When Should a Company Hire Its First Head of Legal in Germany?

Most growing companies in Germany start by using external law firms for their legal work.

There's a commercial agreement that needs reviewing, an employment issue to resolve or a funding round to complete. The company instructs a law firm, gets the advice it needs and carries on.

For many businesses, this arrangement works well for years.

But eventually, some companies reach a stage where legal matters are taking up more time than anyone expected. Contracts become more complicated, regulatory questions come up more frequently and the CFO or CEO seems to be spending an increasing amount of time dealing with lawyers.

This is usually when the conversation about hiring someone in-house begins.

The difficult part is deciding whether the company genuinely needs a Head of Legal, a senior in-house counsel or simply a better way of managing its external advisers.

How big should a company be before hiring its first lawyer?

There's no obvious answer to this.

I've seen relatively small companies with complicated legal requirements and much larger businesses that manage perfectly well with external support.

A German technology company selling a relatively standardised product to smaller customers might have limited legal requirements beyond employment matters, data protection and occasional commercial agreements.

Another company with the same revenue and headcount could be negotiating complex enterprise contracts with large international customers, operating in several jurisdictions and dealing with significant regulatory requirements.

Their legal needs will be completely different.

This is why I wouldn't use revenue, employee numbers or funding rounds as the deciding factor.

A company with 80 employees can have a more complicated legal environment than one with 800.

The nature of the business matters far more than its size.

When external lawyers start becoming expensive and inefficient

One of the more obvious signs that a company might benefit from an in-house lawyer is the amount of work being sent to external firms.

This isn't necessarily about the total cost.

A business spending €200,000 a year on a handful of highly specialised regulatory matters might have little reason to employ a permanent lawyer.

Another business spending the same amount on routine commercial contracts, employment questions and recurring legal advice might be in a very different position.

The type of work matters.

External lawyers are excellent when you need specialist expertise. They are less practical when the business needs quick answers to everyday questions from people who understand how the company operates.

Take commercial contracts.

An external lawyer can review an agreement, identify the risks and suggest changes. What they may not know is how important the customer is, what the sales team has already agreed commercially or which risks management is genuinely comfortable accepting.

That context takes time to explain, and it often changes from one negotiation to the next.

An in-house lawyer gets to know the business, its customers and the way commercial decisions are made. Over time, they can deal with many of these questions without needing to involve an external firm.

That doesn't mean external legal spend disappears. Even large legal departments use law firms regularly.

But it can make a considerable difference to how efficiently legal matters are handled.

The CEO and CFO are spending too much time on legal matters

This is something I think companies sometimes underestimate.

When there isn't an in-house lawyer, responsibility for legal matters usually ends up with someone else.

Often that's the CFO.

They become the main contact for external law firms, deal with corporate matters, review contracts and coordinate legal questions from different departments.

HR handles employment issues. Procurement deals with supplier agreements. The CEO gets involved whenever something particularly important or sensitive comes up.

It can work, particularly when the company is relatively small.

But as legal activity increases, these responsibilities can become a distraction.

A CFO shouldn't be spending several hours every week coordinating routine contract negotiations if there is a better way of organising that work.

Equally, a CEO probably doesn't need to be involved in every discussion about liability provisions or contract termination rights.

At some point, having one person responsible for managing legal matters across the business starts to make sense.

Commercial contracts are slowing the business down

For many technology and growth companies in Germany, commercial contracts are one of the main reasons for making the first in-house legal hire.

As businesses start working with larger customers, negotiations tend to become more demanding.

A relatively straightforward customer agreement can turn into weeks of discussions around liability, indemnities, data processing, intellectual property and service levels.

Larger corporate customers often have their own legal teams and detailed procurement requirements.

If the company is relying on external counsel for every negotiation, the process can become slow and frustrating for the commercial team.

A good in-house commercial lawyer can make an immediate difference here.

They can develop standard contract positions, deal directly with customer legal teams and help sales understand where the business has room to negotiate.

They also become familiar with which issues genuinely matter and which ones don't justify another week of discussions.

For a company negotiating a high volume of commercial agreements, this can be a compelling reason to hire.

It doesn't necessarily mean the business needs a Head of Legal, though. An experienced Legal Counsel might be more than capable of handling the work.

Regulatory requirements are becoming more complicated

Germany has plenty of businesses where regulatory expertise becomes important relatively early.

Financial services, FinTech, healthcare, energy and certain technology businesses can all face legal requirements that are considerably more demanding than those of a typical unregulated company.

The German and wider EU regulatory environment adds another layer.

Depending on the business, that might include GDPR, financial services regulation, cybersecurity requirements, or legislation governing particular products and services.

Regulatory complexity doesn't automatically justify employing a lawyer.

A company with a very specific compliance requirement may be better served by a specialist external adviser. In some cases, the relevant responsibility belongs with a dedicated compliance or data protection professional rather than a Head of Legal.

But if regulatory questions are regularly affecting product development, customer negotiations or management decisions, it's worth considering whether the business needs someone who can deal with these matters internally.

This is particularly relevant when the company operates in several regulated markets or is introducing products that raise new legal questions.

International expansion is creating more legal work

A German company expanding into other European markets or the United States will inevitably encounter legal issues it hasn't dealt with before.

Employment requirements differ between countries. Customer contracts need adapting. Corporate structures become more complicated.

Initially, local law firms can usually handle much of this work.

The challenge comes when the business is operating in several countries and nobody internally has responsibility for coordinating the legal advice.

Different departments might be instructing different advisers, with limited visibility over the wider picture.

An experienced in-house lawyer can help bring some structure to this.

They won't know every aspect of French, Dutch or US law, and they shouldn't be expected to.

But they should be able to work with local counsel, understand the commercial implications of the advice and help management make informed decisions.

For a company with serious international growth plans, this can be particularly useful.

Should the first hire be a Senior Legal Counsel, Head of Legal or General Counsel?

This depends on what the business actually needs.

If most of the work involves commercial contracts, employment matters and managing external law firms, an experienced Senior Legal Counsel may be perfectly capable of handling the role.

There are plenty of Senior Legal Counsels in Germany who already operate independently, advise senior management and handle complex legal matters without holding a Head of Legal or General Counsel title. Some are more than ready to take that next step.

If the company needs someone to advise the CEO and board, support transactions, manage regulatory issues and build a legal function, an established Head of Legal or General Counsel may be more appropriate.

Hiring someone too junior can leave them out of their depth if they're expected to manage complex legal matters independently.

Getting the level right from the beginning matters.

What should you look for in your first in-house lawyer?

One of the challenges with hiring the first lawyer is that there usually isn't another legal professional in the company to assess them.

The hiring manager may be the CFO, CEO or HR Director.

They can assess whether someone communicates well and seems commercially minded, but evaluating the depth of their legal experience can be more difficult.

For a first in-house appointment, I would pay particular attention to how independently the candidate has worked.

Have they been responsible for legal matters themselves, or have they always worked within a large team with more senior lawyers available?

Can they deal with different types of legal questions, or is their experience concentrated in a narrow area?

How comfortable are they advising non-lawyers?

And perhaps most importantly, can they give a clear recommendation when the legal position isn't straightforward?

There's also the practical side of the job.

The first lawyer may need to introduce contract templates, organise external advisers, improve internal processes and build relationships with departments that have never worked with an in-house legal team.

Not everyone enjoys that kind of environment.

A lawyer who has spent their career in a large, well-resourced legal department may be excellent technically but less comfortable establishing everything from scratch.

That doesn't mean they can't make the move successfully.

It simply needs to be considered during the hiring process.

Does hiring in-house actually save money?

It can, but I would be careful about treating this as the main reason to hire.

An experienced in-house lawyer in Germany is a significant investment. Beyond base salary, the company needs to consider bonus, employer costs and the wider employment package.

If the business is mainly using external firms for occasional specialist advice, employing someone permanently may not make financial sense.

The calculation becomes more interesting when a substantial proportion of external legal spend relates to work that could realistically be handled internally.

It's also worth looking beyond law firm invoices.

How much management time is being spent on legal matters?

Are contract negotiations taking longer than they should?

Are deals being delayed because nobody internally can make legal decisions?

Would the business benefit from someone identifying problems before they become more expensive?

These are harder things to quantify, but they can be just as important.

In some cases, hiring the first lawyer won't immediately reduce overall legal costs at all.

The benefit may be that legal work is handled better, decisions are made more quickly and management has greater confidence in how risks are being managed.

Don't leave the decision until there's a problem

One final point. Companies often start seriously considering their first legal hire after something has gone wrong.

Perhaps a major contract has been delayed, an unexpected regulatory issue has come up or management has become frustrated with the cost of external advice.

Those events can certainly highlight the need for internal legal support.

But recruiting a good lawyer in Germany takes time, particularly when the company needs someone experienced enough to operate independently.

The strongest candidates are often already in good positions and may not be actively looking.

They will also want to understand why the company is hiring, how the role fits into the business and what kind of support they can expect.

It's therefore worth having the conversation before the need becomes urgent.

So when is the right time?

I don't think there is a particular revenue figure, employee number or funding stage that tells a company it needs its first Head of Legal.

Some businesses can continue using external law firms for a long time without any real disadvantage.

Others reach the point much earlier.

If legal work is becoming a regular part of everyday business, external costs are increasing, commercial negotiations are taking too long and senior management is spending too much time coordinating legal issues, it's probably worth exploring.

The next step isn't necessarily to recruit a General Counsel.

It might be an experienced senior generalist.

The important thing is to understand what the business actually needs before deciding who to hire.

Deep Blue Recruitment specialises in recruiting in-house lawyers across Germany, from first Legal Counsel appointments through to Head of Legal and General Counsel searches.

If you're considering making your first in-house legal hire and would like an informed view of the German candidate market, get in touch.