The daily work of being an in-house lawyer is something that is constantly expanding and becoming increasingly multifaceted. Whether it be responsibility of your company’s legal budgeting or working with IT to counteract cyber threats, working in-house forces lawyers to broaden their wings and pick up skills they would never otherwise pick up while working in firms.
We discussed over email some of the intricacies of the in-house remit with corporate counsel at Kia Motors America, Inc. an extensive writer on all matters in-house Casey Flaherty and will be releasing three articles on the information Casey kindly gave us: on managing outside counsel, the importance of knowing the lawyer psychology and the increasing importance of new technologies for in-house law.
(D. Casey Flaherty is corporate counsel at Kia Motors America, Inc. The opinions expressed herein are his own and not those of Kia Motors America, Inc. or its legal department.)
You’re written about how managing outside counsel and budgets has become a critical part of an in-house remit. Why is this and is it typical of the generally expanding responsibilities of in-house roles?
Budget is critical. My impression is that most companies treat legal as a cost center. Generally, we do not directly contribute to the bottom line. And there is no accepted way to capture the ROI of successful prevention. Legal is a support function to the core mission—in Kia’s case, selling cars.
The legal budget, like any other, is subject to scrutiny. Legal budgets, however, are highly contingent. How much assistance do other departments request? Who decides to sue the company? Does a case settle early? What unknown unknowns reveal themselves? Legal departments have minimal control of their budgets on a macro level. We tend then to focus on the micro level—e.g., specific matters, processes, standardization—to rein in costs where we can.
Different legal departments do this different ways. Some build internal capacity because outside counsel is expensive while others outsource heavily to law firms for the flexibility, scalability, and specialization. Kia Motors America, where I work, would be on the latter end of that spectrum. I ‘manage’ far more work than I personally ‘do’. Thus, my cost consciousness is centered on outside counsel.
Importantly, when thinking about “costs,” I try to remain attentive to net spend. In a litigation, for example, one law firm might bill me $100,000 and get the case settled for $500,000 ($600K total); while another might bill me $200,000 but get the case settled for $200,000 ($400K total). The latter actually has twice the direct impact on my own budget—i.e., settlement comes from a different bucket. I can’t let that distract me. The second firm bills more but ‘costs’ less.
Moreover, rates are often a poor predictor of billed totals. Five minutes of time with the $800/hr guru is both less expensive and usually more valuable than five hours of work by the $375/hr associate. Indeed, I am most concerned with the rates on the low end where the labor-intensive drudgery gets delegated. I may never fully comprehend how senior partners can be billed at only 1.5x to 3x the rate of their junior associates when they deliver many multiples more value. Likewise, I am unlikely to be convinced that the $375/hr T14-educated associate working in nice NYC office is three times the job putting together witness binders as the $125/hr TTT-educated associate working in an office park outside Atlanta.
I do, grudgingly, accept the $375/hr associate as a package deal with the $800/hr guru. I am willing to pay a premium for experience and expertise. Again, from a net-spend perspective, it costs less in the long run. I say “grudgingly” because I audit the $375/hr associate to gain some peace of mind that the firm is at least handling the necessary busywork semi-efficiently.
I wouldn’t necessarily say my focus on budgets is “typical of the generally expanding responsibilities of in-house roles.” Though I am relatively new to in-house (a little over 2 years), it is my impressionistic sense that this is how it has always been: legal departments as a cost center; in-house lawyers managing their budgets and trying to rein in outside counsel. The Great Recession, however, has shifted some paradigms. All budgets, including legal’s, are subject to heightened scrutiny. We are probably more cost conscious than in year past. Further, companies, especially the larger ones, have become more focused on metrics, analytics, etc. That orientation has trickled into their legal departments. So we are increasingly empirically oriented. To paraphrase my favorite TV show: Game’s the same, just got more fierce.
2. You also said in the article how lawyers have a “systematic tendency to attribute our successes to our personal merit, but attribute our failures to situational factors beyond our control”. Is the role of an in-house lawyer within a company to use their awareness of the lawyer psychology to the advantage of the business as much as possible in regard to dealing with external counsel?
Yes. An old poacher makes the best keeper.
Success as outside counsel is often dependent upon salesmanship. Partners face enormous pressure to bring cash through the door. There is some overlap between being a good sales person and being a good lawyer – e.g., understanding your audience, making a compelling argument. But the two are not coextensive. There are good lawyers who are terrible at sales, and vice versa.
Ultimately, lawyers sell time. Any one individual’s time is finite. In order to scale, a lawyer has to sell more than themselves. They sell their team and their firm. Thus, the default reply to, “Can you handle this?” is almost always in the affirmative. I trust that answer only to a point.
Every degree of separation from the lawyer with whom I have a relationship reduces my confidence. If my relationship partner is handing primary responsibility over to a trusted lieutenant with whom she has worked for 15 years, my faith transfers fairly freely. If she is suggesting I use some lawyer in a different practice group from a different office on a matter that is outside her own expertise, I suspect that I’m being sold.
The same skepticism holds as you work down the ladder. When I broach the subject of my audit, the partner follows their look of bewilderment with calm assurances that the firm’s associates are all excellent—very technically savvy, very efficient. Yet, it is unlikely that the senior partner would actually know this. The partner knows that the associates are bright and hard working. And she has a general impression that younger people are good with technology. But she has no sense of the skills required to pass my audit—which, invariably, the associates fail.
Knowing when you are being sold is important. But I think the whole quote is worth sharing. In that article on budgeting, I wrote:
“Lawyers, as a group, seem particularly prone to the planning fallacy — the systematic tendency to underestimate how long is required to complete a task, despite past experience of similar tasks that ran over budget. Lawyers, as a group, are also less apt to recognize such shortcomings because we are the poster children for self-serving bias — the systematic tendency to attribute our successes to our personal merit, but attribute our failures to situational factors beyond our control.”
I really did mean “we.” Just because I am aware of cognitive biases does not mean that I am immune from them; just like that I ‘know’ the image is static yet succumb to the optical illusion of movement.
In particular, being in-house counsel can feed an ego. It is really easy to believe that people are sincerely laughing at your jokes. If you didn’t think the jokes were funny, you wouldn’t tell them. But as long as you control any kind of budget, there will be outside lawyers willing to laugh at your jokes, funny or not. And, of course, it goes beyond the jokes.
My move in house engendered significant cognizant dissonance. Suddenly, the $800/hr gurus reported to me. Yet, in age, experience, expertise, and earnings, I remained much more the peer of their associates—the group of whom I may now seem so dismissive. It would be soothing to tell myself a story about how very special I am and how I am just getting my just desserts (except, of course, for the pay).
Instead, I constantly remind myself that I am fortunate. I could very easily still be just another associate. The vast majority of associates are talented, intelligent, diligent, and ambitious. There are just so damn many of them. Opportunities to differentiate themselves are rare. I have been given an opportunity and hope to make the best of it.
3. In covering this area of IT and Law, do in-house lawyers work with IT departments at all/enough?
At all, yes. Enough, no. Again, generalizing, but bridging that yawning chasm is a challenge. The language barrier between IT and Legal is substantial; neither is fluent in the other’s mother tongue.
4. I read recently that it is very important for in house to do so in respect to potential damages caused to companies by technology issues like cybercrime, for example.
Cybercrime, personal identifying information (PII), e-discovery, document retention, information governance, information security, etc. There is a long list of subjects where cooperation between IT and Legal is essential. And that cooperation does happen. Unfortunately, it is normally in response to a crisis. Like too many other areas, we end up being reactive because of our inability to be proactive. My confidence is all too high that many more crises are on the horizon for that very reason.
5. If you are at liberty to tell us, how do you personally use technology to help your work at KIA?
Our legal department is currently in the process of updating our matter and contract management systems. I’ve also created a cross-subsidiary working group on e-discovery for all the U.S. affiliates of Hyundai Motors. In addition, I’ve:
- Initiated the use of a document assembly program for our standard contracts
- Converted paper to electronic files and put them in an SQL database
- Introduced electronic signatures and required it for all signed documents
- Setup SFTP and Dropbox-like file sharing
- Begun using on both contract attorneys (domestically) and legal process outsourcing (in the Philippines)
- Worked to create one spreadsheet to rule them all—i.e., bring together a lot of the regular, disparate reports generated by other departments from their structured data.
- Upgraded myself and my direct reports to dual monitors
Finally, that technology competency audit I keep mentioning will hopefully be coming to a firm near you in the not too distant future. I’m working with a training company to create an audit that is automated, remotely administered, and free to in-house counsel.