USA Today (June 21, 2005 at 1B) described the Gallup Organization’s so-called Q12 questionnaire that measures employee engagement. Engagement has to do with understanding, liking, and committing to one’s job. Since 2002, 332 companies have paid Gallup to administer the Q12 instrument, gaining responses from among others 17,406 VP and above executives.

Disturbingly, among that large group of executives nearly one in ten is “actively disengaged … beyond the point of even going through the motions.” Quite plausibly the executive group included more than 300 general counsel (one per company) and some other officer-level lawyers. There seems no a priori reason to hope that those top management lawyers enjoy engagement levels higher than other executives.

I haven’t heard of or consulted to professionally depressed (disengaged) general counsel, but the law departments of this company must have their share, if the Gallup findings are generally valid and hold specifically for the subset of CLOs.

As part of a large-scale review of itself, a law department I am working with appointed a team of about ten lawyers to conduct the study. At a two-day offsite, the team brought in an in-house facilitator. That person made sure the meeting room had the requisite toys to play with, easels and markers, tape supplies, and technology.

The facilitator also took notes of the discussion on the easels and made sure the group stayed on topic and did not dwell too long on any particular subject.

If you law department embarks on a serious introspection or other project, consider the benefits of having a neutral personal alongside who can expedite the processes of meetings.

Law department benchmark metrics show that law departments face at the median, say, 20-40 lawsuits per lawyer. Metrics disclose cycle time for lawsuits, whether they are as plaintiff or defendant, cases per outside counsel, and what the department spends on them.

No metrics capture complexity of cases (although spending per unit of time is a crude proxy for complexity). Since reports of court filings show that the absolute number of lawsuits filed has been increasing roughly with the growth in population (1-2% a year) – aside from bulges in certain products liability categories such as asbestos – we are left with a question: are lawsuits of law departments becoming more complex? If so, how might we quantify the change in complexity?

Perhaps we could add the number of counts in complaints; we could argue that more tens of thousands of pages of documents turned over in discovery evidences complexity; perhaps depositions per case point in that direction, or the incidence of substantive pleadings. None of these metrics are available to the public, so we can neither prove nor disprove the subjective sense that litigation is growing in sophistication.

At a consulting client, the paralegals and the secretaries in the different practice groups report directly to the lawyer heading the group. One of them, overseeing a dozen or more lawyers, has more than 20 such staff reports!

Inefficient is the mildest term for this misuse of senior lawyer time.

Paralegals ought to report to the lawyers they support directly, not to a higher level lawyer. Secretaries ought to take day-to-day direction from the lawyers they support (and from paralegals working for those lawyers, by the way), but should report to the Administrator for purposes of evaluations, vacation clearance, workload distribution, development and other purposes. [See my post today on the changing distribution between paralegals and secretaries.]

Consistently, benchmark surveys tell us that law departments spend 40 cents of every dollar on their inside costs and the other 60 cents on outside counsel. Year after year, this median ratio holds true. Why?

If you knew nothing about law departments, wouldn’t you assume that the inside lawyers would do most of the work, and only turn occasionally to outside counsel? Wouldn’t you marvel that these expensive, talented groups have to buy still more expertise and manpower from even more expensive external counsel? Other staff groups don’t spend more outside than inside. Litigation accounts for a chunk of the explanation, as it swallows half of the outside fees. Even so, it troubles me in a way that I can’t pinpoint why law departments do less than they buy!

For a recent consulting project, I used these two shapes to describe on the non-lawyer side how law departments are changing composition. The older model had many lawyers, a few paralegals, and many secretaries – the hourglass. Progressive law departments these days are hiring more paralegals, rafts of them sometimes (such as at Rouse), and are shedding secretaries as lawyers resort mostly to email and telephone as well as holding down lawyer headcount – bulging more in the middle and slimmer at both ends, the almond.

Re-jiggering staff in this way makes sense. Paralegals can be highly productive yet much less expensive than lawyers. Secretaries, or at least the 20th century version, are a breed at risk of extinction as travel agencies nibble away what they used to do, online calendaring helps with scheduling meetings, PDAs become ubiquitous, no one writes letters, and the talent pool dries up.

In my post of May 14, 2005 I exceedingly roughly estimated the loss when a lawyer leaves a law department – a hair over $100,000. I based the SWAG on ABA data about law firm turnover costs. Now, new data suggests the law firm costs are twice as high, so I suspect my law department estimates were too low.

Law Practice, in its June 2005 issue at 7, cited data from Catalyst, a nonprofit research organization [http://cba.org/CBA/EPIIgram/April 2005]. Among Canadian law firms of 25 lawyers or more, the turnover loss comes to twice the cost of the average associate’s annual salary.

It is difficult to obtain metrics about the costs of litigation [but see my posts of March 29, May 1 and 4, 2005 on patent litigation costs.] Thus, when the Sullivan Group’s Autumn 2002 report shared some data on D&O suits (from a 2001 Tillinghast Towers Perrin study), I grabbed it.

The average cost of defending a D&O claim – back in 2000 – was $540,000. The average payment was $5,650,000. Thus, the ratio of defense costs to settlement or judgment costs was one dollar for every ten.

Legalaffairs (May/June 2005 at pgs 10-12) discusses sending legal work to Indian firms. The editor who wrote the piece, Daniel Brook, notes that “third-party outsourcers … remain popular mostly with corporate legal departments, which use outsourcing to keep costs down.” (He mentions GE and Microsoft.)

He then cites a law professor (Thomas Morgan of GW University Law School): “Bar association ethics rules require law firms to pass on to clients cost savings from outsourcing.” I did not know about such an ethical requirement. If there is one, why would it not apply to cost savings achieved in other ways, such as through investments in technology, training, systems, cost control measures, knowledge management, practice group efficiencies, and more?

Brook’s piece does not pursue this wallet-busting notion, but closes with a different clincher: “In theory, at least, it would take only one big firm looking for a competitive advantage to start a bidding war that could change the cost of buying legal advice in the U.S.” It is already reported that Milbank Tweed has moved word processing work to Chennai, India.

Legalaffairs, in its May/June 2005 issue at pgs 10-12, discusses sending legal work to Indian firms. Here is the eye-popping metric: “The market for outsourced legal work is expected to reach $163 billion by next year, and India is positioned to seize the largest share.” [See my posts of Feb. 20, 2005 and of May 20, 2005, the latter attacking a figure one-hundredth as large.] Before such a figure sinks to urban legend, we really need to know how it was calculated.

Editor Daniel Brook’s piece cites three companies, Intellevate and Lexadigm and Imaging & Abstract International. It otherwise adds little to the hubbub about Indian outsourcing.