Law Department Management

Three reviews of business challenges for corporate counsel

Previous posts discuss three surveys that asked substantially the same question: What are the big challenges law departments face (See my posts of July 4, 2006 from Australia; May 10, 2006 from Canada; and Aug. 26, 2006 by Robert Half.)? Here are the findings, numbered consecutively to make some comments easier.

The four most pressing business issues that face Australian law departments are (1) “reducing outside legal costs,” (2) “staying appraised of company activities," (3) "too much work, too little resources/legal budget issues,” and (4) "demonstration of value.” In the US, the “business challenges” to law departments are (5) “increased workloads,” (6) “compliance or regulation issues,” (7) “controlling litigation or outside counsel costs,” and (8) “budget restrictions.” As for the Canadian counterparts, the “most important functions” corporate counsel perform for the management team started with (9) “candidly weigh and assess risks of various courses of action,” (10) “minimize risk,” (11) “provide good alignment with business units,” and (12) “manage outside legal counsel and related costs.”

Three themes have multiple votes. Watch the money is one of them, with (1), (7), (8) and (11) expressing variations on it. The theme of over-burden of work shows up twice, in (3) and (5); the same for risk management in (10) and (12). There is some consensus among these three surveys, but not complete.

What would philosophers say regarding law departments?

Cogito, ergo bill.

No, a philosopher would speak learnedly about epistemology -- how do we know what we think we know about law department management (See my post of September 22, 2005 regarding what might be our fundamental inability to comprehend such complexity.). A philosopher would Socratically dialogue on ethics – how does a corporate lawyer know what is right and wrong behavior (See my post of March 19, 2006 regarding the fact/value dichotomy.). A philosopher would hold forth on methods of logic and rhetoric – what are the best ways to reason through to the solution to a difficult legal situation (See my various posts under the category of Decisions and Cognitive Styles.). The philosopher’s discourse would touch on metaphysics – why do law departments exist and how came they into existence sub specie aeternitas..

To show all my Descartes, it’s a Locke that general counsel Kant Hegel over philosophical niceties.

Plaintiff’s law firms funded by hedge funds

Not only do law departments have cause to worry about the funds contingency fee firms receive in massive settlements only to invest in further litigation (See my post of Aug. 24, 2005 on the dollars involved). They also can fret now about another litigation financing source: specialized hedge funds.

According to James Altucher, in the Fin. Times, July 18, 2006 at 7, several hedge funds lend to law firms, “with loans backed by cash flows from the firm as a whole, and from personal guarantees from attorneys.” The interest rates are lucrative and the hedge funds diversify their risk by lending to different law firms and collateralizing their loans by proceeds from various kinds of litigation recoveries. Law departments bear the brunt of that litigation liquidity.

An ailing metric: sick days per lawyer per year

It hurt to realize that all is not well with one metric: median sick days taken per year by in-house lawyers. We know from the Fin. Times, July 18, 2006 at 6 that “on average, managers in the UK take just 3.19 days off a year due to sickness -- about half the rate recorded by other staff." That precision means the finding is not doctored. We do not know the comparable figure for the workaholic in-house counsel of the world.

I have a malingering fear that the absent metric will not get well. I can’t put to bed the worry that the ward of law department management may never recover from this lack of an operating benchmark.

The risk that employed lawyers lose their “sense of craft”

The Fin. Times, July 11, 2006 at 10 refers to Prof. Richard Sennett, a professor the London School of Economics. Sennet argues that many professional people in corporations are judged according to their position in an occupational hierarchy, not by the quality of their craft. You are assessed as a VP and Associate GC, with attendant expectations, rather than as a consummate negotiator and drafter of acquisition agreements.

Stennet further believes that professionals, such as lawyers, are motivated to do a good job for its own sake, rather than just to meet a production target. A patent lawyer strives to prepare excellent applications, not hit a goal of 4.5 apps/month. If you remove from them their craftsmanship, morale plummets. I agree with his analysis, and regret that to the degree Stennet is correct, it is harder to manage in-house lawyers.

Heightened thinking about augmented-cognition software

Software developers have staked claims to programs that can deduce what information is important to a user, based on what the user is doing, and deliver information or tools that help at that moment. According to the Economist, Sept. 23, 2006 at 24, “plenty of measures can tell you something about the user's state of mind: keystrokes, how many windows are open and their content, whether the user is scrolling, the time of day, the contents of a desktop calendar" and more.

If so-called augmented-cognition software could pick the key concepts out of a document open on the lawyer’s computer (See my post of Feb. 19, 2006 on concept-search software), it could search in the background for relevant e-mails or precedent. If the software analyzed the last 50 incoming e-mails from other lawyers in the department, it could detect a pattern of cooperation and decide when to interrupt a lawyer more appropriately. If the software noticed that a lawyer delays opening e-mails from a certain user, it might filter them into a low-priority directory.

Futuristic? Absolutely. But once you start picturing the potential of augmented cognition, the possibilities for in-house counsel are exciting.

Ten major trends and their effects on law departments (McKinsey)

The March 2006 McKinsey Quarterly Global Survey of Business Executives received 3,470 responses from a worldwide sample of business executives. The survey asked them to assess the consequences of 10 trends, the results of which appear in the McKinsey Quarterly, 2006 No. 3 at 20.

What struck me is that seven of trends speak directly to a need for law departments. The two trends deemed most puissant over the next five years concern growth in emerging markets and regions. Law departments will need more familiarity with international laws, statutes, and ways of doing business.

The third-ranking trend, "greater ease of obtaining information, developing knowledge," underscores how crucial will be knowledge of intellectual property. The fourth trend, "increasingly global labor and talent markets," promotes the need for human resources, employment and labor lawyers.

Environmental regulations and "shifting industry structures/emerging forms of corporate organization" (trends ranked 5th and 7th) will put a premium on environmental lawyers and corporate lawyers, respectively. I took a special shine to the eighth trend: "application of scientific techniques and approaches to business management." Law department management has a long way to go to be buffeted by this perceived trend.

An open-door policy for a general counsel swings both ways

It is wonderful to hear lawyers say that their general counsel has an the door policy. They can drop in and talk with the lead lawyer with a degree of informality that evidences comfort and teamwork. Conversely, the general counsel is much more aware of workloads, issues, talent, and the legal heartbeat of the company.

An open door policy usually means that the law department is relatively small, in the range of 15 lawyers or less, and is clustered in one location. It also means the General Counsel's office is proximate to the rest of the department (See my post of May 16, 2005 about the gold coast syndrome). The more lawyers in the department, however, the more the door shuts.

Coaching in-house lawyers as compared to other forms of assisting them

I have modified these useful distinctions from an article in OD Practitioner 2006, Vol. 38, No. 3 at 13, and adapted them to law departments. Managers of lawyers should bear the differences in mind.

• Training: Someone with subject matter expertise and authority shows another person or group how to achieve success in a task. CLE courses train in-house counsel.
• Performance management: A boss influences or requires improved behavior from a subordinate. The general counsel sets objectives for a lawyer, such as to speak up more during client meetings.
• Mentoring: A seasoned individual shares advice and insight about the “way things work here” as they guide someone less experienced towards desired outcomes. The Deputy General Counsel meets periodically and informally to guide a promising newcomer.
• Coaching: A partnership between a client and a coach accomplished through regular phone calls or visits that are typically designed to help the client acquire more self-understanding, life fulfillment, direction and success. The HR department assigns a coach to help a lawyer who is passive-aggressive come to terms with that style and reduce its deleterious consequences.
• Organization development (OD): Individual work with a client-leader as part of a dynamic values-based approach to system change in organizations. As part of a department-wide culture change, an OD expert assists the general counsel to contribute to the process.

Analysis of net scores from a survey

Many surveys by law departments ask for answers on a scale that moves from negative scores to positive scores. For example, 1 (hate), 2 (dislike), 3 (neutral), 4 (like) and 5 (love). The analytical tool, "net scores," displays the combined effect of related scale scores. Net scores are calculated by subtracting the percentage that indicates negative directional change from the percentage that indicates positive directional change. If there are five choices on the spectrum, net the percentages of the top two against the bottom two.

When analyzing responses to four-point scales, often the "top two responses" and "bottom two responses" are grouped in the findings. For example, "somewhat agree" and "strongly agree" responses are combined into a "total agree" percentage (See my posts of June 30,2006 on analysis and depiction tools.).