A 2005 study by Laurence Simons [www.laurencesimons.com] draws on compensation data from 9,000 legal professionals and more than 50 multinationals in 16 countries.

The executive search firm published base salary data in U.S. dollars for six Asian countries. The only size category with full data consisted of departments with 1-5 lawyers. Note the astonishing inequality, based on the mid-point of the base salary ranges given.

Hong Kong $255,000
Singapore $187,000
Japan $142,000
Australia $143,000
China $ 89,000
India $ 39,000

If the quality of work has anything close to a match, no wonder the prospects of using low-cost offshore lawyers loom large.

An article in The Metropolitan Corporate Counsel (June 2005, pg. 48) presented a teaser of data on the costs of compliance with Sarbanes-Oxley Section 404. Jeffrey Steinberg, an Ernst & Young partner who was interviewed for the article, explained that E&Y’s most recent study “indicated that fifty percent of the incremental cost of Section 404 are internal costs of the organization; twenty-five percent are extra costs from the audit firm; the other twenty-five percent are external costs…” Thus, inside counsel show up in the first category and outside counsel in the third category – but the study apparently dug no deeper.

In-house counsel, to be sure, spend time on Section 404 reviews. Steinberg said “[w]e have worked with corporate counsel in every one of my Section 404 experiences.” [See my posts of May 30, 2005 regarding Adecco’s costs and May 10, 2005 regarding SOX and IP audits.]

Like many disjunctives, the excluded middle comes closer to the truth. A general counsel leans toward a name brand law firm for matters that put the general counsel at serious risk. No top lawyer furthers his career by pinching dimes but pouring outside counsel fees down the hole of a lost case or failed acquisition.

For more routine work, with lower risks, general counsel – or more likely the direct reports who actually choose which firm to retain – usually think in terms of hiring a particular lawyer, regardless of that lawyer’s firm.

When law firms talk of laterally hiring a new partner, they assume the partner’s clients will follow. “Our firm just hired Chris Jones, who brings a book of business of $2.5 million.” The hiring law firms put their trust in the accuracy of “hire the lawyer.” The opposite of what happened in Jerry McGuire. But firms also market the firm as a whole, putting their trust in branding. Hence, the choice we started with is in fact a spectrum.

Dorothy Leonard and Walter Swap explain in Deep Smarts: How to Cultivate and Transfer Enduring Business Wisdom (Harv. Bus. School 2005, pg. 49) that “most evidence suggests that it takes at least ten years of concentrated study and practice to become an expert (as opposed to merely competent).”

Assuming the Ten Year Rule holds for lawyers, and assuming three years of law school starts the clock, and further assuming a typical lawyer stays in one specialty area of law, then around seven years out of law school they can be considered an expert.

Having assumed all that, when does an insider have time to overlay substantive expertise with in-house savvy, which has to do with client relations, knowledge of the business, and political finesse within a corporate structure? The answer is often that deep legal expertise remains with outside counsel, whereas the lawyer hiring that outside counsel needs less substantive expertise and more generalized skills.

The loss of experience, judgment, social networks, and cohesion when a veteran retires can wound a legal department. Most of what that lawyer contributed leaves at retirement, locked away in the retiree’s brain as tacit knowledge. What can a general counsel do to staunch the retirement loss?

Have the veteran coach a successor. Have the veteran prepare guidelines and rules of thumb about what she has learned. Have the veteran draft standard form documents with alternative language to handle different possibilities. Keep matters on a matter management system so the work of the old-timer remains available to others. Maintain a document management system so that the veteran’s work product remains accessible to all.

What beliefs do law department members take for granted, assume to be true without questioning, and indeed, never articulate? I thought about this after reading Dorothy Leonard and Walter Swap, Deep Smarts: How to Cultivate and Transfer Enduring Business Wisdom (Harv. Bus. School 2005). So-called “deep smarts” – intuition, judgment, experience, and knowledge stored explicitly and often tacitly in people’s heads – make good lawyers indispensable.

Legal deep smarts often rest on underlying assumptions. Some of these bed-rock beliefs law departments hold dear include:

Law is an intellectual profession. Ideas, concepts, analysis and rationality predominate. Smarter is better where corporate counsel are concerned.

Money motivates professionals. Paying more, dangling bonuses as incentives, holding out the possibility of promotion are all means to get more out of in-house counsel.

Professionals will learn on their own. The drive to gain mastery of an area of law applies to in-house lawyers.

Lawyers serve as checks and balances in a company. Everyone else wants to step over the legal line; vigilant lawyers haul them back from plunging into the abyss.

Words are privileged. Incantations, totems, magical phrases, and precise eloquence count. A good lawyer sounds and writes like a lawyer.

“Stress-related illness is now the leading cause of long-term absence from work among non-manual workers,” according to the Financial Times (April 19, 2005 at pg. 12). The article cited a study by the UK’s Chartered Institute of Personnel and Development.

Stress stalks the corridors and cubicles of law departments. Piles of documents to review, demands on Blackberries for instant responses from many clients, bean-counting pressures to control costs, competition for promotion, conflicting messages regarding expectations and roles – the stressometer can shoot heart-stoppingly high.

British Petroleum, in collaboration with others, has devised an online risk assessment tool. If a lawyer were to answer its questions, it would produce a report identifying the lawyer’s stress level as “very,” “a bit,” or “at peace with the world.” According to the article, the software “indicates which forms of pressure are causing the most stress, suggests solutions and gives links to detailed advice” on the intranet of British Petroleum.