Articles Posted in Tools

The Kreller Group specializes in providing due diligence and background investigations for companies, according to a profile in Met. Corp. Counsel, Vol. 16, May 2008 at 38. They serve as private-eyes for companies and are likely to be retained by law department attorneys. I mention them because they are a genus of service provider that I haven’t written about (See my posts of July 21, 2006: cottage industries and 10 references cited.).

While on the topic of unusual vendors, I should mention the specialist companies that help luxury-goods manufacturers locate, authenticate, and dispose of counterfeit goods.

One of the most common management activities among law departments, of all sizes, is the offsite (aka retreat, legal conference, annual meeting, etc.). As my article describes , these gatherings can have wonderful events.

I have just completed helping with two retreats, one for a law department of three lawyers and one of thirty lawyers and I feel even more the importance of doing them right.

More and more I feel that (1) getting to know each other is by far the most important activity, (2) boredom rules the day for most people most of the time when they attend a retreat, and (3) for most of the attendees, it is a chore. Sigh, because the potential is so great (See my post of Feb. 12, 2008: with eight references cited; Feb. 17, 2008 #3: Insights Preference Evaluator as a tool at a retreat; and Feb. 25, 2008: virtual reality games as a retreat.).

Mehul Patel, the general manager of Axiom, published an article in the National Law Journal (April 28, 2008). He argues that pressures on law firms will force them to change, with two of those pressures being offshoring and “new-model firms.” Summing up his piece, he makes a dramatic statement: “After decades of stasis, the legal industry is changing quickly.”

I question both ends of that claim. Over the past two decades, three big changes in the field are the dramatic increase in size and quality of law departments, the introduction of technology into all aspects of their operations, and the acceptance of business-management concepts such as budgets, transparency, competitive bidding, and procurement. Stasis is not the word for such fundamental changes.

As to the rapid pace of change Patel asserts is happening right now, I don’t see that either. There have always been front runners with new ideas to change the relationships between law firms and law departments. The drumbeat of innovation and new application has included task-based billing, matter management systems, convergence, partnering, competitive bids, fixed fees, single-firm selections, e-billing – to name a few new management steps in the past few years, evidencing a constant pace of change.

In Edward Russell-Walling, 50 Management ideas you really need to know (Quercus 2007), the author mentions this so-called law (at 11). Data should serve as aids to analysis (See my post of June 14, 2007: basic good practices regarding data.).

The essence of the law is that once a social or economic indicator becomes a target for the purpose of conducting social or economic policy, then it loses the information content that would qualify it to play such a role. The law was named for its developer, Charles Goodhart (a chief economic advisor to the Bank of England).

Goodhart’s Law suggests that once a general counsel picks certain metrics to combine as a scorecard, the metrics begin to lose their value to inform. The reason is that the lawyers in the department start to “teach to the test,” to alter practices that the metrics used to say something about, to intervene in the reporting and analysis of the metrics, and to nudge them closer to the implicit or explicit goal.

Edward Russell-Walling, 50 Management ideas you really need to know (Quercus 2007) at 49, differentiates three items, each of which a general counsel might seize upon. A mission statement articulates “our purpose, why we’re in business”; our values: “our style, what is unchanging and important about the way we work”; and our vision: “our goals, where we want to be in X years.”

As to law departments and mission statements, I have weighed in, and not positively (See my post of March 20, 2008: 18 references cited on mission statements.). My grievance is that mission statements are full of sound and fury … you know the rest.

Values declarations of law departments have triggered several thoughts (See my posts of Aug. 8, 2005: part of McKinsey 7S model; Dec. 19, 2005: active inertia and “beliefs that inspire, unify; and identify”; Feb. 7, 2006: values assessment at Cox Communications; May 31, 2006: all management reveals values; Sept. 17, 2006: expressed and revealed preferences; Oct. 6, 2006: Code of Conduct expresses values; Nov. 26, 2006: memes and memetics; and Jan. 10, 2008: employee engagement and values.).

It is entirely probably that 80 percent of the value in this blog – perhaps wildly optimistic – exists in 20 percent of the posts. Why not, since Pareto’s Rule crops up everywhere (See my post of June 27, 2007 on Pareto’s idea and an illustration from timekeepers on a matter or for a client.).

Here are several metrics that probably honor the rule:

1. Timekeepers and hours on a firm’s bills (See my posts of Jan. 21, 2008: those who bill short time periods on matters; and Sept. 4, 2005 and Nov. 8, 2005: to the same point.).

In 1987, Robert S. Kaplan and William Bruns introduced to business managers the tool of activity-based costing (ABC). The effort purports to trace indirect costs, such as legal ones, back to individual products or services, according to Edward Russell-Walling, 50 Management ideas your really need to know (Quercus) at 53. It sounds enticing to try to attribute legal costs to some output of a company (See my posts of Dec. 3, 2007: companies don’t tag legal fees to corporate initiatives; June 16, 2006: an application of ABC to e-mail; and April 12, 2006: applied to Total Cost of Electronic Discovery.). Too wonderful, however, to be realistic.

The ABC process requires arbitrary starting and ending points. What does that mean?. If a law department helps its client set up a company in a new country, it is entirely possible to track internal time spent on that assignment and multiply that time by some fully-loaded cost. It is also straightforward to add in the costs of external counsel.

But do you also chip in something for the cost of the matter management software that lets you track all this? Do you attribute something to subsequent, associated legal costs? Should you account for whatever was done in the past that enabled you to find and choose the local law firm?

Most general counsel, when they think of benchmarks, have in mind only the typical ratios of numbers. Total legal spending as a percentage of revenue leads the parade (See my post of Dec. 19, 2007: within an industry.), followed by such stalwarts as lawyers per billion of revenue (See my post of Jan. 18, 2007: differences between industries in lawyers per billion.), and inside spending in proportion to outside spending (See my post of Dec. 5, 2007: 60/40 ratio of outside-to-inside spending.).

However, devotees of benchmarking urge it as a method better suited to learn about processes. A process, according to Edward Russell-Walling, 50 Management ideas your really need to know (Quercus) at 14, is a group of tasks while a group of processes is a system. In other words, don’t confuse process benchmarking with taking part in a survey that merely gathers numbers. In my experience, very few law departments formally benchmark key processes, such as how to manage large numbers of contracts. As one step in doing so, you need to choose the right benchmarking partner if you hope to obtain useful insights about a process.

The primary point of a database should be to allow managers in a law department to see the department’s work more clearly and to manage it more effectively – to take better decisions – based on the data (See my post of Sept. 10, 2005: myths of matter management systems.). If all a database does is collect data and report it, to be sure some purposes are served, but the most effective use of that database remains untapped.

Hence, for example, a matter management system provides some payback if it allows a general counsel to collect spending information more easily and compile reports on that spend. The more valuable level, analysis, can reveal concentration of spending, which might suggest opportunities to obtain discounts from the firms paid the most or possible firms to cease using; imbalanced workloads, which might suggest remedial training, different hiring patterns, or different decisions about how work is assigned; and the efficacy of different billing and bill review techniques.

Consolidation of data helps, effective reports help more, but most helpful are analyses of data and appropriate action.

Matter management systems have ample reporting capabilities, but inevitably various people in legal departments want reports that are not producible from the canned set. The report formats that come with the package need to be tweaked. Or a pre-defined report does not contain all of the information you need. Or a report could use some polishing and jazzing up. To make such changes, most law department analysts who work with a matter management system learn to export the data from that system into a spreadsheet.

With the data in a spreadsheet, analysts can sort by whatever data they want to, they can reformat the data, such as with highlighting, color, or bolding. They can do additional calculations, such as ratios. They can alter the report itself, such as with page breaks and borders and they can combine information from other sources.

All matter management systems can export data to .cvs files or Excel files; all law departments that have a system, I venture to say, supplement their reporting with spreadsheets (See my post of Aug. 10, 2007: barebones management system in Excel.).