(1) The urge to converge, as illustrated here, leads to massive – and therefore expensive – law firms. The French financial services giant recently underwent a review of the firms that it deems members of its nine-firm global roster, Legal Week, Vol. 8, March 2, 2006 at 1. Of those nine, four are Magic Circle firms (Allen & Overy, Clifford Chance, Freshfields, and the newcomer, Linklaters). Three others are huge firms: Shearman & Sterling, White & Case, and Orrick Herrington. Rounding out the panel are Gide Loyrett Nouel and the UK firm, Norton Rose. (For other arguments against convergence, see my article from Legal Times this month.)

(2) It takes time to cull through law firms and make decisions. SocGen started the review in June 2005 and announced its results, at least for the global group, ten months later.

(3) Convergence programs always have exceptions. For example, here the French bank has completed separate national panels for the UK and for France and intends to add others covering Central and Eastern Europe. Not stopping there, the bank is “drawing up a series of sub-panels covering [11] niche areas.”

Inside lawyers want as much transparency about bonus distributions as possible. They want to know how decisions are made on the award of bonuses. They want to know that bonuses are awarded based on merit, not personal friendship or other non-objective criteria. When bonus allocations seem arbitrary or based on factors other than merit, dissatisfaction spreads like kudzu.

They also want some satisfaction that there is rough peer-to-peer equity, assuming performance contributions are relatively the same. Fair compensation, the burr under many saddles, means whether or not a lawyer is being paid what the lawyer’s peers make.

A “contract general counsel” is neither fish nor fowl. They are neither employees of the company – because there may not be enough legal work to keep someone busy or no one can competently handle the expansive variety of legal issues – nor are they in private practice and retained for individual matters. Instead, according to an article by Vida Harband of Advanced General Counsel, on the website of the San Francisco Bay Area Chapter of the National Association of Women Business Owners, you have a third option: an experienced contract general counsel who commits to work a set number of days a month on your premises.

According to Harband, a contract general counsel keeps overhead down, and may have lower cost structure than a law firm partner, yet provides more objective advice than an employee can give. The CGC can also choose and manage outside counsel. For companies not quite ready for a first in-house lawyer, this intermediate step meets a need.

A white paper by executive search firm BCG levels blast after blast at law firm lawyers who are seduced by the siren call of a recruiting law department. BCG praises the training a lawyer gets in a law firm, but says that “once an attorney goes in house, he/she is unlikely to be supervised with this [extensive law firm] chain of command.” Maybe not, but most lawyers who join a law department after four or more years in a firm have already been reasonably well trained. BCG holds the opinion that law firms thereafter become sycophants and do not guide in-house counsel.

Two sentences express this fawning abdication of professional responsibility and really irk me. “Incredibly, in house attorneys may even find poor work they do praised by outside law firms representing the company. Very few law firms ever criticize the work product of the in house counsel of their clients.” Such a sentiment, that law firms toady, staggers me. For one reason, the reputation of the outside firm is on the line. For another, if a piece of work stinks, won’t someone look at the partner and say, “How did you let this go out?” Third, law departments criticize work product of law firms and the qualities of their lawyers; doesn’t that invite a reaction? Finally, law departments retain outside counsel to bring specialized knowledge to bear, and if a firm forebears, if it thinks that obsequious sucking up keeps clients loyal, it is sadly wrong and ought soon to be discharged.

When Team Factors and the Corporate Lawyers Association of New Zealand (CLANZ) conducted an online survey of CLANZ’s members in April-May 2005, 391 in-house counsel participated. Those lawyers worked in more than 150 law departments and according to the release, accounted for more than a quarter of New Zealand’s in-house profession.

To put this into context, Citigroup and GE have almost as many inside lawyers as New Zealand!

The executive search firm BCG summarizes the sunshine inside: “more interesting work, shorter hours, potentially lucrative stock options and the opportunity to be on the ‘business side’ in a corporate environment.” To these rays of light I would add that you can believe in what your client is doing more than in a law firm and you neither have to market – in the same way that law firm partners have to bring in business – nor do you have to track time.

What law firm lawyers do not as fully appreciate, according to BCG are the in-house clouds: (1) “It is extremely difficult to get another law firm job once you have gone in house;” (2) “The overwhelming majority of attorneys do not reap an economic windfall when they go in house;” (3) “It is very difficult to move to another in-house job once you have gone in house;” (4) “Your legal skills are likely to deteriorate once you go in house (See my post of March 26, 2006 disagreeing with this point.); and (5) “You may have to work as hard as you did in a law firm.” To these dark sides I might add that often there is little or no career path, in terms of promotions – but then again, when is a law firm partner promoted? It also seems to me that there is more job security in a law firm, assuming you keep yourself busy, than in a company where mergers, spin-offs and downsizings flare up.

As to point 2, unless you work for a publicly-traded company, are awarded stock options, the options vest, and the stock rises, most employee lawyers simply earn what they earn. But my reaction most of all is that BCG is comparing journeymen corporate lawyers to high-profit partners at big firms. The majority of private practice lawyers toil in the vineyards of obscurity and modest earnings. As to point 3, I have not seen data about mobility between law departments (See my post of Oct. 26, 2005 spoofing on sources of hires.)

In a profile of Paul T. Dacier, senior vice president and general counsel of $10 billion EMC Corp, Nat. L.J. Vol. 28, March 13, 2006, Dacier mentiones that his law department has an “operating budget” of $25 million for its 70 lawyers and 40 other staff. As a benchmark junkie, I reflexively calculated that EMC’s inside spending per lawyer – assuming that is what the operating budget covers – comes to $357,000 per lawyer, which is a modest-to-low figure. And, compulsive that I am, it has 7 lawyers per billion dollars of revenue, which is a bit on the high side, except that EMC is most definitely a high-technology company. To complete my obsessive trifecta, the ratio of almost two lawyers per support staff is very high, in light of the median of one to one found generally.

But quantophrenia must be resisted (See my post of Feb. 8, 2005.). The comment that inspired this post came right after his $25 million budget statement. Dacier proudly pointed out that “we bring in more than we spend on the legal side.” Wouldn’t that warm the cash registers of a CFO’s heart! Truly a law department as a profit center (See my post of Feb. 8, 2006 on DuPont’s efforts, Feb. 16, 2006 on IP recoveries, and March 15, 2006 on litigation recoveries.).

In 2002, Dickinson College (Carlisle, PA) and Gettysburg College (Gettysburg, PA) decided to share a general counsel and the two liberal arts schools, nearby and with similar legal issues, hired Dana Stevens Scaduto.

According to GC Mid-Atlantic, March 2006 at 29, Scadutto endured the double duty, and nearly killed herself with overwork, for two years before deciding to become Dickinson’s full-time general counsel. Quite an interesting experiment, but hard to imagine many situations where one person could straddle to law departments.

James Diggs, the general counsel of PPG Industries, spoke to a reporter about the recent restructuring of his 37-lawyer department, GC Mid-Atlantic, March 2006 at 24. In that retelling, we can pick out three important points about law department structure.
For the first point, Diggs explains that a new CEO combined the company’s 15 business units into five “clusters.” Diggs restructured the law department to have a “mini-GC” responsible for the legal work of each cluster. That lawyer serves as the Single Point of Contact (SPOC) for the top executives of the group which that lawyer serves. The point is, the restructuring and re-aligning of the law department followed the changes in the client group.

Secondly, Diggs abandoned the old system of “functional hierarchies,” where lawyers practiced in “siloed groups of specialty lawyers,” such as intellectual property, labor and employment, commercial, and litigation. Under the new system those specialists report to a cluster leader, dubbed “corporate counsel.” That point is, legal/functional orientations give way to business-unit oriented groups.

Before Diggs jiggered his structure, he had introduced practice groups. His practice groups “brought together lawyers from different specialty areas who routinely dealt with common subject matters.” For example, PPG’s legal department had a commercial transactions group, a patent applications group, and a licensing group. Here the structural point is that even with a functional arrangement a law department can coordinate legal work that cuts across areas.

Bear in mind that litigators – two of them – and environmental health and safety (EHS) lawyers remain in specialty clusters. And one other fact: Of the 37 lawyers, three are based in Europe; and one each in Brazil, Hong Kong, and Asia.

An interview in GC Mid-Atlantic, March 2006 at 22, of Sarah Lee’s general counsel, Roderick Palmore, gives background on his 2004 letter urging law departments to take action on law-firm diversity. As noted (See my post of March 17, 2006 on diversity efforts.), more than 100 companies have co-signed Palmore’s letter. With that kind of support, what kind of answer would you think Palmore gave to the reporter’s questions, “How do you gauge diversity? How can you tell if a firm isn’t measuring up?”

Oddly, he answered: “I think that’s a next-step question. It’s a little early in the process to talk about how [diversity] gets implemented and how it gets measured.”

After more than a year, and considerable publicity, the advocates of diversity in law firms don’t know how to measure it? Yet Palmore continued, saying “the next true step, in my judgment is to talk about best practices…” How can anyone identify a best practice if they cannot measure and define it or know how diversity gets implemented?