Articles Posted in Structure

A brand new benchmarking report gives lawyers per billion Euros for five industries: professional services, high-technology, pharmaceutical, consumer/retail, and manufacturing. The industries’ medians varied by four to one.

When we index the metric for manufacturing as 1, then consumer/retail was 1.74; pharmaceutical was 2.4; high-technology was 2.8; and professional services was 4.1 times as many lawyers per billion Euros. Professional services had only seven reporting companies, but the other industries had ten, 14 and 20 so the data should be reasonably reliable. The data reinforces the conclusion that different industries have different levels of legal intensity.

The source for this data is benchmarking study of Europe, Middle East and Africa (EMEA) law departments that collected data for 2008 from 123 departments. Conducted by Laurence Simons, a global legal recruitment firm, and this author, the report is available for a nominal cost from Laurence Simons. The report contains recommendations for most of the benchmarks for how to alter your law department’s metric.

If your legal department is scattered around the world, you might like to know some of the ways you can create a one-department culture. These ten techniques certainly do not exhaust the topic, but they should help you strengthen your efforts. I have listed them roughly in what I perceive to be their declining order of frequency.

1. Intranet. If everyone in the department can see the same organization charts, FAQs, learning resources, and policy statements, it helps bring them together (See my post of Nov. 30, 2008: legal department intranet sites with 12 references.).
2. Retreats and conferences. Nothing beats shaking hands with a colleague and getting to know them in person (See my post of Feb. 12, 2008: retreats and conferences with 8 references; Oct. 3, 2008: Gucci’s annual legal meeting.) and my article, Sweet Legal Retreats

What has happened since InBev mixed its law department with Anheuser-Busch’s? We know from Corp. Counsel, Vol. 16, March 2009 at 61, that a few months after the November 2008 merger the legal team had stirred together 250 lawyers. The acquiring company’s general counsel, Sabine Chalmers, was named for the new role (plus complilance), although the ci-devant general counsel of the American company leads the North American arm of the department.

The article mentions that since the merger, ten Anheuser-Busch lawyers have left the company. Based on departures from other merged law departments, it is likely there will be more (See my post of Jan. 16, 2009: layoffs after mergers with 9 references.). “The legal team is now dominated by InBev lawyers, who outnumber those from Anheuser-Busch 4:1.” But that may have been the ratio before the merger, if you get my pint.

It would be convenient for the cognoscenti of law department management to be able to describe numerically levels and spans of control. For example, if a 10-lawyer department has four lawyers who report to the general counsel (“direct reports”), the general counsel’s supervisory ratio is 4:1. The remaining five lawyers of the level below the direct reports (“second-level reports”) would give the direct reports a ratio of 1.25:1 (5 lawyers divided by 4), if none of the second-level lawyers has a lawyer report.

Likewise, if a 20-lawyer department has six direct reports to the general counsel, that general counsel has a 6:1 supervisory ratio. The remaining 13 lawyers means that the second level reports, assuming no levels below the third level of lawyers, have a ratio of 2.2:1.

If we assume that the number of direct reports to a general counsel tops out at seven, then a law department with 100 lawyers would have 92 of them reporting ultimately to those seven direct-report lawyers, an ultimate supervisory ratio of 13.1: 1.

The Dutch giant, Philips, has a huge group called Intellectual Property & Standards (IP&S). According to IP Review, Iss. 24, Winter 2008/2009 at 34, IP&S has a headquarters team of 45, and “some 500 people spread across 16 countries.” It is responsible for all of the company’s IP assets – trademarks, copyrights, patents, and so on. Its structure mimics the structure of Philips’ business units, so patent attorneys work for and intimately understand the IP needs of a particular unit.

Of note also is that some members of IP&S take a strong interest in standards and standards-setting bodies, such as the International Standards Organisation and the European Telecommunications Standards Institute. To help lobby for favorable standards, or standards at all, is a contribution in-house lawyers can make. I have even found a blog by an in-house lawyer at Microsoft on standards, the Unoffical Standards Law Blog by David Rudin.

IP Review, Iss. 24, Winter 2008/2009 at 13, profiles the German automotive components company, Bosch. It explains that the large IP team of Bosch has two sector-specific patent groups (mechanical and electronic), a licensing expert, a trademark specialist, and an anti-counterfeiting team, “which has its own network of brand protection experts in key sales locations around the world.” Even though Bosch doesn’t sell as much to individual consumers as to businesses, it cares about counterfeits of its products (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: outside law department’s budget; and Oct. 11, 2008: role of law departments in anti-counterfeiting.).

The IP department works closely with a group of Strategic Patent Portfolio Managers “who provide the link in the chain between innovation and registration.” Those Managers spot potentially patentable innovations and convey the information to the patent lawyers. It sounds as if the Managers take part in patent disclosure committees, but not the lawyers (See my post of March 23, 2008: invention disclosure committees; Oct. 10, 2006: examples at Dial and Avery Dennison; July 25, 2007: Halliburton Energy; April 8, 2006: University of Virginia; Sept. 25, 2008: LexisNexis initiatives; Dec. 4, 2006: set patent strategy at Palm; and June 25, 2008: patent lawyers pay off.).

In Germany in 1897, Robert Bosch applied to register a patent for the magneto device that starts a car’s engine. Eleven years later, his company formed an intellectual property division, which celebrated its centenary last year. During the intervening 100 years, Bosch added more than 30,000 employees working in research and development, reinvests an average of 7.7 percent of its revenue into R&D (above the automotive industry average of 4.7%), and its IP team filed 3,281 priority patent applications in 2007. IP Review, Iss. 24, Winter 2008/2009 at 13, provides this information about an early law department.

From time to time I have written about the history of law departments (See my post of Oct. 24, 2008: historical references to management of legal departments with 7 references.). Perhaps the term “law department” should not apply to that first in-house group of patent prosecutors at Bosch back at the turn of the 19th century, but I am at least assuming they were lawyers and they were employees.

At Cadbury PLC the business regrouped from four regions to eight, and the law department matched that change exactly. It is a clear example of how efforts to align with the business side can push a law department to restructure itself (See my post of June 15, 2008; alignment with clients with 16 references.).

As laid out in Corp. Counsel, Vol. 16, Feb. 2009 at 70, the Cadbury law department – with 85 lawyers and 130 legal staff –now has eight regional heads, a company secretariat team, and a global intellectual property team. It sounds as if chief legal officer and group secretary, Hank Udow, has at least 10 reports (possibly an administrator too). That number would be on the high end of direct reports to the top lawyer (See my post of Jan. 12, 2009: reporting other than decentralized by lawyers, with 13 references.).

At least six senior legal roles at Merrill Lynch have been axed as part of the investment bank’s global restructuring. As reported on The Lawyer.com, an associate general counsel, the “general counsel of litigation and employment,””co-head of global litigation,” and three other senior lawyers have been terminated and will leave imminently. The reductions follow Bank of America’s acquisition of Merrill Lynch in late September. Merrill’s vice chairman and general counsel Rosemary Berkery remains in her position. That news triggered a half-dozen thoughts (See my post of Jan. 16, 2009: layoffs after mergers with 9 references.).

One way to proceed with post-merger layoffs is to choose the best lawyer from the two companies to fill a position. Thus, which lawyer will most capably handle litigation, or employment, or international operations. Unless the general counsel who makes those decisions takes a fair amount of time to make those assessments with sufficient knowledge of the contenders in the other company, it is very likely that lawyers he or she knows will be selected (See my post of Jan. 30, 2009: balanced mix at Bank of NY – Mellon.).

Another observation is that these terminations took place four months after announcement of the acquisition. I do not know whether internally people knew much sooner, nor if there have been layoffs already in the legal department(s), but four months is a long time for people to hang fire.

When the Bank of New York — Mellon Corp. merger closed in July 2007, Carl Krasik, the general counsel, had to meld 150 lawyers from two very anxious, legal departments into one legal team.

According to an article on Law.com, Krasik structured the merged department based on merit, lawyering skills and the company’s needs. He named three deputy general counsel and divided the legal duties among them — Matthew Biben (from BNY) would oversee all litigation and corporate governance; Raymond Dorado (from BNY) would be legally responsible for all nonasset-and-wealth management businesses; and James Gockley (from Mellon) would preside over asset and private wealth management.

In naming those three, Krasik properly started from the top down with his deputy general counsel (See my post of Nov. 9, 2005: Miriam Rivera, Deputy General Counsel of Google; Jan. 4, 2006: Nancy Anderson, DGC of Microsoft; Aug. 14, 2006: the former chief auditor of Mellon Bank; March 6, 2007: Mark Morril of Viacom; April 13, 2007: William Mostyn of Bank of America; Nov. 27, 2007: Lucy Fato of Marsh McLennan; and Nov. 20, 2007: ConocoPhilips.).