An earlier post today commented on the methodology of this survey. Here, I accept the data as given, and remark on part of the findings.

The interviews asked the senior decision-makers to rank eight law-firm attributes for the degree to which companies were influenced by the attribute in selecting counsel. [I set aside for this post the relative infrequency with which even large companies select law firms they have not worked with.] The scale for the responses was from 1 (low value) to 10 (highest value.)

Communicate effectively 8.8
Work as part of a team 8.2
Enjoyable attorneys 6.4
Hourly rates 5.2
Racial diversity 3.2
Gender diversity 3.1
Proportion African-American 3.0
Pro Bono Activities 1.7

Some thoughts: (a) legal experience and capability must have been presumed to be givens, not worth asking about; (b) knowledge of the company or its industry seems odd to be omitted; (c) productivity and responsiveness are included on most lists of attributes; (d) why are there three choices on diversity, when the scores are so low; (e) “hourly rates” should have been worded more broadly, such as “cost in relation to value”?; and (f) what about technology resources, geographic diversity, and non-business relationships?

Interviews in the summer of 2005 with 97 “senior decision-makers who help choose outside counsel” were “done in conformance with generally accepted research principles set forth in CASRO and ESOMAR, [and] has a sampling error of +/- 10%.” (From Kirkpatrick & Lockhart Nicholson Graham’s Top of Mind 2005 survey) I commend the effort to legitimize results by applying a scrupulous methodology.

What undermines the methodological rigor is the high number of non-lawyers, or officers not in the law department, whose responses were included. The brochure says that the study interviewed “senior in-house counsel in FORTUNE 500 and 1000 companies,” which it did, but not only that group.

The people interviewed included at least 32 – one third of the sample – whose titles suggest that they are not in the law department, let alone lawyers. That third includes 20 CEOs, COOs, and Presidents; another 4 are VPs of Operations; 5 head functions such as HR, CFO; and 3 are “Executive Vice Presidents.”

The major use of outside counsel comes from companies with law departments, and most law departments control the retention of outside counsel. A survey on outside counsel issues, therefore, should mostly solicit responses from senior members of law departments.

Consider a charming idea, one that sweeps away lists of questions asking about attributes of a law department, which lists are lengthened with invitations to clients to give examples and explain themselves. Replace all that with one simple question: “On a scale of zero to 10, how likely is it that you would recommend use of this law department to your colleagues?” BusinessWeek, Iss. 3969, Jan. 30, 2006 at 94. With customers, “promoters” give responses of 9 or 10, whereas “detractors” give scores of 6 or below, and very different behaviors and loyalties follow.

To use this test for a law department’s clients, a couple of immediate objections should be set aside. Many clients have no choice but to go to the in-house entourage, but let’s imagine that they can avoid doing so as long as possible, sneak in some legal advice from their own staff who have legal training, or plump for outside counsel. The familiarity and dominance of surveys would be the second block (see my Law Departments and Client Satisfaction, Corp. Legal Times 2002); here, the response is that if something better comes along, consider it.

Clobbered by a wave of lawsuits against its key product, OxyContin, and revenue pressure from a generics competitor, the law department of Purdue Pharma turned to contract lawyers.

Then, inspired by layoffs the company had made, the law department hired 18 former employees and trained them to do work that junior lawyers and paralegals normally handle. “Within a few weeks these employees were conducting research, reviewing and analyzing medical records, summarizing depositions and reviewing and summarizing discovery documents,” Corp Legal Times, Vol. 15, Sept. 2005 at 42. (See my post of July 14, 2005 about hiring former lawyers of a department.)

Started sometime in early 2004, within the next 12-15 months the new system saved the law department $1.5 million in legal expenses.

Because off-the-shelf software didn’t take into consideration all the costs of developing and protecting a patent for RIB-X, a small biotech company, its chief patent counsel and a financial analyst developed an Excel program. The program “can predict costs based on just about every conceivable variable that might impact the cost of filing, prosecuting and maintaining a patent,” as stated in Corp. Legal Times, Vol. 15, Sept. 2005 at 38.

The program asks for and handles priorities of patents, all governmental fees, the complexity of patent applications, outside counsel costs and more. The model it produces shows how much each patent in the company’s portfolio costs per month and for the coming five years.

To engage clients better in the defense of the 10,000 lawsuits ChevronTexaco faces, in 2004 the company’s new general counsel, Charles James, created the ChevronTexaco Objectives-Based Litigation Technique, Corp. Legal Times, Vol. 15, Sept. 2005 at 37.

The initiative combines several useful features: (1) it defines the responsibilities of everyone involved in litigation – clients, outside firms, inside lawyers; (2) it pushes clients to involve their inside lawyers at the first sign of possible litigation; (3) it requires early assessment of a case (ECA); (4) it assures that clients commit adequate resources for the case, which means the case must be aligned with the strategy and goals of the client; and (5) it encourages post-mortems, retrospective look backs at resolved lawsuits to figure out how to reduce their cost and number. (See my post of Aug. 3, 2005 about Baxter’s Litigation Advisory Board.)

COBALT also has plans to create a Web-based, company-owned extranet. The extranet will help with document discovery, knowledge management, metrics, and generally fathoming litigation.

In 2001, the 30 or so lawyers of Independence Blue Cross’s law department were organized into five practice groups. The lawyers in those practice groups didn’t communicate much or well with their colleagues in other practice groups, according to Corp. Legal Times, Vol. 15, Sept. 2005 at 34.

The general counsel Paul Tufano’s solution was to create cross-practice group teams, who focused on such projects as group contracts, medical policy, license agreements, and governance issues.

Not only do those teams (of about six lawyers) open the lines of communications across the practice-area silos, they add a career development twist. Only lawyers that don’t hold management positions are eligible to lead the teams.

This was a smart and useful solution. Most law departments have columns of dead air, into and out of which no information blows; most law departments have few promotions available, yet want to develop leadership in their more junior lawyers. Two problems, these, but neatly addressed by one management technique.

I worked on the consulting project in 1990 that famously resulted in Continental Bank closing down its 70+ lawyer department and by outsourcing satisfying its legal needs with Mayer, Brown & Platt. That decision was the page-one headline on the inaugural issue of Corporate Legal Times, and it triggered much controversy.

Dramatic, but still old hat since it turns out that in 1920, Karl Llewellyn “joined the legal department of the National City Bank, which at the time was transferring its legal department to the Wall Street law firm of Shearman and Sterling [Cited in Ajay K. Mehrotra, “Law and the ‘Other’: Karl N. Llewellyn, Cultural Anthropology, and the Legacy of The Cheyenne Way (Law and Social Inquiry, Vol. 26, Summer, 2001 at 748)].

Probably the Greeks invented law department outsourcing.

An anecdote told by Karen Ruzic Klein, vice president of legal, consumer travel at Cendant Corp., illustrates this point. Klein calculated that her inside lawyers cost about $150 an hour to work on a certain type of matter, whereas her outside counsel would charge $200 an hour. The zinger: “it was taking staff nearly four times as long as outside counsel to complete the matter”! (Legal Times, Vol. 15, Sept. 2005 at 50).

Unless you track internal time, you can’t objectively peer beyond the simplistic per-hour gap between inside and outside lawyers. The comparative productivity of outside counsel – based on more experience, skills, or resources – will tell its tale

According to Constance E. Bagley, Winning Legally: How to Use the Law to Create Value, Marshall Resources, and Manage Risks (Harv. Bus. School Press 2005) at 122, Hewlett-Packard wanted to increase its patent applications 50 to 150 percent over the two years ending October 2004 (See my post of Aug. 3, 2005 on Microsoft boosting its patents by 50%.) To achieve that increase, H-P “offered employees $175 for each patent idea submitted on an invention disclosure form and $1,750 for each formal patent application.” The company also gave commemorative plaques.

Bagley continues. “Some firms offer stock options for each patent filed or issued, and 3Com Corporation gives each business unit a share of the licensing fees their patents produce.”

The patent lawyers in a company will face much more work if companies give such incentives. Additionally, the rewards might lead to a dilution of quality, and thus more work by the lawyers.