Articles Posted in Talent

In The Financial Times (May 19, 2005) Patti Waldmeir speculated about whether corporate directors need independent counsel – not from the law department – only from time to time or whether in our Sarbanes-Oxley world as “some legal experts believe permanent independent counsel will become a fixture.” (See also my post on June 15, 2005 regarding SOX legal costs.) Waldmeir complained about the lack of data on boards hiring their own firms, but she did not lack for opinions on all sides from various experts.

My first thought went to the cost of such counsel, and whether the poor general counsel who is charged with managing all spending on law firms will have any say in board retentions and fees. My second thought went to conflicts of interest, and whether outside counsel retained by the board will be able to know if they are in any conflict situations. Then, too, what about the gap independent retention must create; the board may not want the general counsel even to know about some legal thorns on which it seeks guidance. My final went to the complications that could arise if different directors want their own counselor, or if audit committees, for example, want their own. To quote the Grinch: “He puzzled and puzzled ‘til his puzzler was sore.”

“General counsel are no longer measured by their legal prowess,” blares Corporate Legal Times in its July 2005 survey of law department – law firm sentiment, “but by their business acumen.” How silly!

If you thought that “business acumen” means how skillfully they apply the law to the business environment of their company or understand that business, you might be closer to a truthful statement, but according to the article (July 2005 at 37) you are wrong. How well GCs manage to a budget matters more than how well they apply the law or understand the business. I disagree completely.

To say that the CEO and CFO are pressuring general counsel to squeeze costs falls a long way from saying that protecting the company legally no longer counts as the primary objective. Neither in hiring outside counsel nor in running a law department does a general counsel privilege cost reduction if quality and results are at risk of slipping below professional expectations. Legal ethics, professional training, the in-house culture, and career longevity put quality of legal insights over bean counting, cost shaving.

Consider this quote: “Numerous studies, however, have shown that being a superstar performer versus a poor performer is situational. More specifically, people generally perform as superstars when their work engages their best talent, skill, capability, and passion.” The Professional Services Firm Bible, John Baschab and John Piot, Eds. at pg 286. Setting aside the point of situational fit, note the definitions and the clarity they bring to law department talent development.

“Talent” is the natural endowment of a person. The Gallup organization has identified 34 talent themes that explain the differences between how people relate to one another and why different people will excel or fall short based on various settings. The themes include 7 under “Relating,” 6 under “Impacting,” 9 under “Striving,” and 12 under “Thinking.”

“Capability” is the potential for future development of a person’s talents into skills and capabilities.

The authors of Deep Smarts: How to Cultivate and Transfer Enduring Business Wisdom, Dorothy Leonard and Walter Swap define the role of knowledge coaches. Law departments should develop and reward knowledge coaches and colleagues who can shape their learning. Mentoring, by the way, implies more personal counseling and socialization, whereas coaching implies more knowledge and skills training. They add provocatively that “a consulting company we know encourages coaching by promoting only those employees who have trained someone to take their place.”

The co-authors discuss extensively how to make available knowledge coaches. As we work on more projects, a knowledge coach can help us extract the most from the experience.

USA Today (June 21, 2005 at 1B) described the Gallup Organization’s so-called Q12 questionnaire that measures employee engagement. Engagement has to do with understanding, liking, and committing to one’s job. Since 2002, 332 companies have paid Gallup to administer the Q12 instrument, gaining responses from among others 17,406 VP and above executives.

Disturbingly, among that large group of executives nearly one in ten is “actively disengaged … beyond the point of even going through the motions.” Quite plausibly the executive group included more than 300 general counsel (one per company) and some other officer-level lawyers. There seems no a priori reason to hope that those top management lawyers enjoy engagement levels higher than other executives.

I haven’t heard of or consulted to professionally depressed (disengaged) general counsel, but the law departments of this company must have their share, if the Gallup findings are generally valid and hold specifically for the subset of CLOs.

In my post of May 14, 2005 I exceedingly roughly estimated the loss when a lawyer leaves a law department – a hair over $100,000. I based the SWAG on ABA data about law firm turnover costs. Now, new data suggests the law firm costs are twice as high, so I suspect my law department estimates were too low.

Law Practice, in its June 2005 issue at 7, cited data from Catalyst, a nonprofit research organization [http://cba.org/CBA/EPIIgram/April 2005]. Among Canadian law firms of 25 lawyers or more, the turnover loss comes to twice the cost of the average associate’s annual salary.

“Stress-related illness is now the leading cause of long-term absence from work among non-manual workers,” according to the Financial Times (April 19, 2005 at pg. 12). The article cited a study by the UK’s Chartered Institute of Personnel and Development.

Stress stalks the corridors and cubicles of law departments. Piles of documents to review, demands on Blackberries for instant responses from many clients, bean-counting pressures to control costs, competition for promotion, conflicting messages regarding expectations and roles – the stressometer can shoot heart-stoppingly high.

British Petroleum, in collaboration with others, has devised an online risk assessment tool. If a lawyer were to answer its questions, it would produce a report identifying the lawyer’s stress level as “very,” “a bit,” or “at peace with the world.” According to the article, the software “indicates which forms of pressure are causing the most stress, suggests solutions and gives links to detailed advice” on the intranet of British Petroleum.

A study of a city Law Department (Austin, Texas) wrote that “[r]ecommended best practice advisories suggest a ratio of one management attorney for every eight to ten attorneys.” The report cites its own analysis and an article by Altman Weil. [http://www.ci.austin.tx.us/auditor at pg. 34] By that measure, an 18-to- 22 lawyer municipal law department should have only two managers with lawyer reports.

I am surprised at so wide a span of control. Perhaps in government this ratio finds support, but in corporate law departments, this ratio is too wide; spans of control extend more to four-to-six lawyers. By span of control, I mean lawyers who report to another lawyer and are evaluated and directed by that senior (managing) lawyer.

A lawyer who reports to a business unit executive faces a presumption AGAINST being able to assert the privilege. This according to the May/June 2005 issue of Business Law Today (pg. 23), quoting from a 1998 case:”[t]here is a presumption that a lawyer in the legal department or working for the general counsel is most often giving legal advice…” [Rees Morrison: what about tax counsel reporting to the CFO?]

By contrast, paraphrasing the same decision, the article explaines that if the in-house counsel “also works under a business unit of the corporation or otherwise acts in some management role… then the opposite presumption arises – the communication was not for the purpose of obtaining legal advice.”

Jeopardizing the attorney-client privilege argues for having all practicing lawyers report up to the general counsel. Even so, does the risk darken the advantages of having lawyers dedicated to support particular business units? Is that “working under a business unit?” At the extreme, where inside lawyers want a seat at the table of management, does this pull the chair of privilege out from under them?

In the 2005 European Law Department Survey (with Laurence Simons), to date 17 departments have participated in both. For the absolute numbers of lawyers reporting to the general counsel in Europe, the median change was zero: four departments had the same number of lawyers both years. Five departments had one more or one less lawyer; four went up or down by two lawyers; one by three lawyers. The extremes were found with one law department that reported 26 more lawyers, and one lost 21 lawyers.

As a percentage of the 2004 numbers, the changes were much more significant. Eight departments had less than a 10% shift in staff; two less than 21%; four less than 31%; and five with a lawyer staffing shift of 30% or more from the 2004 number.

Admittedly a small sample, but still the changes in just one year in the number of lawyers – somewhat nominally but quite a bit as a percentage – are in total quite dramatic.