Rees Morrison, Esq., is an expert consultant to general counsel on management issues. Visit his website, ReesMorrison.com, write Rees@ReesMorrison(dot)com, or call him at 973.568.9110.
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    Rees Morrison’s Morsels #168: the long and the short of it (in brevia veritas)

    Functions, linear and otherwise. A function of some variable is linear if the plot of the function creates a straight line when you plug in different values for the variable. Think of X=3Y. If you plug in different numbers for the variable Y, the function of that equate creates a straight line. Function is another way to refer to the equation that summarizes the relationships between numbers. As an example, the larger the law department, the lower its total legal spending as a percentage of its company’s revenue – that is a function. The variable would be the revenue and the output graphed would be a line with different spending benchmarks (See my post of July 25, 2010: linear descriptions of data with 11 references.).

    Another criticism of the Delphi technique. A 1991 study “showed that the Delphi was no more accurate than other decision-making methods, because ‘consensus is achieved mainly by group pressure to conformity.’” This debunking comes from David Orrell, Apollo’s Arrow: the Science of Prediction and the Future of Everything (Harper 2007) at 240 (See my post of Dec. 9, 2005: Delphi technique -- nominal group technique; Feb. 1, 2006 #1: introduced in 1964 by Rand researchers; Aug. 25, 2009 #2: criticism of Delphi technique based on same research; and June 16, 2011: two descriptions of the technique.).

    An app from TyMetrix for rate information. LTN Law Tech. News, June 2012 at 54, mentions that TyMetrix offers a free app for mobile devices that uses data from its Real Rate Report to provide average hourly rates of law firms (See my post of May 31, 2012 #2: first law department app.).

    State taxes on legal services. Other than in five states, law departments do not have to pay state taxes on legal services billed to them. The exceptions are Delaware, Hawaii, New Mexico, South Dakota, and Washington according to Legal Spend Management: An International Perspective, a white paper produced by Jeff Hodge and Bridgeway at 3 (See my post of July 17, 2005: currency complications and VAT; and Dec. 1, 2006 #4: US state taxes on law firm services.).

    A metaphor to visualize why companies spend lower percentages on legal services as they grow larger. Thinking about why increasing revenue correlates with decreasing legal spend as a percentage of revenue, a metaphor captures such economies of scale. Visualize the demand for legal services by a company as multiple pipes that at different times and volumes flow into balloons of varying sizes. Each balloon stands for a lawyer (let’s simplify away all the other staff). Some balloon lawyers are too big for the pipe that fills them, so there is “untapped capacity”; some balloon lawyers are too small to catch all their flow. As law departments grow and add balloons or adjust existing balloons, they better match them to the flows. The larger the department – the meta-balloon – the more efficiently it matches the demand for legal services (See my post of Nov. 7, 2010: metaphors cited explicitly on this blog with 25 references.).


    Useful clarification of invoice formats under the various e-billing standards

    A white paper written by Jeff Hodge for Bridgeway, entitled Legal Spend Management: An International Perspective, discusses at page 7 differences between the various invoice formats for legal e-billing. It explains the three formats currently available under LEDES, the Legal Electronic Data Exchange Standard.

    “LEDES98B1 is an extension of the LEDES98B format that has been long used in the US, and by design is not particularly flexible." This early version is in ASCII format. LEDES 2.0 and LEDES 2.1 are built on an XML specification, "which enables it to be much richer, more robust, and scalable." Hodge believes that the XML versions will come to be the preferred formats of legal departments over time, yet currently more law firms can create an ASCII invoice then an XML invoice (See my post of Nov. 26, 2008: Legal Electronic Data Exchange Standard with 9 references; and June 23, 2011: Wilson Legal Solutions and Invoice Optimizer.).


    Budget-busting when a company pays the defense costs of a director or officer

    The legal fees paid by Goldman Sachs in defense of a former board member were almost three-quarters of $30 million; Procter & Gamble picked up the balance. From the same article in the NY Times, June 19, 2012, at B1, Morgan Stanley paid $4 million in the defense of one of its employees accused of insider trading, CA (formerly Computer Associates) paid $15 million, and Enron absorbed a gargantuan $70 million plus. Some of these expenses may be recovered eventually from the employee or insurance.

    Companies incur such expenses because their by-laws require them to indemnify board members’ and officers’ legal fees for conduct that occurred while acting on behalf of the company. If the legal fees are charged to the legal budget, then, like the legal fees incurred by independent counsel to the board, they could swamp the GC’s ship that year (See my post of July 25, 2005: costs of Boards retaining independent counsel; and July 25, 2007: payment by a company of Board members’ fees of outside counsel.).

    If the legal fees are not applied against the law department's budget, then total legal spending by the department, such as in response to a benchmark survey, is to that extent significantly understated.


    Metrics on prevalence among law departments of refusal to pay for newbies out of law school

    A piece in Met. Corp. Counsel, June 2012 at 16, cites a survey published in December of 2011 by the New Jersey Law Journal. The sentence with the citation says that “54% of law firms have clients who will not pay for the work of first-and second-year associates.” The partner at Gibbons PC who wrote this then goes on to explain the firm's Apprenticeship Program.

    This blog has noted several times the distaste of some general counsel for first-year associates, but not the extension to second years (See my post of May 30, 2005: hiring only partners; Nov. 8, 2005: minimum experience levels for associates; Nov. 19, 2005: USF&G uses only partners; Feb. 8, 2006: no charge by first years; April 30, 2006: no payments for first-year associates; May 11, 2007: such policies re associates; and Nov. 19, 2007: dilemma if law departments ban billing by junior associates.).


    Introverts compared to extroverts -- general counsel as leaders and their personality styles

    The Atlantic, July/Aug. 2012 at 68, has a piece on the leadership styles of introverts and extroverts. According to some recent research, "introverted leaders typically deliver better outcomes than extroverts, because they're more likely to let proactive employees run with their ideas." Later, the article suggests that extroverted general counsel, "who like to be at the center of attention," may feel threatened by subordinate lawyers who take too much initiative (See my post of Feb. 14, 2011: Kronos effect.).

    The short piece mentions other powers of introverts. They persist, they take more careful risk, and they are more comfortable with solitude – "a crucial spur to creativity."

    So, a boisterous, rah-rah style, Teddy Roosevelt leading the Rough Riders may not fit so well in a law department (See my post of April 18, 2005: lawyers' MBTI scores compared to those of the general population; Aug. 21, 2005: lawyers as introverts; and June 11, 2006: Meyers-Briggs and a generational shift toward extroversion.). Many of its projects last a long time, involved risk judgments, and call for thoughtful solutions.


    An annual strategic planning process that involves a law department’s staff

    Kenneth Fredeen, the General Counsel of Deloitte Canada, mentions in ACC Docket, June 2012 at 114, that he uses strategic planning as a management tool. In fact, "His staff participates in the exercise annually." I have cast doubt on the value of strategic planning by a group that is essentially reactive to business needs (See my post of Dec. 15, 2005: doubts about law department strategic planning.) but there are different flavors of strategic planning.

    Fredeen doesn't say much about his flavor of process or outcome but it could be useful for a law department each year to pick one area of its operations and think how to reengineer it to be more efficient. Or, the department could ask each staff member to bring one operational improvement to the strategic planning meetings (See my post of Dec. 21, 2008: quarterly idea from each lawyer on outside counsel cost control.). The meetings could call through them and pick a few to work on during the coming year.

    Strategic planning could involve scenario planning (See my post of Aug. 25, 2009: uses of scenarios in legal departments with 18 references.) or a SWOT analysis (See my post of Aug. 8, 2005: SWOT analyses with five criticisms of the method; Dec. 9, 2005 #1: SWOT review of large legal department discloses risk aversion; Jan. 13, 2006 #3: SWOT’s historical roots; and Nov. 5, 2007: strengths, weaknesses, opportunities and threats.).

    In other words, the term “strategic planning” encompasses a wide range of possible activities, all of which are designed to keep the department thinking about how it runs and how it might run more smoothly in the future.


    State-owned enterprises that have law departments probably differ from private-enterprises in their benchmark metrics

    Many of the largest companies in the world are owned in whole or part by a government. In Italy, for example, the government owns substantial stakes in Sace, an insurance group; Simest, a financial institution; Fintecna, a service provider; Eni, an oil company; Enel, a power utility, and Finmeccanica, a military conglomerate. When I read about these state-owned entities (SOE) in the NY Times, June 16, 2012, at B6, I thought also of China’s many SOE’s and the myriad others around the world.

    The competitive tension and cost-consciousness of private companies (whether publicly traded or not) and their consequent decisions on legal staffing and spending inevitably result in lower benchmarks than those of SOEs. When a government runs a business, political and social forces push toward different decisions regarding employment and budgets. Leading candidates that reflect the difference would include lawyers per unit of revenue and legal spending in proportion to revenue, all of which would likely be seriously warped by the inclusion of inefficient SOEs in a benchmark study.


    Don’t bother with formal acknowledgements by law firms that you have retained them

    A presentation by the President of doeLEGAL, Tom Russo, addressed how to design what he calls litigation spend architecture. On a slide having to do with how to start a matter you have assigned to outside counsel, Russo recommends, “Within five days – outside firm must file [an] Assignment Acknowledgement form.”

    I did not hear Russo speak so I do not know whether he embellished or qualified this bullet point, but I have not heard of a requirement by legal departments that outside counsel formally acknowledge that they have been retained. These days, an e-mail should be quite sufficient and that a form does no more than create make-work on both sides.

    If you are interested in the full presentation, please write Scott Miller of doeLEGAL.


    Web-based offering that prepares litigation decision trees

    A former general counsel, John DeGroote, has created Resolution Tree. An online service, it allows law departments to prepare litigation trees as needed for a fixed cost. An ad in Alternatives, March 2012 at 80, brought this to my attention.

    I have mentioned DeGroote before (See my post of Feb. 13, 2009 #4: Settlement Perspectives blog; and Jan. 20, 2012: CLO compared to GC titles.) as well as tools like decision trees for settlements (See my post of June 17, 2009: decision tree software with 6 references; July 9, 2009: comments about decision trees; Oct. 21, 2009: online decision tree for import/export law; June 17, 2011: models and decision trees; and Dec. 31, 2011: process analysis should branch out to decision trees.).


    Another software package to track diverse attorneys who work on your adversarial matters

    CPR, the International Institute for Conflict Prevention and Resolution, is a non-profit initiative of general counsel, law firms and legal academics "whose mission it is to install alternative dispute resolution (ADR) into the main stream of legal practice." CPR has a National Task Force on Diversity. That task force has produced an ADR diversity audit, available from CPR’s website “which companies can use to analyze how their legal work is being performed” by “professional women and minorities in settlement negotiations, arbitration and litigation by outside law firms.”

    This note comes from Alternatives, March 2012 at 77. This is the second diversity-tracking package I have come across (See my post of Jan. 9, 2012: Trakit software.).

    Wisdom about law departments and metrics from a GC serving as an interim CEO

    If there are something like 80,000 publicly traded companies in the world, how many privately held companies with law departments might there be?

    Rates and cost per hour comparisons between inside lawyers and lawyers at law firms in the United States

    Two “proven” profitability techniques of law firms that law departments should refuse

    Five categories for how your law firms might be rating you

    Somewhat misleading data about law departments and e-billing: leading and laggard countries

    Rees Morrison’s Morsels #168: the long and the short of it (in brevia veritas)

    Useful clarification of invoice formats under the various e-billing standards

    Budget-busting when a company pays the defense costs of a director or officer

    Metrics on prevalence among law departments of refusal to pay for newbies out of law school

     
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