Articles Posted in Tools

A paper by Lefki Giannopoulou and Gavin Lawrence discusses several sophisticated techniques for making better litigation decisions. They explain this technique with an example of a decision tree to think through whether to negotiate a settlement or prepare for trial (See my posts of Jan. 17, 2006 and Oct. 24, 2005 on decision trees.). Decision trees suffer from the disadvantage that the number of alternatives can grow almost exponentially and the tree become unwieldy.

The co-authors discuss an alternative: belief nets. “Belief nets are isomorphic with decision trees but are easier to understand and communicate the relationship of all the elements of the problem, and they can cope with substantial sophistication and complexity.” The example they give from the negotiation-litigation decision has four different circles of different sizes as well as two boxes and a diamond each connected by a variety of solid dotted lines. Each geometric figure matches one of the nodes of the decision tree but it is easier to see the total picture no matter how complex.

As part of the material Rachel Taknint, VP – Law Department Planning and Operations & Associate General Counsel of Northwestern Mutual, made available to members of the Association of Life Insurance Counsel (ALIC), she included a summary of the Law Department’s 2007 strategic priorities. Each one is admirable.

Align legal services with Company priorities.

Make processes more efficient.

More ought to be said on Bayesian statistics (See my post of Jan. 20, 2006, with its brief comment.). The breakthrough of Reverend Thomas Bayes (1702-1761), there is now even an International Society for Bayesian Analysis (ISBA).

Bayes first expressed the probability of any event – given that a related event has occurred – as a function of the probabilities of the two events independently and the probability of both events together. Bayes’ theorem can be understood in relation to the probability of being sick, given several pieces of data: a positive test result, p(sΙ+), the probability of receiving a positive test result given that one is sick, p(+׀s), the general probability of being sick, p(s), and the general probability of getting a positive result, p(+). According to Scientific Am., April 2007 at 108, Bayes’ theorem in this situation is p(sΙ+) = p(+׀s) X p(s)/ p(+). Got it?

Two examples of Bayesian calculations for law departments may help. If a law department knows that the probability of its company being sued for employment discrimination five times in any quarter is 40 percent, it knows what is referred to as a prior probability. If two discrimination cases are filed in the first month of a quarter than, Bayesian statistics allows the law department to calculate the posterior probability and its associated odds.

An article in Historically Speaking, Nov./Dec. 2006 at 11, addresses historians but also speaks to those who try to make sense out of how law departments are managed. The author – Prof. Marc Trachtenberg of UCLA – stresses that, contrary to the popular saying, facts do not speak for themselves.

As applied to law departments, someone’s theory governs what “facts” that person picks out. One or more theories shapes how that person interprets those “facts.” Whoever selects “facts,” for example about how a law department identified and addressed a management problem, operates within the constraints of theory, whether articulated or tacit.

“A theory is above all an instrument of analysis, and depending on what the analysis reveals, it can also serve as the basis for interpretation,” notes Trachtenberg. A theory serves to generate a series of specific questions you can only answer by doing empirical research. A theory gives a law department analyst an architecture, an overview, of what might happen and how to figure things out. But each law department, and the legal industry as a whole, needs objective research to confirm “facts” test the plentiful theories that abound.

Management Tools and Trends 2007, at slide 14, reported on by Bain & Company’s Darrell Rigby, lists usage and satisfaction rates from 2006 for 25 well-known management tools. Of those 25, 12 of them general counsel use in various forms. I list them below as they are named and in order of decreasing usage percentage among the executives who responded.

Strategic planning and benchmarking (in the 80% range of usage); mission and vision statements, core competencies, and outsourcing (in the 70% range); business process reengineering, knowledge management, balanced scorecard, and total quality management (each in the 60% range); lean operations at 54 percent; Six Sigma at 40 percent; and offshoring at 37 percent. Admittedly, the penetration of several of these management tools is lower in law departments – especially balanced scorecards, lean operations, Six Sigma and offshoring.

We could even include “shared service centers” in the list, but it’s a stretch because that structure is usually forced on a general counsel.

From an article in the McKinsey Quarterly, 2007 No. 1 at 77: “The fact is that many everyday concepts in business – including leadership, corporate culture, core competencies, and customer orientation – are ambiguous and difficult to define.”

No wonder this blog has had much to say, but has not hazarded any ultimate definitions for these four often-used concepts.

I have launched sallies at aspects of leadership (See my posts of Dec. 5, 2005 and July 18, 2006 on women and leadership; Dec. 19, 2005 about leadership as a key goal; Dec. 21, 2005 on emotional intelligence; April 4, 2006 on Accenture’s Leadership Council; Feb 4, 2006 and Oct. 6, 2006 on leadership generally; May 30, 2006 on neuroscience and leadership; Feb. 4, 2006 on leadership as one of three keys for knowledge workers; March 15, 2006 on Boeing’s leadership attributes; Sept. 27, 2005 on upward evaluations of leaders; Jan. 14, 2007 which questions a general counsel’s leadership role; May 2, 2007 about stress after promotion to a leader’s position; and May 11, 2007 on five leadership practices.).

The Five Percent Trimmed Mean, a descriptive statistic, can help law departments describe such data as their spending patterns, amounts of invoices, cycle times, and internal hours worked. The technique came to my attention in an article by Stephen J. Lubben, “Choosing Corporate Bankruptcy Counsel,” ABI Law Rev., Vol. 14, 391, at 397 (See my posts of June 30, 2006 for more on statistics of dispersion; and Nov. 30, 2005 for definitions of terms that include average, median and mean.).

When a law department has a large set of numbers, but some are very high or very low, the analyst may choose to drop the top and bottom five percent of the numbers and then average the remaining numbers. That trimming leaves the remaining numbers as more representative, less skewed by the omitted extremes. Hence, when you use the Five Percent Trimmed Mean you concentrate on the 90 percent of the data that is in the most normal range.

Those who want to improve the effectiveness of a law department need to attend to its processes. A framework for doing so comes from Michael Hammer in Harvard Bus. Rev., Vol. 85, April 2007 at 111, where he proposes and describes the five key process enablers.

“Design” covers “the comprehensiveness of the specification of how the process is to be executed.” For example, has a law department shown with a process map, manual, and forms how to prepare and distribute litigation hold orders?

“Performers” covers “the people who execute processes, particularly in terms of their skills and knowledge.” Has a department assigned responsibilities for processes as well as seen to training and backup coverage for those members who perform the processes?

If the Six Sigma methodology intrigues you, read the recent piece in Of Counsel, Vol. 26, May 2007 at 7. The article explains how Tyco purportedly used Six Sigma techniques in deliberations that led to its hiring Eversheds (See my post of April 22, 2007 about the arrangement.). Being possessed of no colored belts or six Sigma training, I can’t critique the piece competently. I can say that the senior associate at Eversheds who wrote it poured into it an impressive number of methodological concepts (See my post of March 7, 2006 for explanations of some terminology.).

One step stupefied me. The article mentions that Tyco’s law department focused, among other steps, on the creation of a “Control Chart: a continuing monitor of the variance in the Tyco legal process over time. The results create an alert when there is an unexpected variance that may lead to and eventually cause process defects.” What sense can you make of that pottage?

InsideCounsel, May 2007 at 66, profiles the general counsel of the Dutch chemical company Akzo Nobel. It mentions that Jan Eijsbouts “drastically reduce the number of outside firms uses from hundreds to less than 20.” Two pages later it states that Mark Harding, the high-profile general counsel of Barclays, demanded in 2006 that Barclay’s law firms provide statistics on the gender and ethnic make-up of their staff if they wanted to continue receiving assignments from the bank.” Carrefour’s general counsel, Franck Tassan, has a legal staff of the hundred and 63 people spread over 30 countries (at 71). To integrate that dispersed group, Tassan “successfully establish clear reporting lines from each country’s’ legal directors to his home base in Paris, all the while fostering a sense of community among his multinational team.”

All that is to say that a Dutch law department converges law firms, a British bank aggressively pushes diversity, and a French retailer deals with law department structure and culture. Management challenges in law departments are universal.