Articles Posted in Showing Value

Recently I took in-house counsel to task who fail to consult with outside lawyers if they get in too deep. Ken Grady in turn took me to task and made some good points.

“Do in-house counsel err from time to time – sure. Do outside counsel – at least as much. Being outside does not make you an expert. It seems like every day I am telling outside counsel about statutes they missed, regs they haven’t read, cases they failed to read, and so on. Oh yes, these are partners and sometimes associates at the major firms who claim ‘expertise’ in their areas. It should not be in-house or outside counsel, it should be lawyers who go beyond their skill or knowledge level.”

Ken is exactly right. Both sides need self-knowledge and humility. Many in-house counsel know the law pertaining to their business far better than the “generalist” outside lawyers. It badly serves your clients, whether they are managers or in-house lawyers, to exaggerate your command of the relevant law.

An article in the Admin. Sciences Quarterly, Vol. 54, June 2009 at 272, somewhat ponderously defines strategic plans as “formal documents that articulate organizational goals and the means by which to achieve them over a specified period of time and propose to promote effective management by prioritizing goals under resource constraints.”

For a chief legal officer, the unpacked version of that sentence means the department’s strategic plan (1) states in writing (2) the goals the department wants to achieve and (3) how it will achieve those goals during (4) a year to five years and implicitly (5) what goals it will not try to achieve in light of (6) limited resources.

It is not enough to record the aspirations of the department; the plan must also explain what the department will do (with individual accountabilities and milestones in the better plans) to get there. A strategic plan needs a timeframe, be it one year or five years, and to be realistic it needs to acknowledge that not everything can be accomplished; some things must go. The plan should be a roadmap for a relatively few, specific priorities (See my post of June 25, 2008: strategic plan with 10 references.).

According to a study some years ago by the General Counsel Roundtable, contract management poses four key challenges for lawyers in-house:

1) “standardizing and simplifying the drafting of contracts.” This is the domain of templates, retrieval of prior form agreements, and automated creation of contracts (See my post of Feb. 26, 2008: document assembly with 16 references; and Dec. 6, 2007: document management with 15 references.).

2) “setting policies regarding legal department review of contracts.” Law departments that adopt a risk-based model, for example, do not review contracts based on a set dollar amount but instead identify the areas of greatest risks in various contracts and then review the contents in light of the associated risks (See my post of Sept. 17, 2005: Cargill and its $25,000 minimum.),

The general counsel of Novartis spoke at the recent Legal Week Corporate Counsel Forum. His presentation covered the strategic planning process his 200-lawyer group started in 2006. Of the three components in the plan – organization, people, and culture – the cultural goal was to “play at the top of our game, and make the most of our assets.”

I like that aspiration much more than to “be world-class” or some such thing, because every law department can strive to squeeze as much as possible from its mix of people, resources, systems and culture. Only one law department can be best-in-class and to be “world class” is very loose (See my post of May 16, 2007: misguided goals embedded in “world class”; and Aug. 22, 2006: the common overuse of “world class”.). In my book, achievable stretch goals have more usefulness than too-grand dreams.

For many fundamental reasons, the practice of law within corporations breeds caution and circumspection. Setting aside whether those who choose to attend law school start off more risk averse, or whether those three years foster it, other forces strengthen the aversion during a career.

1. The world is extremely complicated and unpredictable, so even the most conscientious and painstaking legal research, drafting and thinking can be upended instantly. The best-laid schemes o’ mice an ‘lawyers, Gang aft agley. Worse hindsight almost always sees what should have been done or known.

2. Unlike good decisions that have a hundred parents, a lawyer’s mistake is an orphan laid squarely at the door of that person. When rewards are shared and setbacks personal, the risks of judgment are asymmetrical (See my post of Aug. 10, 2009: pirates and slaves and individual risk.). Why try something new when the potential target will blaze on your back?

Some observers believe Microsoft was wrong footed on open source. Was it the nay-saying of lawyers?

“One of the reasons Microsoft seemed so ill-informed about open source was that its lawyers had forbidden its engineers from working with it. The license that Linus and similar open source software uses, known as the GPL (general public license), requires that every “derivative work” of open-source software also be open source. The lawyers decided that this made it a virus: Any Microsoft programmer who touched it might be at risk of infecting anything else he or she worked on, with the possibility that one mistake could even accidentally open-source Windows.”

This passage, from Chris Anderson, Free: The Future of a Radical Price (Hyperion 2009) at 110, wonderfully captures the perversion of risk aversion some lawyers exhibit. The quote is not clear whether the lawyers who banned work at Microsoft on open-source software were outside lawyers or inside lawyers, but either way the legal department at least permitted the block (See my post of Aug. 24, 2008: lawyers and risk averse behavior with 11 references.).

This is high-level stuff, but it helps to put several pieces and terms in place. Start with an image of an upside-down pyramid where the top level is your corporation’s goals.

To further those corporate goals – why the legal department exists –– usually finds expression in a department’s mission statement the next level down (See my post of March 20, 2008: mission statements with 17 references; and Dec. 7, 2005: mission statement with 7 references.).

The third level from the top of the pyramid could be a statement of the legal department’s core values (See my post of May 23, 2008: values with 12 references.). Mission statements often conflate core values. Furthermore, the pervasive culture of a department frequently affects people more than any formal statements of values.

“A legal department which claims a high degree of self-sufficiency and prides itself on doing as much as possible in-house can be a cause for concern“ writes Mark Prebble, Managing In-House Legal Services: Providing High Value Support for Your Organisation (Thorogood 2009) at 18. I agree. Begrudging the use of external counsel can lead to disaster. Some legal departments may have to forego some outside expertise because of budget constraints, but eventually and inevitably issues arise that go beyond what the internal team (or solo lawyer) can competently handle (See my post of July 8, 2008: the autarkic department of Respironics.).

For good reasons in-house groups turn to outside counselors for roughly half of their total budget (See my post of March 29, 2009: 40/60 ratio of inside-to-outside spend with 18 references.). To boast that you are tough and capable and that you don’t need to waste the company’s money on high-priced partners is a fool’s errand.

There are benefits to having your department written about approvingly for its programs and management efforts. Most CEOs like it when their people and units get kudos. The members of your department feel proud and more engaged (See my post of Aug. 26, 2009: the performance boost from engagement.). Other general counsel reach out to you, share their ideas, and you gain from the exchange. Recognition usually spurs further effort and continuous improvement. Being well regarded has advantages for recruitment and retention. Finally, when people outside the legal function know what you have done you have somewhat of a way to benchmark how you are doing.

Publicity for a legal department, however, also has its dark sides. The “star” general counsel may spend too much time being interviewed, speaking at panels, serving organizations, and basking in that modest flame of fame. Management of the department is not the highest priority of a general counsel, but renown in that area can seduce you.

Praise for a program can also bring out those who criticize the underlying philosophy or your allocation of resources. Inevitably, success for a program creates some competitiveness within the ranks and inevitably bad feelings about the apportionment of credit. Finally, if you hit upon a clever technique or program, it might be a competitive advantage, one that is frittered away by an article or remarks at a panel (See my post of Jan. 30, 2008: publicity by law departments with 12 references; and June 11, 2007: publicity with 12 references.).

In-house attorneys face occasional challenges to their professional status, notably as to the attorney-client privilege when they give business advice, the degree of their objectivity as employees of their client, and whether they are admitted to practice in a given state or court. A further limitation I had not known about came to my attention in Robert Haig, Ed., Successful Partnering Between Inside and Outside Counsel (Thomson Reuters/West 2009 Supp.), Vol. 2, Chapter 27 at §27:38.

“A number of recent decisions have explored the question whether in-house counsel can be precluded from having access to the adversary’s confidential information in litigation even when the information is protected by a confidentiality order.” The paragraph cites three decisions in District Courts and comes to no conclusion and makes no predictions. I would hope that courts do not make in-house lawyers litigate with one hand tied behind their back, having access to highly relevant information found during discovery barred from their view.