To allocate legal department costs to business units – embed the costs in their budgets

A tidbit from Counsel to Counsel, Nov. 2006 at 10, notes that the in-house lawyers of Golden West Financial Corp. are assigned to and co-located with the bank’s three major business units. The units must include in their annual budgets the costs of the lawyers assigned to them. Because that cost is a fixed overhead, those who manage the business unit try to make the best use of the resource (See my post of Feb. 18, 2006 on fixed versus variable cost lawyers.). No longer a free good, the charge back arrangement disciplines the use and increases the effectiveness of the in-house business lawyers.

Co-location with clients and a fixed cost assessed helps aligned business lawyers to the group they support. To whom those lawyers report is another issue.