Articles Posted in Structure

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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.

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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.

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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.).

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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:

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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).

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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.

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Breaking itself into three pieces, the ITT spinoff underway will result in the promotion of two of its lawyers to the new top spots. As laid out in Corp. Counsel, Aug. 2011 at 32, the former ITT corporate secretary, Burt Fealing, will head the lawyers of the new company that retains the old name. The former ITT general counsel, Frank Jimenez, will continue in that role for the water-technology spinoff. As for the third piece, the defense business, Ann Davidson, who was the original company’s chief compliance officer, will become its new general counsel.

As a career path, to move to a spun off company as the general counsel ranks at the very top. You then get to create a law department as you see fit, although your raw material has been working together for years. My other thought went to the ratio of spin-offs to mergers: the creation of new law departments to the end of law departments. What is that ratio in the United States?

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With the promotion of Laura Witte to General Counsel at $108 billion Cargill, more has come out about that huge conglomerate and its legal group. According to Corp. Counsel, July 2011 at 38, the company has 131,000 workers spread across 66 countries. Of the 200 lawyers in-house, 120 of them are located in 30 different countries outside the United States.

To have 6 out of 10 lawyers internationally based places Cargill at the high end of that particular benchmark. Witte puts it well: “Our legal team footprint really matches the footprint of the businesses and the company.”

With 655 workers per lawyer, the ratio for Cargill has dropped significantly since 2008. Finally, at 1.8 lawyers in-house per billion dollars of revenue, Cargill – quintessentially a commodities and business-to-business enterprise – not surprisingly ranks very low on legal staff as a percentage of revenue.

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Although I don’t speak Portuguese, I hope I correctly translated a post on the LinkedIn site of FDJUR, hosted by Jose Nilton Cardoso. He asked the group’s members a question along these lines. “The structure of the law department in your company might include other functions. Of the following, where you can check more than one, which functions fall under the law department?” 35 respondents marked a total of 78 items from the multiple choice list (the Portuguese is in brackets).

Government Relations [Relações Governamentais/Institucionais] 13 (37%)

Government RFP bids [Licitações] 13 (37%)

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Several of the functions that are “on the bubble” for law departments or are more typically handled outside the department have significant process elements. With contract administration, to take one, the legal counsel is a smallish part, but tracking, database entry, distribution, and calendaring are repetitive tasks. Likewise for compliance, where the auditing, training and checking are heavily process oriented. Or with both import-export compliance and anti-counterfeiting or anti-piracy, some legal issues arise but mostly the work involves day-to-day monitoring, paperwork, coordination with non-lawyers and other process steps.

Lawyers give counsel; others should handle processes.