Clay Haden, general counsel of Skanska USA, a construction company with 26 offices and revenue of more than $3 billion, runs a seven-attorney department that works as a “virtual in-house law firm.”

Haden provides support for all of the company’s operations and is a member of the company’s senior leadership team. He is responsible for leading Skanska USA’s transformation from relying heavily on outside counsel to having a regional in-house counsel structure.Skanska USA, a subsidiary of Stockholm-based Skanska AB, is headqartered in New York and Haden works from the company’s Southeast region office in Atlanta.

A native of Bryan, Texas, he grew up in Tempe, Ariz., and received a bachelor’s degree in construction from Arizona State University. He earned his law degree from Vanderbilt University, where he met his wife, Mary Elaine, also a lawyer. They have two sons, Henry, 10, and Davis, 7.

Prior to joining Skanska, Haden was a partner in the Atlanta office of Seyfarth Shaw, where he focused on construction law and litigation. He started his legal career as an associate in the government contracts and construction law group in the Dallas office of Baker Botts.

Haden serves on the board of CHRIS Kids, which helps disadvantaged children and families in metro Atlanta. His hobby is “spending every spare moment with my two boys doing whatever it is they like to do, including playing tennis and basketball as well as biking and hiking in the Great Smoky Mountains of Tennessee, where their grandfather has a mountain cabin.”

Why did your department transform from relying on outside counsel to a regional in-house structure?

Cost was certainly a major factor. When my predecessor began building our legal department in 2004 and 2005, law firm rates were escalating at a fairly rapid pace. Given the volume of legal work that our company was generating, simple math led our management team to conclude that pulling some of the legal work in-house would generate significant cost savings.

They also suspected that in-house lawyers would be better at assessing risk, formulating case strategies and managing outside law firms. This proved correct. Better management of our outside legal resources has enabled us to cut our annual outside legal spending over 30 percent over the last five years.

Cost was not the only factor. An in-house attorney provides a quality and level of service that is difficult, if not impossible, to purchase from an outside law firm, because an in-house attorney is truly part of the business. An in-house attorney understands the business in a way that an outside attorney never can. This deeper understanding of the business enables the in-house attorney to provide legal advice that takes into account the broader business considerations and long-term goals of the company.

In-house lawyers are better at driving necessary change within our organization because in-house lawyers, being part of the business, must live with the end result. Unlike outside lawyers, they cannot stop at simply giving the correct advice.

In-house attorneys have a vested interest in making sure that good advice is actually implemented and that problems are actually solved. Recognition of this unique perspective and added value led our company to continue expanding the use of in-house attorneys even after the recession hit our industry hard in 2008.

What was the biggest challenge with outside counsel?

My biggest challenges have been attributable to poor communication and poor planning. Some outside counsel simply roll with the punches, doing what literally has to be done at that moment, and their plan consists of doing everything. They do not take time early in the case to sit down with the client and determine what specific actions can be taken to best position the case for an early resolution that will serve the company’s broader business goals and priorities.

The end result is oftentimes an unhappy client, even when a legal “victory” is ultimately achieved. We are not in the business of winning legal cases and creating new law. Legal victories are nice, of course, but we would much rather achieve a sensible, economical result as quickly as possible and stay focused on our core business.

How does your department function?

We do not have a completely centralized legal department that resides at the corporate headquarters. Construction is fundamentally a local business. With hundreds of projects being performed out of dozens of offices spread across country, we have a lot of local ground to cover. We could not effectively service our local business operations from a central office with lawyers who did not have close relationships with those they served and who did not have a good understanding of the local legal and business challenges.

Our lawyers needed to be more connected with their internal clients and have more intimate knowledge of the local legal and business environment. At the same time, we did not want to lose all of the cost and control benefits of the centralized model.

The question was how to get the best of both options. The answer was to create a matrix organization, which consists of a network of attorneys, some of whom are regional generalists, while others are national specialists, but all of whom report to the general counsel and share certain centralized support functions. The power of this matrix is further expanded by requiring every attorney in the group to support the entire network as a subject matter expert with respect to at least one special subject.

This matrix approach is highly effective, especially when coupled with good communication, effective use of technology and a strong network of preferred outside counsel. It enables our department to develop strong client relationships, provide high-quality service and handle a broad array of issues with a relatively small staff.

Describe your management style.

The success of our decentralized model depends upon having experienced lawyers who do not require a great deal of direction on how to carry out their day-to-day work. I tend to do a lot of coaching and supporting rather than directing. I try to focus on strategy and maintaining corporatewide consistency. I dive into the details of particular transactions or issues selectively, typically when I can add value or the stakes for the company are high. I have to be flexible, constantly shifting focus between long-term strategic goals and short-term needs.

Do you still use outside counsel?

Yes. We routinely engage outside counsel to handle litigation and to assist us with complex transactions, litigation and special subjects. What has changed for us over the years is how we select and manage outside counsel. We have consolidated the vast majority of our legal work with a smaller number of lawyers who are strategically located around the country. These are lawyers who understand our core business and who consistently produce good, economical results. We have numerous outside lawyers around the country who advise us on a variety of special subjects such as intellectual property and immigration.

How do you avoid litigation?

One of the keys to our company’s success is our commitment to safety. These beliefs are embodied in our Injury-Free Environment (IFE) culture, in which our approach to safety is driven by caring about people rather than rules and statistics. The notion of a Litigation-Free Environment (LFE) is derived from this concept.

Litigation simply does not fit with our business model. That is why I stress with my team and those we serve within the company that we should always be working proactively to avoid and resolve disputes at the earliest stage possible. It is simply unacceptable to let a dispute spin out of control and then use litigation to clean up the mess.

Our goal is to achieve a Litigation-Free Environment everywhere we work. We have been very successful in this regard, but the challenge, of course, is that some companies we encounter do not have the same goal. Some companies make claims and litigation is an integral part of their business models. Needless to say, we try to avoid doing business with those companies.

What are your biggest litigation issues?

Litigation is always a big issue for us, especially if it involves a client. We will do everything we can to avoid it. This starts with negotiating a reasonable contract that gives everyone involved in the transaction a fair opportunity to succeed. If you don’t start there, you are headed for trouble. We then work proactively to resolve potential disputes as soon as possible. As I always say to my internal clients, disputes are not like fine wines. They don’t get better with age.

What percentage of litigation cases do you mediate?

We mediate virtually every case before going to trial. We mediate because it works. We resolve the vast majority of our cases through the mediation process. The first key to a successful mediation is selecting the right mediator, a person who, in addition to being a respected person who understands the applicable law, is able to quickly grasp the underlying business dynamic and discern the factors that are influencing each party’s position.

The second key is timing. I’ve seen many mediations fail simply because the parties were not ready to mediate. A certain amount of discovery and motion practice need to take place prior to mediation. Otherwise, the parties will simply show up to the mediation armed with the same arguments and misunderstandings that led to the dispute in the first place.

Mediation is a process, and you have to let the process work. Rushing that process is like trying to push a string. It simply does not work.

What is your biggest legal challenge?

Keeping pace with the rapid changes in our business. Skanska is an innovative company that is making greater use of technology, so intellectual property is becoming much more important to us.

Also, the recession forced everyone in the industry to get much more creative with how projects are financed and business relationships are structured. We spend a tremendous amount of time vetting and creating out-of-the-box transactions. Some of our projects happen only because the people on all sides of the transaction are looking for solutions and pushing to make them happen. Our legal team is integrally involved in those efforts.

How do you envision your department five years from now?

Given the company’s growth plans, our department will need to be larger in five years, but not dramatically so. I anticipate that we may add a fifth region within the next five years.

I also envision our department making greater use of technology, converting to a completely paperless subcontracting process, for example.

We do not have a completely centralized legal department that resides at the corporate headquarters. Construction is fundamentally a local business.