A sidebar for an article on overseas legal teams, published in the ACC Docket, Vol. 26, Nov. 2008 at 51, pulls together several arguments in favor of adding a lawyer to your staff in a foreign country.
Strategy + bus., Iss. 53, Winter 2008 at 52, has a thoughtful, metrics-based analysis of how global dispersal of a company’s research and development correlates to its improved financial performance. “Overall, our analysis suggests that companies taking a more aggressive posture in globalizing their R&D footprint enjoy stronger sustained financial performance.” The benefits from locating researchers around the globe include lower costs, access to better talent, as well as market proximity and insight.
Quite possibly and similarly, globally dispersed law departments also produce stronger metrics of legal performance. Local lawyers are closer to customers and clients, they know national laws better, they can lower costs with less expensive personnel, and legal managers may push themselves to lead better because of the challenges of global operations.
Extend the reasoning of the article to total legal spending. If someone could compile benchmark data from a set of law departments on how much is spent on inside and outside lawyers by country, some benchmarking analyst should be able to see whether global legal reach increases efficiency.
The controversy has been quelled: the top of the small law department ranges is exactly five lawyers, no more, no less (See my post of Dec. 27, 2008: arguments and metrics for that conclusion regarding “small”.). Next, let us solemnly affirm that between 6 and 12 lawyers constitutes a “medium” size department.
That law departments with more than 12 lawyers should be deemed “large” might strike many people as not so prepossessing, but that category might account for a third of the lawyers employed in the United States (See my post of Dec. 23, 2008: 61% of one group of surveyed in-house lawyers served companies that reported less than $1 billion of revenue.).
With a consensus on size adjectives, surveys and journalists would have comparability. Most benchmarkers create groupings after examining the number and size of the participants they attracted. The ranges vary from year to year because the analysts juggle the groupings so that each has in it a reasonable number of law departments. Journalists use small, medium, and large very loosely, often based on the companies in the region they cover. A consistent terminology to describe legal teams by number of lawyers would help greatly.
General counsel, consultants, vendors and others who swim in the law department pool would be better off if there were a generally-used definition of small law departments. Herewith are some of my thoughts on this small step toward standards.
As a starting point, I would argue that number of lawyers stands as the best basis for categorization. Number of total legal staff could serve, but some departments have related functions, like contract administration or claims and their staff of mostly non-lawyers would skew the use of it because of the variability. Also, one of the redoubtable metrics is the ratio of lawyers to non-lawyers, at about one to one, so the lawyer part of that equation speaks for most of the non-lawyer personnel.
To speak of the total spend of law departments won’t work because few law departments disclose the data and outside spend can vary significantly from year to year. Inside spend varies according to cost of living influences. Nor do structural components such as the number of offices create a meaningful distinction.
The chief blogster here would like to know how many US companies have an employed lawyer. I had thought the tipping point where a company hires its first attorney was several hundred millions in revenue, since the overall median of lawyers per billion is about 5. Ergo, put crudely, at $200 million the statistically typical company would add its first lawyer.
Data teased out of the Fulbright & Jaworski 2008 Litigation Trends Survey suggests a revenue threshold half that figure or lower. The data comes from 358 in-house counsel, of which 22 percent work at companies that report revenues under $100 million. (Another 39 percent of them work at companies that report revenues between $100 million and $999 million.) Thus, 85 companies under $100 million have at least one lawyer.
If we knew how many companies in the US have upwards of $100 million in revenue, and if we knew something about participation rates from that cohort in the F&J survey, we might be able to estimate the frequency of law departments in that revenue category. The, we would be able to refine the threshold for the first lawyer and our estimates of how many companies have law departments.
Law department administrators are responsible for operations of the department and a new survey offers many insights into that responsibility (See my post of Feb.13, 2008 administrators with 21 references.).
This post kicks off a series about the First Law Department Operations Survey, published by InsideCounsel and Blickstein Group in cooperation with Huron Consulting Group and David Cambria, Director of Operations, Law Department, Aon Corporation. The survey obtained responses from 50 administrators, although it uses the term “law department operations.” I commend the survey as it addresses a hole in the legal-department metrics market not served by Jon Bellis at Hildebrandt or Dan DiLucchio at Altman Weil.
Three out of four survey respondents report directly to the general counsel. This reporting structure is analogous to the reporting lines of general counsel: in the US somewhat more than three quarters of them report to the CEO (See my post of April 12, 2006: reporting of GCs to CEO.). Given the importance of the role, it is meet and right so to do.
Should transaction-oriented business lawyers, generalists who mostly handle contracts and the range of legal issues that arise for a business unit, also handle the litigation that arises for the client? Most law departments answer no, at least for cases other than the most routine and lowest risk.
Litigation is a specialty and a very expensive one, sometimes played for high stakes. An anti-trust counselor, or indeed any other non-litigation lawyer, may be a very poor manager of litigation. Even worse is a situation where the lawyer’s earlier efforts led to the lawsuit, since they could hardly remain objective during the litigation. Moreover, at a time when discovery of electronically stored information has become so expensive and so fraught with risks, it is better to have a person overseeing that aspect of litigation who is familiar with it.
Then too, at irregular intervals, litigation can consume huge blocks of time and often requires travel. The urgency of trial can drive out the importance of supporting a business unit.
A post earlier this month considered the systemic prospect of headquarters staff shrinking in number (See my post of Nov. 30, 2008: HQ legal groups will shrink *1.). In support of that prediction, consider what happened after the merger of Akzo Nobel and International Chemicals in early 2008. Corp. Counsel, Vol. 15, Dec. 2008 at 111, reports that Akzo Nobel’s general counsel, Jan Karel van der Staay, disbanded the company’s central legal department. Now the lawyers are “situated within the decorative paints, high-performance coatings, and specialty chemicals divisions.”
It is possible that the executives of those divisions still have offices at headquarters, but I suspect that several or most do not. Thus, the lawyers who support them are now also dispersed (See my post of Sept. 19, 2008: smaller ratios of lawyers at HQ for global companies; and Sept. 19, 2008: Bombardier’s dispersed structure.).
Let’s define three kinds of foci for inside lawyers: SPOC, specialist, and majors/minors.
A Single Point of Contact is a lawyer whom clients in a line of business or staff group can call if they do not know which other lawyer to call. A SPOC is like a relationship partner at a law firm (See my post of Oct. 14, 2005: SPOCs; March 23, 2006: SPOCs at PPG Industries; and March 17, 2006: four disadvantages; March 31, 2007: survey data and analysis; Nov. 8, 2007: a way to align with clients; Nov. 16, 2008: international SPOC assignments; and Dec. 7, 2008: BAE Systems*6.).
A specialist lawyer handles all the work for a substantive legal area, such as litigation, employment, collective bargaining, environmental, or patent (See my post of May 5, 2008: specialty lawyers with 30 references.). Law schools teach specialty law.
Philip Bramwell, the recently appointed general counsel of BAE Systems, immediately kicked off a three-year plan to reshape the legal department. According to Corp. Counsel, Vol. 15, Dec. 2008 at 96, Bramwell’s overhaul of the 120-lawyer group includes “making sure each line of business has its own chief counsel, who reports to the general counsel.”
I support a structure where clients in each line of business have a single point of legal contact. It makes it easier for everyone to know whom to call. At the same time, such an arrangement has its problems (See my post of March 17, 2006: four disadvantages of SPOCs; and Sept. 19, 2008: Bombardier and two business unit general counsel.). Upon reflection, I will add another two concerns.
To the extent a lawyer hitches his star to one business unit, as its chief go-to lawyer, that lawyer starts to align with the client, which imperils the lawyer’s objectivity. If a law department has multiple lawyers who serve the business unit, the impetus to counsel in favor of the unit’s top executives will mute.
Law Department Management Blog