When lawyers walk down the halls talking on a BlueTooth headset, the scene is surreal. Concerned always about confidentiality and attorney-client privilege, here is a lawyer blabbing for all the world to hear. Yet, the scene is not uncommon. It gives new meaning to “communication in the department” (See my post of Dec. 7, 2005: communication time wasters; March 23, 2007: communication frequency declines with distance; Oct. 19, 2005: communication tools; Nov. 30, 2005: everyone clamors for more communication.).

Jabbering in the air about a legal matter may mean that attorney-client privilege goes by the boards. The talk-in-public lawyer may think he is conveying how important and busy he is, but remember the World War II slogan, “Loose lips sink ships.”

We may see signs in legal departments that show a cell phone (mobile for the European readers) in a circle with a red diagonal slash through it.

"Over the past few decades, Fortune 500 corporations have increasingly opted to self-insure, with retentions of at least $3 to $5 million per occurrence and often $25 million or more. They look to insurance companies only for coverage of catastrophic events. The insurance industry is not seen as offering cost-effective first dollar or low-retention coverage. Since they are insuring themselves, Fortune 500 corporations have had to become their own claims managers, expanding their law departments to manage the risk." (emphasis added) Met. Corp. Counsel, Vol. 16, May 2008 at 47, blares out this staggering claim by the President of eLawForum.

It is not common for the claims function to reside in the legal department (See my posts of April 23, 2006: claims-to-litigation metrics; and March 13, 2008: Council on Ethical Billing.). Nor has there been any recent noticeable growth recently in law department staffing. Is the emphasized statement true? Perhaps “claims” should be read as lawsuits. Even with that reading, it is not true that law departments previously abdicated litigation management to insurance companies.

During a presentation recently, the finance manager of a large law department mentioned that in 2007 his company’s internal audit group had reviewed the legal department’s processes. He proudly added that internal audit gave the department a “strong” rating.

If you want headaches, invite internal audit to look at your processes for invoice approval and reporting. They can conjure up all manner of risks and prescribe all manner of onerous checks and counter-checks.

For example, the person who approves a bill should not be the person who enters the bill’s information into the matter management system. The person who approves the bill should approve the bill after the information has been entered into the matter management system. Approval levels need to be scrupulously observed and there must be adequate written documentation about the terms of the retention. Accruals must be accurately updated every month. On and on.

Few law departments take these precautions.

The issue of Ethisphere, Qtr. 2, 2008 highlights the 93 companies that the Ethisphere Institute honors in 2008 as “the world’s most ethical companies.” Of them, 29 are not US companies (and for six of them I have done consulting projects) and 33 industries are represented

What I wish we could know is whether total legal spending by these companies, as a percentage of their revenue, is lower than the spending of their less-ethical peers. It seems plausible that if employees consistently choose to act with integrity and ethical sensitivity, their company will suffer fewer lawsuits, acrimonious negotiations, contract disputes, joint ventures riven with legal tangles, and other malefactions.

A fascinating website, for peculiar people like this blogger who revels in words, is Word Count. Based on a massive archive, the website tells you the frequency with which 86,800 English words have been used in print.

Naturally, I tried out several of the nouns that appear frequently in these posts.

321 Law
428 Management
544 Department
750 Legal
2022 Partner
4001 Lawyer
5888 Counsel
8018 Litigation
9157 Attorney
27190 Lawsuit

Several of these words have very broad meanings and usage and several serve as more than nouns. Also, not tracked in the archives are “paralegal” or “settlement.”

My challenge, therefore, is to use all these ten common terms in one sentence. For legal departments, the management of law partners by counsel in litigation means that one lawyer directs another attorney in a lawsuit. Feels like “The quick brown foxy lawyer jumped over the lazy..."

A special supplement to the Fin. Times, June 9, 2006 at 5, delves into the views of CFOs on risk management. The two professors who wrote the piece had asked 334 CFOs “What fraction of your company’s value would you attribute to the finance function?” The average estimate was 10 percent of the value of the company and there was relatively little variation by region, industry or between public and private companies.

I am not sure what to make of the responses to that question if it were asked of a large group of chief legal officers. I can’t conceive how they would even begin to think about quantifying such a figure. If the figure has validity, it would bestow the ultimate measure of a law department’s value.

I would be fascinated to see how a group of CEOs rank the various support functions in terms of their contribution to the value of the company. Where would legal stand?

In law departments, titles are important for showing where someone stands in the hierarchy, for morale, and for status (See my posts of Jan. 27, 2006: titles should reflect and explain the work staff does; Jan. 24, 2006: try to match lawyer grade/titles to client grade/titles; Dec. 10, 2005: titles are positional goods; Oct. 29, 2005: morale in a law department affected by a hodgepodge of titles; and Feb. 28, 2006: value to an in-house lawyer of an officer title.).

Those who have a title and those around them read significance into the title (See my posts of Nov. 8, 2005: “Associate” over “Assistant” General Counsel; March 23, 2006: hierarchy below Associate and Assistant General Counsel; Aug. 21, 2005: titles for paralegals or legal assistants; Dec. 9, 2005: new title at Barclays of Chief Operating Officer; and March 16, 2006: A-positions may not match titles.).

Titles and changes in titles (promotions) are a key part of talent management (See my posts of Jan. 4, 2006: hallmarks of a progressive performance management system; March 23, 2005: title simplification is passé; Nov. 1, 2005: title simplification, but “Corporate Secretary” still needed by law; March 6, 2006: dual-track career paths for generalist managers and specialist experts; and Nov. 8, 2005: human resources representative for the law department.).

The varying elements of experience for an in-house attorney consist of the attorney’s (1) formal education, (2) years since graduation from law school, (3) years in the current company’s law department, (4) degree of legal specialization over time, (5) actual work experience, which includes the number of different jobs held, (6) professional development such as CLE, and (7) the abilities of supervisors.

Each of these elements of experience accounts for a different amount of influence on benchmarks. A law department could create a scaled metric for each of the seven elements for each of its lawyers. With such data compiled annually going back several years, the department could see how well its lawyers per billion dollars of revenue or total legal spending as a percentage of revenue correlated to the elements of experience. Similarly, for the benchmark of inside spending per lawyer, each of these kinds of experience makes a different contribution but it would take a set of data to show the degree to which they correlate with that metric.

To derive such data, to find out which elements of experience are more important for productivity – as indicated by benchmark ratios – it would be fascinating if several law departments contributed this data about their lawyers. The group could then draw conclusions about correlations after someone runs a multiple-regression analysis (See my post of Feb. 4, 2008: an example of multiple regression.).

If people are law departments’ most important assets, then data about their experience is the most important area to study.

All the techniques in the world for outside-counsel cost control make barely a dent unless the in-house lawyers who direct firms willingly set their shoulders to the yoke. The hard pulls of choosing not to retain counsel, but if so of then choosing a good but lesser-known and less costly firm, and even then of telling it to leave some stones unturned and that some work has too little value to be billed -- all of it falls on the responsible in-house lawyer.

You kid yourself, you putter at the periphery, to think depersonalized system changes like requiring prompt billing permit more effective cost management than do the individual decisions of lawyers: to coax out putative discounts, go through the charade of reviewing bills, crack down hard on copy charges, jawbone flush partners, and re-issue your outside-counsel guidelines. Those peripheral efforts are not where a general counsel will reap significant savings.

No, the unpleasant work of lowering legal fees demands vigilance, vigor and some violence to the accustomed routines of law firms made wealthy by cost-plus excesses. The analogy in military terms is boots on the ground, the grunts on the front line.

To reduce external legal costs, in-house lawyers have to take risks. Risks that their client ought to understand and accept; risks to the lawyer’s career when some decisions backfire. The lawyers who manage outside counsel have to make tough calls, some of which will look bad in retrospect. And they have to do consistently what they dislike to do at all – exercise tough love on lawyers they need and like. That grass-roots discipline doesn’t happen steadily enough without massive shifts in culture, incentives, training, and tools.

When we use the term “productivity,” we should not mean in-house lawyers just churning out lots of work, but rather lawyers completing lots of important legal work. A good lawyer picks out the services that help the client the most. A competency of a good lawyer is the ability to identify and focus on priorities.

The topic of priorities has come up numerous times on this blog (See my posts of Dec. 22, 2006: prioritizing legal risks; Aug. 28, 2006: paired comparisons to analyze priorities; March 27, 2005: set priorities on management issues; March 10, 2005: Johns Manville’s priority grid; June 16, 2007: identify strategic priorities; and June 25, 2007 on status reports to clients as an aid to setting priorities.).

Core competencies focus on priorities (See my post of Oct. 6, 2006; and May 23, 2008: 12 references cited.). The broadest statement of the importance of recognizing priorities is that the skill is integral to thinking: to think is to decide and to decide is to set a priority.