Articles Posted in Showing Value

A law review article to be published by Mitt Regan, Co-Director of the Center for the Study of the Legal Profession, discusses offshoring legal services. At page 111, among several arguments in favor of outsourcing services, the authors write, “Finally, a firm may free up its internal resources for more complex work, thereby expanding capacity for higher-value activities.”

Dig into this quote with me.

Lots of the work of legal departments is not complex, not to the experienced lawyer who handles it. To solve a problem may take time (because more facts are needed, for example, or someone must make a decision or something has to occur) and may require attention to detail, but elapsed time and precision do not create complexity. Some legal research may even be necessary, not that that is the same thing as complexity. In sum, I would argue, legal problems that are challengingly complex account for only a fraction of the matters handled by a legal department.

“The OECD estimates that international trade in counterfeit and pirated goods was worth around $250 billion in 2007.” Others put the loss to business much higher, according to the Economist, March 6, 2010 at 81, for various reasons. One reason is that much of the world’s manufacturing now takes place in countries with poor protection of intellectual property. The internet has also allowed much easier means of distributing knock-offs.

The article quotes a British lawyer as saying that “Lawsuits brought by companies against manufacturers and distributors of counterfeits are at an all-time high.” Risks and losses on this scale justify attention by the legal department, even though its involvement must necessarily be alongside other groups in the company (See my post of May 5, 2008: Lenovo law department is very involved; June 11, 2008: vendors that locate and acquire fake products; Sept. 9, 2008: keep outside the law department’s budget some costs of fighting counterfeits; Oct. 11, 2008: role of law departments in anti-counterfeiting; Feb. 19, 2009: Bosch and its anti-counterfeiting team; and Nov. 11, 2009: Gucci and whether to count anti-counterfeiting firms as law firms.).

The Legal and Corporate Affairs Department of Microsoft has one or more people dedicated to looking at the company’s strategy and trying to define the goals and develop scenarios for the Department to support those strategies. “The department’s Strategic Framework consists of a three-year strategy with defined outcomes that summarize a course of action assembled on a scorecard with 30 indicators spread across seven headings that are directly tied to goals and outcomes of the business. Thus, Economic (four indicators), IQ and IP (nine indicators), Software and Additional Services (four), Citizenship (one), Interoperability and Anti-trust (four), Operational Excellence (3) and People and Culture (five indicators).” Thirty indicators on one dashboard (See my post of May 19, 2009: dashboards with 6 references.)!

This description comes from an article by Richard Stock at Catalyst Consulting, where he reports comments in late 2009 by a deputy general counsel at Microsoft. It’s hard to imagine how the Department keeps track of 30 metrics, harder still to align the lawyers on all those business strategies (IQ anyone?).

The more lawyers in a legal department, the more choices its general counsel and managing attorneys can make. With 100 lawyers the number of initiatives, decisions, permutations of structure and process, and investments are uncountable. Because of that profusion, some departments excel; other departments languish or decline.

With 10 lawyers, a general counsel’s degrees of freedom narrow dramatically. He or she can only do so much in terms of assignments of responsibility, recruitment and retention, allocation of budget to initiatives, benchmarking, and all the other leadership possibilities available in the larger department. At two or three lawyers, the flexibility of a manager shrinks to relatively very little. Managerial scope, and therefore outcomes, expand exponentially with increased size.

That said, and recognizing that total legal spend as a percentage of revenue as well as lawyers per billion grow smaller as legal departments grow bigger, it is likely that that overall dispersion of management effectiveness widens with size. In every population, extremes become more extreme as you add members. The long-tails of both excellence and weakness extend further out than with a collection of comparable but smaller departments. Managerial scope expands the possibilities of success and ineptitude.

Among the year’s most influential people in business ethics, shoulder to shoulder with President Obama, the Pope and the President of Sri Lanka, are no less than four general counsel.

Ethisphere, in its Winter 2009 edition, started with Brian Martin (#84), the chief legal officer of KLA-Tencore, who not only wrote for InsideCounsel but also taught a course on ethics and presented at more than 15 CLE events on ethics. Mark Chandler, of Cisco (#81), spent 2009 “reinventing corporate legal practices and services(See my post of Sept. 25, 2008: Cisco’s Mark Chandler with 30 references.).

Tim Mayopolous, the erstwhile top lawyer for Bank of America and currently the head lawyer at Fannie Mae, holds spot 76 because of his stand on Merrill Lynch. The silver medal slot, however, goes to Peter Solmssen of Siemens (#2), “called in to clean up Siemens and revamp its culture” (See my post of Nov. 13, 2010: Solmssen simultaneously served as CEO of a division.).

The corporate jungle is not for the shy. Reticent general counsel, who believe that steady but unheralded good work by the legal team will win the hearts and minds of internal clients, may be disappointed. The benefits brought about by solid legal service over time may go unnoticed and unrewarded.

Jasveer Singh, head of legal at Man Group, points out the cultural hurdles some general counsel face with his remark in the European Lawyer, Issue 91, Nov./Dec. 2009 at 40. Singh said “Lawyers are generally conservative … and they don’t like to be seen as salesman, which is sometimes how they view suggestions that they should more actively promote their contributions to the overall business.”

Don’t hide your candle under a bushel. Hold the torch aloft to shine clearly when you have added value (See my post of Jan. 30, 2008: publicity by law departments with 12 references; and June 11, 2007: publicity with 12 references.).

It’s hard to see why general counsel are confident about legal risks if they don’t observe basic management practices. The benchmarking survey of legal risk and compliance, prepared in early 2009 and published by the Practical Law Company, gathers responses from 69 companies.

At page 9 the report starts by saying that “Three quarters of respondents say they are very or extremely confident in their company’s ability to manage legal risk.” We are in control, brother!

Oddly, though, less than half of the respondents “say they have a clear process in place to identify legal risks” and fewer than that (“around two fifths”) “say they have a clear process in place to prioritise legal risks.” We have a feeling sometimes for what’s going on and what to do.

A survey of legal risk and compliance in early 2009, published by the Practical Law Company, gathers responses from 69 companies. It produced some findings about their methods to understand and cope with legal risks.

At page 5 the report notes that almost 60 percent of the respondents use risk maps or risk matrices. Commonly, these tools plot legal risk according to estimates of their frequency and their levels of financial disclosure. Ideally, a legal department directs its efforts to ameliorating the most severe combination, as in those with the highest possible damage when you multiply frequency by consequence.

Slightly fewer of the respondents survey their business units to uncover legal risks and nearly half of them use interviews or meetings with management. As a fourth method described in the report, nearly half of the respondents have set up formal risk committees (See my post of Aug. 17, 2009: controlling legal risks with 13 references and 2 metaposts.).

The benchmarking survey of legal risk and compliance, prepared in early 2009 and published by the Practical Law Company, gathers responses from 69 companies.

The report offers several suggestions for how to maximize the effectiveness of legal risk management processes, but at page 3 its three “key ways” in addition to those suggestions are fatuous.

“Develop and maintain close relationships with external legal advisers”;

The Financial Times published its report, “Innovative Lawyers 2009,” dated Oct. 23, 2009. One “legal innovator” is Adil Hussain, the general counsel of Gatehouse Bank, the only Islamic bank in the UK. The Bank, unusually, employs “an in-house Islamic scholar,” based on whose prowess Hussain received his commendation (at 30). He built a team of three around the scholar (the department has two lawyers) and created a sharia advisory service. “It has become an important business line for the bank and Mr Hussain is responsible for selling the service to potential clients.”

A general counsel who develops, runs, and markets a business line certainly makes tangible the notion of a legal department as profit center But is that the highest and best use of legal talent (See my post of April 27, 2008: profit center with 18 references.)?
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