As I read in Law Tech. News, July 2010 at 38, that American Express has to its credit “110 attorneys and 90 support staff in 12 countries,” I wondered why there was so little about that department in these pages. My posts are from two years ago and older, and several came from just one speech.

As with many legal departments that are quite large, they go about their business like a placid lake and little about their management practices creates even ripples (See my post of Jan. 25, 2006: American Express' patent on law-firm rate increases; Jan. 25, 2006: fixed fee arrangements of American Express; Feb. 18, 2006: budget practices at Amex; July 27, 2007: uses Serengeti Tracker; April 27, 2008: patent licensing fees; and May 3, 2008: American Express and patent services and discovery.). Not one reference in more than two years.

Several points struck me from an article in Wired, Aug. 2010 at 132, about occupational stress. The most striking is that the higher your position, the less damage stress does to you. The reason for this seeming paradox is that the higher you rise the relatively more control you have over your pace, pressure, and priorities. For that reason, a general counsel has to make tough calls under time pressure and never with enough information, but that general counsel has some say over what’s on the desk and how to handle it. The mid-level lawyer in a department has less control and therefore more stress.

The article also points out some possible misunderstandings about stress reduction. One is that “blood alcohol levels above 0.1 percent – most states consider 0.08 the legal limit for driving – trigger a large release of stress hormones.” Several stiff ones at night exacerbate the angst. Also, exercise can help alleviate feeling stressed out, but not if you don’t want to exercise in the first place. Meditation, studies show, can dramatically reduce levels of stress and anxiety. Finally, learn to walk away from provocations; we actually have more control than we think over what sets us off (See my post of May 18, 2007: stress and pressure with 7 references; and June 11, 2008: stress with 18 references.).

I lashed myself unsparingly to update my posts on stress and now feel deeply relieved that I have done so (See my post of Nov. 17, 2008: procrastination increases stress; Dec. 7, 2008: dogs at work reduce stress; Jan. 30, 2009: cortisol, released under stress, harms memory; Feb. 22, 2009: vacations relieve the grind; Dec. 10, 2009: leave more time between meetings; Dec. 10, 2009: vexations of air travel; March 11, 2010: pressure levels between big and little legal departments; June 17, 2010: bureaucracy can reduce stress; and July 19, 2010: decision-making under time constraints.).

Korn/Ferry compiles an annual Index of Global Executive Compensation. A chart in talent mgt., July 2010 at 50 shows form it “Global First-Year Executive Compensation” for the years 2005 through 2009. Four positions each start at an index score in 2005, those being the CEO, CFO, CIO (Chief Information Officer or Chief Technology Officer), and “Global Top Executives” (also defined as “C-suite/SVPs”). Chief Legal Officers (CLO) would be in the last group.

The compensation of CFOs and CIOs increased from the 2005 index more than did the compensation of the Top Executives. HR and Compliance heads, among others, are in that category, to be sure. The study does not disclose total amounts of compensation, only percentage changes from the baseline index in 2005.

Since pay clearly signals pecking order, it is sobering for general counsel to realize that those who manage the corporation’s money and technology have counted for more than those who manage its legal risks.

Koans are verbal paradoxes contemplated by Buddhists on the path to enlightenment. My homemade koans have more modest goals: to convey some thoughts about the risks grappled with by legal departments. In a few days I will post my explanation of each koan.

1. Risk flirts with dollars but marries reputation.

2. Up the line can mean end of the line.

3. After too many ‘No’s,” the wise client “Knows.”

4. No lawyer minimizes the immeasurable.

5. Legal risk is in the wallet of the beholder.

6. Risk, the law’s chameleon.

7. Learn from the rainbow about legal risk.

If these koans are enlightening, listen for one hand clapping.

An article quotes Susan Hackett, ACC’s general counsel, on “value-based” billing. Hackett says that “surveys show the average client laying out between 15% and 30% of their legal spending this way.” The Economist, July 24, 2010, at 72, does not elaborate, but I doubt very much that the figure is so high. Not if value-based billing excludes discounts.

If we had data from a representative sample of US legal departments, I would go all in that close to 90 percent of all fees paid by them to law firms are based on full or discounted hourly rates. Bills paid by law departments based on value delivered are rare exceptions that prove the rule.

A few days ago, Jon Olson, the thoughtful general counsel of Blackbaud,commented on my post about legal departments as multi-dimensional (mathematical) spaces. He explained his own theory:

“One theory that I find useful is the idea that law departments essentially manage the externalities of a business. That is to say, law departments manage the friction point where the untrammeled corporate will meets the greater society. It happens that many of these friction points are legal in nature; and the many that aren't strictly legal still benefit from good "lawyering" skills (e.g., the ability to communicate clearly, analyze an issue, build consensus). As such, the "space" is at the intersection of corporate strategy and the outside world, with all the layers of politics, culture, personal preference, laws, legal delivery systems, internal process and policy, risk appetite, and technology that entails. Multi-dimensional, indeed !”

Olson certainly envisions a transcendent, fundamental role for legal departments, on the ramparts between clients and the world with the protection going both ways. My image of in-house legal teams is less grand, to be sure, but Olson certainly sketches a fascinating perspective about the attributes lawyers can bring to bear and the contribution they can make.

Showing the value of a legal department can be accomplished in various ways. One way that may be overlooked is to do what the company wants. If the company wants process maps, use Visio for lots of boxes, triangles, and arrows. If Six Sigma is the initiative of the moment, collect black belts. When HR changes the evaluation process, fill out the forms. In other words, playing well in the sandbox helps legal departments be seen as cooperative, good corporate citizens.

Too often, lawyers think they are a breed apart or above. “We are lawyers so we don’t need to comply with the corporate expense policy.” That attitude creates a perception of trouble-makers and malcontents who diminish value. Instead, pick your fights and mostly do what the company wants on travel policies and high potentials. Take part in the leadership development programs. Show value by linking arms, not arm wrestling.

“Does your law department have a formal knowledge management system or practice?”
In answer to this poll on the Association of Corporate Counsel website as of the afternoon of July 25th, 7 people had answered “Yes” and 32 had answered “No.” htt Managers of law departments need metrics. That is my mantra and this poll does provide metrics. Having acknowledged the potential value of this poll, at the same time it seems to be riddled with problems.

What does the adjective “formal” add? I suppose it means that actions are described somewhere in some detail, people know about them, and the whole system has some official, departmental imprimatur.

Even if a law department has a “formal policy” to preserve knowledge, how effectively is the policy followed? Many people own dusty exercise equipment.

Does any component of knowledge management (KM) count and count equally? One department may specify in its outside counsel guidelines that law firms who represent the department must provide electronic copies of all documents produced. Would that alone suffice for a “Yes”?

Are enthusiasts of KM more likely to notice the poll and take the time to answer it? My hunch is yet, and survey methodologists have found that to be true.

Might a law department have multiple respondents? No individual from a legal department would know that another has responded. For that matter, a zealot (or a forgetful person) could take the poll more than once.

Finally, were all these methodological bumps smoothed, the ultimate question remains untested: To what degree does the implementation of a formal KM policy make a difference to the effectiveness of the department?

Each year the Economist uses the cost of a Big Mac in various countries to compare the official exchange rate to that cost. The magazine uses a standard Big Mac in the US ($3.73) as the index and ranks countries according to whether the same order costs above or below that amount. If the price is above, the currency is deemed over-valued by the calculated percentage. For example, what someone pays in Euros for the ubiquitous hamburger is equivalent to $4.33, so the Euro is overvalued by 16 percent. By the same methodology Asian currencies are generally undervalued. All this is laid out in the Economist, July 24, 2010, at 72.

To the extent the Euro is overvalued, law departments that convert their 2009 spend and revenue into dollars for benchmark purposes over-state those figures (See my post of July 7, 2010: regional gap on total legal spend as a percentage of revenue.). Spending metrics that use revenue as a denominator to internal or external spending will not be affected by the imputed conversion rate (since the numerator and denominator are equally affected), but metrics like internal spend per lawyer in US dollars will look higher if the currency is over-valued.

Based on a recent consulting project, I realized there are as many as four levels of people who can help in-house lawyers and others best use their software applications. The first responders are the admins who among themselves can solve many questions. Next to be called in are power users. Power users spend lots of time with an application and perhaps have taken a course on it. Whoever is in charge of the matter management system should be a power uer. Or the resident SharePoint expert.

Third, the administrative group may have an IT person or two who can solve more significant problems – login problems or printer defaults – and decide when to go to the fourth level: dedicated IT support.

Each level triages for the next level. Somewhere the vendor of the software may even pitch in as might a user group.