Law Department Management

Irrational assumptions based on perceptions of worth, regardless of factual support

Value attribution, according to Ori Brafman and Rom Brafman, Sway: The Irresistible Pull of Irrational Behavior (Doubleday 2008) at 48, is “our tendency to imbue someone or something with certain qualities based on perceived value, rather than on objective data.” It is what compels us to take seriously twaddle from the mighty and ignore wisdom from those we perceive as weak.

Value attribution means general counsel get feted at conferences regardless of their insights or blindness. A well-known law firm basks in value attribution even if the talents of its lawyers in an area of law are sub-par. Graduates of elite schools enjoy the halo effect (See my post of April 13, 2007: “tendency to make specific inferences on the basis of a general impression.”). High billing rates may create the same positive valence of value attribution.

The value that we attribute to someone fundamentally changes how we perceive that person. Studies (cited by the Sway at 56-59) suggest that high fees paid to a law firm may affect our evaluation of how well the firm performed (See my post of April 5, 2007 on this mechanism of cognitive dissonance.). We irrationally credit a firm, lawyer, or position that has exalted status and often irrationally disregard those we feel have not succeeded.

180 degree views on 360 degree evaluations

Having written approvingly about so-called 360˚ assessments, where managers, peers, and reports complete assessments of a lawyer, I think of them as useful (See my post of Dec. 26, 2007: 360˚ instruments with 5 references.) What a person learns from a 360-feedback can be constructive, but an article in talent mgt., Aug. 2007 at 12, raises some disturbing points that vendors and advocates won’t tell you.

1. “Most 360-feedback instruments measure competencies that are highly correlated with one another, making it difficult to discern specific areas on which to focus developmental efforts."

2. “If you use average scores to summarize rater feedback, without some indication of rater agreement, it's easy to misinterpret polarized feedback. This can lead to behavioral changes that might actually be destructive.”

3. “Correlations among rater groups are only modest, inviting difficulty in knowing what the differences among groups really mean or where to put one's energy to modify behavior.”

4. "Little research exists about whether qualitative or quantitative results from 360-feedback optimize acceptance and behavior change.”

5. The “effect size,” how much behavior actually changes, from 360-feedback is typically very low.”

Ouch. With blows like these landing all around, it’s a wonder 360˚ assessments stand up.

Nine tips for dealing with change

A publication from an insurance company offers some suggestions for how to deal with change, which I have paraphrased.

1. Get the facts about what is changing, what is not changing, and why. Rumors and speculation distort the actual changes that may be ahead.

2. Actively seek information from people you trust to get the facts and try to learn the bigger context. The broader your view of what is coming, the better you can cope.

3. Learn to live with ambiguity and trust that over time clarity will emerge.

4. Talk constructively with your colleagues about the changes underway. Brooding and introspection breed anxiety.

5. Learn to let go of the things you cannot control. Focus instead on what you can influence.

6. Stay focused on your work and the quality of your performance. Life goes on and you still are an employee.

7. Try not to be rigid and resistant. Give the new arrangements a chance and try to appreciate the opportunities they may bring.

8. Act on the fact that you can cope with change better if you are rested, exercised, and nutritiously fed.

9. If necessary, seek counsel from professionals or employee assistance sources.

“Most CEOs have never hired a general counsel.”

The quote comes from Catherine Nathan, a partner at Spencer Stuart who places senior in-house lawyers. She makes the point in Diversity & The Bar, Vol. 10, May/June 2008 at 32, that CEOs have much more experience hiring CFOs, COOs and HR executives, but they are on unfamiliar ground when they have to select a CLO. That may well be true. One of the contributions of an executive search firm is to help those CEOs establish the right priorities and processes for hiring a top lawyer.

The article profiles several leading search partners (See my post of July 5, 2006: list three prominent search-firm specialists.), including Selena LaCroix at Egon Zehnder International (See my post of Sept. 16, 2008: recruiters with 12 references.)

Performance in relation to budget should determine whether one of a panel of firms gets more work

If you have several firms that handle similar kinds of matters, use their performance against budget to allocate work in the future.

The performance of each firm against their original budgets on matters should influence the likelihood of their being chosen to handle more matters. For example, if on a rolling average for the past three months one firm comes in 20 percent above budget, then their odds of being chosen for the next matter should shrink by 20 percent. The point is, if a firm manages costs well, it should get more work.

Managers of outside counsel will gag at this proposal. It will seem bizarrely quantitative, a bull in the china shop of what they see as their intuitive, subjective, multi-faceted artistry of selecting the right firm.

Converge if you don’t increase your average firm size and you get volume discounts

For years I supported convergence, but my enthusiasm has waned lately. Inevitably, larger firms remain after a pruning and they charge higher billing rates (See my post of Jan. 3, 2007: increased rates with firm size.). In addition, with electronic billing, the administrative hassle of dealing with scores or hundreds of law firms has shrunk considerably. The measure is not total numbers of law firms used by a department but how many an individual in-house lawyer can effectively oversee. At the lawyer level, numbers of matters counts for more than numbers of firms.

My latest thought is to urge law departments to reduce the number of law firms they retain so long as they maintain their pre-convergence, average firm size.

In a further divergence from my former opposition to discounting, the department that converges should obtain appropriate volume-related discounts. Insisting on discounts of 5 percent should be relatively straightforward; 7.5 percent seems about standard for $500,000 of fees; 10 percent at $1 million; and 12.5 percent or more at $2 million and higher.

Deconstruction of a definition of value-based payments to law firms

In its campaign to change the basis on which corporate counsel pay law firms, the Association of Corporate Counsel has seized on the lodestar of “value.” ACC defines value as a law firm “returning a desired outcome in a matter which corresponds to its appropriate cost and worth.” This definition comes from the ACC Docket, Vol. 26, Oct. 2008, at Value Challenge 2, and deserves deconstruction (and possibly destruction).

“Desired outcome.” A verdict against a client could rarely be a “desired outcome,” yet a law department should pay the firm that represented it in the litigation. Perry Mason can’t win a case with horrible facts. Some acquisitions fall through; sometimes polluters settle with the Environmental Protection Agency.

If “desired outcome” really means the “best outcome a reasonable person could have hoped for” we are closer to reality but no closer to an unarguable, quantifiable conclusion regarding how much to pay. Given people’s propensity to rationalize and manage perceptions as well as to revise history, it’s like painting a target around the spot where the bullet hit the barn. A retrospective decision about what to pay is highly suspect (See my post of Oct. 22, 2008*5: cost-benefit analysis.)

“Corresponds to its appropriate cost and worth.” The result of the law firm’s work should bear a reasonable relation to what someone in retrospect judges to have been a reasonable quantum of work for what the company got [the number of expected timekeepers at prevailing or better hourly rates doing sensible tasks for plausible amounts of time]. “Corresponds” leaves ample room for discretion, as its plasticity can cover a wide range of decisions.

“Cost.” Cost has to do with the law firm’s economics, not the client’s benefit. A firm can pour tens of thousands of dollars of time into useless research or trivial proofreading, with no return to the client. Or a single partner’s discernment regarding one key decision could shape the entire deal and assure success. In neither situation should the costs of the firm influence how much the firm gets paid.

“Appropriate.” This weasel word begs the central question: what’s appropriate to be paid is the value of the services. To say that the right value is the appropriate amount to pay creates a tautology (See my post of March 30, 2008: bumps on the road to value billing.).

“Worth.” The worth to a company of specific legal services can be exceedingly difficult even to estimate. What is the relevant time period? What about how the worth of something can change over time? What else is the “worth” dependent on?

Having unpacked ACC’s definition of value, consider an example to test its parts. An in-house lawyer responsible for a senior executive’s severance agreement hires a law firm to make sure the agreement addresses the right legal issues and reflects the latest thinking among employment lawyers. The firm’s lawyers toil away and the agreement is signed. The firm deserves to be paid even if a massive payment to the executive fleeces the company and its shareholders, because that resolution depended on many factors other than the law. The pseudo-definition gives no guidance on what to pay the law firm.

Economists and psychologist teach us that what something is worth varies enormously – worth, in the form of price, is what markets circle around and eventually settle on to some degree. In any specific instance however, value is in the subjective and variable eye of the check holder.

Seven team building activities for retreats

Retreats (aka conferences and offsites) often start with a get-to-know-others activity (See my post of Sept. 25, 2008: ice breakers at law department meetings.).

Later on, many meeting planners want a dose of team building. Here are some examples from my consulting experience.

1. Team cooking (such as by Team Cuisine in Massachusetts) lets members of a law department do something together that is not competitive and is fun. It might even be tasty.

2. Trivial Pursuit, either the board game or a special version designed for groups to play, is fun and stimulating.

3. Bomb maze, where teamsguide members through a maze of “exploding” bombs, silent during the entire effort.

4. Move the log, where it takes coordinated action for the people on the log to move it along a course.

5. Assemble bicycles, where it takes about 90 minutes for small groups to put bikes together that are then contributed to needy children.

6. Scenarios and decision making, such as those produce by Human Synergistics. Teams picture themselves as crash landed in a winter storm. They have to decide the priority of items to keep.

7. Model construction, where teams use objects like Legos to build a contraption.

Each of these activities helps law department members get to know each other and learn, through an enjoyable activity, the dynamics of effective teams (See my post of Feb. 12, 2008: retreats and conferences with 8 references.)

Law department activities as priorities, programs, projects and practices – Part IV, practices

Practices are the fourth and most common level of activities in my schema (See my post of Nov. 19, 2008: priorities; Nov. 19, 2008: programs; and Nov. 19, 2008: practices.).

Practices are people’s accustomed ways of working and working together. They include culture, and everything that ethnographers pay attention to such as dress codes, collegiality and cliques, and interaction in the cafeteria. Practices show up in many other areas such as management by walking around, informal communication patterns, recognition ceremonies, open and closed doors, silence, hierarchy, the dispersal of offices, dual reporting, legal leadership teams, and hiring patterns.

Some corollaries of practices deserve notice.

Practices are generally are unnoticed by members of the department. They breath without awareness of their atmosphere.

Practices usually change very slowly as they are part of organizational DNA, unless an energetic new leader alters the patterns.

Few general counsel undertake deliberately to change practices, such as to ban cell phones and PDAs during meetings.

Law department activities as priorities, programs, projects and practices – Part III, projects

Projects are a third level of activities in law departments, defined primarily by their being one-off significant activities (See my post of Nov. 19, 2008: priorities; and Nov. 19, 2008: programs.).

Project examples of projects include relocation of the law department and the choice of a matter management system. Other one-time projects would be build-outs of new space, installation of filing cabinets, or selecting a consult to conduct a review.

Projects raise a number of considerations.

Often projects involve an external consultant or someone with expertise from within the company. Members of the law department have not done what needs to be done and they seek guidance.

People can be passive-aggressive about projects (See my post of Jan. 17, 2006 on passive-aggressive behavior.). In public they applaud; in private they disregard.

Projects are frequently discretionary and have to gain budget approval.

You often need to show return on investment to fund a project, unlike a program.

A project starts and finishes (usually); programs just keep on running.