With all the hullaballoo about fees – discounts, fixed, blended, effective, contingent – we have overlooked a much more significant lever to shift costs: the law firm and its staffing and billing practices. A firm’s number of lawyers and its billing ethos go together; bigger firms have a bigger cars to move, so to speak, and therefore press harder on both the staffing and billing pedals.

I am gravitating toward the belief that law departments need to change firms, not fees, to really move the needle. Put metaphorically, a fixed-fee arrangement with an expensive firm is hoping the emu can high jump. Hourly billing by a frugal firm is not worrying about a hummingbird over-eating.

Even with large numbers of participants, such as 1,000 in the General Counsel Metrics law department survey, benchmark metrics probably reflect more centralized law departments than decentralized. Not just more of them, because centralized reporting departments – where all practicing lawyers report ultimately to the general counsel – greatly outnumber decentralized ones – where some practicing lawyers report to a business unit manager.

More than even when you account for that imbalance, since it seems logical that decentralized departments don’t make up a similar percentage in survey results. To explain, assume 90 percent of all law departments are centralized. If 95 percent of all benchmark respondents are too, my surmise would be supported – relatively greater representation. The reason I would put forward is that general counsel who don’t know the full headcount of their company’s legal staff, or the spending on them, let alone the company’s outside counsel spend, more frequently pass than their centralized peers on invitations to take part in benchmark surveys. If they know their key figures are incomplete, why bother?

Could the compensation of general counsel, relative to their function peers such as the CFO, HR head, and CIO, give a clue to the relative value ascribed to law departments? In any specific company, not necessarily, because SVPs and EVPs arrived at different times, with different levels of experience, and different employment contracts. Overall, however, were there comparative metrics within industries, we might use this as a proxy of the relative internal value of a law department.

More broadly, the fully loaded cost per employee within the staff functions tilts heavily toward the law department. Law departments have relatively little leverage – one lawyer for every non-lawyer – and lawyers receive relatively high salaries and bonuses. If the investment in human capital by companies tells us what they value, then the higher investment in legal staff may complement the value ascribed to in-house legal teams through the pay of their leader.

These two indicators of value – leader pay and department costs -- came to me when I read in Eduardo Porter, The Price of Everything: Solving the mystery of why we pay what we do (Portfolio/Penguin 2011) at 120, that “the sixfold rise in the pay of chief executives officers in the United States between 1980 and 2003 was due entirely to the sixfold rise in the market size of large American companies.” Revenue growth, not increased worth brought to the table, drove CEO pay. Lawyer pay may track revenue growth, to a degree, but implicit or explicit relative perceptions of value delivered might account for more.

Frank Fletcher, the general counsel of Nero AG whom I cited in a post a couple of days ago, wrote me. “We used MediaWiki, available at http://www.mediawiki.org/wiki/MediaWiki. We have been happy with the software except on occasion links to documents have become corrupted.” That is useful background, and thank you, Frank.

Christian Liipfert added this in a comment on my post: “Marcus Stamm from Lucent, also in Germany, did a presentation at the ACC Annual Meeting in 2006 on their use of TWiki. TWiki is open source source and available at no cost.

I remember also a law department that used a Google product, Knol, to host a wiki (See my post of Jan. 2, 2009: Google’s Knol.). So, here are three choices for a law department that wants to test drive a wiki.

Law departments of US companies can handle internally much of their client’s legal needs, the exceptions being litigation and some relatively infrequent specialty advice. International legal questions make up a small portion of the work (See my post of April 30, 2011: globalization overstated.). By contrast, with a company based in a smaller country, such as Greece or Portugal, that has grown to trade substantially outside its home market, you would assume a higher proportion of its legal issues would concern foreign laws. The balance depends on the proportion of the company’s revenue that comes domestically or internationally.

But this split is surmise. The General Counsel Metrics global benchmark survey does not ask law departments to break their headcount into domestic and international. Some companies with global cultures might not even see the relevance of that geographic distinction. Were data available it would allow the start of a more definitive response to the surmise.

The Economist, April 23, 2011 at 72, praises a book by Pankaj Ghemawat. His World 3.0 demolishes the world-is-flat argument, proving from many angles that globalization has much more modest manifestations. For example, “according to a study a few years ago, less than 1% of all American companies have any global operations.” Or, “Exports are equivalent to only 20% of global GDP.”

Ghemawat explodes the myth that the world is being taken over by a handful of giant companies. “The level of concentration in many vital industries has fallen dramatically since 1950 and remained roughly constant since 1980.” It follows that the number of law departments has not shrunk (See my post of Dec. 31, 2010: estimates of total number of worldwide law departments with 9 references from 2010.).

The very largest law departments deal with international legal issues, and the biggest law firms want to play up that angle (as they angle for clients). But by and large the fearsome tidal wave of globalization may be a modest breaker (See my post of Dec. 5, 2010: globalization and internationalization with 13 references and 3 metaposts.).

Covering 240 participants or so to this point, the 2010 data on key benchmark metrics will be quite rich. Lumen Legal is hosting a webinar for me to explain the findings and discuss law department benchmark metrics more generally. If you would like to sign up to dial in, at 2PM Eastern, please click on the Lumen link here. I hope you will participate and spread the word.

While you’re at it, click on the link upper right and take the survey for your law department!

No one has written about the development over the past few decades of management practices in US law departments. We don’t know when operational methods first developed nor when they faded away. There are no historiographies of general counsel’s efforts to run their legal departments effectively. Bits and pieces of the past appear in the various books on law department management and in articles, but nothing comprehensive or historically inclined is available to my knowledge.

An article in the Acad. Mgt. Learning & Ed., March 2011 at 77, impressed me with its discussion of the relevance of the past as critical to the future. This blogger would very much enjoy trying to trace management in US law departments over the past decades, but children and mortgages and consulting pose some obstacles. It’s a shame we don’t know more about the history of management – even of a single aspect, such as outside counsel management. To know what works and what doesn’t has value, but deeper appreciation and creativity comes from familiarity with the antecedents and evolution of our knowledge.

The Center for Studies on Economic and Social Law (CEDES), a Brazilian think tank, has sponsored a competition. “[T]he winners will be granted access to the litigation portfolios of five global companies with presence in Brazil, the United States and Europe. Winners will assess and compare the causes for litigation in these jurisdictions and will create a proposal, which CEDES will publish, for improving the Brazilian scenario.”

Fascinating, that description from the ACC Docket, April 2011, Supp. 2, and it intrigues me. That five large law departments open up the litigation kimono is impressive; that data might be produced that gives glimpses of costs and management is to be hoped; that law department responses to litigation has its own competition and awards thrills me.

An e-mail correspondent alerted me to a vendor I had not heard of, Lecorpio. I looked at the company’s website. It listed a number of distringuished clients, including Autodesk, Analog Devices, IDT, LexMark, Merrimack Pharmaceuticals, Palm, Symantec, Thoratec, and Tyco International. It also listed three software applications that I have not heard of for law departments, for invention disclosures, for IP deals, and for open source software. Using the site’s descriptions, let me give a quick summary.

Invention Disclosure Management provides a web based portal for inventors to collaborate and to submit new disclosures electronically. The workflow automatically routes the disclosures to subject matter experts and patent committees for virtual review or committee meetings.

IP Transactions Management supports patent and trademark teams licensing in or out. It helps them track investigations, oppositions, assertions, defensive actions and enforcement activities.

Thirdly, Lecorpio’s Open Source Management lets engineers and R&D teams submit requests to use open source software, participate in projects or release open source code. The system provides self service compliance for pre-approved licenses and comprehensive workflow capabilities for corporate legal and review boards.

The website does not tell more about the underlying code or give screen shots of any of these applications. Lecorpio also offers software for (1) Patent Management; (2) Trademark Management, where a law department can also track information related to domain names including domain profiles, renewal schedule, consolidator groups, DNS server mappings and security credentials; (3) Contract Management; (4) Entity Management; and (5) Spend Management, which it describes as a matter management system with e-billing capabilities.