Articles Posted in Clients

MIT Sloan Mgt. Rev., Vol. 49, Summer 2008 at 53, discusses customer satisfaction and two specific problem areas. “The linkage between satisfaction and customer behavior and positive financial outcomes has tended to be modest.” To my knowledge, no one has ever tried to show that corporate employees who have higher levels of satisfaction with the law department use their department more, use it better, or try to improve the relationship. Since our industry lacks a common metric for client satisfaction, we cannot say whether satisfaction has any positive effect on performance, such as a decline relative to less satisfied clients in total legal spending as a percentage of revenue.

The second difficulty mentioned by the article concerns how much satisfaction has to improve for it to have any impact. Satisfaction metrics for consumers do not behave like other numbers — their relationship to behavior tends to be nonlinear. Put differently, even if a law department ekes out improvements in satisfaction scores, will that make any difference in the behavior of its clients? Probably not, until a tipping point is crossed and behavior changes significantly.

To be synchronized with their clients, shadows of the business executives moving hand-in-hand toward the company’s efforts – that is alignment for a law department (See my posts of Sept. 21, 2005: activities aligned with client goals; and May 10, 2006: an important Canadian-department goal.). Profiles of law departments often highlight their efforts at alignment (See my posts of Aug. 2, 2006: Qualcomm; and March 28, 2006: PPG.).

Although frequently invoked, the term “alignment” finds few definitions. The purest version finds lawyers reporting to business unit heads (See my posts of May 30, 2005: privilege risk of lawyers reporting to non-lawyers; July 11, 2005: AXA and decentralized reporting.).

Even without a consensual meaning, observers note obstacles to alignment as well as how to achieve it (See my posts of March 31, 2007: road blocks to alignment; April 16, 2007: carrying alignment too far; July 14, 2005: “alignment chart;” and Nov. 8, 2007: eight suggestions for alignment.).

A profile of the general counsel of Whole Foods Market, Roberta Lang, appears in InsideCounsel, June 2008 at 72. The all-natural food supermarket giant has seven in-house lawyers and they all are described as invested in the beliefs and values of their client. At one point, Lang says, “We give our recommendations based on law, and we also make sure those recommendations are in line with our core values.”

Don’t all in-house counsel shape their legal advice in light of their company’s core values? Don’t the lawyers employed by most companies believe that what their company does promotes and provides values?

A discouraging view about lawyers and their win-lose mentality is expressed in the Harv. Bus. Rev., Vol. 86, May 2008 at 82. In the context of “competitive arousal” that afflicts executives during high-stakes, time pressured and publicized deals, the author disparages resort to lawyers. After all, “most of them are trained to see conflicts and competitions in terms of right (who deserves to win?) and wrong (who deserves to lose?).”

This attitude broadsides in-house counsel who seek a place at the decision table for important corporate deals. Sadly, the animus against attorneys lurks just below the surface of many senior executives.

When clients complete satisfaction surveys on behalf of law departments, rarely do they have a question that asks their views on the performance of outside counsel. A question might touch on the cost of external lawyers, but otherwise the external contribution is entirely refracted through inside lawyers. The external lawyers may make the internal ones look good, but clients may have no sense of that or how much it happens.

Yet, half or more all legal spending finds its way to law firms (See my post of Dec. 5, 2007: steadiness over time of the 60/40 ratio of outside to inside spend.) so it should be equally important to ask clients about how they evaluate outside firms. The management of outside counsel is a skill of the internal lawyers, and subject to evaluation by clients. But the actual performance of the outside counsel could also be assessed by clients.

The UK-based law firm Eversheds posted on Legal OnRamp a document about its Advisory Board. The Advisory Board consists of senior members of legal teams and, apparently, the firm convenes it every now and then to share ideas on various topics. For example, one general counsel “went around the company and totaled up the costs of making penalty payments and settling disputes with suppliers and customers where the legal department had not been involved or had cleared up the mess because there no written contract.” Amazingly, that general counsel found that “these costs considerably exceeded the total cost of the legal team.” I too am amazed, unless there was one contractual penalty that was huge.

Another law department set up Service Level Agreements, specifying among other things the response times of the law department. “Far from putting added pressure on the team, as might have been expected, the SLAs in fact made their lives easier. The SLAs made the rest of the business aware of what was realistic in terms of response times and the team found that they were no longer called in at the last minute and asked to approve something 30 minutes before it was being printed.” If you have time and joint commitment with clients to hammer out Service Level Agreements, they can be useful (See my posts of May 14, 2005: standards of service; and July 9, 2007: example of Koch Industries.) and even with law firms (See my post of Nov. 24, 2007: levels of support promised to law firms who agree to accept a set fee.).

Most law departments charge back to business units a significant portion of the outside counsel fees paid on their behalf (See my posts of Feb. 27, 2008: practices of Time Warner Cable; and July 31, 2006: goal of 100% of outside counsel fees allocated out.).

Far fewer legal departments charge back business units for the time incurred by inside lawyers. Most general counsel want to do nothing that discourages clients from coming to the law department early and often. Otherwise, the general counsel first has to force reluctant lawyers to submit their time (See my posts of Aug. 31, 2005; having in-house counsel track time; and Sept. 10, 2005: lawyers loathe recording their time.).

The big second step is to charge clients for that internal time (See my posts of June 30, 2006: five bases to charge business units for internal time; April 27, 2005: Eastman Kodak’s European lawyers; and Jan. 13, 2006: tracking internal lawyer time and charging clients: pros and cons.). Some decisions should precede that (See my posts of May 14, 2006 and Oct. 22, 2006: multiple charge-back rates not a good idea; May 16, 2006: definition of “chargeable” time; and Sept. 10, 2005: charging only for particular services.).

Rather than a long email or memorandum, an in-house lawyer might depict various choice points and possibilities of a complex situation by means of a flow chart. Many people can grasp branching alternatives and complex relationships better from a diagram – either a flow chart or a process map – than they can from text.

What’s the difference between a flow chart and a process map? One source says that a process map is a flow charting method that uses general symbols and arrows to show the flow of the manufacturing process. A flowchart is a tool that shows the inputs, activities and outputs from a process. Some authorities distinguish between flow charts and process maps because maps have more detail and include a timeline (See my posts of Jan. 10, 2008 #3: process maps; Aug. 28, 2005 on process maps.). The differences don’t matter to law department lawyers; both methods are useful in several ways.

The technique brings benefits more broadly than when in-house counsel explain something to their clients. In a like manner, a law department might ask a law firm to describe a legal issue schematically, with a flow chart. Similarly, these graphics can make clearer for those in a law department how to think through and handle a commonly-encountered situation.

Laws permeate the operations of companies, as do regulations, ordinances, agency procedures, judicial decisions, and many other forms of juristic governmental dictates. Let’s just call them all “laws.” Given the pervasiveness of laws in a company’s operations, what should be the scope responsibility for observance of them sought from the eponymous department?

Obedience to laws hardly falls completely on the law department. Rather, the weight of day-to-day compliance falls to managers and specialists outside that department (See my posts of Aug. 30, 2006: Industrial Relations; April 23, 2006: Insurance or Risk Management; May 10, 2006: Human Resources; Nov. 10, 2007: Compliance; Dec. 22, 2005: Ethics and references cited; and Oct. 16, 2006: generally on “legalistic units.”). Many, many people throughout a company respond to the laws every day and they are the first line of defense.

Lawyers in the company should give advice and help with interpretation, but the onus of responsibility for behaving legally lies squarely on others in the company.

A general counsel, speaking recently to a large group of in-house lawyers, proudly explained that in his law department, “Our lawyers never say ‘no’ to clients.” Lest you be concerned about such patsies who abdicate their checks-and-balances role, he hastened to add that that his lawyers will tell wayward clients something like “That is really not a very good idea,” or “What if we did this instead,” or “Do you know the criminal penalties under the Pflegal Law?”

He also emphasized that the more the in-house lawyers explain legal risks and considerations to clients, the more they educate non-lawyers, the easier it is to point them in the right direction. In-house counsel need to strive to be enablers and one way to do that is to show clients how they can achieve what they want to with the appropriate amount of understood legal risks (See my post of Jan. 3, 2008 on the squishy definition of “legal risk.”).