Articles Posted in How to Manage Against Legal Risks

The Point

I’m qualified to discern fat-vs-muscle in Legal spending from firsthand experience on both sides of the lawyer / client table. I’ve practiced business law for 25 years, and I ran divisions as a general manager and then served as an M&A executive for 12 years.

This Matters

To cut corporate law function spending — and to do it safely — a company needs both an attorney’s technical grasp of the legal system’s demands, and a businessperson’s cost control and management savvy. Continue reading

This morning The Boeing Company announced that Dennis Muilenburg had resigned as its Chief Executive Officer.

This follows the loss of 346 lives in two separate crashes in 2018 and 2019, and allegations that Boeing had withheld from FAA regulators, and from airline customers and their pilots — vital information about hazards inherent in the Boeing 737 Max 8’s autopilot system.

This morning’s announcement from Boeing:

Under the Company’s new leadership, Boeing will operate with a renewed commitment┬áto full transparency, including effective and proactive communication with the FAA, other global regulators and its customers.”

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Technology that improves the quality and efficiency of legal work will be stymied as long as hourly billing prevails among attorneys. At least that’s my belief.

Why do I say that?

  1. Hourly quotas for attorneys encourage more lawyer time per task;
  2. This motivates a proliferation of lawyers on any given task — each lawyer with their own hourly quota; and
  3. This proliferation leads to insertion of recent law graduates alongside fully qualified attorneys to do the routine & repetitive work for which law clerks or paralegals are suited — but billed to clients at several hundred dollars per hour.

A profession that gets paid more when its work takes longer, that gets paid even better when it assigns more people to do that work, and that charges clients for training its junior personnel — will lose money using a system that improves the quality or efficiency of that work.

Pretty straightforward, I think.

Last week I heard from a couple of others on this.

On December 6 I attended “Artificial Intelligence in the Enterprise (Legal Services Version)”, sponsored by the Law and Technology Initiative of Northwestern Pritzker School of Law and Northwestern McCormick School of Engineering.

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10 years into my legal career I accepted a corporate client’s offer to run one of its divisions as a general manager. Only by leaving law practice and becoming an executive did I learn how to protect a company from its legal risks.

This protection has two elements:

First Element: Prevent legal problems before they happen — attorneys’ emphasis on fire fighting amounts to bad risk management; and

Second Element: When you fail at the first element, see to it that legal problems are solved with the same high quality and efficiency that you demand in every other corporate function.

Every corporate function other than Legal.

Lawyers, for the most part, don’t see their jobs this way. Prevention of legal problems receive their lip service; but after-the-fact clean-up takes more time (hours billed) — and so it pays better. And one-off, ad hoc efforts on “bespoke” tasks (each contract is “different”) get their serious time and attention — “boring” process disciplines, not as much.

And when legal problems arise, the profession’s business model offers its own, dysfunctional, “management” methods:

  1. Pricing that’s unpredictable — because it’s based on how long the lawyers decide to take doing their work;
  2. Over-staffing by design — more people billing more hours; and
  3. Assignment of inexperienced attorneys alongside those who actually know what they’re doing.

Meanwhile, these “management” methods stymie adoption of accuracy-improving and labor-saving technology: Systems that remove errors automatically and make workflows more efficient reduce the hours for which attorneys can bill the client.

So a company needs P&L people to make sure that the job of protecting the company from legal risks gets done right. And that’s because CEOs, CFOs, and other general managers — in my experience — focus more readily on the company’s business goals.

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