Law Department Management

A brief encounter with some legal processes, and a dubious process

GRC 360˚, Fall 2007 at 6, has a sidebar that briefly lists ten of the many processes its publishers maintain are involved in governance, risk and compliance (GRC). One of the ten is “Legal.” All that the sidebar says is that “Processes typically executed by the general counsel and legal staff such as defining legal strategy, investigations, litigation and assisting with due diligence for mergers and acquisitions.” With examples that broad, everything done by a law department is a process (See my post of April 9, 2008: all aspects of law department management fall under people or processes.).

But I consider “defining legal strategy” as something higher, more unusual, and different. “Processes” are steps of a repeated series of actions that lead to an anticipated outcome (See my posts of April 27, 2006 and June 28, 2006.). “Defining legal strategy” has too many elements, too many vagaries to be called a process. It is creativity and thought, not assembly-line predictability according to a cookbook.

Processes are important in law departments and I have devoted many posts to the concept and to examples. I have collected the germane posts twice (See my posts of Oct. 8, 2006 – 4 posts; and Feb. 6, 2007 – 17 posts.). Since then I have returned to processes five more times (See my posts of Feb. 24, 2008 and June 10, 2008: RFP processes Oct. 31, 2007: competitive bidding processes; Jan. 13, 2008: procurement processes; May 18, 2008: law departments rarely benchmark processes.).

Processes and an emphasis on old-school efficiency or new-age learning

An article in the Harv. Bus. Rev., Vol. 85, July-Aug. 2008 at 60, distinguishes between execution-as-efficiency and execution-as-learning. If law department managers lock into the first set of beliefs –efficient, timely, consistent delivery of legal services, they run the risk that people won’t bring to their attention critical information, won’t take time to learn, and won’t collaborate well.

A law department that embraces execution-as-learning makes it psychologically safe for members to explore and try new practices. Beyond that, managers need to use the best available knowledge – which is NOT a frozen best practice – and encourage lawyers and non-lawyers to collaborate by giving them ample information. Third, they need to gather information and data about processes to learn how the work actually happens. Finally, they need to study this data to find ways to improve execution (See my post of Aug. 22, 2006: the power of kaizen.). If general counsel take these steps, the execution-as-learning will lead to steady improvement.

A disconcerting impression of lawyers who walk and speak with ear plugs

When lawyers walk down the halls talking on a BlueTooth headset, the scene is surreal. Concerned always about confidentiality and attorney-client privilege, here is a lawyer blabbing for all the world to hear. Yet, the scene is not uncommon. It gives new meaning to “communication in the department” (See my post of Dec. 7, 2005: communication time wasters; March 23, 2007: communication frequency declines with distance; Oct. 19, 2005: communication tools; Nov. 30, 2005: everyone clamors for more communication.).

Jabbering in the air about a legal matter may mean that attorney-client privilege goes by the boards. The talk-in-public lawyer may think he is conveying how important and busy he is, but remember the World War II slogan, “Loose lips sink ships.”

We may see signs in legal departments that show a cell phone (mobile for the European readers) in a circle with a red diagonal slash through it.

Priorities for in-house counsel

When we use the term “productivity,” we should not mean in-house lawyers just churning out lots of work, but rather lawyers completing lots of important legal work. A good lawyer picks out the services that help the client the most. A competency of a good lawyer is the ability to identify and focus on priorities.

The topic of priorities has come up numerous times on this blog (See my posts of Dec. 22, 2006: prioritizing legal risks; Aug. 28, 2006: paired comparisons to analyze priorities; March 27, 2005: set priorities on management issues; March 10, 2005: Johns Manville’s priority grid; June 16, 2007: identify strategic priorities; and June 25, 2007 on status reports to clients as an aid to setting priorities.).

Core competencies focus on priorities (See my post of Oct. 6, 2006; and May 23, 2008: 12 references cited.). The broadest statement of the importance of recognizing priorities is that the skill is integral to thinking: to think is to decide and to decide is to set a priority.

Limits on billable hours by inside and outside counsel

“Surveys indicate that lawyers who work 60 hours can probably bill 40 hours to client matters …” That assertion in the NYSBA Journal, June 2008 at 45, got me to thinking along two lines.

One direction was that outside counsel, who might take four weeks of vacation a year, will be hard-pressed to break the 2,000 billable hour mark. To do so they would need to work approximately 2,880 hours to be able to bill 2,000, which means 10 hour days including Saturday all year. No wonder law departments are suspicious of such feats (See my post of Oct. 20, 2005: ask for total hours billed by your key outside lawyers.).

The second direction concerns the legitimacy of assuming in-house counsel work approximately 1,850 chargeable hours (See my post of Sept. 25, 2005: a reasonable assumption?). I don’t know whether the work-60-to-charge-40 rule of thumb holds, but corporate counsel have their share of activities that shouldn’t be charged for the benefit of a client (See my post of May 16, 2006: definition of in-house chargeable hours.). Also, in my consulting experience, it is rare for in-house lawyers to come to the office on weekends. They may check e-mail, do some reading, and organize material, but I think there is nothing like the long hours often logged on weekends by lawyers in private practice.

Preferred methods to communicate with distant colleagues

The source of this data is a survey by Robert Half Legal, referred to in the ACC Docket, Vol. 30, June 2008 at 52. The data comes from a “survey of 150 lawyers from among the largest corporations in the United States and Canada" (See my post of June 22, 2008: critique of the data source

The respondents were asked, "When working with colleagues who telecommute or are located in remote locations, which of the following, in your opinion, is the most effective method for maintaining communication?"

E-mail 62%
Telephone/conference calls 16%
In-person meeting 7%
Videoconference 5%
Paper memo 2%
None/no effective method 5%
Don't know 3%

I find it hard to credit that so many people do not believe that sitting in front of someone and talking with them is not the supreme method for communicating. If face-to-face isn’t possible, a telephone call does the job so much better than e-mail. But perhaps the word “maintaining” led respondents to assume familiarity of the communicators and that the content going back and forth is mostly facts and keeping people informed. Or, worse, e-mail has become the premier form of contact.

Commodity legal services, routine legal services, and standardized legal services: the same?

In his book, Theodore Levitt, Thinking about Management (Free Press 1991) at 64, Levitt writes dramatically that "routinization of anything is self-immolating. It deadens alertness, attentiveness, imagination, energy, and reaction time.” Other than that, I guess, routines are fine. A page later Levitt recommends "periodic euthanasia of the organization's accustomed routines." How would Levitt’s diatribe translate to law departments? To start our ruminations, I offer some definitions of three common terms: routine work, standardized work, and commodity work.

Routine work accounts for much of what lawyers in corporations do (See my posts of June 14, 2007: more than 50 percent; and Jan. 25, 2007: think again about commodity work; and Dec. 5, 2005: topsy-turvy pyramid of work.). It is “run-the-business” work. Routine legal work occurs frequently, although it may be quite challenging to lawyers who are not familiar with it. Those who manage lawyers in corporations like routine work because it’s easier to delegate and simplify, and sometime even export it to clients (See my post of May 18, 2008: self-serve and references cited.).

Standardized work is routine work that has been packaged, made uniform (See my post of April 17, 2007: debunks standardization of legal work.). The work can be sophisticated, such as ISDA agreements, but the path has been well trodden, well marked, and well mapped. A summary of an Evershed’s study, published in Met. Corp. Counsel, Vol. 16, May 2008 at 62, notes that “premium services become increasingly standardized and then commoditized as they become common.” In their view standardization precedes commoditization.

Commodity work is cookie-cutter, run-of-the-mill, and very predictable (See my posts of March 18, 2007: commodity work crucial to the business; and Sept. 13, 2006: references to 5 posts.).
The truth is, law department lawyers should not handle commodity work, such as workers comp or claims management. Click on the next link for my article on how to handle commodity work. Download rees_morrison_commodity_svcs_52107_legal_times.pdf

Routine, commodity, and standardized: those are legal services that are, respectively, frequently in mind, pre-shaped for normal minds, and mind-numbing: (See my post of May 21, 2007: interesting legal work and perceptions of workload.). Routine work exalts expertise; standardized work exalts experience; commoditized work exalts efficiency. Each of these definitions implicitly categorizes work as relatively simple, not complex (See my post of March 13, 2007: a complex issue to define a matter’s complexity.).

Seems like IP lawyers ought to be core competencies quite frequently

Intangible assets – trademarks, patents, proprietary processes, among others – account for approximately two-thirds of the total assets of U.S. public companies, according to an article in Met. Corp. Counsel, Vol. 16, May 2008 at 18. The article even provides a formula to estimate the value of intangibles of a firm [Q]: the intangible value equals the difference when you subtract from 1 the result of 1 divided by its total market value [MV] divided by its book value [BV]. That is Q = 1-1/(MV/BV). For example, if a company has a market value of $100 million and book value of $25 million, its intangible value is 75 percent.

Why, then, isn’t intellectual property -- its development, protection and transactions – not a core competency of nearly every company (See my post of May 23, 2008: 12 references cited to core competencies.)? Why are patents viewed ambivalently in terms of legal expense (See my post of May 23, 2007: strategically invaluable, yet prosecution often a tactical commodity.).

Legal specialties aren’t likely candidates for core competencies

Other posts have discussed definitions of core competencies in law departments (See my post of May 23, 2008.) and some consequences of deciding on those competencies (See my post of May 23, 2008.). To complete a triptych of posts, let’s think about one other perspective: Is any specialist lawyer a core-competency lawyer?

Litigation should not be privileged because the unblemished, well-run company will confront little of it.

Employment law is mostly counseling and litigation rather than anything to do with developing talent in a company, so it is not a core competency. Companies hardly yearn for tough HR legal issues.

The same arguments hold for environmental problems and legal issues. A few companies that consume copious resources or produce noxious wastes may encounter difficult and strategic legal problems, but at bottom the companies care about their products, not the legal effluents.

For publicly-traded firms, securities law is required and mostly responsive, but not at all business generating, while anti-trust counsel is both defensive and offensive – for mergers and acquisitions. No company hankers for a good competition-law fracas.

On the other hand, for some companies their law departments give advice and counsel in areas of law that define the company, such as intellectual property or regulatory law. Those are certainly specialized areas of practice and should be considered part of the department’s core competency.

Law departments need to concentrate their expertise in those key areas of legal practice that are crucial to the company’s success. The fortunes of few companies rise and fall on their real estate activities (unless you are a REIT); few companies create shareholder value with environmental strategies (unless you are a remediation firm); none litigate to make profits (unless you are a patent troll). No corporation exists to pollute the countryside, sue and be sued, or cope with discrimination and harassment.

In short, aside from lawyers in some specialty-dependent companies, most specialist lawyers cannot sensibly be included in the circle of core competencies.

Core competencies and what differences emphasis on them ought to make

A previous post offers four definitions of core competencies for law departments (See my post of May 23, 2008.). What difference do the definitions make? Many, I submit.

First, however, a comment on legal-team size. Is it possible for small law departments, say those with two-to-five lawyers, to nurture core competencies as much as larger departments might? No, not as likely. When there are only a few lawyers, they are likely to be generalists. Even so, small departments too ought to gravitate toward some basis for deciding their priorities and building their skills.

Services de-emphasized. If a core competency is a strategic decision to press the pedal on some areas of law, then a law department logically ought to throttle back its efforts in other areas. Some brakes include triage, de minimis standards for what the department will handle, assigning low priority to certain work, self-help by clients, clients and law departments turning more to outside counsel, and delegation. Decisions regarding non-core activities help define the role of the law department and go far to shape client satisfaction with the law department.

Years of experience of lawyers. Does a concentration on core-competency work require more senior (read, expensive) lawyers? Not necessarily. The notion of core services does not necessarily mean that the legal work put on the pedestal is particularly sophisticated. Junior lawyers can also contribute on core services.

Knowledge management. To the degree that a law department targets certain areas of support as core, the department can build around that core various systems, training, guidelines, and quality control.

Outside counsel. If you narrow the work done inside to core work, won’t you find yourself retaining more external counsel? Or retaining different firms than before, on different terms? Possibly both, if you retain firms to handle peripheral work; but as you climb the skill curve of core competencies, you use law firms in those areas less (See my posts of Dec. 5, 2005: reverse the pyramid of what work should go outside; and May 21, 2008: experience curves.).