Law Department Management

GCs who try their hand at consulting

Many general counsel believe that when they retire other general counsel will eagerly seek out their sage management advice. After all, aren’t they begged to speak on panels? Don’t reporters call them for pithy quotes? Aren’t outside counsel bowing and scraping? Don’t consultants swarm like flies? Haven’t they belonged to exclusive GC groups?

Many ex-GCs have hung out the consulting shingle. I can think of Bob Banks (Xerox), Alan Cleveland (Conoco), Sara Holtz (Nestle Beverage), Jim Jarrell (Columbia Gas Transmission), Paul Reynolds (Mirant Asia), Robert Jackson (Olin), Susan Sneider (Turtle Wax), Rachel Robbins (Morgan Stanley), Michael Ross (Safeway), Debra Snider (Heller Financial), Rich Weiss (Motorola), and Peter Zeughauser (Irvine Corporation). Some have succeeded.

The downside for law departments who consider hiring a former GC for consulting assistance is that the former GC may assume that his or her way of solving some management problem is the only right way. But then, perhaps this writer has a shade of bias?

GC’s office co-located with rest of law department

Many general counsel recognize the value of sitting next to or near the CEO, but worry that having an office on Executive Row means not working in the midst of the law department. The GCs relish proximity to the senior executives, yet miss leading and interacting easily with their staff.

Some general counsel have more than one office, but my sense is that this compromise does not genuinely solve the dilemma. In the end, if I had to make a recommendation, I would have the GC sit near his or her peer executives, because that intimacy best serves the law department.

But, the remote general counsel must redouble efforts to keep in touch and to have presence with the troops

80% of European trademark applications to be e-processed by 2010

At ACC Europe’s recent annual meeting, as reported in Legal Week (July 23, 2005), one of the speakers was Wubbo de Boer, President of the Office for Harmonisation in the Internal Market. He spoke about the European Community Trademark and boasted that “since the Community Trademark was set up in April 1996, its reach has extended to 450 million people in 25 countries.”

De Boer predicted that trademark registrations and renewals will see increasing use of technology. In fact, “In five years time, 80% of business applications would be processed through the internet.” Law departments that use foreign associates extensively to file, prosecute and defend trademarks ought to jump on this development as a way to increase productivity and decrease transaction costs.

7% increase each year typical in inside law department costs?

Corporate Legal Times (Nov. 2003 at 37) quoted Jon Bellis, then of PricewaterhouseCoopers: “All things being equal, a stable legal organization will see inside costs increase by about 7 percent every year…”

Why should inside costs increase faster than the Consumer Price Index? Around three quarters of inside spend goes to compensation – salary, bonus, and incentive stock – and compensation is not rising at anything like 7 percent a year. Nor should other internal costs, such as travel, entertainment, facilities, subscriptions, phones, and CLE.

If corporate revenue increases by 7 percent or more a year, then one could accept the law department’s internal costs matching that pace, but for many companies that would be a champagne year. To the point: I question the validity of the 7 percent solution

Succession planning

One of the critical success factors (ugh, consultant speak) for a general counsel is grooming replacements for her position and other key positions in the department. Thar be dragons, one might say, but a recent article spots many of the critters and suggests how to slay them.

Succession planning, one of the steps of professional development, takes time and attention, but it makes such a huge difference over the years to a law department. Here is the article.

Emotional intelligence best predicts success as a corporate lawyer (!)

Steven Keeva in the ABA Journal (July 2005 at 72) proclaims: “Research over the last decade has conclusively demonstrated that emotional intelligence [known as EQ] predicts success more than any other single factor – more than subject matter knowledge and job experience,” according to Jean Greaves, co-author of a book on EQ.

Swallow hard. I hope you are not on a low salt diet, because to accept this you will need to take a big grain.

To know the law, understand the business, apply analytic ability, live for client service, slave long hours – nah, nothing serves you in the climb to CLO as much as “effective communication between the rational and emotional centers of the brain.” Emotional self awareness, lawyer, that’s the key.

Coyness, be gone!. I viscerally disagree with the claimed predictive value of EQ, but to be honest, I may be an EQ moron.

Six Sigma as a tool for law department management

A recent interview with the General Counsel of General Electric mentioned that the department “uses aspects of GE’s Six Sigma statistical analysis, used to enhance productivity in its factories, when buying time from blue-chip law firms…” (Financial Times, May 12, 2005 at 9). Brackett Denniston, the GC, explains, disingenuously I suspect, that to apply Six Sigma to a problem, “you start with a rigorous analytical process, you apply maths (sic) to the extent that you can, and you measure it.” (See my post of July 14, 2005 about Six Sigma and ranking law department management tools.)

The reality of Six Sigma is much more complex. Even so, quite a few law department have adopted Six Sigma techniques to cut Gordian knots of management. I have read of Honeywell and Tyco, for example, unleashing their belts on various activities. It behooves management of law departments to understand the basics of the technique, especially if it has taken root in their company.

Implausible ROI calculations – an example

Return-on-investment calculations make sense, but law departments can abuse them if they try to justify investments based on unrealistic extrapolations on “loss of productivity.” The typical ROI argument goes something like this:

It takes a typical lawyer six minutes each day clearing spam from Outlook. We have 100 lawyers. Therefore, we are spending 600 minutes (10 lawyer hours) each day clearing spam. Our fully-loaded internal rate is $200 per lawyer hour. Therefore, we are spending $2,000 each day clearing spam. With 250 business days each year, we would recover $500,000 each year by implementing effective spam protection.

Baloney.

The problem with this analysis is that while apparently logical, it ignores real life. To make this type of claim for savings, a law department must analyze actual behavior. The presumption in this argument is that if you get rid of spam completely, each attorney will bill work six minutes more each day and the company will benefit from that saved time to the tune of $2,000 additional legal services each day. If IT staff or vendors argue this kind of position, they should be chagrined.

(See also my post on May 1, 2005 on bill review software and ROI and May 14, 2005 on knowledge management ROI.)

Should groups of business unit lawyers have their own legal specialists?

General Electric’s law department sprawls – 1,000+ in-house lawyers – but still it amazed me to read that “each of the 11 GE divisions has its own general counsel and specialists in fields such as litigation, mergers, employment, government and intellectual property.” (Financial Times, May 12, 2005 at 9). Not, I presume, that every division has each specialist. Sometimes a specialist for one division, such as a bankruptcy maven in commercial finance, helps out another division.
Few law departments can sustain specialist lawyers in business units. If you have only two or three lawyers dedicated to a unit, there is probably not enough work to keep a specialist busy. Rather, a shared service group assists all the business unit lawyers.
A post yesterday considers three structural choices: specialists report to the head specialist, to the head lawyer of the business unit they support, or report to both. Separately from reporting, a general counsel must decide where to locate the specialists: together for collegial interchange or at business unit sites for closer familiarity and integration.
I favor co-location with business unit lawyers, dual reporting, and a strong community of practice among the specialists.

Compliance and law residing within the same function?

An article in the Metropolitan Corporate Counsel (James Ewing and Gerald Kral, July 2005 at 40) stated: “Organizationally, the formal compliance function most commonly resides within the CLO organization.” (See my post of May 20, 2005 questioning the linkage of law and compliance.) Agreed, but consider the authors’ rationale.
The authors defend the logic of this reporting model on the grounds that “the CLO usually has responsibility in the event of an infraction, so having compliance in the CLO’s organization creates accountability for preventing it in the first place.” Well, maybe.
Many “infractions” that compliance detects do not require legal involvement; only changes to practices and procedures need be made. More important, it is harmful to a law department to fill the sheriff’s shoes, arresting bad guys. Lawyers should focus on more strategic activities than “preventing [compliance failures] in the first place.” (See my post of May 20, 2005 about merging law and compliance.)