Some lawyers describe their department as “hierarchical.” I have tried to unravel the concepts in that term because it has many. Five of them are summarized below.
Rank has more than its share of privileges. Distinctions in levels manifest themselves in many ways. Hierarchy has to do with special perquisites for those who are higher on the totem pole.
Information flows up and down chains of command, and mostly, to the extent it does flow, down. Hierarchy has to do with topside control of knowledge about what’s happening.
A small number of lawyers make the key decisions. Usually they fall to a senior legal team of the direct reports to the general counsel. Hierarchy has to do with who makes the final calls.
Access to the top lawyers doesn’t come easily nor do skip-level discussions take place the other way. Hierarchy has to do with protocol and opportunities to meet or talk with levels above you.
Sometimes the notion involves multiple rungs on the career ladder. People aspire to promotion and larger departments have many levels. Hierarchy has to do with moving up in a law department.
Andrea Bonime-Blanc oversees internal audit, enterprise risk management, ethics, corporate responsibility and compliance for Verint Systems, a global software company. She reports to the Chairman of the Audit Committee and indirectly to the Chief Legal Officer. In a recent BNA Insights article (Corporate Governance Reports) she gives four reasons why such a role should report to legal. This topic stretches far beyond the meager confines of a blog post, so I will simply annotate a comment or two.
“The complexity of modern compliance legislation and regulation requires legal expertise and therefore belongs in the legal department.” True as far as it goes, but what percentage of compliance depends on interpretation of laws and regulations?
“The GC is in a better position to coordinate disclosure and regulatory contact.” This ought to depend on whether the information provide and interaction requires legal background or administrative, process skills.
“Attorney-client privilege is automatically created.” But only if the lawyer acts as a lawyer.
“Compliance is paramount, and legal compliance is within the purview of the legal department.” I question the premise, and the second part of the sentence does not logically require that the GC serves as the chief compliance officer. Compliance staff can always come to the law department for guidance when legal counsel is needed.
The author then presents five arguments in favor of the independence of the Chief Ethics and Compliance Officer (CECO) role.
“Ethics, compliance, and risk management are best served through independence from the GC, as there can be inherent conflicts of interest.” Perhaps, but a CECO officer who balances three responsibilities also faces conflicts among them. Others have raised this objection (See my post of Oct. 21, 2005: conflicts between compliance and law; Jan. 16, 2006: conflicts of GC as CCO; and Jan. 14, 2011: Ben Heineman view and rejoinder.).
Separation of the roles creates a checks and balances on other staff functions. I don’t understand this, since a unified law/compliance position could also moderate and balance actions of the other staff functions.
“The compliance roles cover many more areas than strictly legal and regulatory compliance.” Agreed, since process activities, monitoring, and administrative reports should not fall on the law department.
The compliance function focuses on creating a culture of integrity not just a culture of compliance. Neither the implicit criticism of law departments and the culture they nurture nor the claimed superiority of the compliance culture is a given. Many general counsel view their departments as “beacons of integrity.”
“The GC may be conflicted by the demands of the business, and thus not able to exercise completely independent judgment regarding ethical issues.” What exempts chief compliance officers from the same demands?
I thank my friend Jeff Kaplan for sending me the article.
Less than four years ago, Pernod Ricard created six dedicated hubs of intellectual property lawyers and paralegals specialized by different categories of alcoholic beverages. About 30 of them work in these hubs, which are usually located near the production facilities. All this is spelled out in the Leaders League 2010 Intelligence Report at 72.
This arrangement is analogous to a business unit orientation for a law department but carried out for specialty area of law and expressed geographically. It will confront the inevitable issues of silos, consistency, and competition for resources, but no structure is perfect.
Winmark, through its CLO Programme members, obtained survey data in the Autumn of 2010 from 124 UK general counsel. The 27-page report can be requested from John Jeffcock.
Here is the report’s summary of what happened to those departments overall in the financial meltdown. “Like in 2009, 2010 saw a continued increase (1% in 2009 to 3% in 2010) in the size of in-house teams whilst budgets remained flat (3.2% fall in 2009 to 0.1% increase in 2010).” This data from the United Kingdom closely tracks what the General Counsel Metrics benchmark survey found for U.S. law departments (See my post of Sept. 28, 2011: sky did not fall on U.S. departments.). U.S. departments increased their staff a bit and saw their budgets hold up, albeit they remained flat.
Deloitte & Touche’s “Forensic Corporate Counsel Survey 2010: do today’s corporate counsel hold all the cards?” asked a question of its respondents about the number of “non-legal” roles the top lawyer holds.
They found that during the past five years, “the number of non-legal roles held by a GC in an organisation has increased from approximately 2.4 roles to 3.7 roles, the most common non-legal roles being company secretary and those associated with risk, compliance and regulatory responsibilities.”
We might wonder what constitutes a ‘legal role” according to those who conducted this survey? Handling litigation, reviewing contracts, preparing corporate governance documents, I suppose. It feels to be an artificial line, however, to exclude corporate secretarial work. Company secretary may have a different meaning in the UK, which seems to have produced the bulk of the respondents.
Without more detail, you can’t figure out this finding, let alone judge its meaningfulness. The report and this bit of data is cited in The In-House Perspective, April 2011 at 9.
Based on 245 U.S. law departments that have participated so far in the General Counsel Metrics global benchmark survey, as well as 36 Canadian law departments, and 113 from the rest of the world, here are three ratios:
3 lawyers for every paralegal in the United States and the same ratio, exactly, in Canada; but
5 lawyers for every paralegal in the rest of the world.
As evidenced by these far apart metrics, the position of paralegal or legal assistant, by any term someone who cannot practice law but has specialized training or experience in supporting lawyers, is much less common outside of North America. The absence of these intermediate-cost staff who can handle law-related responsibilities competently hurts the productivity of a law department.
A piece in the Harvard Business Review, Sept. 2011 at 32, describes a makeover of office space at the pharmaceutical company Lilly. The facts I extracted from the sidebar may not be representative at all, but they triggered some thoughts.
One point was that employees typically spend only 35 percent of their time at their desks. On account of that, some architects think it logical to reduce individual office space and increase the amount of shared and temporary, unassigned space. I have written about cubicles and movable office spaces (See my post March 21, 2006: hoteling at Sun Micro; June 5, 2007: office layout; Feb. 20, 2005: open cubicles; Nov. 19, 2005: open space at non-US law departments; May 7, 2006: office layout; May 4, 2007: shrinking office space; May 24, 2007 #3: a general counsel in a cubicle; April 23, 2008: physical office arrangements; and Dec. 4, 2010: open office arrangements.).
Another point was that the total square footage per employee was 212 (See my post of Nov. 8, 2005: lawyers at 100 per square foot at SEI Investment; Jan. 29, 2009: rental cost in the US for a law department's space – about $25 a square foot; and Feb. 25, 2009: square foot per lawyer estimated at 700.).
Third, the furniture cost per employee amounted to $9,100, which is an investment I had never allocated to a law department. Offices always just appear, fully decked out, replete with desks, cabinets, shelves and the like (mahogany from heaven).
An early post suggested a number of advantages (See my post of July 5, 2006: large law departments have scale advantages: division of labor, specialization, and investment in technology.). They have streams of similar work so those who do it become more expert (See my post of Sept. 10, 2005 on specialist attorneys in large law departments.). They have the funds to invest in process improvements, knowledge management, software development and licenses.
Somewhat later I extracted posts that together touch on eight more advantages of large departments (See my post of July 29, 2009: aspects of large law departments.). As compared to smaller departments, large ones can support more and different kinds of resources (See my post of March 6, 2007: obtain accreditation for free CLE; March 12, 2006: maintain librarians; Aug. 27, 2005: enjoy the services of dedicated IT staff; Sept. 10, 2005: stock specialist lawyers; May 1, 2006: run internal think tanks; July 25, 2007: explore alternative fee arrangements; March 9, 2009: use slush funds for investments; and May 3, 2008: create internal discovery teams; Nov. 6, 2006: test organizational network analysis; and June 15, 2008: spend seed money for technology ventures.).
Hardly done, I would offer 11 more propositions. As compared to smaller departments, larger ones are more able to:
Take in different practices at a faster pace because they have more flex and resilience (See my post of Aug. 3, 2010: more absorbtive capacity.).
Purchase goods and services at bulk rates because their greater flow gives them more leverage (See my post of Feb. 14, 2007: agreements with vendors for large purchases over time.).
Get better lawyers from firms to work on their matters because of the professional interest of their problems, the ability to bill more, or the prestige of the client (See my post of Aug. 5, 2005: the A Team put on big clients.).
Borrow low- or no-cost lawyers from firms for the reason that large departments have more openings and more clout (See my post of Oct. 13, 2009: opportunities for secondments.).
Put work out for competitive bids since they have larger volume (See my post of Oct. 10, 2008: bigger portfolios are also an argument for convergence.).
Manage knowledge more effectively because they generate a critical mass of users and material (See my post of March 16, 2009: post mortems.).
Assign work horizontally and delegate vertically (See my post of Aug. 24, 2011: delegation compared to assignment.).
Take advantage of more connections since their aggregate personal network is denser (See my post of March 8, 2009: get a leg up from network externalities.).
Pay more because their companies are more flush and so attract and keep better lawyers (See my post of Dec. 6, 2006: richer benefits.).
Implement concept maps because they have more ideas circulating (See my post of Jan. 30, 2011: put conceptual schemas to work.).
Train more clients and train them better because the company is more settled and mature.
Design precedes everything created by people. “[E]verything made and used by humans has been designed, in that it has been realized from an idea or its parts have been selected from the store of existing things, modified if necessary, and assembled into a new and purportedly improved thing.” Thus grandly does Henry Petroski, Success through Failure: the paradox of design (Princeton 2006) at 41, sweep everything humanly created under the sweep of design. Seven pages later he repeats that “Designed things are the means by which we achieve desired things.” Things designed have components; things designed make up systems. Law departments demonstrate the truth of Petroski’s view.
The best designers learn from failures. “Failures are remarkable. The failures always teach us more than the successes about the design of things.” (at 49). To Petroski failure is an unacceptable difference between expected and observed performance. All things designed have unexpected consequences and all things designed embody judgments (See my post of Feb. 15, 2011: ideologies underlie design; and June 15, 2011: design sciences.). Petroski praises pilot tests as a way to learn with problems corrected as you go along (See my post of April 8, 2009: pilot programs with 6 references.).
Petroski hammers home the paradox of design: “Things that succeed teach us little beyond the fact that they have been successful; things that fail provide incontrovertible evidence that the limits of design have been exceeded” (id. at 114).
Thomas Werlen, general counsel of Swiss pharmaceutical company Novartis, leads a legal team of 700-plus that is spread across 140 jurisdictions. As he explains in the European Lawyer, June/July 2011 at 39, “The department is organised in a three-layered matrix of work areas, countries and business divisions.” That makes sense: the commercial lawyers could be a work area (what U.S. law departments might refer to as a practice group), sorted geographically by region of large country, as well as some in support of the pharma unit, some the generics unit (if there is one), and other business functions.
In addition at Novartis, “A layer of ‘enablers’ sits across the group, providing globally shared knowledge and information management, talent development and training, and legal spend and third party vendor management.” The notion behind enablers, as I see it, comes close to the functions a good head of operations (aka law department administrator) should handle. To gather and disseminate work product, to help people learn and progress, to administer invoices from vendors – all are functions that do better with focus and consistency across a law department.
