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InsideCounsel, May 2007 at 66, profiles the general counsel of the Dutch chemical company Akzo Nobel. It mentions that Jan Eijsbouts "drastically reduce the number of outside firms uses from hundreds to less than 20." Two pages later it states that Mark Harding, the high-profile general counsel of Barclays, demanded in 2006 that Barclay’s law firms provide statistics on the gender and ethnic make-up of their staff if they wanted to continue receiving assignments from the bank." Carrefour’s general counsel, Franck Tassan, has a legal staff of the hundred and 63 people spread over 30 countries (at 71). To integrate that dispersed group, Tassan “successfully establish clear reporting lines from each country's' legal directors to his home base in Paris, all the while fostering a sense of community among his multinational team.”
All that is to say that a Dutch law department converges law firms, a British bank aggressively pushes diversity, and a French retailer deals with law department structure and culture. Management challenges in law departments are universal.
Stefan Stern, who writes thoughtful columns for the Financial Times, passes on some good points about why it is better to recruit from the ranks (Fin. Times, March 6, 2007 at 7). "In the long run, growing your own talent, and then holding onto it, is always going to be a cheaper and more effective approach than stepping outside to find it in a noisy and uncertain marketplace."
He criticizes the headhunter business. "According to industry experts, one in three search assignments, on average, is never filled." That statistic, if it holds true for talent searches by law departments, is startling.
Stern believes that many headhunters are second careerists, who may have no particular aptitude or discipline for spotting talented individuals.
Worse, by Stern’s account, the best lawyers are rarely available to fill your vacancy. A law department may end up having to make do with the fifth or sixth best candidate, because that is the person they can get.
The general counsel of a large corporation may have to travel quite frequently for transactions and other business purposes. But what if that top lawyer has responsibility for lawyers who are posted in distant offices?
According to the Bisnow on Business E-Letter, May 2007, Marriott International has in-house attorneys in Washington, DC; and Orlando, Florida as well as in London, Zürich, Dubai, Mumbai, Singapore, Hong Kong and Beijing. The peripatetic general counsel of that company makes it a point to travel at least once a year to each of these legal offices. Buy a passport extension!
When its former general counsel was to retire, Marriott International "had a wide open, nine-months, excruciating search for the right person." As described in the Bisnow on Business E-Letter>, May 2007, the company selected a veteran in-house lawyer, Ed Ryan, to take charge of the 90-lawyer department. During the process no one told Ryan anything about his status, until when he became one of five finalists.
I suppose you cannot give prospects who work in the law department inside information about their candidacy that is not made available to external candidates, but the cost in morale and distraction would be very high for such a protracted process (See my posts of Aug. 1, 2006 and April 16, 2007 about disappointed hopefuls.). Good lawyers who hang fire as long as Ryan did might take some calls from headhunters or decamp.
About 80 years ago, a linguist named Zipf found that "the" -- the most used English word -- occurred about twice as often as "of" (second place), about three times as often as “and" (third) and so on. Others have found similar relationships between the size and frequency of earthquakes and many other natural and artificial phenomena. Brand preferences and spending habits of consumers, according to the NY Times, May 21, 2007 at B3, also exhibit a similar pattern (See my posts of Nov. 13, 2005 on power laws; and Oct. 24, 2005 as they apply to law departments.).
If Zipf’s Law were to apply to law departments and the firms they retain for specialized legal services, law departments might be expected to spend about 53 percent of their outside counsel budget in a given legal-service area on their top choice firm, 20 percent on their second choice firm, 13 percent on the third, and 7 percent on the fourth.
It seems plausible that large law departments, over a period of years, spend in specialty areas of advice roughly in accordance with this ubiquitous and long-established formula.
InsideCounsel, May 2007 at 66, profiles Beat Hess, the global corporate counsel of Royal Dutch Shell. That $220 billion company, the world's third-largest oil company, has a 700-attorney legal team. Given that humongous number of lawyers, no wonder Hess has established a "one team" legal model, where he set common goals for the international legal team.
What awed me, however, was that as part of integrating the energy behemoth’s army of lawyers, Hess "relocated half of the attorneys from the London office to the legal headquarters in The Hague.” I strongly favor putting lawyers near their clients, but that may have been a massive – and costly – implementation of that belief(See my post of June 7, 2006 about BHP relocating some lawyers.). Such a large move runs the risk of losing good talent who decline to relocate.
InsideCounsel, May 2007 at 51, chronicles the decline of arbitration in relation to litigation. The magazine cites at page 56 results from an American Arbitration Association (AAA) survey in 2003 of 254 in-house counsel (See my posts of Dec. 14, 2005 for data from that survey on price-earnings ratios; Dec. 31, 2006 regarding online settlement capabilities integrated with ADR methods; and Dec. 9, 2005 about the AAA and “ADR-favoring companies.”).
To the question, "How does the cost of arbitration compared to litigation?," 58 percent of the respondents said arbitration was less expensive than litigation, 8 percent said it was more expensive, and 34 percent could detect no difference. With regard to "How does the speed of arbitration compared to litigation?," 67 percent felt arbitration was faster than litigation, 7 percent perceived it to be slower, and 26 percent saw no difference.
Three questions come to mind from this data.
Why has the AAA not done a follow-up study in the four years that have passed? Perhaps they are concerned the results will be less favorable?
Why doesn’t the report explain the basis on which those 254 lawyers received the survey, how many in total were sent it, and on what basis were the invitees selected? Perhaps there was some selection bias, such as choosing only former users of the AAA (See my posts of May 9, 2007 on survey bias; and March 20, 2007 on selection bias.).
Why is data touted that gives the edge on cost of 58 to 42 percent (if you combine no difference and more expensive) and on speed of 67 to 33 percent? Perhaps the glass is almost half empty.
Some recent posts have addressed arbitration as a management tool (See my posts of Feb. 7, 2007 on mediation favored more than arbitration; Feb. 7, 2007 on the cottage industry of arbitrators; and May 4, 2007 on international arbitrations.).
From the Canadian Corporate Counsel Association survey of its members for the 2007 In-House Corporate Counsel Barometer, at 28, comes this quote in connection with how many law firm departments have terminated a law firm in the past year. "Three in ten in-house corporate counsel work in organizations that have terminated a law firm(s) in the past year.”
I note in passing, once again, the infrequency with which law departments fire law firms (See my post of Feb. 19, 2007 and references cited.).
One methodological distortion about statistics on terminations of law firms lurks in this survey. Large law departments, as compared to smaller departments, are more likely to have fired a law firm, for the simple reason that bigger departments hire more law firms. Because this survey draws its conclusions based on individual respondents, not on law departments, it is possible that more than one lawyer from the same large law departments completed the survey. This methodological flaw suggests that the actual number of law departments that have recently fired a firm is lower than the 30 percent figure.
Once I noticed one ad that relies on a testimonial of a general counsel I started spotting counterparts everywhere. I wonder what the law departments got in return. Here are a few ads of recent vintage:
Knobbe Martens Olson & Bear ad in Corp. Counsel, March 2007 at 41, quotes Matthew Fawcett of JDS Uniphase. Concentra, a national healthcare company, allows BottomLine Technologies to publish a case study of it in an advertisement Henry Schein, Inc. poses its law department in ads for LawTrac Development Corp. (for example, InsideCounsel, May 2007 at 11). An attorney for American Airlines, not the general counsel, poses in front of an American jet on behalf of LexisNexis Martindale-Hubble (ABA J., Vol. 93, May 2007 at 3). The general counsel of New World Restaurant Group, Jill Sisson, appears in an ad for the US law firm Holme Roberts & Owen (InsideCounsel, May 2007 at 70).
From the Canadian Corporate Counsel Association survey of its members for the 2007 In-House Corporate Counsel Barometer, at 25, comes data on considerations law department lawyers have regarding the choice of outside counsel. The usual desiderata lead the list, such as responsiveness, specialization, depth of experience, and existing relationships. Three unusual considerations deserve comment.
"The consistency of a law firm's performance between offices, departments and lawyers" ranks number five among the nine survey choices. It taps into an important point: does a law firm deliver a consistent level of good quality across locations and levels?
Further down, at number seven on the ranking, is "access to a law firm's premier lawyers.” My first thought is that such access ought to be infrequent, and that there is a high cost to the time of the top lawyer. My second was that a law department needs to match the sophistication of its legal needs to the capabilities of preeminent lawyers.
Finally, the consideration entitled "the media coverage that a law firm receives" comes in last, as a meager 1 percent said it was a “very important” consideration. Articles, roundtables, and quotes in the press evidently do not sway Canadian in-house counsel when they come to pick firms. The report does note that the wording of this option may not adequately address a firm’s overall public profile and reputation (See my post of May 23, 2007 on “prestige” of firms as a meretricious factor.).
