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Distinctions among law departments by market value? ISS, the rating agency, has announced that it will judge companies against a peer group of 14 to 24 companies, based on industry, revenue and market value. It is unclear to me how the market value of a company has an effect on anything about how a law department operates or vice versa (See my post of Aug. 8, 2011: collects four posts on lawyers per billion dollars of market value.).

Surveys that may get more than one respondent from a department. An invitation to a survey was distributed by ACC and MCCA to approximately 10,000 in-house lawyers. Although data was collected from December 2010 through April 2011, only one response per law department was accepted. If multiple responses came from the same law department, which one did they pick? Did they choose by title, first in, fullest data set (See my post of July 21, 2008: survey methodology with 40 references, 25 internal references.)?

The nominal fallacy. We succumb to error when we think that if we name something the name carries explanatory meaning. This error is called the nominal fallacy and is referenced in John Brockman, Ed., This Will Make You Smarter (Harper Collins 2012) at 62. If you talk glibly about a “discount” you may feel that once you have named the arrangement with a law firm with that term you understand it better. You think the term “discount” itself carries explanatory meaning, but that is wrong thinking. This blog has correctly pointed out other fallacies (See my post of March 23, 2006: sunk-cost fallacy; Aug. 22, 2006: fallacy of induction; Jan. 18, 2008: fallacy of misplaced concreteness; March 15, 2009: fallacy of conjunction; April 2, 2009 #4: special pleading as logical fallacy; and Aug. 18, 2011: teleological fallacy.).

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Looking in on my Twitter account, I was surprised to learn how many people are following me (@reesmorrison): 650. Back in late January of 2011, I wrote that 344 were doing so at that time, so something like one a day have seen fit to connect. The group has lots of vendors and legal publishers and people interested in law and technology – plus others that leave me at a loss as to why they follow.

What is going on, I believe, is that all my posts here flow through in abbreviated style to Twitter. Those who follow me can then click on the ones that pique their interest. Reflective of that pattern, Twitter shows up on SiteMeter as the source of 50 visits to my blog recently. The trend is steadily upwards, which does not bode well for RSS sites such as FeedBurner and the many others.

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Here is a classic example of the distorted benchmarks produced by from some small companies. The Graduate Management Admission Council (GMAC) manages the GMAT test taken worldwide for admission to business schools. The current general counsel joined ten years ago as the only lawyer for the non-profit’s 34 employees. Today, the legal department has grown to 9, including 3 more attorneys while the number of employees has tripled to 140.

GMAC’s benchmarks are bizarre. Its 4 lawyers for 140 employees (28 per thousand) blows away typical metrics (See my post of Jan. 31, 2102: median in U.S. of about 2 lawyers per thousand.). Or consider a second common benchmark. The article on this in the ACC Docket, March 2012 at 92, doesn’t give the revenue of GMAC, but its website says that more than 200,000 people took the test last year. At $250 per taker, that revenue would have been around $50 million. Let’s double it because of (presumed) other GMAC services and to be very conservative. That would mean 40 lawyers per $1 billion, which from the General Counsel Metrics survey is eight times higher than the median benchmark.

Small companies haven’t yet grown enough to settle into more typical benchmark metrics for legal departments. For that reason, medians have much more legitimacy than averages.

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Talent is so hard to find, recruit and keep that when one of your strong performers announces that they are departing to lead another law department, do you feel good for them or do you gnash your teeth? Deep down you realize that ambitious, capable lawyers won’t want to wait for you to retire or move on, but, still, the loss of a star hurts (See my post of June 24, 2007: mixed feelings when a strong performers resigns; and Dec. 19, 2007: inevitable departures of some talented lawyers.).

Be magnanimous. That should be your goal. Feel proud that you have groomed a lawyer so good that another company entrusts them to serve as their head of legal. Feel good that the lawyer is confident enough to grab the ring. Feel optimistic that you now have an opportunity to develop some other careers in your department.

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Sometimes it is difficult for a general counsel to get objective feedback about personal performance. One source, tipped by an article in the ACC Docket, March 2012 at 69, could be the search firm that placed you. The source may strike you as strange, but if that firm has good connections with the CEO and Human Resources, not to mention other senior executives, it should be able to tell you how you are perceived. You can ask them after a few months to inquire discretely and summarize the early returns. The firm’s partner who inquires on your behalf will probably welcome the opportunity to reach out to executives and to help guide you.

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Posted in: Talent
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Promoting a lawyer from within has the advantage of letting you promote or reassign others at the same time. Like adding a chair to the musical game, you create choices regarding other members of your department. If you bring in someone from outside to fill a vacated slot, no one else needs to move or has the opportunity to move. On the other side, a reshuffling of your staff, even if just one person, gives a bit of meaning to the hoped for “career path.” It breaks the logjam.

Another salutary result of an upward promotion is that it encourages you to think about the roles and careers of the other lawyers who are potential moves or promotes. It fuels succession planning. Finally, morale surely improves when lawyers see that the department builds and elevates its own talent.

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Posted in: Talent
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“Unlike other departments that have specific deliverables unique to that department, the legal department’s ‘deliverable’ is to advocate on behalf of and address the issues of other departments.” With this puzzling assertion in the ACC Docket, March 2012 at 35, perhaps the author means that IT has sole responsibility to keep everyone’s networks and computers running, HR looks after employees, and Finance alone delivers the company’s numbers. Legal, the authors seem to be saying, responds to the other support functions by enabling their unique activities.

I don’t buy that distinction. At least IT and HR would argue that their primary goal is to enable the business to progress (including support functions such as law). If the legal department needs software, IT helps; if the legal department has a nettlesome employee issue, HR helps; if analysis of data about outside counsel spend is needed, Finance helps out. What makes the legal department any different?

On the other side, only the law department handles litigation, only it pulls together Board materials, and only it makes SEC filings. Like other support departments, those “deliverables” of the lawyers are unique to it.

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“We propose that a successful legal department is one in which the quality of the legal services delivered is unparalleled, the feeling of job satisfaction by members of the legal department is high, and the legal department as a whole is regarded as a partner in achieving the corporate goals and thought leader in corporate life.” The high-flying definition comes from the ACC Docket, March 2012 at 26.

If that be the measure of success, all law departments are doomed to fail. Consider the three tests that need to be passed.

First, “unparalleled legal services,” strictly speaking, means uniquely good, so only one legal department can claim that honor. All the rest fall short of the hyperbolic standard. Second, job satisfaction doesn’t necessarily correlate with high value delivered to the employer. An in-house attorney can be pleased as punch with her perceived contribution but fall woefully short in the eyes of clients.

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An earlier post gave average in-house cash compensation for the five highest-paid practice areas: M&A, Antitrust, International, Intellectual Property – Licensing, and Tax (See my post of April 16, 2012: survey reports averages from $289,000 down.). That post focused on the relationship between cash compensation and the fully loaded costs of in-house attorneys per chargeable hour. Here, several other observations come to the fore (See my post of March 13, 2008: thoughts on that year’s group of highly paid practices.).

With something like half the law departments in the United States at four lawyers or less, they would not have a single one of these specialists. The data caters only to the very largest legal teams, those that can afford and keep busy refined experts.

Tax lawyers are not usually part of the legal department’s budget or headcount (See my post of Dec. 6, 2006: why tax lawyers don’t report to the general counsel.).

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In Met. Corp. Counsel, March 2012 at 16, an FTI consultant mike.kinnaman@fticonsulting.com shares some findings from FTI’s interviews last fall with 31 in-house counsel. The topic was e-discovery and the participants were primarily from huge U.S. companies. He writes, “In spite of greater emphasis and attention on e-discovery, corporations still don’t have a concrete understanding of how much they spend year over year.” The consultant was also surprised that “most participants don’t yet have a line-item tracking system for all expense areas [of e-discovery].”

Others have bewailed the same omission (See my post of Dec. 30, 2011: absence of tracked data on e-discovery attributed to smallness of companies.). It is quite understandable why law departments do not pin down e-discovery expenses. It is a sufficient spur that those costs are exorbitant; no need to weigh an elephant to know it eats a lot. The perceived benefits of granular numbers don’t outweigh the costs to collect them. Further, to pinpoint e-discovery dollars burdens you with difficult assumptions, complex definitions of actions, undesired spotlights on individual or team performance, and heavy-duty analysis of the data that spews out (See my post of April 23, 2006: Uniform Task-Based Management System data lies fallow.).