©2016. Published in Landslide, Vol. 8, No. 5, May/June 2016, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.
Not everything that can be counted counts, and not everything that counts can be counted.
In a world where technology permeates our entire lives, the collection, management, and exploitation of big data is an arms race between corporations seeking to glean every shard of information about their consumers and clients. Data mining as a means to measure progress in our lives is ubiquitous. We monitor how many “likes” we get on Facebook as an indication of our entertainment self-worth. We watch daily stock market prices as a metric of our personal wealth. As a society, we have evolved into people who love to count and track things, sometimes for no good reason.
As applied to the legal field, books have been written and companies are being formed to utilize data mining to reduce the risk of litigation.1 In the future, some form of data gathering will even be used to track the job performance of an in-house attorney in order to quantify his or her impact on the organization. Corporations will become mini versions of the National Security Agency as they scour in-house counsel e-mails and calendar meetings to determine how well an employee is performing.
Since the U.S. Supreme Court declared the minimum fee schedule billing model was a violation of the Sherman Act, the legal community has flocked to the billable hour system to track productivity.2 The billable hour system has many faults but is a fairly clear way of calculating the value contributed by an attorney to the firm’s bottom line. The promise of many in-house counsel positions is that the billable hour is no longer required. Currently, though, there is no easy way to measure how much an in-house counsel impacts the organization’s performance. Implementing a billable hour system in the in-house setting can invariably result in an undervaluation of the in-house counsel’s contribution. While it is true that a billable hour system in-house might indicate how much it would cost the organization to outsource the in-house counsel role, the benefit of having in-house counsel extends far beyond the cost of measureable hourly work.
Because there are so many soft skills that an in-house counsel must master to be successful, tracking the value of in-house counsel work can be a complex matter. Fortunately, there are at least three core activities that a valuable in-house counsel performs that most outside counsel can’t achieve easily: (1) constant client training, (2) good strategic decision-making value, and (3) proactive and timely risk identification.
How can we place a price tag on the value provided by constant client training, good strategic decision-making value, and fast impromptu risk identification and management? Can we really count the uncountable? Will we one day be able to accurately value the contributions of an in-house counsel? What would we do with that information? As insurmountable as this all seems, it may be possible in the future.
In an imaginary futuristic software platform, all in-house counsel might utilize various parameters based on those three core activities to receive credit for the intangible soft skills that significantly influence the performance of an organization.
Constant Client Training Value: The Interaction Credit
The physical presence of an in-house counsel is a great reminder to both the business executives and general staff to “check” the legal box before going down the wrong decision path. And when an attorney is physically present, clients of course are more likely to stop by and ask what the attorney thinks about a certain legal issue.
Modern in-house counsel provide unnoticed everyday training with their human interactions among a diverse set of internal clients including research and development, marketing, finance, and sourcing departments. A wise in-house counsel once said, “If we are sitting at our desks and have our doors closed all day, we are failing at our jobs.”
Counting the number of times legal advice is provided in a day would be an interesting idea, but relatively difficult to measure. However, a simple tally of how many “nonlegal” people an in-house attorney has spoken with during the course of a day would be relatively easy. It’s a simple “interaction credit.” While an interaction credit might likely suffer during times of intense document review and litigation, hopefully it would be offset by nonlitigation periods where the attorney is interacting with the client more often. Such interaction crediting would be on the honor system, like that of billing hours, but it would still be interesting to see what an attorney would report. Such an interaction credit may even benefit from accounting for water-cooler talk.
An interaction credit mechanism may be a catalyst to make attorneys step away from their desks and interact with other live human beings. After all, social interactions foster the concept of accessibility, which should result in legal questions being raised before they become major problems.
Strategic Decision-Making Value: The Avoided Damages Credit
Great in-house counsel regularly provide unprompted insightful information allowing for more streamlined and strategic decision making in high-stakes meetings. One method of quantifying the value of an in-house attorney’s “good strategic decision making” might be an “avoided damages” credit, e.g., how much risk did the in-house counsel avoid in a given performance period? For example, suppose a litigation matter is on track to cost the company $6 million in actual, not alleged, damages. If the in-house counsel is efficient in managing outside counsel to reaching a settlement at $0.3 million, shouldn’t that be reflected somewhere? The attorney might then receive a $5.7 million avoided damages credit within this futuristic tracking system.
Similarly, such avoided damages credit could be applicable to patent prosecutors and patent litigators. For example, in the context of a patent cross-license, a team of in-house litigators and prosecuting attorneys might reach a final cross-license agreement, thus avoiding a $10 million damages award against the company they represent. The patent prosecutors could then receive additional credit for patents they drafted and prosecuted to issuance that were the subject of the cross-license. Therefore, if a prosecutor wrote 50 percent of the cross-licensed patents, he or she would receive an additional avoided damages credit of $5 million. Even though these avoided damages credit numbers are priced in dollars, it’s really only a relative metric to understand how active the attorney was in contributing to a successful resolution of the conflict.
In most intellectual property departments, patent prosecutors are expected to meet a quota of patent applications filed in a year without receiving any credit for successfully issued patents that are actually used in a cross-license agreement and mitigate a multimillion dollar legal bill. This new approach would be a further step in recognizing and rewarding the prosecutors’ good work.
Aside from the avoided damages credit, in-house counsel brings another previously immeasurable benefit to the client. The most effective in-house counsel will make recommendations closer to the business’s interest and goals rather than making decisions in a vacuum based on the black letter law, or heavily influenced by malpractice insurance premiums or cultural norms. In many countries, attorneys are generally more risk averse mostly due to cultural considerations. In-house counsel often must unlearn the risk aversion that is ingrained when working in private practice in order to better align in-house risk tolerance with that of the organization. In-house counsel must judiciously balance their influence to cause the client to avoid launching new products and services, or make desired advertising claims, with the associated financial implications to the overall health of the organization. Extreme risk aversion in the legal realm can also lead to huge monetary losses just like extreme risk-taking. Still, the losses from not launching potentially problematic product designs and ad campaigns are much harder to see and measure than those resulting from a lawsuit and the associated litigation bills. A futuristic tracking system might well include a risk tolerance metric that provides feedback to in-house counsel reflecting how coworkers view the alignment of the attorney’s risk tolerance with that of the organization.
The true value of an in-house counsel lies in his or her ability to promote solid decision making within the realm of the organization’s comfort zone, not in blindly following every legal determination offered by outside counsel. Rather, the in-house attorney should consider different points of view, including the point of view of the internal business clients, and weigh and balance the risks to make a good collaborative business decision in the best interest of the organization.
Fast Impromptu Risk Identification and Management: The Issue Spotting Credit
In a business where no in-house counsel is available, the onus to identify legal risks ripe for consultation can fall to an untrained business person. Further, that business person would typically make the sole determination of when outside counsel should be consulted.
One area where in-house attorneys can shine is identifying risks that may be completely outside of the business person’s purview. In a first hypothetical, a business person finalizes an ad copy that must be sent out that evening and asks the in-house attorney to review it. However, when the in-house counsel reviews the ad copy, she recognizes that the benefits of the product touted in the advertisement are in direct conflict with arguments being made in pending litigation. If the ad copy were to be released into the public, it could destroy a key argument in the litigation having multimillion dollar implications. In a second hypothetical, a product is about to be designed that has a new feature which directly infringes on a well-known valid patent family from a competitor. The in-house attorney quickly identifies this issue to the engineers, programmers, or key executives to implement a design-around or develop a noninfringement or invalidity position.
Accounting for such issues, including the provision for “issue spotting credits,” should provide a general counsel with a good sense of how much risk has been mitigated by each attorney.
With so many types of attorneys working in-house, ideally each specialty would have different standards than can be customized for tracking. Perhaps a merger and acquisition specialist would receive credit for the number of purchase agreements he or she has reviewed in addition to the three core activities described above. Likewise, a contract attorney may track the number of contracts negotiated within a year.
Analyzing the Uncountable: The Creativity Factor
If this futuristic performance tracking system were in existence today, how should this data be used?
First, in an ideal future this system would not be used as simply another metric to tie in-house counsel’s compensation, bonus, ranking, and benefits to a number. In fact, this futuristic tracking system is unlikely to benefit organizations where employees are not already fairly compensated. After all, modern research suggests that extrinsic rewards may boost productivity in the short run but that ultimately these productivity gains are unsustainable and disappear once the monetary incentives are removed. Rather, intrinsic motivators have been found to boost long-term job satisfaction and performance for creative tasks. Intrinsic motivators can be things like enjoyment of the work itself, genuine achievement, and personal growth.
If the science is true, the question to ask ourselves as a legal community is: “Does an in-house counsel’s job require creativity or is it a routine task?” If the in-house counsel role is more similar to a manufacturing worker on an assembly line, then the carrot-and-stick model of billable hours makes perfect sense. If the in-house counsel role is more similar to an industrial designer striving to create a new design for a product, then he or she would be best motivated by intrinsic motivators.
In a recent survey conducted of multinational in-house counsel, the top two leadership skills considered most important were “influence and partnering skills” and “problem solving and ability to turn difficult situations around.”3 In order to solve problems effectively and turn difficult situations around, creativity is a necessity.
The number of diverse scenarios that an in-house attorney encounters on a daily basis requires a high level of creativity in order to find an acceptable compromise in many challenging situations. Creativity is required in structuring agreements between parties where the terms are highly contentious but the parties would like to forge a business relationship. Creativity is imperative when negotiating a settlement between parties that are at the edge of costly litigation. Creativity is at the core of an in-house attorney’s job.
Promising more pay for higher numbers in our futuristic software platform is likely to have the opposite intended effect. Instead, such a futuristic software platform should be used to foster an environment where intrinsic motivation is at the forefront.
For example, if an attorney’s interaction credit, avoided damages credit, and issue spotting credit ratings are relatively high, a supervisor might allow that attorney greater flexibility in his or her work schedule, with “external” benefits and opportunities. As data science and human resource issues converge, the legal community should strive to use the data intelligently and in a way that ensures the long-term success of their organization and its people. Perhaps some law firms or legal departments that currently view their employees as routine assembly workers will join the twenty-first century and recognize their employees are really more similar to Leonardo da Vinci. All they require is an environment that rewards something other than money to reach their full potential, especially for the tasks that are hard to count.
1. Putting Out the Fire: A Book Says That Companies Can Use Technology to Prevent Litigation, Corp. Counsel, Jan. 2016, at 18.
2. Goldfarb v. Va. State Bar, 421 U.S. 773 (1975).
3. E. Leigh Dance, The Global In-house Counsel: What’s Different?, Corp. Counsel (Dec. 15, 2015), http://www.corpcounsel.com/home/id=1202744943824/The-Global-InHouse-Counsel-Whats-Different?mcode=1202615412876&curindex=2&LikelyCookieIssue=true.