Articles Posted in Clients

However much law departments can responsibly offload to their clients, or never see in the first place, means the department can attend more to activities of higher value (See my post of Sept. 14, 2005 about Cisco’s self-service model.)

Law firms can lend a hand, as Eversheds appears to have done with its online program, called “@work,” a collection of training, knowledge and transaction tools (Law Tech. News, Feb. 2006 at 34). The new offering lets clients answer a web questionnaire, click a button and generate a pre-approved document. With capabilities like that supplementing their own, law departments can shunt some of the routine work to clients.

Increasing recoveries from an average of about $50 million per year to $108 million in 2004, DuPont’s law department had recovered over $100 million by the fall of 2005 (Inside Litigation, Winter 2006 at 8).

The department oversaw 88 recovery matters in 2004, with intellectual property (30 matters) and insurance (2 matters) accounting for 80 percent of the recovered amounts. Mostly the in-house lawyers handle these recovery efforts, except for class actions where the company has opted out. Those matters are handled by law firms. (See my posts of Nov. 28, 2005 about IP as a profit center and Oct. 19, 2005 on other IP ideas.)

All law departments from time to time obtain recoveries; the twist here is DuPont’s deliberate campaign to identify, pursue and track them.

A former Cravath partner is quoted in the American Lawyer, Vol. 28, Jan. 2006 at 15, about a change he has observed from ten or 15 years ago. “It was corporate partners who had the close relationships with clients. But these days, it’s the litigation partners who are developing the closest relationships in high-profile litigation, where so much is at stake.”

His observations doesn’t ring true to me, even though the in-house groups have upgraded significantly in terms of giving commercial and corporate advice, while block-buster litigation remains the primary preserve of external counsel and the largest element of outside-counsel spend.

I suspect that litigation remains primarily an unpleasantness that must be dealt with, but that mergers and acquisitions and other corporate-level concerns are still top of the mind for executives. If that is true, the business-oriented partners will still wield the most influence.

Consider a charming idea, one that sweeps away lists of questions asking about attributes of a law department, which lists are lengthened with invitations to clients to give examples and explain themselves. Replace all that with one simple question: “On a scale of zero to 10, how likely is it that you would recommend use of this law department to your colleagues?” BusinessWeek, Iss. 3969, Jan. 30, 2006 at 94. With customers, “promoters” give responses of 9 or 10, whereas “detractors” give scores of 6 or below, and very different behaviors and loyalties follow.

To use this test for a law department’s clients, a couple of immediate objections should be set aside. Many clients have no choice but to go to the in-house entourage, but let’s imagine that they can avoid doing so as long as possible, sneak in some legal advice from their own staff who have legal training, or plump for outside counsel. The familiarity and dominance of surveys would be the second block (see my Law Departments and Client Satisfaction, Corp. Legal Times 2002); here, the response is that if something better comes along, consider it.

As a reaction to ongoing cost and headcount pressures from senior management, one of our clients asked us to assess titles within the Corporate Secretary’s function. Many law departments may find, like this one did, that titles, adopted long ago for various historical or political reasons, no longer serve. The responsibilities have changed or clients need to understand better from a title what people do.

It would be a good idea to review your titles and to take a closer look at designated roles and responsibilities relative to actual tasks performed, and, by clarifying titles, gain greater distinction and transparency in members’ contributions to the company.

The Conference Board and Marsh Inc. recently surveyed 271 North American and European senior executives about their companies‘ ERM programs Of five risk categories, the one the most respondents were “not at all” or “slightly” willing to tolerate risk, was “legal.”

Seventy percent (70%) took that position, as compared to 53 percent for “financial” risk, 52 percent fpr “hazard,” 39 percent for “operating,” and 26 percent for “strategic.” (ExecutiveAction, Jan. 2005, No. 132).

Perhaps the threat of personal liability, the specter of jail, or the fearful snares of lawyers make senior executives respect the law more than the other risks. Law departments should rise in their esteem.

Daniel Kahneman, a Princeton professor of psychology and Nobel Laureate, makes the point that reported levels of happiness do not rise with increases in income. Instead, like people on a treadmill who walk faster but go nowhere, having more money does not boost satisfaction.

Analogously, as law departments perform better, client satisfaction scores may not increase. On the hedonic treadmill of client perceptions and evaluations, which may move faster, satisfaction – now at a higher level – may stay in the same place as far as scores go.

To the same effect, all efforts to improve the working lives of in-house counsel may get soaked up, absorbed, without showing correspondingly higher scores on employee satisfaction surveys.

A piece in the McKinsey Quarterly, 2005, No. 4 at 9 explains that some IT managers, striving to have executives understand and accept the costs of technology, roll out “cost transparency programs.” I don’t know what that phrase means, but that hardly deters me from translating it to law departments, who also need executives to grasp the expensiveness of and need for outside counsel.

Rather than beat one’s head against the wall of budget cut backs, shine light into the black box of outside counsel costs – expose the numbers, educate the pockets. Publish the amounts spent by firm, by practice area, by business or staff unit – and show trend data on all of them if possible. Calculate blended billing rates for your key firms, and show the discounts you have gotten from standard rates.

As Sy Syms says, “an educated consumer is our best consumer.”

“Culture” seems such a woolly word, grandiloquence without ground. Yet, consider the law department of Phillips Electronics North America, molding itself to its company’s three “pillars”: (1) Designed around the customer, (2) easy to experience, and (3) advanced (top of mind, Vol. 4, at 4).

The Vice President, Corporate & Commercial Law, explains that the law department achieves the first pillar, customer alignment, by understanding the business and working closely with it. It achieves the second, user-friendliness, by being accessible and responsive; the third pillar, advanced, finds its counterpart in legal “using all the tools available – knowledge management, intranet training, law firm extranets and more.” Plus, process improvements contribute. One can pooh-pooh these stratagems, but at least the law department has taken its lead from the client’s customer-facing branding efforts.

To the extent law departments train clients, it is almost entirely educating them about substantive legal developments and how to respond to them. Rare is the department that helps clients understand the roles of lawyers, the limits of certainty in the law, the time it takes to produce good legal work, and how the clients can obtain the most value from their in-house legal colleagues.

One technique for this different kind of training is to give clients checklists of what they need to gather before checking with their lawyers. Two other techniques I described in a recent post on improving contract management, Dec. 3, 2005.

A department can post guidelines and self-help material on the corporate intranet (See my posts of March 27, 2005 on artificial intelligence software made available on an intranet, July 21, 2005 about a law department posting its manual and other material, and Sept. 10, 2005 about charging for help if the answers are on the intranet.)