The general counsel of Winn-Dixie Stores, Timothy Williams, has responsibility “for management of all legal, governance, risk and compliance, and quality systems functions.” The final responsibility – quality systems functions – stands out. I have written amply about the wide scope of functions various general counsel oversee (See my post of March 24, 2011: Anheuser-Busch InBev and “corporate affairs.), but haven’t paid much attention to quality functions. By the way, the insight into Winn-Dixie comes from Corp. Counsel, April 2011 at 44.

No less than Microsoft, however, has a similar mix (See my post of Jan. 18, 2011: Legal & Corporate Affairs.). The combination may be more common in Europe (See my post of Aug. 8, 2006: survey data on corporate affairs; and Nov. 7, 2007: Red Hat law department includes two people who handle corporate affairs.).

So, why not add in Lean Sigma or TQM or quality assurance activities to the chief legal officer’s portfolio?

“There are, in essence, only two problems in organizations: how to divide things up, thereby ensuring that the right people do the most appropriate work; and how to integrate the tasks of diverse individuals, functions and teams to ensure that the organization gets things done.”

I am no fan of simplistic dichotomies, as many would pooh-pooh this binary split from Rob Goffee and Gareth Jones, Clever: Leading your smartest, most creative people (Harvard Bus. Press 2009) at 130. Fine and agreed, but for general counsel splitting and lumping – another way to describe the bifurcation of management into two big problems – has some merit: it gives a framework to organize many of the decisions they have to make. What is more basic than who does what and how do we pull it all together?

Most lawyers start their careers being trained to miss nothing, look at everything, and be very wide-ranging. They wallow in complexity, for that rack up lots of billable hours, and become quite enamored with creating and dealing with complications.

Once lawyers reach management levels, however, they need a very different orientation: they need to simplify. A good manager clears away the clutter of detail and focuses, over the longer range and on the most crucial decisions. To illustrate, a general counsel who redlines, researches the law and drafts may be stuck in complexity. They micromanage. A better general counsel concentrates on the actions or ideas that have the most leverage; they simplify to the big-picture considerations.

The Third Annual Law Department Operations Survey asked its respondents to check off to whom do they report. The report that resulted, at 14, states that 44.1 percent report directly to the general counsel as compared to 37 percent in 2009. The writer touts the improvement in the “chain of command.” But two years before the percentage had been much higher (See my post of Dec. 21, 2008: three out of four of the 50 respondents report to the general counsel.).

Another 27.1 percent in the latest survey report to a deputy/associate or assistant general counsel.

What surprised me is that “10 percent report directly to the CEO.” How can that be? I asked Brad Blickstein, one of the coordinators of the survey, who would be pleased to send you the report if you email him. He explained: “Regarding the six CEO responses, we ask people to fill out this survey if they are the person in their law department most responsible for operations. In a few cases, that's the GC himself or herself.”

Finally, the totals come to 82 percent so almost one out of five of the respondents report to someone other than the top lawyer group (or CEO). Who else is a candidate? Again, Brad filled in the missing information. Among the other reports were the CFO, Chief IP Counsel, COO, Sr. VP of HR, and the SVP Corporate Affairs.

A piece entitled Ten ’In-house Secrets For Reducing Your Company’s Legal Costs” appeared on Jan. 8, 2010 on the WikiCFO site. The author is, I believe, a lawyer with the Phillips Law Group.

I don’t think much of the article, but one of its ten secrets pushed me to write. Under the heading ''Calculate Your Company’s legal costs” it says, “This requires adding up all of your legal bills for the previous year AND estimating the cost of productive executive time lost due to involvement in, concern about, or management of legal issues.” Note the second cost estimate, after the AND.

No law department has come to my attention that attempts to estimate the costs of executives, let alone other employees, in depositions, discovery steps, strategy meetings, expert testimony or other legal-related costs. The numbers might be quite significant but their estimation would be quite subjective. Without them, for sure, Total Legal Costs fall short of Total.

A recent report entitled Litigation Cost Survey of Major Companies, presented at the Searle Center on Law, Regulation, and Economic Growth (Northwestern Univ. School of Law, May 10-11, 2010), presents time series data on litigation costs for 37 Fortune 200 US companies. The authors found that “companies spent, on average, 16 to 24 cents on US litigation for each dollar of profit earned in 2008.” I find that 20 percent of profits hard to accept.

At the median, US law departments spend about one-third of a percent of their revenue on outside counsel, two-thirds of that being for litigation. That is, they spend roughly two tenths of a cent of every $1 of revenue on litigation fees and disbursements.

If typical corporate profit rates run at something like ten percent of revenue, then multiply the two tenths of a percent by ten and that leaves about two cents for every $1 of profit. The Searle report found litigation expenses to be approximately ten times higher!

The authors comments that “increases in hourly rates do not appear to be driving the increase in litigation costs, as the available data show relatively little change in outside legal fees over time.” True, the research was conducted on behalf of a group which argues litigation costs are too high for business and wants to reform the civil litigation process in the United States. Still, my metrics and theirs are hard to square.

Perhaps some of the explanation comes from the choice of the report to use averages and not medians? A few huge companies may have suffered enormous costs, but the median department may have fared considerably better. Or, the sample of companies lists toward litigation-besieged companies? Incidentally, depending on the year, U.S. litigation costs were between four and nine times higher than non‐U.S. costs (as a percent of revenue).

An extreme value distribution is a curve that does for abnormal values what the normal, Gaussian bell curve does for run-of-the-mill values. A theory to predict extreme events first appeared in 1928, gained its first real traction 20 years later, and Extreme Value Theory (EVT) has recently become more and more mainstream for insurance companies, financial services companies, and governments that have to decide how much to invest to protect against a calamity. EVT came to my attention in Robert Matthews, 25 Big Ideas: The Science That’s Changing Our World (MJF Books 2005) at 103.

The theory draws on data from the past. For a law department, or a group of them in the same industry, EVT might look back at the number and frequency of law suits that cost more than $3 million in a year, in present dollars, to defend. It appears to be a sophisticated mathematics that could project the likelihood of such a budget-crusher in the future.

My friend Jeff Hodge, Executive Director – Corporate at doeLEGAL, wrote a fascinating blog post about law suits per person in major countries. He cites research in Christian Wollschlager, Exploring Global Landscapes of Litigation (Nomos 1998) and testimony before the House Committee on the Judiciary in 2004 by Theodore Eisenberg, a law professor at Cornell.

For a fuller list of countries, see Jeff’s post. In short, over a decade ago Germany came tops in this dubious metric, with 123.2 cases per 1,000 people. The US, in the middle, had 74.5 cases per 1,000; and France was the lowest, at 40.3 cases.

Not having reviewed the underlying data and methodology, all I can say is that if the cases against corporations are roughly similar in scope and expense across countries this information should make law department managers of litigation re-think where their litigation load and cost arises.

People who conduct surveys – I raise my hand high – should be wary when they throw stones at other surveys’ methodologies. Even at risk, I will continue to chide others on how they word questions and expect rocks through the windows of my own benchmark survey in turn.

So, consider this question from the Third Annual Law Department Operations Survey: “Are there plans to improve or evaluate a new matter management and/or e-billing system in the next 12 months?”

Start with praise, Rees: The topic, updating two important classes of software, deserves a question and the findings could be revelatory. Further, to put a time frame on the question gives it more precision – “in the next 12 months.”

But the question has four flaws. Start with it being a yes/no question (See my post of July 17, 2007: need a choice of “neutral”.). A binary choice in a complex world is very crude. A conjunctive question, the second problem, leaves interpretation of the results almost worthless and this one even manages has two “or’s”: “improve or evaluate” as well as “matter management or e-billing.” You can’t figure out which branch an answer sits on.

Third, the question leaves a gap, since it asks about “new” matter management or e-billing while but not about upgrades to an “existing” package. Fourth, “plans” is so vague a notion that any self-respecting administrator could say yes, if the thought flitted across their mind four months ago. Had the question asked a provable, operational question such as “Has money been budgeted to invest in improvements in the next 12 months?” that makes the answer more credible.

Here are some of my candidates, in alphabetical order. I welcome other nominations of general counsel of this stature who deserve extraordinary recognition for their managerial contributions.

Bob Banks, one-time GC of Xerox and a founding father of what is now the ACC Mark Chandler, Cisco’s outspoken and innovative GC, in part for his rousing speech at Northwestern a few years back Jeffrey Carr, an influencer and advocate in many areas, especially outside counsel Ben Heinemann, GE’s pathbreaking GC for many years, especially in talent spotting and development Rod Palmore, GC of Sara Lee, for his ceaseless efforts on diversity Tom Sager, before he became the current GC of DuPont and even now the leader and proponent of so many management initiatives

Waiting for induction would be potential Hall of Famers Brad Smith of Microsoft, Amy Schulman of Pfizer, Michelle Coleman Mayes of Allstate, and Sabine Chalmers of Anheuser-Busch InBev. Paul Lippe, erstwhile GC, would probably be on the list as might Mark Harding of Barclays.

These general counsel pounded the speaking and writing circuit; other general counsel may be as innovative and worthy but they are less well known to the industry.