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The emigration happens infrequently and I have always thought it was a result of client poaching. Put more politely, a client likes a lawyer’s background and abilities and persuades the lawyer to move over and take on a business role. The lawyer presumably welcomes the change of seat. The general counsel grins and bears the loss.

Then I read the opposite perspective in “From in-house lawyer to business counsel,” by the UK law firm Nabarro at 3. Said a general counsel, “It is quite difficult to persuade the business that it is a good thing for a lawyer to move into the commercial side.”

I never imagined a general counsel who wanted to offload a lawyer to the client side. Well, maybe in the rare case of a short grooming period for a likely successor, but not as a matter of course, not at all. To persuade a client to take on a lawyer sounds completely improbable.

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An equation known as a progress curve “describes how productivity improves in a range of human activities from manufacturing to cancer surgery.” Having read that brief enticement in the Economist, April 2, 2011 at 76, I tried, probably unsuccessfully, to apply the equation to law departments.

The formidable equation Tn =T1n-b quantifies a learning curve. Tn is the number of days between the nth event and the next event. Try this to wrap your mind around the formula. Think of the number of days between the fifth bankruptcy proof of claim a paralegal completes and the 30th one. How much has the paralegal improved during that period?

The power b is calculated from the relationship between the logarithms of the event number, n, and the period of elapsed time. Perhaps the 30th proof of claim came on the 400th day after the fifth one. The logarithms of the 30th event (1.47) and 400 days (2.6) are used to compute the superscript power, which when divided by log2 gives the negative number (See my post of March 11, 2009: learning curve with 9 references.).

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It must be that legal work done in-house has steadily moved up the value curve much like the work done by outside counsel has elevated (See my post of March 11, 2011: huge productivity increases, plus quality.).

By “value curve” I mean the importance of the work done for the company per hour of lawyer time has increased, however we measure that. In general tasks have trended up on complexity (multiple inter-related issues), urgency (documents or advice needed quickly), relations (more people involved and requiring consultation), consequences (resulting profits or risks avoided are greater) and information (statutes, regulations, law reviews, cases, online information, press and commentary, internal documents). Value delivered is a function of those five components.

Both in-house and outside, commodity legal services – those of relatively less value as defined — have drifted away to other providers or become so standardized that they take less attention and have been delegated or have been handled by better informed clients. This upward migration of work may account partly for why the number of lawyers per billion of revenue has remained relatively stable for years. The lawyers are solving higher-level problems, doing more important work, as well as performing more efficiently.

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A technique developed in the 1990s by Professor Ben Shneiderman at the University of Maryland has come to be known as tree-mapping. As explained in the NY Times, April 3, 2011 at BU3, tree-mapping “uses interlocking rectangles to represent complicated data sets. The rectangles are sized and colored to convey different kinds of information.” A tree-map is a two-dimensional visualization for quickly analyzing large, hierarchical data sets. Many look like stacked, colored mosaics. To see what one looks like, courtesy of the Hive Group, click here for one of their examples.

As an example, a treemap would allow a law department to depict its spending on outside counsel by number of firms used and the amount spent for each firm by practice area (See my post of May 8, 2008: an online site that enables tree maps.). Much more is possible, however. Viewers can reorganize the display to explore whether other patterns appear or they can drill down on a subset of the data.

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Data visualization software for legal departments will someday go beyond the static presentation of data graphics. My earlier posts covered much of that basic level (See my post of May 7, 2008: methods to portray data with 9 references; 22 cited in one.).

Even slightly more elaborate graphics unnerve many in-house counsel. Numbers and patterns are alien and a bit intimidating. For most of them, a modest pictorial effect – no animation, please! – will be quite enough (See my post of Sept. 28, 2008: lawyers are less comfortable with images than with words; Jan. 15, 2009: box-and-whisker plots; March 1, 2009: cartograms; March 20, 2009 #1: Tableau data visualization software; March 26, 2009: offshore data analytics; July 10, 2009: plotlines add much more to timelines; Feb. 10, 2010: business intelligence, data mining, portals draw on data portrayal; June 29, 2010: Codean software for cross references; and Dec. 24, 2010: expertise network portrayed visually at IBM.). Thus, to go beyond charts in a dashboard to an interactive, dynamic presentation stands as far off as science fiction.

Much more is on the horizon for law departments to array and make data compelling. The NY Times, April 3, 2011 at BU3, conveys some of the excitement and “visceral comprehension” that could be unleashed. Imagine ten years of data on the size of law firms paid by a department depicted as spheres and their color showing the yearly amounts. Or budgets to actual each year over a decade could be vividly stretched and compressed in front of the viewer. Maybe the locations of offices around the world could pop up and expand or shrink over time. For a group of cases, key events could show on a timeline next to a rising bar of costs. As the article says, “the brain is more attracted to and able to process dynamic images than long lists of numbers.”

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It is a red-letter day for me when someone publishes a book on law department management. So, I celebrate by quoting from promotional material I just ran across from the International In-House Counsel Journal (IICJ). The book is 160 pages, it costs $200 and I believe quite a bit of its contents come from articles previously published in the Journal:

“IICJ are delighted to announce the publication of a new book written specifically by leading commercial lawyers for commercial lawyers covering all the key issues presently relevant to the in-house counsel function. The book contains 29 in-depth articles written by leading global counsels and topics range from negotiating external fees to running the in-house department as a profit centre. Click here for more information and how to secure a copy.”

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Henry Kissinger reviewed a biography of Bismarck in the NY Times Book Rev., April 3, 2011 at 10. He praises the Chancellor’s exquisite use of power and remarks more generally: “Power, to be useful, must be understood by its components, including its limits.”

That sentence provoked me to think about the components of power a general counsel can exercise as well as some of their limits. Managerial power vis-à-vis lawyers who report directly to the general counsel includes the right to (1) promote, (2) re-title, (3) award a bonus, (4) increase a salary, (5) send them to executive education, (6) place them in a high-potential program, (7) assign them work, (8) publicize achievements, (9) rearrange responsibilities, (10) locate offices, (11) set and evaluate personal objectives, and (12) shift subordinates – or to withhold or restrict any of them. In short, anything a manager can legally offer an employee or withhold exercises power.

Each of those decisions, each of which wields and manifests power, has limits. Human Resource policies and practices curtail the profligate bestowal of titles and compensation; a desire for internal equity and the congenial dynamics of the rest of the lawyers constrain too much lavish attention or harsh retribution. Then too client demands and headcount constraints hedge in some choices. Even with some reins, the components and variations of power cover much ground.

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The General Counsel of Nationwide Building Society, the UK’s largest building society (the US equivalent of a savings and loan), believes in measurements and feedback. Liz Kelly encourages here team members to “circulate e-feedback foms across the business seeking view on the quality of their service.” That sort of client satisfaction assessment raises no eyebrows.

However, according to “From in-house lawyer to business counsel” a lengthy report by the UK law firm Nabarro at 9,“Each team has a target of three responses per quarter.” The report doesn’t state the number of teams. In any event, the general counsel’ target puts some teeth in the initiative. It gives a specific minimum goal for the activity, which is good management most of the time.

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A knowledge-based theory for legal departments, and its link to transaction cost economics

“According to the knowledge-based theory of the firm, the raison d’être of firms is to generate, combine, recombine, and exploit knowledge.” This quote comes from the Acad. Mgt. J., Dec. 2001 at 1212. Further, “whether a firm performs activities in-house or through market contracts depends on whether doing so makes the generation and exploitation of knowledge more efficient.” If legal departments fundamentally traffic in knowledge, then the decision to make that knowledge in-house or buy it from law firms would fall squarely in the sights of a knowledge-based theory for legal departments. So would the development of bench strength, knowledge management, process codification, and training of clients, to name a few implications when we focus on a law department’s knowledge creation and application.

Moreover, management scholars have integrated that theoretical framework with a second theory of the firm (or department): transaction cost economics (See my post of Nov. 19, 2009: Coasian analysis with 6 references.).

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I’m not trying to be silly or too clever. The heading of this post, borrowed from a phrase that has been applied to finance, conveys the proper notion that: in-house lawyers are more likely to be lubricants than propellants. They enable business to succeed, but they don’t drive the strategic direction. Lawyers pour in their specialized advice, which a business person mixes with other ingredients. In-house lawyers react to the problems that arise more than they hold them off at the pass. They play the second violin, but the orchestra would be less pleasing without their contribution. They smooth the way but don’t determine the path.