Managing Legal
The Point
In turning from the current reactive, makeshift approach to Legal, to a financially sustainable and operationally coherent strategy, what options does the business have?
I suggest three kinds. Continue reading
Articles Posted in How Lawyers Deliver Their Services to Business
Corporate Legal Needs a Strategy (Part II of IV)
The Point
Part I of this series concluded:
” … In most companies, corporate Legal is a business function without a strategy … without objectives and metrics by which to assess its effectiveness .”
In other words, most corporate Legal functions neglect to target specific results for which executive management can hold them accountable. And they lack measures against which to assess their results (other than generalized cost complaints).
Nevertheless, most corporate Legal functions have what amounts to a substitute for a strategy, implicitly adopted by default. As the article cited in Part I (“The One Thing You Need to Know About Managing Functions“, Roger L. Martin & Jennifer Riel, Harvard Business Review, July – August 2019) put it:
“You have a strategy whether you like it or not … The goal may be implicit … The choices may have emerged without discussion or exploration. The actions may be ineffectual in achieving the goal. But the strategy exists nonetheless.”
So the typical corporate Legal function’s implicit, default substitute for a coherent strategy that actually amounts to a set of tactics:
- Respond to events ad hoc; don’t commit Legal to achieve particular outcomes, and
- When a legal need arises, simply assign lawyers to whatever task needs doing.
Corporate Legal Needs a Strategy (Part I of IV)
The Point
In most companies, corporate Legal is a business function without a strategy.
Executive management needs to fix this. Because neither attorneys in law firms nor those in-house have defined what is — and is not — within Legal’s scope of responsibility. And, apart from generalized concern about cost, business leadership lacks agreed measures by which this function’s results can be evaluated.
Unaccountable to explicit performance metrics, Legal lacks a meaningful foundation on which to craft its strategy as a corporate function. (“The One Thing You Need to Know About Managing Functions“, Roger L. Martin & Jennifer Riel, Harvard Business Review, July – August 2019).
So Legal’s prevailing mode of operation, with minor exceptions, is reactive. With attorneys both in law firms and in-house making ad hoc responses to client events. Leaving the business enterprise without objectives and metrics by which to assess Legal’s effectiveness as a corporate function. Continue reading
Mark Cohen on “Law’s Delayed Future”: Legal Is Stuck in Its Ways, Business People Must Drive It Forward
The Point
Since I first met him 5 years ago, I’ve come to regard Mark Cohen, along with the UK’s Richard Susskind, as one of the world’s two leading authorities on the legal profession’s future. Here’s what he wrote in his most recent regular column for Forbes, entitled “Law’s Delayed Future” (subscription required):
“The industry is a digital laggard, misaligned with the needs of business and society … Law’s future has been delayed by the legal profession, not by the absence of tools, resources, and a digital transformation roadmap ….
“If lawyers do not lead the legal function’s future, business will … The legal function … will be a proactive, positive force in the enterprise, not a reactive, ‘department of no'”. Continue reading
A Financial Reality Corporate Law Functions Don’t Talk About: Variable Costs Should be Managed Differently from Fixed Costs
The Point
Over the past four decades, the constant law department refrain, in response to rising costs, has been: “bring more work in-house” (see here, here, and here). Swap out on-demand law firm specialists who charge (high) fees, for full-time in-house generalists who receive (lower) salaries and benefits.
This “cost-saving” method hasn’t worked — a consistent 50 to 60% of law function spending has long consisted of payments to law firms (see here). And, excepting the 2008 to 2009 Great Recession, companies’ legal spending has consistently spiraled upward.
This Matters
Most industries charge more per unit for purchases made in small numbers, or only occasionally, than they charge for purchases made in bulk, or on a regular basis. But the waste that the legal profession’s hourly billing business model builds into law firm charges multiplies any variable cost premium to grossly excessive extremes.
So, to an extent not true of most other industries, the legal industry offers corporate law functions no economically viable way to manage their variable costs — at least when it comes to sourcing help from lawyers. Continue reading
Another Lesson from the FisherBroyles Law Firm: Inexperience Has No Place on Your Company’s Legal Team
The Point
In a recent post, this blog covered the FisherBroyles law firm, which recently won acclaim for becoming one of the 200 highest revenue U.S. law firms (“AmLaw 200”). It has no offices, no associates, and no secretaries—what partner James Fisher calls, “the headwinds of profitability.”
As to “no associates”, since its inception 20 years ago, FisherBroyles has guaranteed that everyone it designates as a “lawyer” or “attorney” on a client company’s bill (whose work that bill describes as “legal services” or “legal advice”), is a fully-qualified attorney of at least 7 years experience — more typically 15 to 25 years experience practicing law.
This Matters
This is not true of the traditional U.S. law firm.
Whose hourly billing business model relies on adding more recent law graduates to pump up total charges for the work of mature, accomplished attorneys. Continue reading
Bruce MacEwen Writes: The Corporate Law Function Has “A Scal(ability) Problem”
The Point
In a recent article, Bruce MacEwen, one of the three or four leading experts on lawyers and law firms, explains that those firms and the in-house law departments who hire them can’t keep up with the U.S. legal system’s increasing demands.
Not at the current rate of increase.
This Matters
MacEwen breaks down the numbers to show that the U.S. legal system’s demands on business enterprise are skyrocketing, and that the growth rate of those demands shows no sign of abating.
According to Mr. MacEwen, the corporate law function’s go-to move amounts to simply “throwing more bodies” at those demands as they increase.
Barring basic changes in the way that the corporate law function manages its work — i.e., finding economies of scale — simply adding attorney headcount (in-house and / or in law firms) ratable to the pace of increase in demand is not financially sustainable. Continue reading
Law Firms to Pay $200,000 a Year to Law Grads Who Have Never Practiced — Inexperience Is Costly
The Point
Earlier this month several top U.S. law firms announced that they’d be paying 2021 law graduates $200,000 per year (Wall Street Journal: “Entry-Level Lawyers Are Now Making $200,000 a Year”).
Whether the law firms account for this as overhead (very unlikely), or pay for it by charging clients for the time of such novices (much more likely), client companies will shoulder the bill for this largess.
This Matters
Any U.S. law graduate will attest to the reality that a freshly minted law graduate — without any experience in or training for actual practice — is unqualified to perform as an attorney.
As the founders of AmLaw 200 firm FisherBroyles have described it (before this month’s announcement of $200,000 a year salaries), assigning such unseasoned individuals to perform legal tasks for clients, and then charging clients hundreds of dollars per hour for their work, amounts to, “the $180,000 a year associate being trained on the client’s time“.
Empower Business People to Speed Up their Contract Negotiations via Technology — Avoid the Lawyer Logjam
Speed-to-contract is vital to your revenues.
As a P&L executive you know that.
As a former P&L executive — now practicing law — I know that.
But too many lawyers just don’t. They focus on verbal tweaks and “improvements” that hold up the process.
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It was only after I accepted a corporate client’s invitation to leave law practice and run one of its divisions that I understood how important timely execution is to doing the deal. Until then I was preoccupied, like most of my lawyer colleagues, with constant adjustment of terms in pursuit of a legally perfect document.
Of course the answer can’t be that we eliminate attorneys’ contribution to all this. Speed-to-contract that ends up with the wrong contract terms is self-defeating.
But now there’s technology that helps to accelerate the pace, while incorporating good legal guidance into a much more agile and timely process.
Clients Need Legal Services But Not Necessarily Lawyers (Part 4 of 4)
This four-part post’s premise:
A company’s “legal” problems are likely to be — in functional terms — business problems that have a legal aspect.
The traditional impulse to call in a licensed attorney from a law firm or in-house counsel department doesn’t always lead client companies to the most practical choice for their needs.
Hence my introduction of “Alternative Legal Services Providers”, or “ALSPs” — and Georgetown Law Center’s recent, authoritative survey, “Alternative Legal Services Providers 2019” — in this four-part post.
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Here are four take-aways: