Articles Posted in Structure

Why does the sentiment prevail that lawyers in small law departments face noticeably more burdensome workloads than do lawyers in larger departments? Small and stretched vs. large and lazy? To the contrary, size probably creates more legal problems; smaller but legally simpler companies may need fewer lawyers.

This is a manifestation, I believe, that the grass grows greener on the other departments’ lawns – small law departments tell themselves that if only they were more numerous they could plug more holes in the dike. Lawyers in big departments, stressed and equally strapped, spend their frantic days feeling just as beleaguered. They dream that their workload would be simpler, less stressful, if they only had a relatively simple one billion dollar company to protect.

Neither is correct. Benchmark studies show that lawyers per billion of revenue stays relatively stable above a billion dollars in revenue, if anything it may drop as company size increases. Below that size, when a company has only one or two in-house staff, life is probably more of a blaze of fire drills. Perhaps generalists, who are more common in smaller legal teams, feel more besieged than specialists.

Despite having addressed reporting from several perspectives, I have not pulled together my pieces on where the general counsel reports. So, I have filled that hole (See my post of Aug. 28, 2005: general counsel who seek to be the CEO’s consigliore; Jan. 1, 2006: reporting lines of General Electric business unit GCs; Jan. 17, 2006 #1: reporting lines of McDonald’s general counsel; Feb. 7, 2006: book’s recommendation that GC should report to the Board; May 28, 2007: time GCs spend with CEO; Aug. 12, 2008: 12% of European GCs reported to head of corporate governance; Dec. 21, 2008: analogy to reporting lines of administrators; Nov. 13, 2009: criticism of reporting line of Bank of America’s general counsel; and March 2, 2010: GCs who report to the CEO are paid more.).

My strong recommendation is that general counsel report directly to the CEO (See my post of May 14, 2005: most US GCs report to the CEO; and Nov. 30, 2008: GC should report to the CEO.). The situation is somewhat different in Europe (See my post of April 12, 2006: UK GCs report less often to CEOs than the 80%+ mark in the US; July 25, 2005: less common for European GCs to report to the CEO; Nov. 9, 2006: about 40% of European GCs report to the CEO; and March 8, 2010: GCs in the UK more frequently report to the CEO.).

Several years ago I wrote that many more general counsel in the UK report below the CEO than do US general counsel (See my post of April 12, 2006: UK GCs report less often to CEOs than the 80%+ mark in the US.). Since then, that disadvantage appears to have diminished. In the benchmarking survey of legal risk and compliance, prepared in early 2009 and published by the Practical Law Company at 8, responses from 69 companies suggest a different profile.

For nearly two thirds of the respondents, the top lawyer reports directly to the CEO. “Around a third report directly to the chairman or president of the company” adds the report, which suggests either there is no CEO position or the GC does not report to him or her.

Marschall Smith, the general counsel of 3M, makes further geographic dispersion of his lawyers an inexorable trend: “Because 65 to 70 percent of the company’s sales are outside the U.S., so are the majority of our lawyers.” His interview in Inside Counsel, Jan. 2010 at 43, indicates that 3M has its 165 lawyers located at 30 sites (See my post of May 15, 2009 #4: metrics on 3M.). We can foresee that corporate lawyers will follow the money. Where a company makes its money, there it will seat its lawyers.

The $25 billion 3M has appeared on this blog before (See my post of June 20, 2007 #4: Smith’s fourth general counsel position; Oct. 10, 2008: 3M patent lawyers sit regularly with inventors; May 12, 2009: little support for contingency fees at 3M; May 13, 2009: program to train leaders and business-savvy lawyers; March 1, 2010: quarterly teleconferences for all lawyers; and March 2, 2010: replacement of patent lawyers by patent agents.).

An article of mine on twenty ways to integrate a dispersed legal department will appear next week in the National Law Journal. It mentions teleconferences but not at the scale of 3M’s impressive application of that technique.

3M has 165 lawyers in 30 locations, so it is resolutely dispersed. According to Inside Counsel, Jan. 2010 at 43, 3M’s general counsel “hold[s] quarterly meetings of the entire worldwide department, by teleconference.” Just as a matter of logistics and technology the effort to link the detached department impresses me. More practically, I wonder how many lawyers dial in and I suspect that it is intimidating for people to speak up unless they are very senior and very fluent in English.

Academic theorists have named “the tendency of organizations in a particular sector to converge on a common way of working and set of beliefs that justify that way of working.” Institutional isomorphism is the off-putting label, but the term and its concept could apply to legal departments.

The practices and beliefs of general counsel at legal departments of much size, more so within a country and even more so within an industry, probably tend to become more similar. General counsel hear about a good method and adopt it. Useful innovations therefore evolve and spread – the meme message travels and takes root – and ideological conversion increases. Think of budgets, e-billing, matter management software, in-house e-discovery: the fundamental idea takes hold even though many individual variations persist.

Grist for this heady post came from the Financial Times, Innovative Lawyers 2009 at 44, but there in the context of law firms. The principle likely holds for legal departments. If nothing else, benchmark data pushes corporate legal teams toward more similar characteristics.

In US legal departments, a good proportion of lawyers dedicate their support to one or more business units. By contrast, among a group of UK legal departments that took part in a recent survey, “around 29% of respondents say their legal function is structured mainly by area of law (compared to 17% last year).” The benchmarking survey of legal risk and compliance, prepared in early 2009 and published by the Practical Law Company, gathered responses from 69 companies.

At page 8 the report says that as to being organized by business unit, “21% of respondents say their legal function is structured mainly by business area or product line (compared to 31% last year).” Geography accounts for the primary structural guide for 11 percent (compared to 17% last year).

More plausibly, a large number mix those structural modes, especially in larger companies. In any event, if my sense of US organizational assignments is correct, UK heads of legal see the optimal structure quite differently.

If you have an estimate for the number of corporate counsel in any country other than North American or Europe, please email me. I am trying to figure out a plausible ratio of in-house lawyers to lawyers in private practice (See my post of Feb. 17, 2010: possibly 10,000 law departments in Europe.).

Or if you know an association of in-house lawyers in a country or a person who might know the data I seek, I would very much welcome the tip. For this research, I am not differentiating between lawyers employed by private organizations and lawyers employed by government entities, but that would be even more welcome data.

Here is some fragmentary information. I was told that In Mexico approximately 400 belong to an in-house group (ANADE) and in Belgium something like 1,300 (See my post of Feb. 16, 2010 #2: mandatory to belong to Belgian in-house group.). A correspondent in Japan wrote that “according to the White Paper on Attorneys 2009, the number of attorneys who practice as in-house attorneys is 354 (as of June 2009).” That number surely is too small.

If you have an estimate for the number of corporate counsel in any country other than the United States or Europe, please email me rees@reesmorrison.com. I am trying to figure out a plausible ratio of in-house lawyers to lawyers in private practice (See my post of Feb. 17, 2010: possibly 10,000 law departments in Europe.).

Or if you know an association of in-house lawyers in a country or a person who might know the data I seek, I would very much welcome the tip. For this inquiry, I am not differentiating between lawyers employed by private organizations and lawyers employed by government entities, but that would be even more welcome data.

Here is some fragmentary information. I was told that In Mexico approximately 400 belong to an in-house group (ANADE) and in Belgium something like 1,300 (See my post of Feb. 16, 2010 #2: mandatory to belong to in-house group. A correspondent in Japan wrote that “according to the White Paper on Attorneys 2009, the number of attorneys who practice as in-house attorneys is 354 (as of June 2009).” That number surely is too small.

If your legal team has offices strung out from Albania to Zimbabwe, you probably wish there were more cohesion, collegiality, and collective culture (See my post of Jan. 16, 2009: physically decentralized law departments with 13 references.).

To the dozen techniques I have discussed in previous posts to share a feeling of being one legal department, let me add ten more (See my post of March 1, 2009: creating a one-department culture with 7 posts and 5 metaposts; and March 26, 2009: four more ideas about unification efforts.).

1. Centers of Excellence and communities of interest. Create pools of experience here and there and lawyers will be linked through reaching out to them (See my post of July 21, 2005: brokering knowledge; July 25, 2005: knowledge management and communities of practice; Sept. 10, 2005: COE, center of excellence; March 13, 2007: Lucent Technologies and communities of practice; Feb. 4, 2008: centers of excellence or expertise at GC; and May 7, 2008: seven terms for specialists in legal departments.).