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The Point

Where corporate Legal needs the services of a specialist, it should look primarily among law firm partners for the practitioner who has spent years — more typically decades — focused on the narrow legal area in which the company’s need arises (more on this here and here).

Surprisingly, attorneys employed by such firms as associates — especially the larger ones — receive very little training for their work (see here, here, and here). Yet these law firms assign such associates alongside such partners and bill them at hundreds per hour for their supporting role.

Management lesson: Corporate Legal, to get the expertise its client company requires, should maximize the services of the specialists it really needs, and minimize the services of associates who role is mainly to bloat billable hours (see here and here about the law firm financial technique called “associate leverage”). Continue reading

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The Point

D. Casey Flaherty, legal technology consultancy LexFusion’s Chief Strategy Officer, released an important essay earlier this month. Along with colleagues, he conferred with 435 corporate law departments and 250 law firms in 2022. And with 327 corporate law departments and 240 law firms in 2021. His conclusions:

1. For most companies, the legal system’s demands on corporate Legal exceed that business function’s capabilities to respond. And the gap between those demands and those capabilities have relentlessly widened. So some tasks vital to a company’s legal safety go begging, exposing those companies to potentially catastrophic litigation and regulatory exposure.

2. Meanwhile, corporate Legal has been overwhelmed meeting current needs so that it can’t take the time and money to invest in better ways to do its work. Preoccupied with urgent tactical matters, Legal drops the ball on important long-term strategic needs. So it fails to increase its capabilities at scale, directing almost all of its resources to putting out fires.

3. Despite this precarious mismatch between resources and needs, corporate Legal’s leaders say that they intend, by a large majority, to reduce the budget of their function. Without explaining how they intend to scale capacity to keep pace with law’s relentless, increasing requirements. This is, as Flaherty puts it, “bonkers”. Continue reading

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The Point

Some contracts are more important than others. Figuring out what’s “good enough” depends on the deal’s potential consequences — both good and bad.

Some are considered “bet-the-company”. They call for a degree of quality, investment of time, and costs (especially lawyers’ fees) commensurate with their potential benefit and potential risk. Other, more routine, “run-the-company” agreements might not warrant the same mix of quality, time, and costs.

In business contracting there is no such thing as perfection; only compromises in the allocation of a company’s resources. Continue reading

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The Point

“Corporate Legal”. For decades this phrase has referred to people who have been formally trained and experienced in only one discipline: law. And these people have had just one function: advice and representation on how statutes and regulations — and the courts and government agencies that apply them — could constrain a company’s actions and assets.

Under this traditional view, greater demands on the company from the legal system simply call for … more attorneys. This is how most attorneys in-house and in law firms still view law function capacity.

But Legal can’t keep pace with the legal system’s skyrocketing demands without scaling that capacity. And such scaling demands skills beyond those acquired in Juris Doctor programs and preparing for bar exams.

Continue reading

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The Point

Past actual outcomes should determine who your company chooses as litigation counsel. Jeff Carr breaks it down this way:

“Effectiveness — was customer objective not met, met, or exceeded?

“Efficiency — was actual below or above agreed budget?

“Experience — Customer’s [satisfaction] with team?”

The legal profession — both in-house and in law firms — tends to skip the nuts-and-bolts due diligence required to understand such effectiveness, efficiency, and customer experience. It defaults instead to a loose proxy for these specifics: law firm reputation. Continue reading

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The Point

As both lawyer and executive I’ve seen multiple variations of this scenario: A friend heading an industry lending group at a money center bank calls me. Agitated. He and his counterpart at the potential client company have agreed on all business points for a large loan. But one lawyer’s insistence on their pet wording of some clause threatens to kill the deal, or at least add unnecessary time and work before closure.

Though occasionally legal counsel’s preferred wording may be sound, too often it just reflects one lawyer’s stylistic preferences over another’s — without adding to legal protections. Here’s a corrective viewpoint from Jeff Carr, lawyer and former P&L executive:

“Contracts really are simply business project management charters (who is going to do what when). We lawyers have made them far more complicated by focusing on what happens when something goes wrong. Far better to make sure obligations are understood and can be fulfilled.” Continue reading

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The Point

Two surveys of general counsel reported in December offer identical descriptions of the budget crisis facing corporate Legal departments in 2023:

(1) From the legal system: most face increasing demands, and

(2) From the C-Suite: most face cost reduction demands.

In such circumstances, executive management usually asks Legal for some measure of cost discipline similar to what they ask of other corporate functions and business units. Too often, Legal reacts by threatening a game of “chicken” with the business side: give us the funding we want, or the company faces potentially catastrophic risk.

C-Suites facing intransigence from Legal should consider a tool used where an employee’s performance has slumped, but summary dismissal would be premature: a performance improvement plan. Continue reading

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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

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The Point

From a November 28 report in American Lawyer Media / Law.com (subscription required):

“‘Surprised, Angry, Dismayed’: Legal Departments Vow to Fight Law Firms’ Rate-Hike Plans … The in-house legal community is expressing outrage that law firms will be pressing for aggressive rate hikes in 2023, even though they know that legal departments are under extraordinary pressure as the economic outlook sours”.

C-Suites and business owners concerned about their Legal functions have three options here:

1. The emotional option: Whine about frustrations,

2. The tactical option: Make do the best they can without challenging law firms’ status quo for hiring specialist attorneys, and

3. The strategic option: Take charge, using the same management disciplines by which other corporate functions and business units achieve operational effectiveness. Continue reading

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The Point

1. By long-established tradition, and (nearly) invariable current practice, only licensed attorneys serve as the CEO of a law firm or lead a corporate law department. 

2. As a business lawyer who accepted a corporate client’s offer to run one of its divisions as a general manager 10 years into my legal career, I was largely blind to basic management principles until I became answerable to the P&L.

3. Leading law practice management authority Jae Um recently offered this advice to a class taught by University of Indiana Law Professor Bill Henderson, on how the largest category of major corporate law firms should approach strategy:

“First, professionalize your management. Second, optimize your operating model — because you need to produce quality and consistency at scale and pace. By the way, you need to do it in that order.” Continue reading

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