Articles Posted in Structure

In his description of the legal reporting lines at General Electric, Ben Heineman writes that inside lawyers “have a direct line to [their] business leader and a strong dotted line to [the general counsel] me,” Corp. Counsel, Vol. 13, April 2006 at 87. It is “strong dotted” because “both the business leader and I have to agree to hire (I produce the candidate slates), but either can fire” (See my post of March 1, 2006 on function and dotted line reporting.)

Since Heineman describes the GE compensation scheme but says nothing about who sets compensation or awards bonuses for the business lawyer, it is possible that those decisions are the prerogative of the business leader. If that is so, then a strong dotted line consists of not the full powers to hire, fire, pay, and promote, but the ability to hire jointly from the GC’s list and to fire unilaterally.

The latest Hildebrandt Law Department Survey shows that the median number of lawyers per secretary was four. Four?! Only a few years ago that ratio was closer to two. What’s going on?

Three reasons, particularly, account for the shift. The storm surge of e-mail and Blackberry messages has scaled back the number of letters and memos. Headcount constraints have cut more sharply into the secretarial support ranks than into the lawyer ranks. The more recent lawyers can all type proficiently and would prefer to do their own drafts and revisions.

Some secondary shifts in work practices account for some of the reduction in secretarial support. Electronic documents obviate filing. It may be that some paralegals are doing a bit of work that secretaries formerly did or that secretaries are being treated as paralegals for pay and reporting purposes, but are continuing to do much the same work as they did previously. A few law departments with lawyers located at business units may also rely on business unit secretarial support.

In February 2003, Legal Director and Baker & McKenzie questioned more than 100 heads of legal and general counsel at leading multinational companies with operations in Europe. The summary of findings has a number of intriguing points on reporting lines (See my post of April 12, 2006, for their findings on other views.)

Two out of every five heads of legal “aspire to be a legal director sitting on the board.” Some five percent have ambitions to be the CEO (See my post of Jan. 27, 2006 about GC promotions and April 10, 2006 with Morsel 21.), while four percent would like to become the company secretary. In contrast, in the US, around three-quarters of all US GCs are also the corporate secretary. Very few GCs on this side of the Atlantic are on the Board of Directors of their company

One third of these heads of legal sit on their company’s management committee, which is a much lower percentage than a similar group of big-company GCs in the US would report.

Accenture’s legal department, with 370 members around the world, has two practices, both of which are unusual, that help it maintain cohesiveness. Its Leadership Council, where 50 senior lawyers meet at least monthly in web-based conferences, stands out. Going beyond the direct reports to the general counsel, that group also meets in person at least once a year. This is described in CounseltoCounsel, March 2006 at 26.

Turn to the second unusual feature of the Accenture law department. It has identified a team of “market makers.” The team includes a dozen senior lawyers who work on the biggest, toughest deals. The team meets together at least once a year.

James Diggs, the general counsel of PPG Industries, spoke to a reporter about the recent restructuring of his 37-lawyer department, GC Mid-Atlantic, March 2006 at 24. In that retelling, we can pick out three important points about law department structure.

For the first point, Diggs explains that a new CEO combined the company’s 15 business units into five “clusters.” Diggs restructured the law department to have a “mini-GC” responsible for the legal work of each cluster. That lawyer serves as the Single Point of Contact (SPOC) for the top executives of the group which that lawyer serves. The point is, the restructuring and re-aligning of the law department followed the changes in the client group.

Secondly, Diggs abandoned the old system of “functional hierarchies,” where lawyers practiced in “siloed groups of specialty lawyers,” such as intellectual property, labor and employment, commercial, and litigation. Under the new system those specialists report to a cluster leader, dubbed “corporate counsel.” That point is, legal/functional orientations give way to business-unit oriented groups.

“We have silos in this law department!” I hear that complaint during most of my projects, and it is always pejorative. “The lawyers supporting the widget group don’t know, let alone help, the lawyers supporting the framzjigy group.” Turf wars, balkanization, empires, fiefdoms, hoarded information – never a kind word.

I recommend assigning lawyers to support specific business units (See my posts of Dec. 21, 2005 on “majors” and “minors;” July 30, 2005 on dual reporting of specialist lawyers; July 31, 2005 on business unit lawyers who have specialist lawyers in their midst; and Feb. 15, 2006 on matrix reporting.). And yet when you do – up pops another silo.

You can’t have it both ways. Lawyers who work for one client group have little inclination to pitch in on behalf of another (See my post of March 5, 2005 on the rarity of altruistic information sharing.).

The web site of Network Frontiers summarizes an article in CPM Global Assurance magazine that discusses systems continuity efforts by an information technology function. The article uses the term “emergency management professions,” and includes within them “business continuity, security, disaster recovery, crisis management etc. and you could easily argue that compliance fits within the category.” (See my posts of May 20, July 31, Oct. 21, and Nov. 1, 2005 on whether a general counsel should also manage compliance and cognate function.)

Often, when law departments are at their reactive worst, they too could be deemd emergency management functions.

For law departments with more than, say, 15 lawyers, the median ratio is three lawyers for every paralegal. What that median conceals, however, are wide disparities among different practice areas.

My consulting experience suggests that the highest ratios of lawyers per paralegal are in tax and M&A. Somewhat more paralegals per lawyer would likely be found in commercial, transactional groups of lawyers – and even more so where paralegals administer contracts – and in litigation, if the law department handles much discovery work. The lowest ratios of lawyers to paralegals, even to the point where paralegals outnumber lawyers, are found in such document-intensive practices as real estate, corporate secretary, and immigration (See my post of Aug. 21, 2005 on the differences, if any, between paralegal and legal assistant.).

John Deere’s law department supports dual development tracks, according to “Leading Practices in Job Titles for In-House Lawyers: What Companies are Doing” (Assoc. Corp. Counsel, Aug. 2005 at 14).

It’s logical, isn’t it, that lawyers who manage other lawyers will tend to be more generalists, while those lawyers who concentrate in an area of law and specialize in it will tend not to have lawyers reporting to them. (See my post of July 30, 2005 on specialists co-reporting.)

The problem arises where pay and promotions depend on accumulating people who report to you. For many law departments with specialists, that’s wrong-headed.