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Do you have blazoned on your office wall “for every dollar you spend, the company’s sales force has to generate $10 of additional revenue to cover that expense”? The authors, writing in ACC Docket, Nov. 2010 at 81, actually mean “profit,” not “revenue” but the point remains dramatic. If plus or minus a bit, one percent of revenue goes to total legal expenses and if plus or minus 10 percent of revenue makes it to the bottom line as profit, then every legal dollar costs $10 of profit.

The authors add a fillip: “Never spend the company’s money in a way that you would not spend your own. In fact, treat the company’s assets more dearly than your own.” Does that apply when the in-house lawyer takes a car service or flies business class or treats outside counsel to a fancy dinner? We all find it quite easy to spend reimbursed “company money” much more liberally than our own hard-earned income.

Anyway, legal spend per unit of revenue reigns as the Magi of Metrics, but in the bottom-line world of shareholder return and working capital, legal spend per unit of profit should be the king (See my post of March 4, 2008: profit margins and lawyers per billion; May 24, 2005: profit margin as a benchmark denominator; April 4, 2006 #1: “earn a dollar to pay a 3-cent bill of outside counsel”; May 23, 2007: profit per in-house lawyer; and Feb. 15, 2010: $4,300 per hour in revenue typically needed to pay for one hour of outside counsel.).

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A recent article has much to say about non-practicing entities (NPEs). I have cherry picked from it and quoted several paragraphs.

“Some 20 of the 300 or so known NPEs appear to account for roughly half of all NPE-related litigations, according to intelligence from Patent Freedom (www.patentfreedom.com). In 2008 alone, some 900 operating companies were sued by NPEs.” The article does not mention the number of cases filed (See my post of Sept. 13, 2011: 550 cases in 2010 but no reference to the number of defendants.).

“Some estimates put the amount of capital flowing into NPE models over the past eight years to be between $6 billion and $8 billion. And clearly one aggregator, Intellectual Ventures, has raised massive amounts (reportedly US$5 billion). Others, such as Altitude Capital, Acacia, Techquity and Fortress Investments, are said to have tens of millions of dollars at the ready for patent buys.”

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Judge Richard Posner, the prolific Circuit Court judge, was interviewed by the New York Rev. of Books, Sept. 29, 2011 at 49. Asked about the ages of appellate judges and their effectiveness in their seventies and eighties, Posner offered his obiter dicta: “I think for anybody in a management job, ten years is the limit; you make enemies, you get stale.”

My goodness, what a change that would foist on legal departments if the top position had a term limit of a decade. “Career path” would take on a whole different meaning; search firms would exult. Senior titles would flex and “general counsel” would change to “chief legal officer” or there would be much more turnover at the top.

Do not misunderstand: I do not recommend this disparaging fancy of Posner’s. It takes years to learn the ropes at the top and to cast that hard-earned knowledge and social capital away prematurely would be a waste. Reversed and remanded for further consideration.

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For those of you who think that a law department needs to have some minimum number of lawyers to justify licensing a matter management system, you are right! But the number is one lawyer.

I looked at 125 law departments in the General Counsel Metrics benchmark survey that have licensed a law-department matter management system. Not a contract management system, or document management or patent tracking; not a customized system – I mean one offered by a vendor to law departments so that they can collect and report on data about the matters they handle and the fees they pay.

One department of one lawyer appeared; eight departments have two lawyers; 14 have three or four; ten have five or six; and two with seven. Given that the median law department in the 402 participating law departments so far is exactly 7, I stopped at the 35 smallest departments. Twenty-eight percent of the departments that named a legitimate matter management system were of the median size or smaller.

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Improvisation techniques applied to members of a brainstorming group have much value, judging from a sidebar in Rotman Mag., Fall 2011 at 18. For example, (1) identify a leader, someone who is empowered to keep an eye on the group and its dynamics. (2) Use “build on the ideas of the previous person”: when someone offers an idea, the next several people must say, “Yes, a good idea and let’s ….” and push further on it. (3) Free-wheeling: pick an idea and “pass it around” so that everyone tries to embellish it, alter it, push it further.

Lawyers find it difficult, I suspect it is fair to say, to unbutton, improvise and float in creativity. These acting prods may help them reach their inner, creative selves through brainstorming. Since my last metapost on brainstorming I have written six more flashes (See my post of Jan. 4, 2009: electronic brainstorming with decision-support software; April 6, 2009: brainwriting as an alternative; April 27, 2009: 11 suggestions for a brainstorming session; June 1, 2009: reverse brainstorming; Jan. 28, 2011: brainstorming replaced by techniques based on neuroscience; and June 9, 2011: a tool for Six Sigma.).

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General counsel deserve to have good, reliable, and useful benchmark figures. Many people try to supply that need. All of them face some systemic unknowns about the representativeness of the law departments that participate in their surveys.

Centralized departments: For example, data may be less common from decentralized legal functions as well as less complete (See my post of Feb. 16, 2011: perhaps not full staff or spending figures.).

Sizable departments: Participants may tend toward the larger size since they are pursued more (See my post of July 31, 2011: possible bias toward size.).

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Return on investment, the calculations that justify spending money, figure prominently in decisions by law department managers – or they ought to. Being so important, many posts on this blog aim directly at ROI or refer to it and it has become time for me to invest in updating my previous collection (See my post of Oct. 22, 2008: ROI with 17 references.).

Some of the subsequent posts refer to the calculations themselves (See my post of Sept. 1, 2009: allow for the time-value of money; Sept. 2, 2009: calculating ROI benefits and costs; Sept. 2, 2009: part two of calculating ROI benefits and costs; Oct. 19, 2009: how to figure the ROI of CLE; Nov. 13, 2009: ROI calculation for an entire legal department, the holy grail; and May 3, 2010: vendors and preparation of ROI document.).

More of the recent posts refer to returns on investment of specific types of initiatives (See my post of Feb. 6, 2009: inventor rewards; April 8, 2009: collaboration; April 27, 2009: videoconferencing; June 4, 2009: e-billing; Aug. 25, 2009: technology projects; Nov. 5, 2009: matter management systems; Jan. 25, 2010: AFAs, especially fixed fees; Jan. 25, 2010: administrators; March 1, 2010: recruitment ad; March 29, 2010: matter management system; and July 23, 2010: compliance investments.).

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Metrics and benchmarks provide opportunities for sleight of hand, for tricks that fool some people, for willful ambiguities, and for dumb decisions. Here are eight candidates for booby prizes other than samples that are not representative and questions that are not neutral.

Frame the findings with “save up to” or “reduce up to” language (See my post of June 2, 2011: misleading to tout extremes.).

Use indefinite numbers like “lots of” (See my post of May 24, 2011: Kraft’s law department clarifies estimative language.).

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For many managers, if a way of working gets the job done, who cares why? It makes no difference to them what the cause is, underlying explanations for the reliable outcome, the reasons behind decisions, tools, and management that brings the outcome about. This view is known as instrumentalism, and David Deutsch, in The Beginning of Infinity: Explanations that Transform the World (Viking 2011) at 15, defines it as a denial that explanations – conjectures that are tested and successively improved on – are necessary, valuable, or can exist at all (See my post of Aug. 29, 2008: ideas become means to a solution rather than values in their own rights.).

Pragmatism overlaps with instrumentalism (See my post of May 10, 2010: value can only be a pragmatic determination afterwards; and July 8, 2010: thoughts on positivism and postmodern notions.).

One form of instrumentalism is a rule of thumb, which doesn’t try to explain why it works. A manager comes to realize 30 cases per litigator seems about right; one week for a normal patent application fits most of the time; disbursements run about 10 percent of fees – for these folk wisdom will do, no need to think deeper. I suspect in the sphere of general counsel that delegation is also a rule of thumb. Rules of thumb rely on knowledge that is both familiar and uncontroversial, so-called background knowledge (See my post of June 19, 2011: rule of thumb, with 18 references.).

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