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From my consulting practice, I am sensitive to how many requests major law departments get for benchmark data. My eyebrows went up, therefore, when I read that National Economic Research Associates (NERA) obtained spending data from 302 companies, all with annual ales of $500 million or more, by telephone calls! A telephone call from a script reader, and the likes of JP Morgan and Philip Morris divulged outside counsel spending figures! Amazing.
Without data, law departments flail around trying to manage better. Some chief legal officers can sail close to the winds of management without figures, but the better tack is to know how to express your department’s value, productivity, and comparative standing with credible numbers.
Still, a telephone survey that obtained such a participation rate astounds me. (The report is at www.nera/mediacoverage)
The Wilmington-tsunami – the convergence initiatives that reduce the number of law firms retained by a law department, which DuPont so skillfully publicized – has an almost inevitable side effect: leaving higher cost firms.
If a law department chooses to find a single firm to handle matters in an area of law, say environmental, it will be tugged toward retaining a larger firm than if it stayed with several providers. The siren song of a firm that can handle the spectrum of environmental needs favors larger firms, which – all things being equal – charge higher hourly rates. The higher rates follow from more infrastructure, layers of management, higher compensation expectations, and larger matters.
On the other side of the ledger, larger firms can price services lower than can smaller firms because they can spread the risk over more matters and can accommodate more changes in how they handles matters, such as with technology, systems, delegation, and hiring.
The likelihood remains that law departments trade having fewer firms for paying those remaining preferred providers higher hourly charges.
The law office of Vincent DiCarlo posted a short piece entitled “how to reduce the high cost of litigation” (www.dicarlolaw.com). All the advice mows down the weeds of excess litigation costs, but a few seemed especially cutting edge.
On the bugaboo of wasteful staffing, DiCarlo offers a rule of thumb: “If you have more than one lawyer and one paralegal regularly working on your case, and the litigation is unlikely to result in a judgment of more than half a million dollars, you should ask your lawyer about staffing.” Sounds like good guidance to me. I wonder if anyone has looked at total billers in relation to the plausible judgment range; does two per half million dollars or so sound plausible?
Use customized arbitration clauses, says DiCarlo, and explains clearly in two pages why they are so flexible and effective.
DiCarlo slashes at the weed of digesting transcripts in an era of powerful text-searching software. Digests cost wads of money but can’t beat search software. (I wonder if the brain of
John Henry sometimes can outdo the machine of search engines.) Another cost saver concerns calculating the difference between the trial value of a case and its settlement value.
Some of DiCarlo’s more substantive recommendations I can’t evaluate: for healthy and friendly witnesses, use written statements instead of depositions; answer instead of demurring; don’t seek preliminary relief unless you need it, have a good chance at success, and deem the cost worth it; and purge your complaints of fanciful causes of action.
No paralegals. That’s the fact in large swathes of Latin American, Asian and European law departments outside the UK . They have lawyers aplenty and secretaries galore, but not legal assistants of the kind common in US legal functions. US law departments report a median of about one paralegal for every four lawyers.
Without paralegals, the international law departments have higher numbers of lawyers, many of whom are lower paid than their stateside counterparts – even adjusting for purchasing power parity -- and all of whom do tasks that could more effectively be delegated to a trained paralegal assistant.
During the next few years, the intermediate professional level that we think of as paralegals will become more common around the world. We will see paralegal certification programs crop up overseas and eventually a certification for “international paralegal.”
In the US, probably a dozen conferences a year devote one or more sessions to topics in legal department management. Think of ACC’s annual meeting, Corporate Legal Time’s SuperConference, ALM’s two or three conferences, LegalTech, Northstar, the Texas GC Forum, Northwestern Law School’s gatherings, George Washington’s Law School conference, ALA Corporate/Government Fall Forum, industry legal group gatherings, GC groups (about which I have written previously) and many other conferences I have overlooked or forgotten.
The quality of speakers may disappoint. My impression is that many conference organizers choose speakers based on factors other than the speaker’s deep experience with the topic -- such as PC representativeness, funding, or activity in the organizing group -- and that often speakers trundle out basic observations and platitudes. Vendors who pay sponsorship fees get to pick topics and speakers. Frequently, too many speakers crowd the dais, leaving no time for questions and answers, let alone debate among the presenters.
My biases are showing, as is my consulting career, in these criticisms. To be fair, general counsel have ample conference opportunities to hear about management practices and issues.
What the world needs is a digest of those conferences’ proceedings on management. This blog welcomes materials from conferences and will post summaries of the useful points.
According to an article in Patent World (Sept. 2004), a 2003 survey of the American Intellectual Property Lawyers Association found that “the average cost of bringing a patent litigation is almost US$2 million.” [Article available on www.ipworldonline.com]. As a connoisseur of metrics, this claims raises several, shall we say, patent questions.
Wouldn’t it have been useful to suggest the ratio between litigation costs and the damages reasonably at stake? If the average ante for a suit were $2 million, but the average recovery facing the litigants were $50 million, that doesn’t sound like an exorbitant transaction cost or a paltry return on investment. Does “bringing” a lawsuit mean carrying it through trial or through an appeal; could it mean only the preparation for and filing of a lawsuit? We need deeper understanding about the typical duration and resolution of the cases that made up the average. For that matter, it is important to know how many cases made up the survey population. If ten, I worry about the legitimacy of a number that could be thrown off by one lawsuit. Then too, are the members of the AIPLA representative of most patent litigants in the United States – and are these figures only for litigation in US courts? Even more fundamentally, how do we know whether one or two gargantuan cases skewed the average too high? If there had been a median figure to go along with the average, the findings would be more meaningful.
I could go on. My point is not that $2 million is nothing to sneeze at, nor that full bore patent litigation is a game for parties with deep pockets. I also realize that the survey might address all my challenges. But going beyond both truths – patent litigation is costly and the survey could have tied down its methodology – I still believe that the quote as presented leaves many, many questions unanswered.
Three ideas for how law departments can anticipate future legal risks came from a piece in the Harvard Business Review (Feb. 2005, at pg. 40-41). It referred to a study by the U.S. National Academy of Sciences. Translating the report’s recommendations to law departments, departments should “adopt a transparent risk assessment process to avoid the blindered view so often bred by conflicts of interest between risk takers.” A senior lawyer, for example, might see a huge environmental risk, but have a hidden agenda about staffing, personal interest, or connection to a law firm.
Second, the department should “actively consider [risks] that may not be answerable or measurable.” I favor metrics, without a doubt, but whether the EU might change a fundamental regulation just doesn’t admit to a statistical estimate.
Third, “assessments of big risk must involve a broad, deliberately constructed community of experts and stakeholders.” Before bringing a major lawsuit, a law department should call upon the thinking of a wide range of participants, wise people, and affected parties. No one is even mostly rationale; all of us operate from values and biases – from feelings as well as logic.
A 2004 study by Synectics, a consultancy, found that senior and middle managers spent more than three quarters of their time in meetings. Would this metric hold true for law department attorneys? Worse, on average only 12 percent of managers thought their meetings were productive. Taken together, law departments may lose much productivity through poorly-managed meetings.
Ironically, lawyers taking part in client meetings contribute hugely to client satisfaction and preventive lawyering.
In-housers may not call meetings much, but they can help shape the agenda, recommend locations and attendees, and push for clear outcomes, the disregard of which decisions torpedoing many meetings. I liked the idea from Synectics that everyone should say at the end of a meeting what they think they have heard, and correcting the inevitable misconceptions or partial understandings. I also liked the idea of asking people in a meeting to say what they liked about the things they heard; criticism usually comes unasked.
An article in the Economist (March 12, 2005 at pg. 34) described several “intelligent legal services,” including ones now in use for resolving Australian property disputes between divorcing couples, for assessing applicants’ rights to legal aid, and for deciding criminal sentences. Notably, no US lawyers or academics were cited, but a half dozen were from England and Australia.
The software uses expert systems, which are rules based inference engines (one has 94 different variables), as well as “machine learning” software. The latter allows the software to draw more and more accurate conclusions based on past decisions. The software adjusts itself after seeing the variables in past decisions and the outcomes.
I have written previously about document assembly, which offers a version of these capabilities.
Law departments individually or jointly could invest in this kind of software where they face repeated analyses of a similar kind. Is it too farfetched to have software do the initial analysis on whether a company must respond to this QUADRO request or whether an ad passes muster with the regulatory agency?
Think of the software being available to clients. I can foresee such software running on a company’s intranet and giving guidance on possible Foreign Corrupt Practices Act issues or non-discriminatory firing, to name two possibilities. The software would not reach a conclusion, but it could educate the client, sharpen the client’s appreciation for relevant factors, and train the clients. In very clear circumstances, it might answer the client’s question.
Some executive search firms provide compensation data for in-house counsel. They gather it mostly from candidates, partly from surveys, and sometimes from clients. Since the executive search firms receive as their fee a percentage of the first-years’ compensation of the lawyers they place, the firms would favor higher compensation figures (those comp levels might also induce some lawyers to look around for other jobs, which helps search firms).
Keep in mind, when reviewing the figures search firms release regarding compensation the potential for bias. Ask careful questions about the source of the figures, and compare the figures to other compensation data. You can get law department compensation data from such firms as Abbott Langer, Altman Weil, and Hildebrandt International.
