The Legal Information Institute (Cornell University) has started WEX as the first collaboratively edited legal encyclopedia and dictionary on the Web, aimed specifically at law novices according to an article in the New York State Bar News, Vol. 47, Nov./Dec. 2005 at 31.

WEX is written on the wiki platform, but unlike its famous predecessor, the entries will not be open for anyone to write and edit. WEX does, however, welcome collaboration and contribution. For more details, e-mail Barbara Beauchamp. bbeauchamp@nyspba.org

There’s only one general counsel, and that person may be in the traces for years, so if he or she hires upwardly mobile, talented legal stars, their having a short track and no space to run will cause frustration (See my post of Oct. 10, 2005 on competitiveness among direct reports.).

Ambitious lawyers don’t wear blinkers; they will look elsewhere, eventually, to run for the roses. (See my posts of May 20, 2005 about losing a strong performer, Sept. 10, 2005 about the need for some B-players, and Oct. 18, 2005 about not every lawyer wanting to do rocket science all the time.)

Some amount of legal work is better done inside and lacks charisma: it is meat-and-potatoes guidance that plow-horse lawyers and paralegals ought to do, not stallions. The daily legal fodder of most in-house counsel consists of relatively routine legal questions and documents, not Sea Biscuit dramatics.

A law department needs a team that includes some thoroughbreds, but also some stalwart Morgans.

In the winter of 2002-2003, the American Prosecutor’s Research Institute (APRI) conducted a performance audit of the Pierce County (Washington) Prosecuting Attorney’s Office.

The report (at 9) included survey data collected nationally in 2001 by the US Dept. of Justice’ Burea of Justice Statistics. Nationally, the ratios of attorney to non-attorney staff were then:

o 3.6 attorneys to every 1 investigator
o 5.9 attorneys to every 1 victim/witness specialist; and
o 1 attorney to every 1 support staff position.

It’s amazing that the ratio of lawyer to non-lawyer is 1:1, which holds exactly true at the median in corporate law departments.

A report on two studies of the District of Columbia’s Office of Corporation Counsel mentioned that Nashville’s Legal Department had licensed a matter management system, paid for some hardware to support it, and hired a staff person to run it. The base numbers are now at least five years old, but probably not much older than that.

The initial fee for the software came to $170,000 plus $15,000 for hardware. Nashville committed to paying maintenance fees of $15,000 per year. The employee’s annual compensation amounted to $35,000.

If we assume the department would depreciate its investment for the software and hardware over a ten-year life cycle, after which both would need to be upgraded or replaced, then those two components added to maintenance fees equal $43,500 per year. If the employee has benefits of 30 percent on top of salary, the annual investment in the system reaches approximately $90,000. Next, top off that annual cost for five-plus years of inflation, and the annual cost over the decade for what is probably a 10-20 lawyer municipal law office nears $100,000.

Two studies of the District of Columbia’s Office of Corporation Counsel contained some comments on technology in the Office, and specifically a ratio of end-users to IT system support staff.

The recommended ratio was one IT support person for every 37 users. What that translates into for a 10 lawyer department, which if typical would have 10 other people in the department, is about half of an IT support person. In most companies, corporate IT assigns one or two people, among their other responsibilities, to support the legal function.

The restructured legal department at Royal Dutch Shell has divided its lawyers into “corporate counsel,” “business counsel,” and “regional counsel.” All of these counsel report to the General Counsel, Beat Hess, according to Legal Week, Vol. 7, Nov. 10, 2005 at 62 (See my post of Dec. 21, 2005 about the dual responsibilities of Ascential’s lawyers.).

What “regional counsel” do that differs from what their corporate and business counterparts do, I can’t imagine, except serve as a coordinating layer. The department has hundreds of lawyers, and perhaps needs that extra dollop of management for control and coordination.

The two winners of the 2001 Nobel Prizes in Economics had years before made breakthroughs in information asymmetry, an advantage enjoyed by sellers over buyers because they know much more about their product and service than does the buyer.

How might information asymmetry pervade outside counsel management? Law firms – sellers of legal services – know more about their competencies and economics than do law departments – buyers of legal services. For example, partners understand the skills and capabilities of their associates. Firms know what prior work product, such as briefs or research memoranda, they might be able to use on a matter. Firms know how familiar they are with the particular service needed by the client. They know how busy they are, which the law department does not, and how well they manage projects. For all these reasons, hourly billing leaves all the benefits of information asymmetry on the side of the law firms.

For these same reasons, when law departments insist on billing arrangements that shift some risk to firms, firms resist losing a good thing. Moral hazard applies when law firms can bill for the hours they work. If something goes wrong, and more work is needed or the work is done less efficiently than it might have been done – no worries!

Competitive bids at fixed prices for unknown streams of legal work make law firms very uncomfortable. The advantage of information asymmetry switches in favor of the law department. Not that the law department can see over the next legal hill, but it does possess a more intimate knowledge of the company, the legal issues that have arisen in the past, and their posture towards future legal issues.

Undeniably, the law has much to say with how long a company must retain records, when they can destroy them, and how they may be stored. That those laws and regulations exist, however, should not dump records retention in the lap of the law department.

As with compliance, where lawyers need to interpret the requirements of the law, the nitty gritty responsibility for storing and destroying documents belongs properly elsewhere in a company. So too does training on document retention practices. (See my post of Dec. 20, 2005 on lawyers’ supporting role with crisis management and my post of March 18, 2005 on whether the law department should manage contracts.)

During the summer of 2005, 412 inside corporate counsel answered an online survey sponsored by ACC and Corpedia, a provider of ethics and compliance training. Some 85 percent of those respondents were at US-based companies; and 60 percent were with publicly-traded companies.

The majority of the respondents (69%) from publicly-traded companies said their companies conduct periodic risk assessments, and nearly 80 percent of those estimate both the probability of occurrence and severity of effect of the risks. Boggles my mind!

Lawyers should have a supporting role in this process, targeted at legal risks, but it is surpassingly hard for me to envision how you list legal risks and estimate both their likelihood and consequence.

For example, all companies that export products face a risk that someone connected to them will bribe a foreign government official, in violation of the Foreign Corrupt Practices Act. Beyond that, how can you figure out the likelihood of that happening, let alone the reputational, legal, or economic repercussions if the wrongful act is discovered?

Daniel Kahneman, a Princeton professor of psychology and Nobel Laureate, makes the point that reported levels of happiness do not rise with increases in income. Instead, like people on a treadmill who walk faster but go nowhere, having more money does not boost satisfaction.

Analogously, as law departments perform better, client satisfaction scores may not increase. On the hedonic treadmill of client perceptions and evaluations, which may move faster, satisfaction – now at a higher level – may stay in the same place as far as scores go.

To the same effect, all efforts to improve the working lives of in-house counsel may get soaked up, absorbed, without showing correspondingly higher scores on employee satisfaction surveys.