Law Department Management

Internal audit eyes a matter management system and its processes

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.

Plan for the future, but be wary of strategic plans

Some law departments, usually larger ones, prepare a strategic plan (See my posts of May 14, 2005: tools execs use to improve the performance of their organizations.). Various techniques help general counsel craft a strategic plan (See my posts of Dec. 9, 2005: scenario thinking; Dec. 9, 2005: the Delphi method (nominal group technique); Dec. 20, 2005: real options analysis; Nov. 25, 2006: brainstorming; and Dec. 21, 2005: work analysis.).

I am all for managers of law departments thinking long and hard about their current resources compared to their anticipated needs. If that is strategic planning, then go for it! What I question are elaborate processes, PowerPoint, meetings of teams, and formalization of the output in large binders. I have expressed my doubts about the efficacy of elaborate strategic plans (See my posts of Oct. 10, 2005: defects in execution often drag down strategic plans; Dec. 15, 2005: “law-department strategic plan” is an oxymoron; and Jan. 17, 2006: strategic narratives in place of strategic plans.).

In general, the term “strategic” has been sorely overused (See my post of June 11, 2008.).

Another outpouring on offshoring (aka rightshoring)

Among the 16 tools for reducing costs I posted on recently were “rightshoring and outsourcing” (See my post of May 18, 2008: Oliver Wyman’s list.). Presuming that “rightshoring” means offshoring, I rummaged around and found a plethora of earlier posts on offshoring.

For me, outsourcing is a broader topic, having to do with law departments retaining an external provider to do something. Only when the law department hires people in a low-cost country to do the work should the department use use the sub-set of outsourcing, offshoring (See my post of April 27, 2007: outsourcing does not equal offshoring.). Others apply different terms, as in the quote below.

Legal process outsourcing [LPO], according to a provider in Met. Corp. Counsel, Vol. 16, June 2008 at 20, "involves sending domestic legal work (e.g., litigation document review, contract drafting, legal research) abroad to be performed by foreign attorneys, who are billed at a much lower rates than their American counterparts. Most LPO providers … use India as their offshore hub, which offers additional advantages such as a surplus of legal talent, a legal system based on British common law, and a time differential with the U.S. that allows for a U.S./India round-the-clock legal operation.”

Regardless of terminology, here are my compiled posts to date.

Some posts consider the size of the rightshore market and providers in it (See my posts of February 20, 2005: some fire under all the smoke; June 15, 2005: offshoring legal work, $163 billion market; Jan. 6, 2006: offshore legal services from India -- $61 million in 2005; Jan. 28, 2007: five vendors listed as well as an online compilation; Feb. 25, 2007: 16 additional LPO firms; and July 16, 2007: ranking of providers of “legal process outsourcing.”).

The services on offer are varied (See my posts of Nov. 14, 2005: Motorola and patent work; Dec. 12, 2007: IP work; Dec. 6, 2007: Sapient and offshore contact services; Jan. 27, 2008: offshore legal services for CIT: NDAs and email surveillance; May 3, 2008: American Express and patent services and discovery; Oct. 19, 2007: trademark services; and Jan. 27, 2006: law-related services handled in India for US companies: three variations.).

Cost savings from offshoring figures prominently (See my posts of Oct. 10, 2005: India at 10% of the US law firm cost; May 20, 2005: sharing savings with law departments; Sept. 27, 2005 comparative costs; and Feb. 17, 2008: firm gives choice of offshore or onshore staff.).

Many locations in addition to India offer offshore legal resources (See my posts of Jan. 27, 2006: Accenture and Mauritius; Nov. 27, 2007: Israeli offshoring; and April 13, 2008: Kuala Lumpur.).

Not everything is smooth sailing for the offshoring cottage industry (See my postsof Feb. 18, 2007: bar association approves offshore legal services; March 23, 2007: some drawbacks to offshoring; Nov. 4, 2007: challenges of so many recent entrants to the field; May 11, 2007: guidelines for ethical outsourcing; and Feb. 17, 2008 #2: low ratings on effectiveness.).

For an excellent compilation of information about offshoring, visit Ron Friedmann’s blog, PrismLegal.

A project team to evaluate replacement of a document management system

The needs and desires of many people ought influence managers of a law department when they select department-wide software. For example, the law department of Saint-Gobain Corporation, whose 43 employees are part of the $60 billion Compagnie de Saint-Gobain, need to replace its document management package. The department, sensibly, created a representative project team.

As recounted by the administrator of the department, in Met. Corp. Counsel, Vol. 16, June 2008 at 51, she assembled a team to help her evaluate the extant solutions. “Our team was comprised of seven people: myself plus one attorney and one paralegal/or assistant from each of our department’s three main practice areas.” The team created a wish list for the new document management system and then retained a consultant to help them identify and review candidates. Some teams would have assigned a technical person from within the company.

Six figure savings through Six Sigma at Caterpillar

Caterpillar’s 179-lawyer department follows the problem-solving approach of Six Sigma (See my post of Feb. 13, 2008: Six Sigma and 18 references cited.). "They identify and solve problems by analyzing statistics, and measure the results to track their progress."

An application of that discipline at Caterpillar is set forth in Corp. Counsel, Vol. 15, June 2008 at 102. The department spent several months using Six Sigma to understand their toxic tort load. They cut the number of law firms hired for those cases from 250 to about 10 and worked out a method to decide which cases can be resolved quickly and easily. The restructuring of this litigation “saves the company up to $250,000 a month.”

Important terms diluted by over-use: best practice, innovation, leadership, strategic, world-class

Sloppy use of significant terms by those who care about the management internal legal teams creates clichés and robs the terms of their punch. Five such words are particularly prone to be sprinkled too liberally.

Rarely can we say that some activity is a “best practice,” yet the over-worked term pops up everywhere (See my post of June 6, 2006: with four references.).

Not all changes warrant the accolades of “innovation” (See my post of Dec. 17, 2007.).

Not every person in authority is a “leader” (See my post of June 11, 2008: leadership.).

Not every decision taken has “strategic” importance (See my post of May 31, 2006: difference between a strategy and a plan.).

Few law departments, and certainly far fewer than proclaim it, deserve praise as “world class” (See my post of May 16, 2007: misguided goals embedded in the aspiration.).

Lawyers should be careful about their choice of words, especially charged management terms like these five, yet many spray these high-octane terms as if they were water.

So many cottage industries thrive on law departments! A village!

All manner of enterprises make a living off law departments. I term the teeming community the “cottage industry” and have picked out parts of it from time to time to highlight (See my posts of April 18, 2005; Oct. 18, 2005; May 30, 2006: the revenue that might go to companies that are part of the cottage industry). Listed below are 30 that I have addressed.

ADR (alternative dispute resolution) (See my post of Feb. 7, 2007.).
Auditors of legal bills (See my post of Dec. 4, 2006.).
Class-action claims (See my post of July 14, 2006.).
Consultants on law department management (See my post of Jan. 1, 2008.).
Consultants on compliance, corporate governance, and ethics (See my post of March 28, 2008.).
Corporate governance groups (See my post of July 5, 2006.).
Corporate secretary services and software (See my post of Feb. 14, 2007.).
Corporate secretary portals (See my post of July 19, 2006.).
Court reporters (See my post of July 11, 2006.).
Decision analysts(See my post of Oct. 24, 2005.).
Document assembly (See my posts of Feb. 9, 2006 and Feb. 24, 2007.).
Document discovery (See my post of Feb. 9, 2006.).
E-billing vendors (See my post of July 11, 2006.).
Economic analysis experts (See my post of March 20, 2007.).
Electronic discovery (See my post of Oct. 29, 2007.).
Ethics line third parties (See my post of May 8, 2007.).
Expert witness sites online (See my post of April 23, 2007.).
Legal and compliance training online (See my post of July 5, 2006.).
Legal research (See my post of July 16, 2007.)
Litigation and trial consultants (See my post of July 4, 2006.).
Matter management systems (See my post of July 14, 2006.).
Medical/nurse analysts (See my post of Jan. 28, 2007.)
Offshore providers (See my post of Jan. 28, 2007.).
On-line selection of law firms (See my post of Jan. 20, 2007.).
Part-time general counsel (See my post of Aug. 8, 2006.).
Search firms (See my posts of July 6, 2006; and March 20, 2007 #3.).
Settlement and ADR capabilities online (See my post of Dec. 31, 2006.).
Settlement counsel (See my post of Oct. 20, 2005.).
Writing instructors (See my post of May 13, 2007.).

The law department cottage industry comprises vendors who significantly focus on that market. Following that definition, I would not include coffee makers, airlines, hotels, taxis, or bottled water dispensers, to name a few, because they have ambitions for much broader markets. Other cottages I have yet to blog on include jury researchers, copy services, equipment manufacturers and lessors, stationers, book publishers, CLE services, temporary staff providers, expert witnesses, forensics experts, and many other denizens of the law-department cottage industry.

Two categories of service providers: investigators and counterfeit trackers

The Kreller Group specializes in providing due diligence and background investigations for companies, according to a profile in Met. Corp. Counsel, Vol. 16, May 2008 at 38. They serve as private-eyes for companies and are likely to be retained by law department attorneys. I mention them because they are a genus of service provider that I haven’t written about (See my posts of July 21, 2006: cottage industries and 10 references cited.).

While on the topic of unusual vendors, I should mention the specialist companies that help luxury-goods manufacturers locate, authenticate, and dispose of counterfeit goods.

Legal-department retreats, some observations, and an article by Rees Morrison

One of the most common management activities among law departments, of all sizes, is the offsite (aka retreat, legal conference, annual meeting, etc.). As my article describes Download rees_morrison_retreats_91905.pdf , these gatherings can have wonderful events.

I have just completed helping with two retreats, one for a law department of three lawyers and one of thirty lawyers and I feel even more the importance of doing them right.

More and more I feel that (1) getting to know each other is by far the most important activity, (2) boredom rules the day for most people most of the time when they attend a retreat, and (3) for most of the attendees, it is a chore. Sigh, because the potential is so great (See my post of Feb. 12, 2008: with eight references cited; Feb. 17, 2008 #3: Insights Preference Evaluator as a tool at a retreat; and Feb. 25, 2008: virtual reality games as a retreat.).

Have we recently shot from stagnation in the legal industry to hyper-change? No

Mehul Patel, the general manager of Axiom, published an article in the National Law Journal (April 28, 2008). He argues that pressures on law firms will force them to change, with two of those pressures being offshoring and “new-model firms.” Summing up his piece, he makes a dramatic statement: “After decades of stasis, the legal industry is changing quickly.”

I question both ends of that claim. Over the past two decades, three big changes in the field are the dramatic increase in size and quality of law departments, the introduction of technology into all aspects of their operations, and the acceptance of business-management concepts such as budgets, transparency, competitive bidding, and procurement. Stasis is not the word for such fundamental changes.

As to the rapid pace of change Patel asserts is happening right now, I don’t see that either. There have always been front runners with new ideas to change the relationships between law firms and law departments. The drumbeat of innovation and new application has included task-based billing, matter management systems, convergence, partnering, competitive bids, fixed fees, single-firm selections, e-billing – to name a few new management steps in the past few years, evidencing a constant pace of change.