Britain’s National Health Service analyzes particular drugs, at a known cost per patient per year, to decide whether they provide sufficient benefit, measured in terms of additional “quality-adjusted life years” (QALY). For example, as described in the Wall St. J., Vol. 246, Nov. 23, 2005 at A1, an Alzheimer’s drug costs more than $100,000 per QALY, which is far too expensive for the health service to underwrite. In other contexts, a cost-benefit analysis guides or critiques policies, such as environmental protection mandates, surgical interventions, and tariff or import quota protections.

Can law departments calculate the costs and benefits of their decisions, say in the area of litigation management? Yes, if they aggregated data.

If ten law departments would contribute data on the last 20 employment discrimination cases they resolved, and provide the same information about them, the consortium could come closer to answering cost-benefit questions that now remain unanswerable. Do investments in reducing cycle time reduce total litigation costs (See my post of Nov. 14, 2005 on total investment.), and by how much? To what degree does investing in discovery reduce total litigation costs? Does the size of the company’s law firm influence total litigation costs? Does early case assessment (ECA) make a difference, and how much (See my post of Sept. 14, 2005 regarding claimed cost savings.)? Where does spending on ADR show a payoff?

Only by naturalistic experiments – where people have acted and researchers thereafter look at the inputs and outputs – will law departments as a whole come to understand their costs and “quality-adjusted litigation yields” (QALY).

My top ten reasons why it is difficult to manage in-house counsel (plus a bonus reason):

1. Lawyers view themselves as autonomous, self-directing professionals, not robots. Their scores on a psychometric test (Caliper) shows lawyers to value autonomy much more that the general public (median or average 90, compared to 50)
2. Many lawyers are skeptical about supervising and being supervised. By Caliper measures, lawyers – average or median score of 90 – have a much more doubting, show-me attitude than do members of the general public
3. Law firms devalue management, praise analytic skills, long work, and individual effort – and most in-house counsel join from law firms
4. Lawyers rarely get any training in how to manage professionals
5. Lawyers dislike like being told what to do (ego, background) (“Herding cats”)
6. Supervising lawyers and those they supervise don’t have enough time
7. Lawyers devalue relationships to begin with. Caliper scores show lawyers at 12 on “sociability” as compared to 50 percent for the general public.
8. Lawyers assume that other bright people don’t need “coddling” (“Sink or swim”)
9. Defensiveness rears up when lawyers are asked to manage. Lawyers have less resilience than most people, having Caliper scores of 30 as compared to 50.
10. Lawyers misunderstand what motivates professionals (recognition, peer approval, professional growth)
11. It’s just plain hard to do, never ending, thankless, and impossible to quantify. Lawyers have higher “urgency” scores on Caliber than do members of the general public (72 compared to 50).

Like a 49’er looking for gold, I pan through streams of on-line material hoping to find nuggets that glitter for law department managers. The quantitative ore I often find pertains to patents. Why this online nexus?

Patent filings are public information, as are patent law suits. Another reason is that active trade groups undertake research, like the American Intellectual Property Lawyers Association (AIPLA) and the International Trademark Association (INTA). Third, the massive spending in IP creation and maintenance, as well as the stupendous costs sometimes to businesses if they infringe, both in settlements or judgments and in freedom to operate, gives research in the field a hefty ROI. Also, many law school professors specialize in the IP field, unlike such in-house staples as the Foreign Corrupt Practices Act, litigation management, or contracts negotiation.

If your company does not want to invest in a full-time employee lawyer, it nevertheless might want to have an experienced generalist work on site one-to-three days a week as a rent-a-GC, an outsourced general counsel.

A number of former in-house lawyers or veteran law firm partners offer this service. Included in this group is a firm in Texas, Phillips & Reiter, which hosts a web site that advertises the service .

If a law firm agrees to give a law department a larger discount when the fees paid to the firm exceed a certain level (for instance, 5% up to $500,000 and then 7% for fees paid over that amount), does the higher discount apply retroactively to the initial payments? Obviously, the two parties need to anticipate and clearly state the answer.

With a step discount, a law department might push to send more work to the firm, to reach the higher discount level. On the other side, the law firm – if it faces a rebate for earlier fees paid so that the overall discount on all fees billed hits the agreed figure – may not want to go so high. (See my posts of March 24, 2005 criticizing step discounts, July 30, 2005 on 5-10% discounts being routinely granted and yet my post of Sept. 10, 2005 about infrequent discounts in the case of one major law department.)

ExecComm’s POST laid out our KPI’s, so the CFO and LLT expect the OGC and its SME’s, well before Q2LE, to KISS Project ACRE as an IO or MBO. Check HRSSO for details.

With NA and CENTCO should we do this PDQ (COB 2/30/06), but it’s A-OK for the GMS and FDs, especially in EMEA, to roll out SAP FY05 on QUADROS through LEDES software. Our ROI won’t SNAFU if we TQM or 6SIG the OpPlans of the BUs.

S&D needs to log onto CMS, or at least answer FAQs that those HI Pos at CEI and IA pass on to CEO and BoD before we PTFTO the StratPlanRev3QEst.

QED. Q&A? RSVP

In a group of 23 law departments in companies with more than $20 billion in revenue, the average percentage of lawyers at the largest site was 63 percent. This finding, from the Hildebrandt Law Department Survey, surprises me because these are huge companies, with multi-national operations that all need legal support. To have on average two-thirds of all the lawyers in these companies based at a single location seems high (See my posts of Sept. 21, 2005 on arbitraging local compensation levels, Oct. 10, 2005 on ex pat packages, and Oct. 10, 2005 on purchase power parity.)

With the pressures to be close to the business, the globe-straddling reach of most large companies and their lawyers, and much frowning over “headquarters” and “corporate overhead” costs, I would have thought the lawyers would be more dispersed. If the executives of these companies are similarly concentrated geographically, then the clustering of lawyers has a rationale.

A major company in the southeast has all of its law firms that handle appeals provide their services at a fixed rate. Not the same fixed rate for each appeal, but each appeal is handled on its own negotiated fixed fee.

A UK-based law department has negotiated flat fees for its firms that help prepare positions statements in employment matters. (By the way, is a “fixed” fee one that a firm and department agree to in advance, whereas a “flat” fee is one that a law department decides on and mandates for whichever law firms take on a certain kind of work?)

A third fee arrangement establish some clear-cut difference between types of similar matters, and sets a different fee for each type. Let’s apply this idea. Obtaining a zoning variance for residential might be one tier (and fee), for commercial might be a second tier/fee, and for mixed use a third.

For more on fixed (flat) fees, see my posts of Sept. 14, 2005, about Cisco and its 75% flat-fee arrangements, Sept. 10, 2005 about such fees in litigation, and Oct. 31, 2005 on the competitive bidding process.)

Panelist at a recent conference of general counsel compared practices on the disbursement of monies obtained by the law department’s actions. At one company, the law department can recoup from the settlement, judgment, royalties, or license fees recovered, the expenses it incurred in the effort (and sometimes even gets a premium). I like this idea, because it creates an incentive for the law department that never appears if monies brought in simply swell the corporate coffers.

Another panelist disapproved, and is happy simply to fill his client’s coffers, because of the downside risk of being charged for some portion of adverse decisions. (See my posts of May 30, 2005 on including settlements and judgments in total legal spending and July 16, 2005 on those payments in relation to outside counsel spending.)

Finance departments sometimes tell law departments their aggregate budget for the coming year, which is “top-down budgeting.” Other law departments figure out their spend for the coming year and tell finance, a reverse practice referred to as “bottom-up budgeting.”

Most common might be “golden-spike budgets,” where law and finance come together, as did the east- and west-bound tracks of the first transcontinental railroad. “Golden” conjures up the dollars involved; “spike” connotes the stake in the ground that the budget represents where it is jointly agreed to. (For more on law department budgets, see my posts of July 16, 2005 on GCs and their business acumen, Sept. 27, 2005 on variance in outside counsel expenses, and Oct. 20, 2005 on delegating down budget responsibility.)