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.
Related Posts with Thumbnails

Past Posts by Category

  • Benchmarks
  • Clients
  • Knowledge Mgt.
  • Non-Law Firm Costs
  • Outside Counsel
  • Productivity
  • Showing Value
  • Structure
  • Talent
  • Technology
  • Thinking
  • This Blog
  • Thoughts/Observations
  • Tools

  • Past Posts by Month

  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008
  • March 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007
  • August 2007
  • July 2007
  • June 2007
  • May 2007
  • April 2007
  • March 2007
  • February 2007
  • January 2007
  • December 2006
  • November 2006
  • October 2006
  • September 2006
  • August 2006
  • July 2006
  • June 2006
  • May 2006
  • April 2006
  • March 2006
  • February 2006
  • January 2006
  • December 2005
  • November 2005
  • October 2005
  • September 2005
  • August 2005
  • July 2005
  • June 2005
  • May 2005
  • April 2005
  • March 2005
  • February 2005



































  • Technorati Profile Creative Commons License This blog is licensed under a Creative Commons Attribution 3.0 United States License.

    « The ratio of partner time to other timekeepers’ time on invoices – no more than 30 percent? | Main | An intellectual-property e-billing solution (Honeywell International) »

    When does a company start a law department?

    There’s an unanswerable question for you. As I read about Palm Harbor Homes in Counsel to Counsel, Jan. 2007 at 14, I paused where it states that the $710 million maker of factory-built homes has no internal legal department. Instead, the company relies heavily on a local law firm for many of its legal needs.

    The thought arose: What events lead a company to hire its first in-house lawyer (See my post of April 15, 2006 on solo lawyers and stress; and Feb. 15, 2006 on six ways solo in-house lawyers have fewer management hassles)?

    One factor that determines the answer is the degree of satisfaction the company’s executives have with their outside counsel. If the thing ain’t broke …… I suspect that also on the list of determinants are the personal beliefs and values of the Chief Executive Officer. If that person appreciates lawyers, the department will appear more quickly.

    A second factor is cost. If the CEO or CFO believe that their company’s total expenditures on outside counsel falls within the acceptable range of benchmarks (on the order of .5 to .7 percent of revenue for companies below $500 million in revenue) what’s to worry?

    Third, does the corporation have the cash flow to afford an employee lawyer?

    Whether a company faces significant regulatory or legal hurdles could be a fourth factor but determines how soon it brings in a lawyer. High-tech and pharma companies may more quickly bring someone in-house for patent and licensing work (See my post of Jan. 18, 2007 regarding differences between industries in lawyers per billion.).

    Two metrics also contribute to this discussion. The US median is around four lawyers per billion dollars of revenue, so one might expect the first lawyer to be hired at around the $250 million mark. The second metric draws on the received wisdom that when outside counsel spending in an area of law reaches around $450,000 per year on a foreseeable basis, that can justify hiring a lawyer.

    Regardless of the reasons or the metrics, even when the pioneer lawyer joins the company, that lawyer might be primarily a conduit and conductor of outside counsel (See my post of Dec. 17, 2006 on ADVO.).

    Posted on February 4, 2007 at 10:31 AM in Clients | Permalink

    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.

    In the current environment with e-discovery risks, heightened regulatory scrutiny and the need to demonstrate that your organization encourages ethical conduct and compliance with laws, this begs the question of why any organization would choose not to have a dedicated inside counsel function. Even the most well intentioned outside lawyer cannot manage corporate compliance risks, which need adequate resources, nurturing and daily involvement within an organization. Accountants would prefer companies to expense legal costs over adding headcount for a variety of reasons, but this is one area where accounting considerations should not prevail over legal compliance.

    http://wolfs2cents.wordpress.com/

    Posted by: Rick Wolf | Feb 6, 2007 6:34:58 PM

    The comments to this entry are closed.