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In a June 2010 report, Jomati Consultants includes a chart to show that U.S. partners put up their rates on average by 4.9 percent each year between 1997 and 2007. Associate rates went up by 5.4 percent on average each of those years. Since a typical U.S. legal department spent 60 percent of its budget outside, those rate increases alone – assuming on a blended basis they averaged 5 percent annually – would have swollen the budget each year by three percent.

Such a conclusion rests on several assumptions. It assumes staffing pyramids at the law firms that represented the law departments – the mix of paralegals, associates and partners – remained similar and so did numbers of billers at each level for matters. It assumes no changes effectuated by law departments in how they influence costs. It assumes no changes in which law firms are used or in the mix of work dispatched to firms – a shift toward more complex work, all other things held constant, raises rates. In short, the three percent cost-of-living bulge depends heavily on ceteris paribus.

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It’s not crowdsourcing, quite, but the potential can be seen for lawyers to use computer databases to augment their own inputs. One precedent for this we already know: document assembly. With that genre of software, input from a user allows the database to put together a document or answer a question. Human knowledge is amplified by the software.

As outlined in Bloomberg Businessweek, Nov. 14, 2011 at 49, in a profile of Panagiotis Ipeirotis, there was an example of software that developed a taxonomy of terms and suggested terms to users. Software designed for lawyers could bring up related documents or paragraphs of possible use. That capability could help lawyers search and organize more comprehensively.

It may take collective action by several law departments to accumulate a repository sufficient to be worthwhile. Or service providers with the raw material may add cooperative software. Either way, the era of augmented cognition for lawyers is upon us (See my post of Aug. 9, 2010: software that complements decision-making with 6 references.).

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An article in the Acad. Mgt. J., Vol. 53 (2010) at 701-722, analyzes why corporate prominence may lead to a higher incidence of corporate illegality. The authors studied 194 S&P 500 manufacturing firms between 1990 and 1999. They searched databases for references to what they defined as corporate illegality and reviewed the Corporate Crime Reporter for the period. Of the 469 incidents they located for the group – an average of about 47 per year, therefore approximately one out of four companies per year had an incident – they consisted of 162 environmental violations, 96 fraud-related, 124 false claims, and 87 anti-competitive. The article only studied those four kinds of violations.

Perhaps that pace of corporate wrongdoing by manufacturing companies applies more broadly than just to members of the S&P 500. Those categories of criminal activity, maybe with less emphasis on environmental transgressions, could be extended to other industries. In short, this research suggests a data point and even a way to quantify some portion of legal department work – alleged criminal violations and the associated governmental investigations.

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What can be said usefully in 1,500 words on matter management systems? Lots of vendors and consultants can’t clear their throat in that space – “huge forces at work,” “GCs under huge pressure,” “need for information and insight,” “costs spiraling out of control.” I tried to write my National Law Journal article, published in the Nov. 14th issue, to offer some metrics, some specifics, and a few operational comments of practical use. Judge for yourself and click here for the MMS article.

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The latest submission in my series features Eric Blankenship, the veteran leader of EAG’s matter management system offering.

“Founded in 1986, EAG specializes in providing matter management software to corporate legal departments, and litigation consulting services to banks, insurance companies, securities firms and individual investors.

CaseTrack was first introduced in 1995. Prior to that, EAG had been primarily developing custom systems on a client-by-client basis utilizing a variety of platforms (e.g., DOS, Windows, OS/2, Unix, Mac). These systems were costly to develop and support, putting them out of reach of most legal departments. This, combined with the fact that most corporations were beginning to standardize on the Windows operating system, led us to develop an off-the-shelf software package – and CaseTrack was born. The first half-dozen sales were the most difficult. It’s amazing how creative you can be when someone asks “how many other companies are using the product?”!

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In a variation on the tort doctrine of the thin-skull plaintiff, those who care about metrics and measurement have to accept that most people, including in-house lawyers, become befuddled around very large numbers. Our cognitive capabilities didn’t evolve to let us toss off millions and billions with confidence and intuitive understanding. Inside our thin skulls, we don’t deal with large numbers very well.

For more on this limitation, my most recent column for InsideCounsel online explores some ramifications.

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More than 20% of Canadian lawyers are in-house. CCCA Magazine, in its Fall 2011 issue at 7, has a piece by the Chair of the trade group, Geoffrey Creighton. He writes that “more and more legal practitioners in Canada are working as in-house counsel” and a sentence later that “Some estimates place the figure as high as 25 percent of the profession.” That proportion would be higher than comparable estimates for the United States, although the number of in-house counsel in Federal, state and local government agencies is hard to come by. Creighton says that of the 400,000 member American Bar Association, those who are in-house number 17,000 (See my post of Sept. 25, 2005: ACCA estimate of 71,000 non-governmental U.S. in-house lawyers; Dec. 3, 2006: possible Fortune 500 staff figures; Dec. 11, 2006: ratios in the State of New Jersey; Dec. 31, 2008: oblique data suggests about 21% in-house; March 9, 2009: ABF data suggests 11% in-house in the US; April 2, 2009 #3: rapid growth of in-house bar since 1961; and June 15, 2009: almost one out of five lawyers in a large survey had gone in-house by their seventh year of practice.).

Another online RFP site. Announced during a law department conference in Asia was the “imminent launch” of LIVS (Legal Insight Visibility Services & Systems) a new, secure and stream-lined legal procurement system for RFP’s. This news comes from Asia-MENA Counsel, Vol. 9, Issue 7 at 16 (See my post of Sept. 4, 2005: online Dutch auction by GE with 142 law firms invited.).

More on estimates of the legal market, whatever that is. In a report dated June 2010, Jomati Consultants states that the “American legal market” stands as the largest in the world at around $255 billion (See my post of Oct. 28, 2011: the global or U.S. legal markets and three citations.).

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One of the questions Major, Lindsey & Africa, the executive search firm, asked in-house respondents in a survey was to check which of eight topics interested them. The third-most checked topic was “New technology for legal departments.” Let me riff on that.

Three variations on the central idea of technology could be in play, and only one of them do I wholeheartedly encourage.

(1) Some general counsel might like to know about software and hardware capabilities that have not been used in law departments but that have promise (“New technology for legal departments.”) I doubt that truly novel offerings hold much promise because so many of them disappoint and the learning curve is high.

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Brian Armstrong, the progressive general counsel of Canada’s Bruce Power, was informative and candid about his efforts to demonstrate the performance and value of his department. His 200-page annual report is a compendium of nearly every metric imaginable, according to the long profile of him in CCCA Magazine, Fall 2011 at 28, including results from client satisfaction surveys.

Not surprisingly, senior management rated the department higher than lower-ranking clients. That much could be expected. But Armstrong gave numbers: an overall score of 81 by the top clients compared to a 67 by the rest. That gap of almost one-third makes the point clearly: in-house lawyers snap to much more for the officers of the company than for the non-coms. Armstrong concludes that “if we want to drive these results higher, we have to pay more attention to the other people.” That’s true mathematically, but in the real world, where resources are very finite, I would go with keeping the big chiefs smiling.

The article has lots of other good points and even a picture of this blogger. Click here for the CCCA article.

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Some things to do differently on the second iteration of a fixed-fee arrangement (Sept. 5, 2011)

Four recommendations for what to do differently to improve the second process and outcome.

Social-choice theory, Arrow’s impossibility theorem, and group decision-making (Sept. 5, 2011)

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