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“A combination of increasing automation, new business models, and offshoring has pushed down the average size of finance staff by 30% over the past six years – to 92 people per $1 billion of revenue.” The quote comes from CFO, Nov. 2010 at 48, and Hacket Group data, courtesy of Michel Janssen, chief research officer for Hackett. From my General Counsel Metrics benchmark survey, the median size of legal staff for 800 law departments last year came 9 people per $1 billion of revenue, 10 percent of the finance figure.

Then comes the stunning data on headcount reductions: “In the last 10 years, the average large global company has dropped about 30% of its finance, IT, public-relations, and HR staff.” Janssen estimates that productivity improvements account for twice as much of that slide as offshoring. Fortunately, law departments haven’t suffered anything like that precipitous drop.

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Rotman Mag., Spring 2011 at 84, describes research by Haygreeva Rao, a Stanford professor of organizational behavior. Rao places much importance on the number of statements bosses make in meetings versus the number of questions they ask. “He argues that letting others speak and asking questions – real questions, not statements dressed up as questions – are powerful ways to encourage collaboration and creativity in your employees.”

To grasp this personally, a general counsel might bring someone to meetings to count and calculate the ratio of the GCs questions asked to statements made, as well as the ratio of time spent talking to time spent listening. The article suggests that you guess the results before the data comes back as that will provide a nice test of the accuracy of your self-awareness (See my post of Feb. 1, 2006: how to reduce the chilling effect of a dominant personality or position; Dec. 8, 2006: a GC’s chilling effect; Jan. 9, 2009: ideas are suppressed around a general counsel; and May 25, 2010: sense of futility, not fear of reprisal, silences employees.).

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Academics conduct research that makes me envious. Consider a detailed study of contracts described in the Acad. Mgt. Rev., Feb. 2011 at 182. Three professors studied 385 contracts Compustar had entered into with buyers of its IT services. (Of interest to me was the statement that lawyers negotiated none of the contracts; “lawyers conducted a final-stage review of the contracts” (at 200).) The article focuses on extendability and early termination provisions in the contracts. To research their effect, the authors coded a number of variables regarding the contractual arrangement and the contracting party. They then conducted regressions to find answers to their hypotheses.

My point here has only a little to do with what this particular empirical research can tell law department managers about contracting activities. My main point is that the methodology of data collection and analysis can uncover what is going on in the world far more insightfully and convincingly than the anecdotal sense of even the most experienced lawyer. Once you count it, analysis it, and run regressions coupled with causal relationships, you reach a much deeper understanding of whatever you study. Academics can do this and they publish their findings. This article illustrates the power of that approach.

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“The routines put in place to enhance productivity often hinder the practices that foster learning” This dispiriting trade-off comes from the Acad. Mgt. Rev., 2011, Vol. 36 at 461. Some scholars refer to this as the productivity dilemma: do something with formalized consistently and you retard improvement.

Law department managers want to lock-down repetitive activities, which speeds handling and improves overall quality. At the same time, once a process is codified and rules adhered to, those who follow the defined path have less incentive or reason to think of improvements. The same could be said about form documents. Standards clash with kaizen and one of them has to give ground.

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After I noticed several visitors who reached this blog from Linex Systems, I looked at its website. A law department case study caught my eye and gives some background on a productivity tool for law departments. David Byrne is Head of Knowledge Management for BT Group’s legal department. Working with a team of 130 lawyers, he is always searching for “ways for our people to do more with less effort.”

With a distributed workforce, BT Legal relies on technology to make up for the lack of face-to-face contact. For example, the company became one of the first to adopt Linex Smart Alerts.

At BT they see Linex Smart Alerts as an important business tool: “We use it to share knowledge and work together. The system allows the company to monitor content from its panel of law firms, as well as tracking information from thousands of other sources.” BT has integrated the system closely with its own SharePoint site. Information appears there directly, so lawyers do not have to log in to Linex themselves.

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Every law department has a few law firms they view as their stalwarts, their old-reliables, their go-to firms. Sometimes called primary law firms, they are known quantities and qualities – they are the reigning incumbents. A more formal designation, and the more European term, is a panel.

My sense of the differences between the terms is that (1) a panel is generally larger than the normal handful of primary firms, (2) a panel handles a higher percentage of the department’s work, and (3) a panel has a certain duration, such as two years, and a rebidding for positions on it at the end of the term.

Having collected my posts twice before on panels, it fell time to update another metapost (See my post of May 19, 2009: Sainsbury panel; May 21, 2009: Nestles and its core panel; Aug. 19, 2009 #2: best practices for panel retention and management; Sept. 22, 2009 #2: rule of thumb for how many to invite; Nov. 13, 2009: Royal Bank of Scotland; Dec. 7, 2009: Telstra and its panels; Feb. 2, 2010: fairness to panel firms if the department hires a specialist; Oct. 7, 2010 #4: panels protect in-house attorneys from seekers of work; Dec. 3, 2010: Network Rail’s panel; Dec. 10, 2010: ITV’s panel; Jan. 14, 2011: psychological benefit of panels that reduce choices; March 16, 2011: French departments and panels; June 8, 2011: finding specialists even with panel; July 19, 2011: Liberty Mutual and 1,000 on panel; and Aug. 15, 2011: ProcureLaw and panel instructions.).

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An early post suggested a number of advantages (See my post of July 5, 2006: large law departments have scale advantages: division of labor, specialization, and investment in technology.). They have streams of similar work so those who do it become more expert (See my post of Sept. 10, 2005 on specialist attorneys in large law departments.). They have the funds to invest in process improvements, knowledge management, software development and licenses.

Somewhat later I extracted posts that together touch on eight more advantages of large departments (See my post of July 29, 2009: aspects of large law departments.). As compared to smaller departments, large ones can support more and different kinds of resources (See my post of March 6, 2007: obtain accreditation for free CLE; March 12, 2006: maintain librarians; Aug. 27, 2005: enjoy the services of dedicated IT staff; Sept. 10, 2005: stock specialist lawyers; May 1, 2006: run internal think tanks; July 25, 2007: explore alternative fee arrangements; March 9, 2009: use slush funds for investments; and May 3, 2008: create internal discovery teams; Nov. 6, 2006: test organizational network analysis; and June 15, 2008: spend seed money for technology ventures.).

Hardly done, I would offer 11 more propositions. As compared to smaller departments, larger ones are more able to:

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Lit. Mgt. Mag., fall 2011 at 59, offers an example of a fixed fee for discovery: “no more than 10,000 documents to review, no more than six fact depositions, no more than two experts named by the opponents and no more than one discovery-related motion filed.” That sounds plausible to me as a basis for a set cost.

Articulated parameters such as those lay out the variables and exclude exceptional events (See my post of Aug. 22, 2011: carve-outs and two meanings in fixed fees.). Key terms are defined, or at least available for discussion, and the possibilities are addressed. They attempt to narrow previously unstated assumptions (See my post of Nov. 23, 2010: state bases for pricing.). With such specificity, the arrangement comes closer to unit pricing (See my post of Oct. 24, 2009: J&J unit pricing model.).

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As I thought about the advantages of large law departments, I thought of delegation and assignment. Bigger departments have more lawyers and paralegals, so they can use both to spread the work around to better match the person’s skills.

That led me to consider the differences between the two verbs, assign and delegate. To me, “delegate” implies sending work to a junior person and some level of ongoing supervision and review at the end (See my post of Aug. 28, 2008: delegation in a law department with 14 references.). You delegate work to a paralegal or to someone who reports to you, vertically down the reporting structure.

The term “assignment” suggests that the work is handed off to a capable person and nothing more need be done. You shift the work, sometimes across the law department as when litigation assumes responsibility for a dispute that goes bad.

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Design precedes everything created by people. “[E]verything made and used by humans has been designed, in that it has been realized from an idea or its parts have been selected from the store of existing things, modified if necessary, and assembled into a new and purportedly improved thing.” Thus grandly does Henry Petroski, Success through Failure: the paradox of design (Princeton 2006) at 41, sweep everything humanly created under the sweep of design. Seven pages later he repeats that “Designed things are the means by which we achieve desired things.” Things designed have components; things designed make up systems. Law departments demonstrate the truth of Petroski’s view.

The best designers learn from failures. “Failures are remarkable. The failures always teach us more than the successes about the design of things.” (at 49). To Petroski failure is an unacceptable difference between expected and observed performance. All things designed have unexpected consequences and all things designed embody judgments (See my post of Feb. 15, 2011: ideologies underlie design; and June 15, 2011: design sciences.). Petroski praises pilot tests as a way to learn with problems corrected as you go along (See my post of April 8, 2009: pilot programs with 6 references.).

Petroski hammers home the paradox of design: “Things that succeed teach us little beyond the fact that they have been successful; things that fail provide incontrovertible evidence that the limits of design have been exceeded” (id. at 114).