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In a recent interview, a senior lawyer at Marsh McLennan, Lucy Fato, recounted some history. “A few years ago, we started examining all the firms that we were using to come up with a preferred provider list in the U.S. and then we rolled it out in the U.K. We’ve now narrowed that list to the top 10 to 15 firms that we’re using on a more regular basis to see if we can drive more business to them, eliminating other firms that we were using on a more costly one-off basis. Now, with e-billing and the new matter management system, we will really be able to start tying all these things together and to whittle that preferred list down even further. These systems allow us to look at the firms more closely and analyze the value we’re getting from them.” Fato added: “we’re definitely getting a better handle on the firms and we’re doing a better job of trying to apply billing guidelines and rules in a more consistent way.”

The steps taken are quite typical for U.S. legal departments in recent years. (1) Narrow the list of law firms that are approved for use, starting in the U.S. (2) Extend the process to Canada or the UK. (3) Choose from that list a smaller group of preferred firms. (4) Concentrate the larger portion of total external spend on those preferred firms and exact from them concessions on rates, staff, training, etc. (5) Improve and extend outside counsel guidelines. (6) Enable these steps with software databases and electronic invoices. (7) Think analytically about the data collected. Not that these steps need to be followed in precisely this order, but there is a logic in the set and its progression.

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An interview of Amy Schulman, Pfizer’s top lawyer, offers insights into her view of her role, power, and risks. Found in the NY Times, Dec. 11, 2011 at BU2, her comments on leadership are perceptive. One of them all general counsel should take to heart. Schulman, in her exalted position as general counsel, understands that “people impute motives to you if you are not clear. It’s important not to be ambiguous or vague about what you want, because then people waste a lot of energy trying to figure out” what the GC wants.

She realizes it is a tough balancing act between shedding enough light and blinding every one (See my post of July 12, 2011: suppression of ideas by general counsel with 8 references.). Followers want clarity from the top but at the same time don’t want to be micromanaged. They can’t read your mind; they scrutinize and debate every word and action.

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Posted in: Talent
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This question, asked of the chief legal officer of the Mayo Clinic, John Oviatt, elicited an interesting reply: “Very much so. Legal services are just one more of many shared services within an organization. That’s how the C-suite views it, and so I think having a close working relationship with purchasing is very important. There are numerous examples of law departments that have actually had an assigned purchasing employee who assists them on their work. It’s the purchasing folks’ bread and butter, but it’s often foreign to lawyers. It’s not that we can’t learn; it’s just we’ve never had any reason to be trained in those things before.”

“Numerous examples” may not rise to a trend. And what are these procurement people doing other than assisting with competitive bids? Are their inputs to the law department making a difference?

In this regard, readers may be interested to know that Professor Silvia Hodges, Adjunct Professor at Fordham University School of Law, has been researching and writing regarding procurement and legal departments. Earlier this month she spoke on Power of the Purse: How Corporate Procurement is Influencing Law Firm Selection at Harvard’s Program on the Legal Profession.

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Posted in: Clients
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Bill Mordan’s latest column for the ACC Docket, Nov. 2011 at 108, talks about a variation on Lord Acton’s observation that “power corrupts.” Mordan explains that socially adept people tend to climb the career ladder well, but once they are in charge, some of them suddenly change, and for the worse: the “power paradox.” He says, “Men and women tend to become more self-centered when they gain power.”

This fall-off in commendable behavior may manifest itself with newly-promoted general counsel. The top of the heap can topple a heap of good behavior (See my post of Dec. 21, 2005: emotional intelligence declines with rank; Jan. 13, 2006: three consequences of managerial incompetence; Feb. 15, 2006: ten dumbest management mistakes of general counsel; Aug. 22, 2006: the Peter Principal; Oct. 12, 2006: what happens if a general counsel is a poor manager; Dec. 31, 2006: the imperial general counsel; March 18, 2007: general counsel who are bad managers; Aug. 4, 2007: “jerk” behavior; Aug. 10, 2007: personality disorders among general counsel; Jan. 19, 2008: general counsel as a bully; and Oct. 18, 2010: the warping psychology of power.).

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Posted in: Talent
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A brutal piece in Fortune, Dec. 12, 2011 at 144, about the fall from grace of Bank of New York’s recently ousted CEO, Robert Kelly, gives a little insight into the sharp knives that surround big-time GCs. When Jane Sherburne took the top legal job in May 2010, “the board insisted that Sherburne take on the position of chief of governmental affairs – which meant infringing on a role that Kelly had enjoyed filling.” The board forced the new general counsel into conflict with her boss, that is to say.

Worse, the article describes how “more than once Kelly openly denigrated Sherburne.” At the pinnacle, it is a tough working environment as egos rage, power flashes, rumors and gossip whisper, and politics has a capital P (See my post of June 5, 2007: office Politics.).

For those who yearn for the top legal rung on the ladder, appreciate that it is slippery, high, and not all that stable. The general counsel can clash with the CEO or simply not fit in well (See my post March 8, 2010: the awkward relationship of AIG’s general counsel.).

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Posted in: Talent
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Adrian Furnham, 50 psychology ideas your really need to know (Quercus 2008 at 118, discusses brainstorming and concludes that “people working alone on a creative project produce better and more answers than a brainstorming group.” Any group, in fact, could suffer from these debilitations. He offers three explanations, and I quote his terms.

(1) Because of “evaluation bias,” people become self-conscious in groups and clam up even if they have good ideas.

(2) “Social loafing” allows some people in a group to ride along on the coat-tails of the more energetic members of the group.

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Corporation Counsel for the city of Chicago has pushed to use no-cost lawyers from some of the larger law firms in the city to alleviate the department’s tight budget. In 2010, the city spent $25 million on outside counsel and something on the order of $37 million (its proposed 2012 budget), for its inside staff. Volunteer lawyers can make a difference in the external legal spend.

New York City has also dipped into the free talent pool of nearby firms. Since 2002, New York has saved approximately $84 million in legal fees by doing so. The city’s entire law budget is about $110 million a year so something like an average of ten percent of its budget was saved each year. This interesting practice of not-for-profit law departments comes from the ABA J., Dec. 2011 at 26.

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Not one to eat, shoot and leave, I wish to leave my imprint on law department management in the full regalia of grammatical grace. Toward that end, my powerful search software ferreted out these bibelot:

Plural of general counsel (See my post of March 22, 2006: proper plural of “general counsel”; April 28, 2010 #3: to the same point and cites authority; Nov. 30, 2010 #3: Fowlers lends support; March 3, 2011: an example contrary to my conclusion; and Sept. 28, 2010 #5: verb agreement with “in-house counsel”.).

Proper usage of law and legal (See my post of May 24, 2005: one view of the difference between “law department” and “legal department”; Jan. 4, 2008 #3: Google Blog Search results; Nov. 1, 2008: BlogPulse references to the two terms; April 20, 2009: Google Trends and numbers of references; July 7, 2009 #4: Jux2 searches of the terms; Nov. 7, 2010 #2: favors the compound noun law department; and Oct. 7, 2010 #5: “law” as a noun and “legal” as an adjective.).

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The fast-function part of our brain, that which Daniel Kahneman refers to as System 1, operates mostly in three parts of our brain. Strategy + bus., Spring 2011 at 47, describes each of them briefly. These emanate from deep, primal parts of the brain that evolved relatively early.

One is the basal ganglia, which normally manages such semi-autonomic activities as driving and walking (See my post of May 30, 2006: habits, and the challenge of change, due to basal ganglia.).

The second is the amygdale, a source of emotions and fear and anger (See my post of Feb. 12, 2006: the amygdala hijack.).

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Posted in: Thinking
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Splines. A spline function is based on the difference between a firm’s performance and the performance of a relevant comparison group. For instance, a spline function would look at a manufacturer’s law department metrics after subtracting from them the medians in that industry (See my post of July 31, 2011: smaller law departments should adjust when comparing themselves to benchmarks dominated by large departments; April 24, 2009: adjustments of share price changes for industry and size; and Dec. 31, 2006: nominal versus inflation-adjusted figures.). If each company in the industry is then subtracted from the median, its performance would be stripped of the broader industry fluctuations. This is also referred to as “scaling” — all the above from Acad. Mgt. J., 2011 at 725.

Gibrat’s Law. Gibrat formulated the law of proportionate effect for growth rates to explain what he empirically observed as the pattern for manufacturing firms. The law states that a firm’s expected growth rate should be independent of its size. In other words, “the probability of a given proportionate change in size during a specified period is the same for all firms in a given industry – regardless of their size at the beginning of the period.” If that is true for the revenue of a company, given the relationship between revenue and number of lawyers in a legal department for the same industry, one would guess that Gibrat’s Law holds for law departments (See my post of Oct. 22, 2006: the “laws” of Gresham, Murphy and Damon Runyon.).

Publicly traded company in legal management. We can now add Epiq Systems (NASDAQ: EPIQ) but we must remove LECG (See my post of March 20, 2007: lists four publicly traded firms that do forensic accounting — CRA International; FTI Consulting; LECG, and Navigant Consulting.).

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