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“Most large law firms have far more lawyers than the availability of client work requires.” Ed Wesemann in the Edge International Communique asserts this.

Wesemann explains that “This is, in part, driven by the law school hiring programs that require firms to predict their staffing needs almost two years in advance. But an equal culprit is the fear by most law firms of having a client come to their door with an engagement and not having the people to do the work. New business is so difficult to obtain that, for many lawyers, the fear of not being able to perform it in an acceptable manner causes the firm to err on the side of excess capacity.” If Wesemann has correctly identified systemic over-staffing, it would seem logical for partners to more willingly explore alternative billing arrangements to keep the surplus labor at least somewhat occupied. Over-staffing breeds over-billing, law department managers should worry, because associates hungry for chargeability will likely rack up hours if given the opportunity.

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The Fifth Release of the GC Metrics global benchmark survey will go this week to 829 participating law departments. That is a record increase of 24 from last year. There are now 27 industries detailed, with the addition of special analyses for airlines, automotive suppliers, medical devices, national labs, semiconductors, certain manufacturers, and others. Thirty-four countries are represented among the group, with the United States (510 departments), France (112), and Canada (53) leading the way.

You can still get the Release if you submit your company’s data online between now and February 15th when the 2012 survey – asking for 2011 data – will open. Here is the survey link and all you need do is answer the six data questions:

  • the number of your lawyers, paralegals, and other staff as of Dec. 31, 2010;
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My sense of the term “strategic planning” has been an exercise by a legal department to look ahead a couple of years and try to anticipate evolving needs for legal services and skills. What might happen in the future and how can we best prepare for it? My recent posts on strategic planning by general counsel have explored aspects of this definition (See my post of Feb. 19, 2010: DuPont’s strategic litigation budget; March 1, 2010: complex strategic plan with 30 indicators; Sept. 28, 2010: strategic review of patent holdings; June 5, 2011: difficulty of foreseeing bulk of Dodd-Frank; June 23, 2011: linking risks to strategic objectives of the company; and Oct. 30, 2011: plan your technology path, if not your departmental path.).

An article in ACC Docket, Dec. 2011, at 70, however, led me to realize that the author uses the term “strategic planning” to mean something different, improving the effectiveness of the department. Future scenarios and contingencies play no part in his four steps, which mostly involve identifying and streamlining core competencies along with “setting specific goals and priorities for the law department.”

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As Louis XIV remarked about Edward Gibbon, “scribble, scribble, scribble”), this blog has repaid readers’ interest in compensation many times – on the order of 124 posts, including some duplicates. At your option, you can benefit from delving into this stock of eight metaposts on compensation.

Compensation of in-house lawyers ex US (See my post of Jan. 11, 2011: comp outside the United States with 10 references.).

Compensation posts recently (See my post of Jan. 12, 2011: compensation topics with 31 references.).

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Wading through survey rankings by law department managers of why law firms are reluctant to embrace alternatives to hourly billing, I dutifully listed the results in declining average rank order. Having done so, I was struck by the uneven gaps between some of the rankings. In fact, as I calculated the percentage difference from the highest ranked explanation to the second highest, I realized that among the nine choices, three clusters presented themselves. Each cluster of two or three reasons had a large percentage gap between it and the adjoining cluster.

The gaps between some of the average rankings highlighted how dominant the respondents thought the highest ranking reason was. The gap to the next reason was 33% of the highest score. Reasons two and three were in a dead heat so they formed a cluster. Then there was a 20% gap to the fourth-ranked reason, which stood very close to the fifth, as a cluster. The final item, ranked lowest, was off the chart low. I think this method of gap analysis has much promise.

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No doubt, the Human Resources department controls many aspects of compensation for members of legal departments. They enforce corporate policies about amounts of raises, eligibility, mid-year corrections, promotions, titles, bonuses, equity awards and everything else. To regulate its domain, HR obtains data on lawyer compensation and uses that data to support or challenge what a general counsel would like to do.

The HR department often buys compensation data from third-party surveys and the law department might never know about the data or the participant group – or be able to learn from the management metrics that sometimes come bundled together.

To counterbalance the HR hegemony, general counsel take part in compensation surveys, therefore, is so that they can respond knowledgeably and persuasively to the data brandished by HR. Rarely does HR push general counsel to pay more! As with metrics on staffing and spending, general counsel sometimes want their own independent source to arm them for internecine power struggles.

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The “European Briefings” supplement to the ACC Docket, Dec. 2011, at 12, describes how Procter & Gamble’s EMEA law department, 120 lawyers strong in two dozen locations, coped with regulations by the European Commission’s of chemical substances. The department worked closely with Allen & Overy on compliance with REACH, including swapping knowledge. As described, “Given the expertise of each, the legal department and the law firm implemented practices to ‘swap’ various legal and regulatory information and knowledge without charging a fee.”

This is a wonderful idea! In-house lawyers build up deep knowledge in specialized areas of law and practice. That experience has value to a law firm that represents other clients regarding that area. A mutual exchange of documents, checklists, contact names, case studies and other material can help both sides – law departments to contain costs and law firms to expand their knowledge and marketing.

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Whether or not money is the root of all evil, money is certainly at the root of many posts here. I have collected compensation-related posts since my last metaposts and organized them by several topics.

Past the paycheck, or what do in-house lawyers earn in addition to their salary (See my post of Jan. 20, 2009: does Black-Scholes give a value for restricted stock awards; Nov. 27, 2010: how to handle a request by an executive to reward a lawyer with a bonus; Nov. 30, 2010 #2: car allowances; June 29, 2011: general counsel and potential conflicts of interest based on options held; and Oct. 10, 2011: in-house counsel like their jobs partly because of equity grants.).

Sources of data, or how can you find compensation figures (See my post of Jan. 13, 2011: MySalary.com; Jan. 18, 2011: online salary calculator from Robert Half; Jan. 21, 2011: another online salary site; and Oct. 24, 2011: participation numbers during 2007-2011 in ACC/Empsight compensation surveys.).

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A column in the ACC Docket, Dec. 2011, at 24, by an unabashed proponent of offshoring who invests in companies that provide those services, went too far. He recounts an ABA panel which “showed that outsourcing legal work is more than a trend among law firms and corporate legal departments.” The panel of a professor, a general counsel and a law firm partner had discussed issues and examples, but to my reading had offered no proof of the columnist’s claim that this technique has moved beyond “trend.”

Promoting his view further, his next sentences ends with bravado regarding outsourcing legal work: “It is a new standard in our current legal environment, and has become a permanent fixture among corporate legal departments and law firm users.” No, offshoring and outsourcing are not standard practices among U.S. legal departments nor anything like a permanent fixture. Offshoring (and near-shoring) is one evolving tool that some departments have tried for certain needs and met with varying degrees of success.

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Joseph Mazur, What’s Luck Got to Do with It? – The history, mathematics, and psychology of the gambler’s illusion (Princeton 2010) at 92, “Economists have long sought a meaninghful measure of risk, which should depend on a person’s specific financial situation.” Similarly, the finances of a company affect how legal risks are perceived and handled. The larger the company, the more risks it can take and still remain confident of continuing on if the situation worsens or blows up. This may be another reason why greater size is associated with lower total legal spending – the resources to absorb larger risks and therefore not to invest as much in their detection and amelioration.