PERFORMANCE REVIEW

Executive Summary: Making a Good Legal Department Even Better
In the Winter and Spring of 2000, the legal management consulting firm, Altman Weil, Inc., conducted a performance review of the Legal Department of the City of Houston. This included a review of extensive documentation of the city’s internal legal mission, function, organizational structure, and service delivery processes.  Altman Weil conducted a detailed written survey of major users of legal services in the city’s departments and agencies[1], as well as an internal survey of every employee of the Legal Department. The survey results were further tested and amplified by confidential interviews of representatives of city departments and agencies and of Legal Department personnel.

The Altman Weil consulting team concludes that the Legal Department delivers high quality legal services. The Legal Department is hard working, well managed, and generally efficient. This does not mean, however, that there are not significant opportunities for improvement. Thus, the theme of this report is that the challenge for the Legal Department is to make a good office even better.

This report presents opportunities for improvement that the consulting team identified during the performance review, as well as our major recommendations. These cut across divisional boundaries within the City Attorney’s Office[2] and apply, to some extent, to every division of that office.

Systematic Approaches to Client Satisfaction
Clients, not lawyers, define quality in legal services.

The Altman Weil consulting team observed a high degree of personal commitment to quality throughout the Legal Department. The Legal Department, however, needs better systems and procedures to ensure consistent quality from every lawyer, in every matter, and with respect to every client of the department. Although most clients are satisfied, the interviews revealed a few departments and agencies that are very dissatisfied with the quality of the service they receive. In some instances, the dissatisfaction arises from an apparent misunderstanding or miscommunication of the role of the in-house lawyer vis-à-vis client expectations. In other cases, the complaints concerned a perceived lack of responsiveness from the department. As one client summarized, “There’s no middle of the road ... Either service is very good or very bad.”

Dissatisfied clients were definitely in a small minority, but their concerns point to the need for an office-wide, systematic, and ongoing effort to ensure that client needs and expectations are clearly defined, and that performance against those quality indicators is measured.

Some of the solutions will come from improved lawyering skills, such as understanding and observing the distinction between legal advice and business or operational advice. Some client representatives said that Legal Department attorneys occasionally offer unsolicited, and frequently unhelpful, advice on business issues. Other client representatives criticized the negative approach that some Legal Department attorneys take.As one client representative stated, “Their idea of sound legal advice is always ‘No, you’ll be sued,’ rather than ‘Let’s see how we can do it’."

These are problems in fundamental lawyering skills, especially in the area of communications with clients. Altman Weil therefore recommends an office-wide initiative, rather than piecemeal remedies targeting just a few clients or involving only a few lawyers or divisions.

Productivity and Performance
The best way to make substantial, permanent improvements in the productivity and performance of the Legal Department is to undertake a department-wide program of continuous process improvement.

As discussed in detail elsewhere in this report, the Legal Department uses a number of traditional reporting systems to monitor caseloads. There is little evidence, however, that these efforts have had any demonstrable impact on improving productivity and performance in the delivery of legal services to clients in city departments and agencies. The basic tools are there, but they are not being used effectively.

Substantial opportunities exist for the Legal Department to improve productivity and performance by reducing inefficiency, waste, and rework in internal work processes. The Legal Department should implement continuous process improvement methodology and tools department-wide, and in every division.

Two divisions – Claims and Subrogation and Criminal – should serve as laboratories for the introduction of continuous process improvement into the department. Selection of these two divisions does not mean that they are most in need of improvement. Instead, the nature and volume of the workload in each division is especially amenable to the application of continuous process improvement tools and performance measurements. By first introducing continuous process improvement in these two divisions, it is most likely that significant results can be produced quickly, and that the experience and models from these two divisions can be adapted for other divisions.

Records, Documents, and Reports
Like most government legal agencies, the Legal Department is awash in paper.How much of it is worth the effort that produced it?

It is clear that managers, lawyers, and support staff devote substantial amounts of time to filling in forms, making entries in logs, and preparing reports. It is less clear to what extent these documents are actually used in a way that demonstrably aids the management of Legal Department workflow or the quality of legal services delivered to clients.

The Altman Weil consulting team recommends a “zero-based” review of all records and reports prepared by the various divisions of the Legal Department, to eliminate documentation that does not add value. The consulting team believes that the Legal Department could pare back the number and volume of records and reports by at least half over a period of six to twelve months, with no significant negative impact on management or service delivery.

Delegation
Improved delegation of legal work, and professional responsibility for the quality of that work, should be a major strategy in process improvement in the Legal Department. More than a management tool, delegation is also an attitude.

Like most government agencies with which Altman Weil consultants have worked, the Legal Department does not delegate work efficiently, nor is there any significant evidence of a professional culture that actively encourages delegation. Work product tends to be over-inspected and over-reviewed up the divisional chain of command.In Altman Weil’s experience, multiple inspection of legal work is a costly and, ultimately, inefficient way to manage quality. As many clients note, the over-review and over-inspection of legal work product in some divisions delay delivery of legal services without adding proportionate value in the eyes of the clients.

Delegation is not abdication, however, and managers and senior staff throughout the Legal Department must be prepared to provide the guidance and ongoing supervision necessary to ensure that delegated work is performed competently and in a manner consistent with client service expectations. This is especially true in an environment, as here, where turnover is very high and training of new lawyers and staff is an ongoing necessity. Altman Weil does recommend, however, two department-wide approaches to improve delegation to the lowest level of competency to generate and deliver legal product and services.

First, we recommend a department-wide legal-administrative review to determine which functions and responsibilities of the City Attorney may be lawfully delegated to others in the Legal Department. As a general management proposition, functions that may be delegated should be delegated, freeing the City Attorney, his deputies, and the division chiefs to focus more of their time and attention on the delivery of sophisticated legal services and advice that they can best provide, based on their experience and special expertise.

Second, the consulting team recommends that delegation be considered and, where appropriate, used as a principal process improvement tool in each division.

Deployment of Legal Talent to Improve Client Service
The subject-matter orientation of the Legal Department organizational structure is consistent with models in most municipal law departments. Some divisions, such as Contracts, tend to serve almost every major department in the city, although in varying amount and frequency. Some departments tend to rely primarily on the services of one or two of the Legal Department divisions. This organizational structure tends to facilitate, rather than impede, the production and delivery of legal services to clients in the city departments and agencies.

Several client representatives, however, commented that coordination of legal services sometimes appears to be less efficient than desired and results in noticeable inconsistency in quality. These client representatives, who are a minority of the client departments and agencies interviewed, suggested that the Legal Department formally designate the lawyer who is their most frequent service provider as their “department counsel.” This lawyer would function much like a “relationship partner” or “client partner” in a private law firm, responsible for the coordination of Legal Department resources in support of that department. In some instances, i.e., chiefly where the volume of work so justifies, the department counsel might be physically located at the management offices of the client department. Even so, he or she would continue to report through the Legal Department organization to the City Attorney, both operationally and for purposes of professional supervision.

Altman Weil, Inc., strongly endorses this idea, which would go a long way toward consistently high levels of service quality and client satisfaction throughout city government.

Lawyer Compensation
Inadequate lawyer and paralegal compensation, and the incredibly high degree of turnover[3] that has resulted from below-market compensation, is perhaps the greatest threat to the continued strong performance of the Legal Department. It remains at great risk of continuing to lose its best lawyers to private law firms, corporate law departments, other government legal departments, and even to non-lawyer positions in other departments in the City of Houston.

Despite recent improvements in the city’s lawyer and paralegal compensation, it is still far too low to be competitive. Notwithstanding political or budgetary considerations, Altman Weil would be remiss in our duties to the City of Houston if this report did not include a strong recommendation for a substantial additional increase in total cash compensation for lawyers and paralegals.

The increase need not be entirely in the form of salary. Altman Weil recommends that the city modify its tuition assistance program to provide partial reimbursement of payment of student loans for law school, the percentage of which would steadily increase with years of service. This feature alone could make service in the City of Houston Legal Department a sought-after career alternative for younger lawyers, and an attractive option to working as a junior associate, even at much higher pay, in a private law firm. Another idea that we have seen work well is to regularly visit law schools and conduct meetings focused on the advantages and rewards of working in a government law office. That can be combined with a clerkship program whereby law school students interested in working for the City of Houston Legal Department spend summers there. This typically builds loyalty and often results in newly licensed lawyers staying with the government law office longer than they otherwise might.

Technology
Inadequate and poorly used information technology is the second greatest threat to the continued performance of the Legal Department.

This report describes how the Legal Department has fallen behind in terms of the technology platforms and user capabilities needed to provide the highest quality service at the lowest cost. Some of the challenges arise from keeping up with rapidly evolving hardware and software, a challenge that every organization faces. Other challenges arise from the need to provide the training and management reinforcement needed to ensure that everyone can use – and in fact uses – available technology, consistent with his or her needs and to his or her full potential. Still other challenges are imposed by inefficiencies in underlying work processes, such as unnecessary duplication of databases and a fax room that is locked after normal working hours.

This report outlines improvements in technology systems and management that the Legal Department needs.  These recommendations must be prefaced, however, with the following caveat.  Before investing in new technology, the Legal Department should first invest in eliminating non-technological inefficiencies in the processes that the technology is intended to enhance. This will produce the best return on the technology investment.

Outsourcing the Legal Function
We have encountered calls (in media reports and interviews) to outsource the entire legal function of the city, i.e., to pare the department to a skeleton crew of attorneys whose job it is to refer all legal work to private lawyers and law firms.  Calls for outsourcing have generally been made by those who appear to be the biggest critics of the Legal Department and the City Attorney. As consultants who spend their work lives studying cost issues in the legal profession, including the specific issue of when it does or does not make sense to outsource an organization’s legal work, we feel obliged to respond to those who have recommended this action and to put to rest the notion that it would somehow be less expensive to send the city’s legal work to private lawyers and firms.  One statistic alone should be enough to do that.

The effective, average hourly rate of attorneys working in the Legal Department is somewhere between $84 and $89 per hour, based on last year's budget.   This rate was determined by taking the fully-loaded budget for the department for fiscal year 1999 ($13,814,271) and dividing that figure by the full-time-equivalent number of lawyers in the department for the year (96.6), and then dividing the resulting figure by an assumed number of “billable” (i.e., client-related) hours worked by the average attorney in the department.  If we use 1,600 billable hours (a figure that is less than we would expect to actually be the case), the resulting effective hourly rate is $89.  If we use 1,700 hours, the rate is $84 per hour.  Comparing those rates to survey data (the Altman Weil 1999 Survey of Law Firm Economics) from private lawyers and law firms, it becomes apparent that it would cost the City of Houston many multiples of what it spends now on its legal function were it to refer all work to outside counsel.  An hourly rate of $84 or $89 is not much more than that charged by paralegals in law firms today.  Associate rates in cities the size of Houston start at approximately $100 or $125 and go as high as $200 or more.  Partner rates range from $125 to upwards of $400.

(For footnotes, please contact Jo Wiginton at 713.247.2054)