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A co-panelist with me recently mentioned that her law department regularly compares its fully-loaded hourly billing rate for lawyers with the average rate charged by outside counsel. The comparison has a fair amount of validity, but some faults can mar the match (See my post of June 29, 2009: insurance company’s calculation of savings based on fully loaded costs.).

The internal load needs to be full, that is, to include all the costs of internal lawyers (See my post of Aug. 27, 2008: fully-loaded cost per lawyer hour with 31 references; and March 9, 2009: fully-loaded with 7 more posts.).

The chargeable hours estimated or tracked for the internal legal group must be legitimate (See my post of May 21, 2009: internal chargeable hours with 12 references; and Jan. 5, 2011: internal time tracking with 9 references and one metaposts).

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Many companies have spun off parts of themselves, thereby sundering their legal departments (See my post of March 12, 2011: spin-offs with 6 references.). Perhaps none of them created a new law department of the size of Motorola Solutions’. According to Diversity & The Bar, March/April 2011 at 14, the spin-off has more than 100 lawyers and 150 other legal personnel. Some of the allocation of personnel to stay or spin was undoubtedly pre-ordained, such as the commercial lawyers and patent lawyers who had been dedicated to a business unit. Other choices were harder to make, such as litigators and other specialists that could serve either side well.

A second point, on secondment, caught my eye. Lewis Steverson, the general counsel of the new spinoff, joined Arnold & Porter after law school. The firm represented Motorola and when the company inquired about borrowing a litigation associate, Steverson was chosen. The finance department of Motorola referred to him affectionately as a “rent a lawyer” recalled Steverson in the article. Motorola eventually made the secondee an offer and his path in-house was set.

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“Would it kill you to say you’re sorry?” blazes the huge type at the top of the Taco Bell ad. Never naming the law firm, the ad starts “The law firm that brought false claims about our product quality and advertising integrity has voluntarily withdrawn their class action suit.” No payment by Taco Bell, no changes to products or ads, no settlement agreement. Vetted by the law department for sure, this is litigation prevention with a vengeance. A flame in a newspaper ad as a litigation management tool!

A decision by a judge makes in-house litigators feel good; a case dropped during months or years into the action makes them feel better; a withdrawal so humiliating inspires a trumpeting ad in the New York Times!

Here is the close of the ad. “As for the lawyers who brought this suit: You got it wrong, and you’re probably feeling pretty bad right about now. But you know what always helps? Saying to everyone, ‘I’m sorry.’ C’mon, you can do it!”

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Aficionado that I am of metrics, I started slicing and dicing the revenue figures from the 215 law departments that have submitted data so far to the GCM global benchmark survey. Those companies reported $2.4 trillion of combined corporate revenue for 2010. (For those reporting in Euros, British Pounds and Canadian Dollars I used the average exchange rate to US dollars during the year.)

Poking around further, it turns out that 119 of those participants (55%) reported revenue greater than $1 billion. Moving up in size, 78 (32%) reported more than $3 billion and 56 (26%) broke the Fortune 500 barrier at more than $5 billion.

At the top: 34 of the participants so far exceed $10 billion. One out of seven loom that large; at the other end, about half the participants reported less than $1 billion in 2010 revenue.

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To manage is to be interrupted. Too often, however, we are distracted, a minor detour such as the ping of incoming emails, or interrupted, which suggests a more important break in your attention such as someone at your door. Either way, a writer in the NY Times recently suggested keeping an interruption log. The log will tell you more about why you are behind in your work and give you clues how to diminish efficiency-sapping intrusions.

Allow me to interrupt this post to bother you with previous posts on intrusions (See my post of July 14, 2005: technology distractions; April 3, 2005: Blackberries and interruptions; Oct. 12, 2006: interruptions degrade thinking; Aug. 26, 2009: loss of 24 minutes for each e-mail interruption and IQ diminishment; June 15, 2010: apps that screen out distractions; June 16, 2010: Internet interruptions; and July 12, 2010: quiet time declared.).

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The NY Times reports on April 19, 2011, at D6 an oddity about learning. “[I]f you study something twice, in spaced sessions, it’s harder to process the material the second time, and people think it’s counterproductive.” So, to explain further, if you have pored over a decision or a debenture, when you return later for a second round it feels difficult to dig in and learn more. Surface familiarity misleads your awareness. “But the opposite is true: You learn more, even though it feels harder.”

Repetition and practice makes a huge difference, despite what you may feel, and the superior way to learn. The article adds that “difficulty builds mental muscles, while ease often builds only confidence” (See my post of Nov. 19, 2009: spaced education and pre-tests.). Felt familiarity should not blind you to the value of diligent application to absorb and understand.

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Whether or not responsible for them in their budgets, general counsel should track and report capitalized legal costs. The accounting treatment of a legal expense doesn’t whisk away the cost to the company. Checks written are real (See my post of July 30, 2005: capitalized legal expenditures; Nov. 25, 2006: stock options and how to account for their value; Nov. 9, 2008: more legal costs will have to be expensed; Feb. 25, 2009: capitalized (depreciated) patent costs; March 11, 2009: capitalized legal fees; Aug. 12, 2008: options expensed; and Nov. 9, 2008: deal costs must be expensed, not capitalized.).

A similar reasoning applies where business units pay for parts of patent costs. For example, a law department might absorb the costs of prosecution but once a patent is granted, the business unit that “owns” it pays for maintenance fees and other costs. Likewise for settlement costs. To shift a legal cost to some other budget line should not hide it.

I would go so far as to include legal fees paid by insurance companies. Premiums reflect those payments at some point to some degree. Capitalization, cost absorption, and cost transmutation make it harder to accumulate, report on and analyze what is truly the total legal expenditures by a company. If not done, however, a company cannot get an accurate read on the budgetary impact of its legal operations.

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During the past fortnight I have labored over an article on in-house value. The word value perplexes everyone who thinks about it and tries to articulate what it entails. I won’t pretend to breakthrough insights but here I can certainly be the Pied Piper to my posts on in-house value (See my post of May 1, 2006: definition of the term “value-added”; Jan. 2, 2009: one of two hardest questions for a general counsel to answer; and April 6, 2011: view that value has steadily trended upwards.). Some of the article’s germinal ideas have come from posts written on this blog about value produced by in-house lawyers (See my post of Oct. 18, 2005: in-house lawyers don’t want steady diet of rocket science; Dec. 20, 2005: train clients to get the most value from their legal team; and May 1, 2006: broad compass: company goals, or social responsibility.).

Value rises above skills and techniques (See my post of May 14, 2006: value when you manage projects that have legal ramifications; April 8, 2007: Robert Bosch and four ways to add value; March 26, 2008: writing boosts your value; July 15, 2010: simply arraying budget figures doesn’t add value; and Sept. 12, 2010: institutional knowledge creates in-house value.).

How to quantify value mystifies us all, but law departments keep trying (See my post of May 28, 2005: Telstra and value calculation; March 8, 2006: Northwestern Mutual and balanced scorecard; June 24, 2007: graphical depiction of valuable services; Jan. 21, 2009: value-indicator checklist is similar to SLA; July 4, 2009: report on value in legal services – clients set value.).

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General counsel hold their settlement data close to their vest. They fear repercussions in litigation if those amounts or terms leak out. Therefore, those who want to collect data on corporate settlements for benchmark purposes should dispense with direct inquiries yet try oblique ones.

Surveys could ask for the average amount paid over a three-year period. That smoothes out the peaks and conceals specifics. Or they might ask for a range or an estimate of only those amounts that have been publicly disclosed, such as fines paid to government agencies. Another way forward would be to ask for the aggregate minus the largest settlement, which is probably the most controversial or proprietary. Or the average – total settlements divided by cases settled during a year – would protect both the numerator and denominator.

It might also be easier to collect data on what law departments receive in settlements. Since amounts paid dwarf amounts collected for most corporations that would be provide meager insights.

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Career paths for in-house attorneys occasionally wend out of the practice of law. It’s a tough transition, however, and controversial. The large number of references on this blog to émigrés from the legal team are perhaps the notable exceptions that prove the rule (See my post of April 18, 2005: high failure rate at Manulife of departing lawyers; Aug. 3, 2005: career of Rosemary Berkery of Merrill Lynch; Nov. 6, 2005; Telstra example; Nov. 6, 2005: David Krasnostein of the Bank of Australia ran its strategy group for a while; Dec. 15, 2005: MetLife’s general counsel left the law department for some years; and Aug. 14, 2006: new deputy general counsel had most recently been the chief auditor.).

After my spurt of posts early on, the stragglers thereafter have come at long intervals (See my post of Aug. 4, 2007: general counsel, Jeffrey Kriendler, ran Boston Markets; Feb. 16, 2007: grooming a general counsel with business experience at TransCanada; Oct. 22, 2008: Weyerhauser lawyer left department for six years; and April 6, 2011: who instigates transfers.). With headcount and hiring restrictions shackling general counsel, perhaps the incidence of moves to the business side has declined.

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