Articles Posted in Talent

Some compensation surveys gather data about the amounts awarded in-house lawyers for stock options and restricted stock grants. Yet many law department managers don’t understand how accountants can place a value on those equity awards.

To value a call option, many people use the Black-Scholes formula. That formula uses five inputs: the stock’s price, the option exercise price, the time to expiration, the risk-free interest rate, an the standard deviation of stock returns [Economic Approaches to Intellectual Property: Policy, Litigation, and Management (NERA Econ. Consulting 2005, at 322)].

Quite similar inputs are used for valuing a real option (See my post of Dec. 20, 2005.)

If a lawyer can’t manage others, if a paralegal never gets the hang of litigation document review, if a secretary proofreads horribly, they may be blissfully ignorant, but they leave carnage all around. Incompetents don’t see how poor their own performance is and they can’t recognize or learn from the accomplished performances of others.

According to a summary in the Harvard Bus. Review, Vol. 83, Dec 2005, at 19 of 1999 research “incompetent people don’t perform up to speed, don’t recognize their lack of competence, and don’t recognize the competence of others.”

Worse, ineptness in a law department employee can harm others, including “if incompetent people have people reporting to them, their poor judgment may damage careers besides their own.”

In-house counsel seeking an innovative solution need not wait for the muse, they can goose it. Here are some ways to think beyond the

• Challenge defensiveness and “we tried it”

• Brainstorm and use scenarios (See my post of Dec. 9, 2005.)

A study, reported on Columbia ideas@work, distinguishes between two kinds of diversity. Diversity of social networks varies according to how commonly and well team members knew each other before joining the team; diversity of demographics varies according to race, age, gender, national origin, religion and other mostly-innate characteristics.

The research, which looked at 1,518 project teams at a contract R&D firm and measured team effectiveness by timely completion of its project, showed that demographic diversity had a negative effect on “internal density,” whereby team members already part of other team members’ networks “get a running start in working together.” Social network diversity had no effect on internal density.

This research suggests that a law department manager staffing a team for demographic mix will create a less effective team than if the manager staffs it with members who previously knew and worked with each other. (See my post of Jan. 4, 2005 on virtual teams.)

A piece discussing management of radical new business ideas (NY Times, Jan. 1, 2006 at B4) stridently claims that “you must hire an outsider to run the breakthrough idea because insiders are always wedded to orthodoxy and the inside success formula.”

If the law department has stagnated, quality has sagged, and it has squandered its clients’ confidence, should the Board and CEO to bring in a general counsel from outside the company? After all, “hiring from within kills breakthrough innovation.” I am sympathetic to this assertion, because someone imbued with the fine-china tradition of the department may find it hard to break glass.

A group that reviewed the DC Office of Corporation Counsel back in 2000 recommended solid practices to transform its evaluation system for attorneys and support staff into a performance management system. Key elements of that system were that it should be:

• based on a core competency model;

• aligned with the law department’s strategic objectives;

Often, in law departments, seemingly petty differences cause rancorous discord. “He has an office two floor tiles longer than mine,” “She got promoted to Chief Assistant Senior Counsel, while I am only Assistant Senior Counsel,” “I got a bonus of 17.2 percent while the other lawyer got a 17.4 percent bonus.”

It’s not fair! Justice among lawyers has not prevailed!

Complaints such as these have a genetic basis. As reported in the Economist, Dec. 24, 2005 at Survey 9-10, research shows that when we perceive a slight to ourselves, we quickly, intuitively, and loudly react with to injustice. It has been evolutionarily valuable for humans, living in small tribes and interacting frequently, to detect even minute discriminations in status and treatment. In-house counsel will continue to gripe over who sits closest to the general counsel at staff meetings.

I thought I would planet an idea. Only the most mercurial personality would concur that the Venus de Milo of talent management is something we can unearth. Some traits, like avoiding punishment and martial arts, lead to success, by Jove, but the saturnalia of managing people is neither that simple nor that fun.

As Uranus was a Titan usurped by his son, so too our cherished beliefs get overthrown by an ocean of research and writing, worthy of Neptune’s realm, a wealth of insights about the importance of people that becomes an intellectual plutocracy.

Sun of a gun, none of this is startling or a shot to the solar plexus of understanding.

A paper recently published by three academics, in the Consulting Psychology Journal: Practice and Research (2005), 57, 196-209 can answer every question imaginable about this method of assessment.

Drawing on 28 published papers, the three authors arranged their findings under 27 questions. The questions include “Does it work?,” “Why does it work?,” and “How should they be used?.” Some of the improvements researchers have recorded seem more due to regression to the mean than to the evaluations.

Law departments should include 360 degree evaluations in their personnel arsenal.

A false dichotomy, for sure, since the wise manager addresses a report’s above-normal and below-normal characteristics. Still, how pragmatic is it to lean toward one pole or the other? I favor pushing someone’s stronger traits. What good will we see from raising everyone to average?

Aside from voicing that bias, let me raise some tangential points for you to marinate. How accurately does a manager identify someone’s “strengths” or “weaknesses” if both have much to do in actual fact with the person’s position (See my post of Oct. 8, 2005 on position’s determining success.) If all of us operate at different points on spectra of measurable behavior, what privileges any particular mix? (For more on psychometric instruments and law departments, see my posts of April 18, 2005 on MBTI scores of lawyers, April 9, 2005 on Hartman-Kinsel, and Aug. 21, 2005 on MBTI, and Oct. 21, 2005.)

On a different tack, isn’t the implicit assumption that a given strength or weakness either benefits or harms the company – but then, how do we know the company’s needs? It also seems arguably true that some people, by their personality or psychological makeup, can absorb and construct from criticism, whereas others cannot.