Articles Posted in Talent

“Any three workers in a group performing similar tasks earn substantially more than any other two.” This quote from the NY Times, April 25, 2010 at BU4, befuddled me. The author, a respected economist at Cornell, explains that while economic theory holds that the combined salaries of the two best Associate General Counsel should be higher than the combined salaries of the bottom three AGCs, in reality they do not. Far from it. The most productive lawyers at any level are likely paid less than the relative value of what they produce (See my post of Aug.18, 2006: high-quality lawyers are far more productive.).

Prof. Frank speculates that this seeming anomaly continues to exist because good performers care not only about pay but also about status. Accordingly, in exchange for admiration and exaltation they accept the nominally inequitable compensation. All of this goes to empirical data that I do not have on how well in-house pay matches ability and productivity.

Trevor Faure, author of The Smarter Legal Model: more from less (Practical Law 2010) devotes pages 50-66 of his book to the basic principles of neuro-linguistic program (NLP). I have questioned the utility of NLP (See my post of Oct. 21, 2005: neuro-linguistic programming.), but perhaps the set of beliefs and techniques that it encompasses deserves further consideration.

For general counsel and others who are so inclined, many primers are available on NLP.

No manager can control an independent contractor (law firm lawyer, temporary hire, consultant, vendor) as well as an employee. Each external worker has interests that diverge from the manager’s to some degree. Even employees pursue their own interests. With both external hires and internal hires, the ever-present risks and how to mitigate them are the topic of agency theory (See my post of July 14, 2006: adverse selection; Aug. 13, 2006: moral hazard; Jan. 16, 2006: risk aversion and the principle-agent problem; Jan. 28, 2007: agency theory doesn’t translate from economics to law departments; Jan. 1, 2008: elements of agency theory that shed light on law department management; Jan. 1, 2008: agency theory part II: adverse selection; and Feb. 9, 2008: adverse selection.).

Almost always, a conflict of interest between a law firm and a client implicates agency theory (See my post of April 20, 2008: conflicts of interest with 24 references.).

The theory applies to many aspects of legal department management and economics. Various means are available to try to align the interests of the agent with those of the law department (and company), such as fee arrangements, bonuses, performance measurement, information reporting, procedures, and fear of firing.

A law review article, based on empirical research, makes a good case for the vital role of general counsel when a company’s legal problems come to the unwanted attention of the public. Public relations plays a crucial role when there is a crisis or harsh scrutiny in the press and the article makes a strong case for the top lawyer to be on top of the crisis.

The article, written by Prof. Michele DeStefano Beardslee, is in the Georgetown J. of Legal Ethics, Fall 2009 at 1259. Prof. Beardslee interviewed 39 general counsels of S&P 500 corporations and obtained survey responses from 139 of them. Of the survey respondents, 12 percent of them directly oversee the PR department (at 1287).

My gut reaction is that general counsel should NOT carry the cross during a crisis. A legalist view of the world can create problems. Just because a person is well-spoken, intelligent, and disciplined does not make him or her – a top lawyer – a good spokesperson for a company in trouble.

Based on a survey of large US legal departments, the average number of years a general counsel occupied that position was 4.6 years. The median was even shorter, a mere three years. This data comes from a survey during 2007 of Fortune 500 legal departments and is reported in a paper presented by Prof. Michele Beardslee at the Georgetown Conference on the Future of Law Firms at 19.

The tenures seem too short. It is unusual for general counsel of large companies to leave other than by retirement so less than five years in the job strikes me as too short (See my post of Aug. 14, 2005: suggests around seven years average tenure for GCs of major companies; and Nov. 11, 2005 on tenure.).

But who am I to argue with a statistic?

My friend Brad Blickstein,head of the Blickstein Group, wanted to supplement my recent post about law department administrators who mediate between the legal function and other support functions. I had mentioned the profusion of titles for administrators so he helpfully sent a partial list of responses to the question “What is your title” from The Second Annual Law Department Operation Survey:

1. Associate Vice President, Operations
2. AVP-Financial Reporting & Administration

One of the metrics that came out of a survey conducted by the Harvard Law School Center on Lawyers and the Professional Services Industry tells us the provenance of new general counsel. A table from an unpublished article by four authors from the Harvard Center (at 19), gives results from 139 companies in the S&P 500. Actually, however, the figure they cite comes from the American Lawyer 2007 Survey of Fortune 500 Legal Departments.

The internal promotion figure is 56.4 percent, meaning that in slightly more than half of legal departments in the Fortune 500 the new general counsel came from the ranks of the company’s legal department, the remainder presumably coming from another legal department or a law firm. You could view that fifty-fifty figure as an abject failure of succession planning. Clearly, many Boards and CEOs do not think the internal talent pool is deep enough.

By the way, here is the explanation of the S&P 500 (“a committee of analysts at Standard & Poor’s selects the S&P 500 from among companies whose stock trades on the New York Stock Exchange or Nasdaq with the goal of including a representative selection of industries in the US economy; most companies are US.”).

Aaron Van Nice, Director of Operations for the legal department of Baxter International, will be speaking at Mitratech’s upcoming Interact conference. The conference will take place May 16-19, but I read Van Nice’s bio in the program materials.

Among his many responsibilities, “Mr. Van Nice has primary responsibility for being liaison between other corporate staff (IT, Finance, HR, and Facilities) and the legal department.” That go-between role deserves mention.

Operations Managers in large legal departments (aka Law Department Administrators, Business Managers) have many roles (See my post of Feb.13, 2008 administrators with 21 references.). The plethora of titles intimates their wide range of responsibilities and the breadth of both their backgrounds and influence.

The general counsel I interview can always rank their direct reports in terms of their ability to take on the general counsel’s position. Some they recognize as very strong candidates (“X is my likely heir apparent.”) while others are pegged as workmanlike lawyers who will never make the jump. Most general counsel have some sense that they should assign broader responsibilities to their leading lights and to let them know, in some fashion, that they are contenders. In fact, succession management is a muted version of high-potential programs.

But only in the largest companies, with demanding HR practices, must general counsel formally state succession candidates for their own position, let alone the positions just below (See my post of May 1, 2005: who will succeed a lawyer; July 31, 2005: succession planning; Oct. 10, 2005: politics and succession planning; Jan. 4, 2006: hallmark of a robust performance management system; June 5, 2006: general counsel succession planning; and Oct. 19, 2008: deleterious effect of turnover.). In well-run companies, it is incumbent on a manager to rank succession candidates and explain what those candidates need to do be promoted.

A publication of the law firm of Butler Snow has in its Pro Te: Solutio, Jan. 2010 at 13, an impressive three-page summary of the requirements in each state “governing admission of out-of-state attorneys who represent business organizations as in-house counsel within the forum state.”

Shannon Hoffert compiled the list and I commend it to those readers who may be concerned about their professional legitimacy within the state where they practice law (See my post of Dec. 17, 2007: hullabaloo in New Jersey over in-house bar admissions; and May 31, 2005: obligation of legal department to track admission status of its lawyers.).