When attorneys at a firm who have worked significantly on a matter leave the firm, clients “incur significant costs to pay for both the learning curve of the new lawyers and the in-house lawyers time spent on training.” To quantify that intuitive sense, one legal department tracked the costs incurred and “estimates a minimum in-house department loss of $14,000 for each lawyer lost from an outside counsel team.” This finding comes from the ACC Docket, Nov. 2009 at 98, in an article about the organization, Balanomics.

The methodology by which this legal department calculated is figure is not disclosed, but if it is plausible, a law department might set a fixed write-off whenever any core lawyer leaves a team within a period of time. That would be a better technique than something vaguely worded about “we will not absorb the costs of replacement team members coming up to speed.”

In Australia, Allygroup “was set up by a specialist litigation manager specifically to project manage litigation on an outsourced basis.” The ACC Docket, Nov. 2009 at 18 says no more and the website too is taciturn.

Still, it makes sense to import the skills and disciplines of project management to large-scale litigation (See my post of June 24, 2007: project management with 5 references; and Sept. 22, 2009: project management with 13 references and 1 metapost.).

The 2009 Empsight/ACC Small Law Compensation Survey reports on 146 organizations that gave text responses to a question concerning the effects of the recession. As published in the ACC Docket, Nov. 2009 at 8, several points struck me.

“Travel expenses were frequently cited as targets for reduction or elimination.” I assume this means departments tightened the belt for their own lawyers, particularly on air travel.

“In other cases a hiring freeze had been imposed, while others had essentially delayed hiring, which had the same short-run effect.” If business slumps, perhaps for some departments a freeze or a delay makes little difference in workload.

Some “participants reported the elimination of outside training resources on topics like compliance.” Consultants, including trainers, feel the axe first when times get tough.

“Though both were reported, more participants cited use of salary freezes than outright reductions in salary. Several reported the reduction or elimination of bonus payments.” Better all jobs with pay notches than fewer jobs with raises.

Overall, though, no shock and awe appears from this collection of minor adjustments.

Although chary of broad-brush topics, I still try constantly to pull together material from this sprawling blog. So, here are six steps that a general counsel should take to ratchet up lawyer productivity in his or her department.

But first, the term “productivity.” Productivity for a law department means doing things efficiently – getting the most output from a general counsel’s resources. Productivity for a law department is only partly measurable as units of output per period of time (See my post of Nov. 23, 2008: how hard it is to prove how hard internal lawyers are working.). The raw material may be available – matters handled and hours worked – but the productivity equation remains unsolved. Macroeconomists use the term “total factor productivity,” which is the sum output of a country’s capital and labor. Law departments have some capital investments, but mostly consist of labor, professional’s brains working hard.

Hire good lawyers. The essential starting point for any general counsel is to hire (or inherit) intelligent, experienced, engaged, collaborative, and hard-working lawyers. Everything to do with this -- talent management -- conduces to higher productivity (See my post of Sept. 22, 2009: ways to find lawyers for openings other than search firms with 17 references and 1 metapost; and Sept. 16, 2008: search firms with 12 references.).

Keep your good lawyers. Talent combined with tenure boosts productivity (See my post of March 8, 2009: attrition in law departments, with 16 references and one metapost; and July 29, 2007: high potentials with 10 references.).

Train your lawyers. Everyone improves with training (See my post of May 25, 2008: CLE with 30 references; and Sept. 1, 2008: learning methods with 12 references.).

Direct work appropriately to your lawyers. Clean lines of responsibility, manageable workloads, a match between ability and the complexity of matter, nimble decision-making, a balance between micromanaging and abdicating – all these components build productivity (See my post of March 13, 2007: complexity with 4 references; and Dec. 27, 2008: complexity of legal practice with 20 references.).

Create incentives for your lawyers to be productive. Set goals for your lawyers and reward them for effort and accomplishment (See my post of June 30, 2007: bonuses with 8 references; and May 4, 2009: in-house counsel career paths with 15 references.).

Support your lawyers. This means not with capable support staff but also with facilities and evident teamwork (See my post of Aug. 28, 2008: delegation in a law department with 14 references; and April 5, 2009: teamwork and collaboration internally with 16 references.).

Productivity follows if you do well on these six talent-maximizing steps, and far more predictably than if you rely on illusory standardized processes, knowledge management or technology.

“Orrick, Herrington & Sutcliffe is earning a flat fee to handle all of the legal work worldwide for Levi Strauss & Co., other than its brand protection work, the Recorder reports. If work needs to be done where Orrick doesn’t have an office, it will hire an outside law firm at its own expense. Orrick wouldn’t disclose how much the Levi’s deal is worth, but the story calls the deal a “multimillion-dollar arrangement.” Twenty-five percent of its fees comes from alternative billing.” This news comes from the ABA Journal’s website.

Since Levi Strauss’s revenue for 2008 was $4.36 billion, at typical ratios its total legal spending would have been about 0.3 percent, of which 60 percent or so would have been spent on outside vendors. On those figures and estimates, the company would have spent approximately $7.8 million on external legal costs. Taking away ten percent from that for non-law firm expenditures, and guessing that brand protection work for such an important brand is substantial, the deal with Orrick could well be in the $4-to-$6 million dollar per year range. The next step would be a reprise of Continental Bank in 1991 – a wholesale transfer of the internal legal department to the law firm.

“Experience teaches us that if you conduct a very good early case assessment that looks at the facts and the law and the witnesses and the documents that you will know when you complete your ECA, 80 percent of all you will ever know about this case.” Coming from PD Villarreal, the head of litigation for Schering-Plough, that quote packs a wallop.

If it is true, after the initial investigation most general counsel would be excellently positioned to figure out what needs to be done in the case, what the case’s likely settlement value is, what kind of firm and other service providers are needed, and perhaps an alternative fee deal (See my post of Feb. 23, 2008: early case assessment with 8 references.). http://lawdepartmentmanagement.typepad.com/law_department_management/2008/02/the-average-for.html. Although 80 percent is not omniscience, Villarreal maintains that “it is adequate and sufficient knowledge upon which to make decisions about the direction in which you want to go to resolve most controversies.” The interview of Villarreal is in Met. Corp. Counsel, Vol. 17, Nov. 2009 at 11.

I can imagine litigation partners at law firms not all that enthusiastic about short-circuiting what might be a long-running and lucrative matter, but for the ECA analysis they do at the start. A conflict of interest? Somewhat like settlement efforts by a pit-bull litigation partner?

Many law departments specify in their outside counsel guidelines that if a law firm anticipates an external expenditure above a certain amount -- perhaps $10,000, such as for an expert witness or storage on servers, the law firm should have the vendor bill the law department directly. Whether those payments to third parties that might otherwise flow through a law firm bill are treated as internal law department expenses or as external expenses is an open question.

I submit that the law department should treat those expenditures as external expenses.

I have this belief, quite possibly fallacious, that lower-cost firms have less margin to cut, so discounts across the board along the lines of “10% from the standard rates of each of our firms” hurt them more than higher-cost, fatter margin firms. Perhaps that belief is unfounded hooey, since lower rates may be possible because they pay their lawyers less and have lower operating costs such as rent and services. In other words, margins stay comparable regardless of overall billing rates.

But assume that high-rate firms can absorb higher discounts and not suffer as much as a lower-rate firms. Why not emulate the progressive tax code and raise the discount levels faster for law firms with higher rates?

To illustrate, one combination could be that for every $50 of difference in effective billing rates, the threshold for when a higher tier of a rate discount applies drops $500,000. By that rule and for a given number of hours of work, a law firm with an effective billing rate of $300 an hour would hit the higher discount rate later than a firm with a $350 an hour rate. Alternatively, since $50 is one-sixth higher than the $300 an hour of the lower-cost firm, the threshold for the discount to rise would be one-sixth lower for the more costly firm.

Possibly, the underlying premise is flawed or the approach too complicated. But a decent matter management or e-billing system could handle the computation and tracking and you would only do it for a handful of firms. Savings could be greater and the law department would thereby drive law firms toward more similar effective hourly rates.

I smile when I read all the survey results about what law department attorneys look for in outside counsel (See my post of Oct. 22, 2008: law firm attributes for selection with 12 references.). In the abstract, anyone can reel off desiderata.

The nitty-gritty chore, however, of rating a specific firm too often gets shunted aside or done poorly (See my post of Nov. 16, 2005: evaluations of law firms with 9 references; and Nov. 6, 2009: law firm assessments with 19 references.).

Sergey Brin’s technique to test a candidate for an in-house law position. Ordinary people interview in the traditional mode (See my post of Sept. 3, 2008: techniques for those who interview.). Not Brin, one of Google’s billionaire co-founders. According to the Economist, Nov. 14, 2009 at 103, he “asks a candidate for a senior legal position to draw up a contract for the sale of Mr Brin’s soul to the devil.” Hellish indemnification and warranty provisions!

Path dependency in legal departments, especially for management innovation. The process of accumulating innovative knowledge is usually highly path (history) dependent and firm specific. “Path dependency” reeks of academic jargon but it means the commonsense idea that the way in which a legal department arrived at a particular practice depends greatly on its people, the work they did, its relations with its clients, and much more. For another department to crib from it is to risk failure, because the “path” of the cribber is very different (See my post of Feb.14, 2009: best practices with 24 references and one metapost.).

Synecdoche – lumping a large firm based on the work of a few of its lawyers. “Dechert does a good job for us,” “We like Cravath,” “Shea & Gould had irregular quality.” Every day, in-house lawyers generalize about hundreds of lawyers in one fell swoop, with broad conclusions based on no overall evidence or basis. Sporadic and individualistic evaluations done inside don’t justify such broad descriptions.

ISO 9001 certification. Novus Law announced that it has “received an ISO 9001:2008 global quality management certification from Underwriters Laboratories ("UL"), which is also a first in the legal profession.” The interview of Raymond Bayley, CEO of Novus Law, can be found in Met. Corp. Counsel, Vol. 17, Nov. 2009 at 47 (See my post of April 28, 2009: ISO and other certifications in the legal industry.).