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In 2003, the general counsel of Captivate Network identified three ways that law firms could get his attention, including free CLE training and brand awareness. It was the third idea that I particularly noticed in the 2011 supplement to Bob Haig’s Successful Partnering Between Inside and Outside Counsel, Section 4 at note 4.10. A firm can “’Buy’ the corporation’s attention by making business introductions for the company.”

Its website explains that Captivate is a “media solutions company. Its digital programming and advertising network informs and entertains business professionals at work.” So, if a law firm introduced a company that hired Captivate, the general counsel would take note. This is like investment banks that like their legal department to direct work to law firms that refer them clients (See my post of April 26, 2006: also bankers and real estate brokers.). I noted that the six member management team listed on the website of Captivate does not include the general counsel.

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Diversity asked about in RFPs was virtually irrelevant in selection decisions six years ago

The 2011 supplement to Bob Haig’s Successful Partnering Between Inside and Outside Counsel adds a footnote to Section 4 on Selection of Outside Counsel. It cites a 2004 study of in-house counsel by Kirkpatrick & Lockart (now K&L Gates). Regarding diversity in the firms they considered for selection, “the responding corporate counsel acknowledged that diversity was not a key factor when choosing outside counsel, with less than one-half of one percent of their decisions being explained by a firm’s diversity.” The footnote says the data is available at http://www.kl.com/TOM__brochure__2004/media/topofmind__all.pdf but that link does not work. I found a reference to the survey on the firm’s website. It summarized the findings: “In fact, racial diversity ranked below effective communication, working as a team, hourly rates, and working with enjoyable attorneys.

A survey by the same firm two years later seemed to find somewhat more influence (See my post of Jan. 30, 2006: three categories of diversity asked about, and rankings.). It appears still true, from my consulting projects, that diversity efforts and results, along with pro bono involvement, are asked about by law departments far more than the answers influence selections.

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Wonk that I am, to find a different approach to gather and present data gives me a glow. So, when I dug into the PwC Annual Corporate Directors Survey, I glowed. I fastened onto its methodology for the question on topics board members would like to devote more time to (See my post of May 8, 2011: Corp. Bd. Mbr., First Quarter 2011 at 10.).

For each of the topics the survey gave five choices (at 10 of the report): (1) yes, much more time and focus than in the past; (2) yes, but not a great increase from the past; (3) no change, it’s already a major focus; (4) no, I don’t expect any change; and (5) no, we will decrease our time and focus. The report combined the first two and in a previous post I remarked on the ranking of “Compliance and regulatory” as eighth out of nine.

But when you look at the data, three out of four respondents sought no increased focus on this because it is already a major focus. In fact, “Compliance and regulation” is next to the top in terms of current focus. Thus, aware now of the methodology, the negative implication I drew previously was wrong: directors feel they spend ample time on compliance and regulatory issues.

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Boris Groysberg, Chasing Stars: The Myth of Talent and the Portability of Performance (Princeton Univ. 2010) at 127, talks briefly about how an organization, such as a law department, can excel at assimilating new hires. Unfortunately, research about this is scarce: “Little is known about integrating experienced professionals into a new organization.”

Most general counsel probably do not think too long about the post-hire integration of a new head of litigation or a new EMEA regional counsel. Groysberg’s study of equity research stars who change companies found that the most success came to those companies that “had thought deeply about both hiring and assimilation and had drawn up systematic plans to guide both processes” (at 128) (See my post of Aug. 25, 2010: on-boarding with 6 references.).

When a lawyer joins a department, it is too important to be casual, let alone negligent, about how to help that lawyer come up to speed both professionally and socially.

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“Researchers have estimated the cost of losing a seasoned professional as 75-150 percent of the person’s annual salary,” according to Boris Groysberg, Chasing Stars: The Myth of Talent and the Portability of Performance (Princeton Univ. 2010) at 239 (See my post of May 14, 2005: estimate of about $100,000 for inside lawyer; June 15, 2005: upward revision of that estimate; and July 27, 2008 #2: 100-150% of salary of high performer with unique skills.). Those estimates may hold for most in-house lawyers, but not for the top lawyer.

When a general counsel leaves, the loss far exceeds such monetary ones as recruitment, relocation, training, ramping up. The entire ethos of the department alters. Passed over candidates can fester or leave; everyone has to prove themselves all over; established routines change; political elbowing sharpens; and everyone holds their breath (See my post of March 8, 2009: attrition in law departments, with 16 references and one metapost.)

My impression is that most general counsel leave on schedule. They retire with their boots on. Unexpected resignations or terminations – unusual, but they happen – occasion the greatest loss and upheaval.

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Another blog by a general counsel. Frank Fletcher, the general counsel of Nero AG, has started a blog at “LegallyFrank.com”. He plans to make contributions every Sunday and in time to post his ACC Docket articles plus some new material. Not all of the topics will be legal (See my post of Feb. 11, 2011: lists eleven blogs by in-house counsel; March 1, 2011: Melanie Hatton blog; March 3, 2011: Mr. Bizzle blawg; March 10, 2011: three more blogs; and March 21, 2011: Rich Baer blog.).

Malpractice for pro bono involvement. A General Counsel I was speaking with the other day mentioned in passing that he discourages pro bono activities by his lawyers because they lack malpractice insurance (See my post of April 25, 2009: malpractice and in-house lawyers with 6 references.). I wonder what such incremental coverage costs?

Nice comments about this blog. Jordan Furlong of Edge International picked 10 “must-read” legal blogs. Law Department Management was one of them and he had these kind words: “Rees Morrison’s blog is the deepest collection of data and insights on in-house law departments available anywhere.” Furlong’s kudo, for which I thank him, comes from the Edge International Communiqué of May 2011.

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Corp. Counsel, April 2011 at 22, summarizes a recent panel discussion on alternative billing. Altria Client Services’ Murray Garnick, an Associate General Counsel, told the audience that “A firm is disguising hourly billing as value billing if it merely estimates the number of hours it would spend on a case and derives a flat fee from that.”

I disagree with Granick if his implication is that something devious or dishonorable happens if a fixed fee derives from an estimate of the amount of hours needed to accomplish the goal (resolution of a case). Estimated hours represent a solid basis for a flat fee. Moreover, a flat fee, however derived, differs enormously from hourly fees. The firm and the client have arrived at a mutually acceptable fee, and therefore value to the client, for services and the firm has an incentive to deliver on budget. No more time and materials, gone are the salad days of cost plus, both parties embark on a different paradigm: a major step toward efficiency and cost consciousness. The clock replaced by a price tag makes a huge difference, and it is irrelevant how the price came to be proposed.

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PwC U.S.’s Annual Corporate Directors Survey assembled the views of 1,110 directors on which topics they would like their board to devote more time to in 2010. Nine of the choices as topics are listed in Corp. Bd. Mbr., First Quarter 2011 at 10. Strategic planning occupies the top spot (59% selected it), and among the other topics four concentrated on knowledge of the business. In declining frequency of selection they were “Meeting company managers,” Visiting worksites,” “Discussing the industry,” and “Discussing the competition” (the lowest one at 38%).

As for legal concerns, the number two area where more time was desired was “Risk management” (57%), which includes litigation and other legal risks, but the broad subject enfolds much more than just legal risks. In the fine print, down in eighth place, above only “Director liability” (10%), straggled in “Compliance and regulation” at 25 percent.

Frequently when law department managers bewail their increased workload they complain of regulatory complexity and the associated compliance burdens. That may be warranted for the legal team, but based on these survey results board members do not chime in with agreement.

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It is easier to bring a lawyer into a department that already has one or more lawyers already in that person’s practice area than it is to bring in the first lawyer of a kind. This common-sense proposition came to my attention from Boris Groysberg, Chasing Stars: The Myth of Talent and the Portability of Performance (Princeton Univ. 2010) at 133, where he talks about exploitation of existing competencies compared to exploration of new competencies.

A law department’s first employment lawyer, by way of example, faces a daunting task of setting policies, reviewing an unknown collection of agreements, meeting clients, determining priorities. The second HR lawyer who joins that first one has a much smoother path.

For this reason, larger law departments have an advantage, since they do much more exploitation – build on existing expertise and knowledge – than exploration – establish a new practice area. Related to this idea is the notion of core competencies. The more a department focuses on what is most important for it to handle, the more it will bring in bolt-on talent to exploit as compared to pioneer talent to explore.

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“Independent internal investigations are very frustrating for management and in particular for general counsel. Not only can they not be involved, very often the outside lawyers are being paid out of the general counsel’s budget.” The quote is from Dan Bookin, an O’Melveny & Myers partner in Corp. Bd. Mbr., First Quarter 2011 at 61.

A law firm hired to conduct a sensitive investigation probably reports to a Board committee. That arrangement brings benefits (See my post of March 9, 2010 #4: independent counsel impresses regulators and preserves attorney-client privilege.). The rationale for the engagement of independent investigative counsel may be different from other reasons why directors hire their own counsel (See my post of Aug. 3, 2009: independent law firm serving a Board of Directors with 9 references.). In either case, the general counsel may be helpless to control free-wheeling spending that clobbers the law department’s budget.