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The history of inhouse legal (view source)

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{{a|work|[[File:Legal eagle.jpg|450px|thumb|center|The origin of the species, yesterday.]]}}Once upon a time, there was hardly such a thing as an in-house legal department in a bank at all. There ''was'' one, but it was a sleepy area in the basement, rather like a library, populated by a handful of damp introverts who would quietly prepare board minutes and maintain the firm’s register of charges. Their idea of a business trip was an excursion to companies house to be rebuffed when trying to file a [[Slavenburg]].
{{a|work|{{image|Legal eagle|jpg|The origin of the species, yesterday.}}}}Once upon a time, there was hardly such a thing as an in-house legal department in a bank at all. There ''was'' one, but it was a sleepy area in the basement, rather like a library, populated by a handful of damp introverts who would quietly prepare board minutes and maintain the firm’s register of charges. Their idea of a business trip was an excursion to companies house to be rebuffed when trying to file a [[Slavenburg]].


Now, at the time, banks did big, clunking deals. These transactions — [[Merger|mergers, acquisitions]], equity offerings, [[bond]] issues, syndicated [[Loan|loans]] — were big, risky affairs, involving parties who weren’t well acquainted sending each other pots and pots of ''[[money]]'': not just millions, but ''tens'' or ''hundreds'' of millions or, every so often, ''billions''.   
Now, at the time, banks did big, clunking deals. These transactions — [[Merger|mergers, acquisitions]], equity offerings, [[bond]] issues, syndicated [[Loan|loans]] — were big, risky affairs, involving parties who weren’t well acquainted sending each other pots and pots of ''[[money]]'': not just millions, but ''tens'' or ''hundreds'' of millions or, every so often, ''billions''.   
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=== Digression: the dogma of cost control ''uber alles''===
=== Digression: the dogma of cost control ''uber alles''===
Note the narrative sweep here: industrialisation. ''Scale''. ''Control''. ''Margins''. The approach to the problem of legal comes from a particular viewpoint. ''The accountant’s''.  
Note the narrative sweep here: ''industrialisation''. ''Scale''. ''Control''. ''Margins''. The approach to “the problem of inhouse legal” comes from a particular viewpoint. ''The accountant’s''.  


It is quantification, not evaluation, and along a single dimension: ''[[Cost - waste article|reducing cost]]''. The question is never ''what'' to do, or ''why'' to do it, but ''how cheaply'' to do it. The full beam of analytical, reductive rigour is trained on that single question: ''how can we do all this for less and less money''? Hence, management’s laser-focus on the [[delivery of legal services|''delivery'' of legal services]] over the nature of the services themselves. How they should be delivered, with what tools, out of which segments, at which cost.
It is quantification, not evaluation, and along a single dimension: ''[[Cost - waste article|reducing cost]]''. The question is never ''what'' to do, or ''why'' to do it, but ''how cheaply'' to do it. The full beam of analytical, reductive rigour is trained on that single question: ''how can we do all this for less and less money''? Hence, management’s laser-focus on the [[delivery of legal services|''delivery'' of legal services]] over the nature of the services themselves. How they should be delivered, with what tools, out of which segments, at which cost?


Now management orthodoxy has understood for decades that it isn’t [[Cost - waste article|cost]] by itself, but [[waste|''wasteful'' cost]], that is the problem in a distributed manufacturing process: raw materials ''do'' cost money. You ''do'' have to pay machine operators ''something''. You can’t avoid the basic minimum costs of doing something properly. Rather, you rigorously test your processes to check you ''are'' doing it properly — and not ''over''doing it by wasting materials, over-engineering, having your staff standing idle or engaging them in unnecessary activity. This was Toyota’s profound insight: through sheer analytical rigour in [[Toyota Production System|eliminating waste from its manufacturing process]] in the 1950s and 1960s, it beat the American auto-manufacturers to a pulp.
Now the [[Thought leader|thought-leader]]<nowiki/>s of the world have understood for decades that the problem in a distributed manufacturing process isn’t [[Cost - waste article|cost]] by itself, but [[waste|''wasteful'' cost]]: raw materials ''do'' cost money. You ''do'' have to pay skilled machine operators ''something''. You can’t avoid the basic minimum costs of doing something properly. Rather, you rigorously test your process to check you ''are'' doing it properly — and not ''over''doing it by wasting materials, over-engineering, having your staff standing idle, moving unnecessarily or engaging them in gratuitous activity. In fact, you charge your staff with monitoring this: they become frontline optimisers. They, more than anyone else, are best placed to see waste, and figure out the best way of eradicating it.
 
This was Toyota’s profound insight: through sheer analytical rigour in [[Toyota Production System|eliminating waste from its manufacturing process]] in the 1950s and 1960s, it beat the American auto-manufacturers to a pulp.


====Cost and waste====
====Cost and waste====
Now the thing about costs and waste is that they are not some kind of astral yin and yang, orbiting each other in a sort of stable zero-sum relationship. Some costs are worth it; some are not. Some costs are obvious; some are hard to see.  
Now the thing about [[Cost reduction|cost]] and [[Seven wastes of negotiation|waste]] is that they are not some kind of astral yin and yang, orbiting each other in a stable zero-sum relationship. Some costs are wasteful; some are not. But costs are obvious; wastes are, from above, invisible. Wastes are “[[Legibility|illegible]]”.  


The easiest costs to see are ''salaries''. Salaries are big, lumpy and easily stopped: you simply [[Redundancies|dispense with those to whom you are paying them]]. This has passed for sport amongst finance executives for many years.
The easiest costs to see are ''salaries'': they are big, lumpy and easily stopped: you simply dispense with those to whom you are paying them.


But “stupid questions” and “bad ideas”, ''[[Process|prolix procedures]]'' and ''incomprehensible documents'' are '''also''' costs. Smaller costs, to be sure, but more numerous, much harder for the executive suite to see, and ''really'' hard for them to stop. They don’t stop being costs just because the executive team can’t see them.
Now if the salary in question in spent on an expert whose waking moments are spent heading off litigation, breaking deadlocks, identifying system inefficiencies, and providing inspired strategic advice on the bank’s endeavours — if she does nothing but that, all day and every day — then dispensing with her salary might not be such a good idea.


And here is the converse to the observation above: '''{{maxim|very smalls sum of money, if you add enough of them up, amount to a very large sum of money}}.'''
But let us return from the Spheres for a moment and imagine, instead, that she spends her day answering stupid questions, educating people who should know better, wrestling with bureaucracy, hamstrung by rigid policies and fighting to navigate incomprehensible documents.


The funny thing is that the management team ''can'' see that very large sum of money, even though they can’t see any of the small ones. 
Our lawyer is in this case misemployed, to be sure, and there is much that could be done to improve her contribution — but will any of it be achieved by relocating her role to a call centre in Bucharest help?


Silly questions distracts not just those who ask them, but those to whom they are addressed: all who are hindered from doing more productive things. Hare-brained notions skitter around the skirting-boards of all organisations, out of sight, unchecked, by their nature creating ''more'' stupid questions, more bad ideas, triggering little chain reactions of stupidity and waste. If not answered quickly and clearly, these chains sometimes harden into policies, procedures, work-streams, teams and even [[Human resources|whole departments]].  
This ought to be a rhetorical question, but 20 years of management orthodoxy says it is not.  “Juniorising” and “right-shoring” create ''more'' overhead, ''more'' confusion, ''more'' bureaucracy, ''more'' [[Horizontal and vertical escalations|horizontal escalation]], ''more'' people [[Internal audit|auditing]] and monitoring [[Service level agreement|service-level agreements]] and [[Key performance indicator|key performance indicators]] engaged in non-risk-facing roles. Instead of ''answering'' stupid questions, low-cost off-shore replacements ''ask'' them. Measurable cost may have declined — but, all told, probably not all that much, once the bureaucratic machine required to manage the right-shored process is considered — but ''unmeasurable'' waste will have ''exploded.''
 
Silly questions distracts not just those who ask them, but those to whom they are addressed: all who are hindered from doing more productive things. Hare-brained notions skitter around the skirting-boards of all organisations, out of sight, unchecked, by their nature creating ''more'' stupid questions, more bad ideas, triggering little chain reactions of stupidity and waste. If not answered quickly and clearly, these chains sometimes harden into policies, procedures, work-streams, teams and even [[Human resources|whole departments]].


Eventually, this institutionalised, low-level vacuity creates its own invisible tide of cretinaiety, sloshing around the organisation, delaying things, pulling useful people into its undertow, spawning its own little waves of dreck and powering armies of little administrators chasing these fripperies down and, as they go, building out yet more complicated operational infrastructure. For all the outsourcing, offshoring and down-sizing of the last 20 years, UK financial services employment has remained largely stable.<ref>Over 21 years, and including all the branch closures, in that time, it is [https://www.statista.com/statistics/298370/uk-financial-sector-total-financial-services-employment/ down just 7.5%] </ref>  
Eventually, this institutionalised, low-level vacuity creates its own invisible tide of cretinaiety, sloshing around the organisation, delaying things, pulling useful people into its undertow, spawning its own little waves of dreck and powering armies of little administrators chasing these fripperies down and, as they go, building out yet more complicated operational infrastructure. For all the outsourcing, offshoring and down-sizing of the last 20 years, UK financial services employment has remained largely stable.<ref>Over 21 years, and including all the branch closures, in that time, it is [https://www.statista.com/statistics/298370/uk-financial-sector-total-financial-services-employment/ down just 7.5%] </ref>  
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But these problems require an understanding of [[Behavioural economics|human psychology]] and a [[Subject matter expert|deep grasp of the legal and market conventions]] — qualities with which your average [[Master of Business Administration|MBA]] is not liberally endowed.
But these problems require an understanding of [[Behavioural economics|human psychology]] and a [[Subject matter expert|deep grasp of the legal and market conventions]] — qualities with which your average [[Master of Business Administration|MBA]] is not liberally endowed.
{{inhouse legal history}}
 
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