The simplest time tracking system asks lawyers to estimate the percentage of time they worked on individual matters each time period, such as a week or month (See my post of Nov. 22, 2008: internal time tracking with 16 references.). General counsel adopt all manner of time keeping methods, but whatever the rules, advantages and disadvantages become apparent.

Proponents say that tracking time:

1. Conveys a constant message that management and clients care about the efficient use of legal time;

2. Captures one measure of productivity;

3. Helps match oral reports from lawyers to quantitative data;

4. Guides more informed allocations of time by types of matters and groups of clients;

5. Provides data to enrich performance evaluations of individual lawyers;

6. Gives a perspective on the relationship between internal time and external costs on matters;

7. Permits more accurate charge-backs or allocations; and

8. May help a general counsel answer questions more quantitatively about what the lawyers do.

Opponents say that tracking time:

1. Lowers morale, since lawyers despise doing it;

2. Foists on supervisors the unpleasantness of incessantly pushing lawyers to comply;

3. Yields a mass of useless data since descriptions are so broad or sloppy as to be meaningless, and matters vary so much;

4. Disgorges data that cannot be verified and at best are ballpark estimates or manipulated;

5. Requires software and someone to gather, scrub, and analyze the data; and

6. Adds another task to the administrative burden of lawyers.

General counsel compete with their peer executives in a company. Humans being what they are, proud and possessive, it follows that general counsel compete at least some of the time with their peer executives. Notwithstanding the internal exchange of legal services for technical, personnel, financial, and physical support from other staff groups, each functional head elbows and crowds for budgetary funds, recognition from the CEO, additions of responsibility, headcount, respect and other prerogatives. The fates of some legal departments hang in the balance.

Varieties of correlation tests. A common type of correlation, known as the Pearson Product Moment Correlation, is appropriate when both variables are measured at an interval level. A wide variety of other types of correlations apply in other circumstances. For instance, with two ordinal variables, the Spearman rank Order Correlation (rho) or the Kendall rank order Correlation (tau) are appropriate. When one measure is a continuous interval level and the other is dichotomous (i.e., two-categories like yes or no) you can use the Point-Biserial Correlation. For other situations, consulting the web-based statistics selection program, Selecting Statistics (See my post of Oct. 29, 2009: how to determine the statistical significance of a correlation.).

Concordance analysis of my nearly 5,000 headers. The first 4,937 headers I wrote for posts on this blog reveal a sensible distribution of frequent words. The ten most commonly used are ”law” (1,569), “departments” (640), “counsel” (584), “department” (573), “firms” (509), “legal” (500), “lawyers” (401), “management” (342), “general” (302), and “in-house” (292). My software, Concordance, says the collection of headers includes 7,352 words (32,347 tokens). Word tells me the file has 50,564 words in it.

Enterprise risk management software at Computer Sciences Corporation. OpenPages is the software CSC uses for enterprise risk management. How would a legal department use such software (See my post of Aug. 17, 2009: controlling legal risks with 13 references and 2 metaposts.).

Posts read from an iPhone! When you see iconfactory.com/twitterrific as the referral source from a visitor, you know that the person was using Mobile Safari on a small screen. That was a first! On October 3rd I noticed the referring site. Amazing that someone read a post of mine on their iPhone.

“Consumer surplus is the aggregate net benefit that consumers receive from using goods or services after subtracting the price they paid.” This definition of an economist’s term, from MIT Sloan Mgt. Rev., Vol. 51, Fall 2009 at 95, hearkens back to what I have written about the effort to measure and generate more value from law firms (See my post of Aug. 21, 2009: value compared to fees paid with 22 references.). Consumer surplus, in other words, is what general counsel who authorize payments to law firms want to maximize.

Law firm partners, too, should be as much interested in pinning down value (aka consumer surplus) as are general counsel. They would like to keep the consumer surplus from going too high as the cost of legal information and some services sink toward zero on the Internet. The cost will also drop, and consumer surplus rise, due to offshore competition, new models of law firms, pricing pressure, and disruptive technologies – but the shift in consumer surplus will be gradual and each change has precedents.

The International Chamber of Commerce studied the distribution of costs in arbitrations between arbitrator and institutional charges (hiring the judges) and lawyer fees, expenses related to witnesses and experts, and document charges (putting on the case). As reported in the NYSBA J., Vol. 81, Oct. 2009 at 21, in the breakdown 18 percent went to the arbitrators and 82 percent for the lawyers and other costs of presenting the case.

The comparable cost breakdown of dispute resolution in court would be more than 99 percent putting on the case. In other words, the transaction costs of the forum of arbitration is almost a quarter more than the legal costs (See my post of Jan. 16, 2008: arbitration with 14 references.).

General counsel may seek to drive some revenue as a result of their department’s patent licensing efforts, but the imagined returns are four leaf clovers. An article in MIT Sloan Mgt. Rev., Vol. 51, Fall 2009 at 72, states that for only a few companies does patent licensing pay off. True, Qualcomm, Philips Electronics, and Thompson generate from $500 million to $2 billion per year in patent licensing. They are exceptional leprechauns. “Indeed, 99% of patent-licensing revenue in the United States is generated by companies that own 40% of all U.S. patents; that is, the remaining 60% of patent holders receive just 1% of the revenue.”

Patent licensing only benefits a portion of companies (See my post of Dec. 31, 2007: intellectual property licensing with 12 references.). Apparently it is blarney to think it will be the pot o’ gold for general counsel who would like to move their department more toward a revenue generator. (See my post of April 27, 2008: profit center with 18 references.).

More generally, the article points out that “Siemens … and Proctor & Gamble Co., for example, recently reported that they use a mere 10% of their patents but nevertheless pay millions in annual renewal fees for the remaining 90%.” Patent activities remain problematic in terms of profit.

I have been compiling a guide to law department benchmarks. While researching it, I realized that this blog has hundreds of metrics, but only some of them fall into a category most general counsel would call benchmarks. They would define benchmarks as commonly-accepted metrics of law department performance. Not that the particular metrics produced are granted gospel status, but the way to calculate them is and so is their significance. So no one says that four lawyers per billion is right; everyone agrees that lawyers divided by billions of revenue ranks among the most important benchmark calculations and metrics.

Less well-known are benchmarks that compare the performance figures of law departments on a selectively acknowledged basis. For example, I am completing a benchmark study for leading trademark holders. Thousand active marks per full-time-equivalent trademark lawyer tells those experts quite a lot, but as an esoteric figure it offers little to general counsel.

Some numbers particular legal departments track, but their general counsel do not see it worthwhile to try to obtain similar numbers from other law departments. They may feel some comparative metric would be fine but far too hard to define and collect. Consider percentage of contracts reviewed. A general counsel can tally that number for herself, but to get methodological reliability and persuade a sufficient number of other general counsel to gather it would likely be too painful for the insights obtained.

Finally, sometimes chief legal officers compile numbers for ad hoc purposes. The CFO wants to know how many acquisitions we worked on last year that had between $30 and $100 million in potential purchase price? These kinds of numbers are descriptive. Benchmarks are proscriptive and evaluative.

Recently I took in-house counsel to task who fail to consult with outside lawyers if they get in too deep. Ken Grady in turn took me to task and made some good points.

“Do in-house counsel err from time to time - sure. Do outside counsel - at least as much. Being outside does not make you an expert. It seems like every day I am telling outside counsel about statutes they missed, regs they haven't read, cases they failed to read, and so on. Oh yes, these are partners and sometimes associates at the major firms who claim ‘expertise’ in their areas. It should not be in-house or outside counsel, it should be lawyers who go beyond their skill or knowledge level.”

Ken is exactly right. Both sides need self-knowledge and humility. Many in-house counsel know the law pertaining to their business far better than the "generalist" outside lawyers. It badly serves your clients, whether they are managers or in-house lawyers, to exaggerate your command of the relevant law.

I have worked recently with a legal department that requires clients to complete an RLA (Request for Legal Advice) which goes into the department’s matter management system. If more than a couple of hours of work will be needed from the law department, clients are required to complete and submit a RLA. Let’s consider the sweet and the sour of RLAs starting with the sweet (See my post of March 26, 2007: comments on a US county that requires them.).

They lessen forum shopping by clients because the request is on file. They create a database and metrics of workload because the information goes into a database format. They reduce the number of trivial requests because clients have to do something beyond a call or email. They clarify expectations on both sides because the service needed is in writing. They push clients to think about what they need because the requirements are spelled out on the form.

All is not sweet, however, with required requests by internal clients for legal services.

They create an administrative hassle because it is simply one more hoop for clients to jump through and they may not be eager to bring in lawyers at all. They may deter valid requests because it takes time and effort to complete the submission (Type I error of there being a legal problem that is not identified). They may require clients to over-document simple requests (Type II error of there being no legal problem but one is identified). They cause delay because someone has to read and interpret the form once it is submitted. They violate a « client service » attitude because they create an impediment and an irritant.

I often see, and as often doubt the value of, one particular question at the end of forms for in-house lawyers to evaluate the firms they use: “Overall, how would you rate the firm?”(See my post of Nov. 16, 2005: evaluations of law firms with 9 references.).

If you have asked direct and comprehensive questions about manifestations of firm performance, you can easily compile those responses and create an overall rating. To ask for an additional, all-in rating is over-kill. Furthermore, such a grand appraisal hardly seems very reliable as it must be an agglomeration of disparate impressions. Better, in my opinion, to analyze the more specific ratings and even weight them.

Rather than distribute hardcopy updates to outside counsel guidelines (environment forbid!) or even tediously email them items that have to be updated, move into the 21st century. Insert where appropriate in your guidelines language to the effect of “We expect your firm to check our online update to these guidelines” and include a URL to a site where you publish changes (See my post of July 11, 2008: guidelines for outside counsel with 16 references.).

One situation for this technique is updates on policies regarding disbursements (See my post of Dec. 1, 2006: disbursements of law firms with 7 references.). Another is a list of corporate entities for firms to use to check conflicts. A third could be revisions to budget forms or task codes.