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Lawyers have long engaged in loose and hopeful speculation that law firms will stop basing their charges on the time it takes attorneys to do their work, and that corporate clients will soon be able to pay legal fees based on a pre-agreed value of attorneys’ services.

For instance, a full five years ago, the influential Georgetown Law Center / Peer Monitor’ 2017 Report on the State of the Legal Market announced, “The Death of Traditional Billable Hour Pricing” — and its replacement with “alternative fee arrangements” and “budget-based pricing”.

But the facts don’t bear this out. Witness a recent and prominent case in point reported in last Monday’s legal insider publication Above the Law: Continue reading

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The Point

What’s wrong with the corporate law function? For the last 40 to 50 years C-suites and boards have taken a hands-off posture on managing Legal, leaving lawyers in-house to manage lawyers in outside firms. Most of these lawyers are pretty good at law, but they’re bad at cost control.

Lacking the will to exert cost control on their fellow attorneys in firms — and free of accountability to the C-suite or board to do otherwise — general counsels passively continue to pay for the waste inherent in the billable hour business model. And fees to law firms have increased every year for the last twenty, except for two years during the Great Recession.

Meanwhile, from 1997 to 2017, law departments went on a hiring spree of in-house talent as an “economy move” — with in-house attorneys on corporate payrolls increasing by 203%. Continue reading

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The Point

1. Corporate law functions perennially experience chronic, gaping shortfalls between the resources they need to do their job and what they actually possess.

2. Without an unlimited budget, a corporate law function must therefore scale its resources to keep up with soaring legal and regulatory demands.

3. To get at-scale impact, Legal needs disciplined systems and processes by which its people work together to accomplish what no single one of them could do on their own.

4. The disciplined systems and processes required for at-scale impact need a proven executive in charge — not an individual whose career has been limited to law practice. Continue reading

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The Point

As I suggested in Part I of this series, scaling a company’s resources to meet soaring legal and regulatory demands is, ultimately, a management challenge. Because at-scale impact — using limited resources — won’t happen without disciplined systems and processes by which colleagues work together to accomplish what no single one of them could do on their own.

Successful companies usually have individuals who have proven themselves as managers. They might be serving in a corporate function like finance, or serving as a line manager in a business unit. Or, in the past five years to ten years, proven managers may be found among a new breed of professionals: “legal operations” executives.

But such proven managers are rarely found among lawyers, whether general counsels or others in-house or in firms. Unhelpfully, lawyers in-house and outside counsel “manage” in dysfunctional ways peculiar to their profession: rewarding excessive time spent on tasks and overstaffing work teams with inexperienced attorneys — actually disincentivizing efficiency.

Therefore only proven executives should manage the corporate law function. Attorneys should play a supporting role in Legal, confined to their technical skills in law and regulation. Continue reading

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The Point

1. In the last four decades, legal and regulatory demands on business have increased exponentially.

2. These demands trigger chronic, gaping shortfalls between what a company needs in order to achieve legal or regulatory compliance, on one hand, and the resources that Legal actually possesses, on the other.

3. Such severe gaps in capacity call for responses at-scale. And at-scale impact won’t happen without disciplined systems and processes by which colleagues in Legal work together to accomplish what no single one of them could do on their own.

4. But most lawyers cherish their autonomy. So most avoid systems and processes they view as cramping their individual style. Continue reading

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The Point

“It’s the front-line people who know what’s going on, not the people with their feet up on the desks in their offices”. So writes Alan Weiss, the clearest thinker on professional services delivery I’ve ever met.

Yet, in the context of critical enterprise risk management, the odds are against one employee’s knowledge of incipient legal or regulatory danger coming to the attention of someone positioned to effectively nip that danger in the bud. Unless that one employee is either relatively senior, or visits with one of the company’s lawyers by happenstance.

This Matters to Your Business

With the early-stage legal and regulatory dangers that mutated into the Boeing 737 Max crashes, the General Motors ignition switch tragedy, and the Blue Bell Creamery listeria outbreaks, it was, as Alan Weiss would have put it, “the front-line people” who knew about those hazards well before any customer died. It was not the corporate law function (see post). Continue reading

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The Point

Legal journalists like to say that in-house counsel are much better positioned than outside lawyers to adopt labor-saving and accuracy-enhancing workflow processes, and the technology to support them, since they don’t have to maximize hours billed.

Despite what one might expect, Thomson Reuters’ “State of the UK Legal Market 2022“, issued this month, demonstrates that in-house counsel are laggards in using the systems and software that can save lawyers’ time and catch their mistakes. Continue reading

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The Point

Many in the U.S. legal profession have long touted “pricing innovation”, promising corporate clients savings and cost certainty.

As of 2022 these promises remain largely empty.

Because in the U.S. corporate legal sector the billable hour continues to prevail. By a wide margin. So says the 2022 State of Corporate Law Departments Report issued by Thomson Reuters Institute, provider of information and technology to attorneys. Continue reading

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Who Should Do What on Legal and Regulatory Risk?

The enterprise needs compliance systems and processes that provide early warning of legal and regulatory dangers, that trigger timely actions against those dangers, and that, ultimately, can prevent them from mutating into something worse. Those systems and processes should report up to the CEO, COO, or CFO (some senior executive who possesses proven management capability), not to a general counsel or other practicing lawyer who lacks such capability.

One lesson of the Boeing 737 Max crashes, General Motors ignition switch tragedy, Blue Bell Creameries listeria outbreak, and dozens of similar compliance misses (see Part II of this IV-part series): in each case the C-suite was blindsided by a devastating legal or regulatory surprise, and Legal was excused from accountability for that surprise by an “ignorance defense” (Part III). Continue reading

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