another 40%. And then the remainder is kind of sprinkled throughout there with this significant asterisk that when I am implementing a new technology, that consumes most of the oxygen in the room. But when my systems are stood up and they are operating effectively and people are trained up and things like that, then that shifts more into a continuous improvement type mode, and I'm spending 5-10% of my time doing those sorts of tweaks and keeping the things modernized and updated. But it's not as all consuming.

Pieter Gunst

It's more like watering a cannabis plant. One might say that.

Bill Novomisle

If your operation is so unsophisticated that you don't have that on automatic timers. But yeah, that's kinda like that.

Pieter Gunst

And we're talking here about how you get it on automatic timers and keep it running. And I see just by the description of the role and the breakdown and the focus of that, how, how you are very well versed in it. So tell me within those responsibilities, what is a key challenge in this role that you would point out and maybe a lesson that you derived from it?

Bill Novomisle

Yeah, I think that the key challenge is really understanding how you can be an effective messenger for the legal department in the overall organization. So I think that lawyers are very good at giving legal advice, as they well should be. If you are hiring well and you are hiring talented people and you are training them. That's not the issue. The issue is that lawyers speak the language of risk and business people speak the language of opportunity. And fundamentally, we as a legal department, to be highly efficacious, need to not speak the language of risk, but speak the language of balancing risks against opportunities, because we are the ones that have to change, not the business people. As we change it can create a virtuous cycle.

And I think that the second challenge, which isn't really so much separate as the other side or the other way of describing it, is lawyers are not trained or particularly adept at telling stories or speaking the language of money. But finance, money, budgeting, spend, savings - all of that is the language of business. So when you're talking to business people, the more that you can put things into dollars and cents - and you can use sophisticated concepts like value at risk and things like that, and you can incorporate some of some legal concepts. But the more financially-sophisticated we are and the more we can speak the language that the business people are, the more effective we can be. 

And I think for me, the main lesson and the takeaway that I somewhat learned but certainly underlined during my time at Cresco is before you rush in and start setting up your financial processes, your financial procedures, your reporting, your taxonomies, all of that. Take the time to understand what the business is looking at, what their sensitivities are, how they look at the world. Right? We in the cannabis space are very, very focused not on our EBITA number, but our adjusted EBITA number, because our adjusted EBITA number represents our core effectiveness as a company based on core operations, whereas EBITA includes a lot of legal spend that we put into growth activities like mergers and acquisitions and things like that. Which is highly distortive, because cannabis is at a place as an industry in their growth cycle of being a bit of a gold rush land grab. So we are a highly acquisitive company. We do spend a lot on that, but it distorts our core operational effectiveness. If I wasn't acutely sensitive to that, then I would not have built the financial reporting tools that I have built in the same way, and I fundamentally wouldn't be respected by my senior stakeholders had I not really internalized and understood that difference and been able to speak intelligently to it.

Pieter Gunst

Right. And that really goes to the power of storytelling and making sure that you're able to back that by data that is meaningful and fits into the story of the business. And then this other piece that resonated a ton is the legal training. The risk aversion that comes with it and then the need to reprogram yourself, because I see this in myself as well; running a business, I am programmed to see downside, not programmed to see upside. And that's really something where you have to shift your mental model. And I can tell from your entrepreneurial experiences yourself, you've had to do that a little bit as well, and you probably bring that with you to work today.

Bill Novomisle

The thing that I always tell my lawyers when I do training on this topic is that risk without opportunity is stupidity. And opportunity without risk is fantasy. They simply don't exist separately, right. And you know, you're right, we're trained as lawyers from law school; issue spot, read the fact pattern, find everything that can go wrong. But what we're not trained in is saying, “Well, how likely is it that someone with standing is actually going to bring in action? How likely is it that a regulator is going to take issue with this? If the regulator does take issue with it, what are the things that we can do to mitigate the risks or work with the regulators?”.

And it's those kinds of things, especially in an area where, frankly, a lot of the regulations are either vague or internally contradictory. You really need to get out of the “there's risks everywhere I look” mindset and into the “How are we going to get this done in a way that is professional, ethical, defensible, and yet still may bear some risks?”.

Pieter Gunst

Right. Now, this brings me in a nice segway to the next topic. Given the complexity of that area, you're interfacing routinely with outside counsel. Outside counsel management and also flat fee and alternative fee arrangements are really an area you already mentioned much of your time in the task package, but I think it's also a bit of a passion for you. And I'm very interested in some of your core learnings there in that area, in the context of your current business.

Bill Novomisle

Look, this is probably the number one lesson that I learned when I was a Pricing Director at a law firm, and that is: the only way that you can get to an effective flat fee arrangement is if both sides of the equation, the law firm, as well as the in-house department, the buyer and the seller have really sophisticated skills in scoping. And again, talking about deficiencies in legal education and legal training, never at any point did anyone ever teach any lawyer how to scope a project out. As a result of that, I think that there are really two main areas where flat fees can work, and things that you can do. So let me step back for a moment. When you're working on the billable hour, I don't want to trash the billable hour entirely, but look, the billable hours, main strength is you don't have to scope anything, right?

You can just go in, get to work, change it every minute, every hour, every day. But what that also does is it incentivizes inefficiency, because the more time spent, then the more money that is made by the law, firm, etc. etc.

If you are going to do a flat fee arrangement, you need to have something that you can scope. Now, what that means is you either need to have 1) something very, very simple where you can incentivize profitability through efficiency, right? So say you are paying people to review run-of-the-mill commercial contracts. If you put in a dollar amount for a per contract basis, then the vendor has every incentive to invest in training, technology and processes to drive down the unit cost of each individual unit of production, meaning a contract, because that's what they make their money [out of]. 

If I could use an analogy from PepsiCo; if PepsiCo charges $1.24 for a blue can, if they can shave a 10th of a cent off of the production of that blue can, then that goes to pure profit, right? And then you sell a billion cans and you made a whole bunch of money that is now in your pocket. However, if you're not looking to outsource well-defined unit work and working with a vendor that is willing to undertake those investments to drive profitability, then if you're looking at fixed fees, you need to build in some kind of mechanism to address changes. Right? So you're never going to know how outside counsel is going to react. You're never going to know how regulators are going to react. You're never going to know how counterparties are going to react. Tthere's never going to be a complete scoping that is going to be so locked down, that can give you a precise dollar and stick to it, and everybody walks away happy. So the only way in that instance to do it that I find really effective is to build risk corridors and cuffs and collars.

So we've priced it out by phase. Our target is, you know, $100,000 for Phase One. There's going to be a 10% risk corridor over/under. We eat it. You know, whoever is in the red versus in the black you just eat it. More than 10% - there's some kind of risk sharing arrangement, right? Where if it's over, the law firm is not collecting 100 cents on the dollar for that overage, but they're at least collecting something. And if it's under, the law firm is getting rewarded in that they're still actually going to collect over 100% realization, but they're not going to collect, you know, 100 cents on the dollar for that underage either. This is, I think, one of the greatest mistakes I saw as a pricing professional was after all of these decades of the billable hour, consumers are trained in a world of heads; I win, tails; you lose. And what they have tried to use alternative fee arrangements to do is still keep a heads; I win, tails; you lose but flip it around so that they're the winners. And that's not risk sharing, that's just, “You used to screw me, so I'm going to screw you now”. If we're going to actually move to a sustainable future, we need to take risks. And that means including letting our law firms win sometimes when they overperform or when they overdeliver.

Pieter Gunst

Yeah, now that is extremely fascinating. And of course, you need good data or at least very clear measurements to set up an arrangement like that successfully. One might almost say it requires a scientist. But do I hear correctly that, for example, if your turnaround for a run-of-the-mill NDA, on average, goes up over a certain amount of time, that could push us into that 10% plus barrier. And trigger, essentially, this risk sharing mechanic.

Bill Novomisle

Yes. So what I would normally do is, I would say, if we're doing something like a general contracting (supply agreement, SaaS license agreements, NDAs, things like that), I'm going to pay you ~$250 bucks a contract and that's it, right? And the more efficient you can get there, then, look, if you can turn that around in 15 minutes and get it executed, that's gravy for you.

If you're going to, like, niggle over the definition of confidential information in an NDA for six rounds, then you deserve to get like, you know, $0.10 on the dollar as far as your realization. Where risk corridors tend to work is say you have a litigation, and I say, you know, Phase One is written discovery and we anticipate written discovery to cost $250,000, and there's a 10% plus or minus. If you use tools like artificial intelligence technology-assisted review, things like that, to drive that down. Capture the efficiency benefits, capture that as profitability and improve realization. You want to do a land war through Asia and do a manual review and it ends up costing $350,000, I shouldn't be punished for your choice to be inefficient.

Pieter Gunst

We might have to retitle this “How to Save $1,000,000 with Bill”, I think. Yeah, Bill, that's super powerful. Thank you so much for sharing your time and your insights with us. [I] really appreciated this frank and transparent discussion.

Bill Novomisle

Absolutely, Pieter. [The] pleasure was mine and [I] really appreciate the opportunity to join you on this podcast.

Pieter Gunst

Thank you so much.

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