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Hewlett-Packard Proves Legal Departments No Safe Haven From Churn
The Recorder
May 08, 2009
Lifers used to be common in Hewlett-Packard's legal department. People like Charles Charnas, 51, who logged 18 years before leaving for Apple last year. Or Alan Haggard, a patent lawyer who left in January after 20 years and took a job at Rambus.
"Many people went there and made their careers there -- it wasn't a high-flying company, but it was very stable," explains Martha "Marty" Africa, a longtime legal recruiter with Major, Lindsey & Africa. "It was a whole lot like working for the federal government, except they paid better -- and they had good taste in people."
But that stability has been under assault as HP has ushered in a new era. CEO Mark Hurd has made cost-cutting a crusade, and GC Michael Holston has been shaking up the legal department since arriving in 2007. Continual layoffs, Holston's intensive new performance evaluation program, and management shakeups have transformed the department. It's out with the old and in with the new.
Some, like Deputy GC Bruce Ives, say these and other changes have breathed new life into the department.
"People are working harder," he said, adding that he finds the work more challenging, attorneys are more engaged, and the job is "more fun."
Others say it has caused a big loss of experienced HP lawyers, who were either forced out or who left because of the changes.
"There was an exodus of great people, like Charles Charnas and Alan Haggard," said Leigh Ann Weiland, an HP senior counsel who left last year. She says their replacements haven't always had the same stature. "I think there's also been a focus on trying to find younger attorneys; many of the more older, experienced people who have a wealth of experience with the company were simply urged to move on."
Holston arrived at HP on the heels of the pretexting scandal that sacked his predecessor, Ann Baskins, and cast the venerable company's legal department in a bad light. A former prosecutor and Morgan, Lewis & Bockius partner, Holston says he has had one goal for HP's legal department: to make it the "best legal and government affairs department in the world."
Soon after he arrived, he instituted a comprehensive review of every lawyer. He has continued the practice twice a year, and later this month he'll once again gather his deputies for two full days of evaluating the more than 300 HP lawyers.
"If you're going to be the best legal and government affairs department in the world, then you're going to have to hold people accountable," he said. "And reward people who are doing it."
The result? HP lawyers whose skills don't match the current needs of the department, or whose performance is under par, are "encouraged to leave," Holston said.
While in-house departments were once thought of as the softer alternative to law firms, far away from the soul-crushing performance reviews and billable hours requirements, times are changing, said one law department consultant.
"I'm gonna guess that 25 percent have strong performance management programs," said Daniel DiLucchio Jr., a principal at Altman Weil. "In recent times, the focus on strong management and performance has grown."
Even as the HP legal department is peppered with layoffs and departures, the company is continuing to hire new lawyers, Holston said. (He declined to quantify how many people have left.) A person who recently interviewed with the company said he was told that HP legal was getting rid of the dead wood and taking advantage of the buyer's market to hire new talent.
CHANGING OF THE OLD GUARD?
When Holston arrived, he said, HP's legal department had fewer than 300 practicing lawyers. Now, he said, it has between 300 and 400. The growth as well as some of the layoffs came as the result of the $13.9 billion merger with EDS last year. Even though the department is larger, the churn over the last few years has changed many of the faces.
In HP's intellectual property department, for instance, of about 70 U.S. lawyers who were there when Holston came on, only about a third are left, according to an informal survey. Some took an early retirement package in 2007; others were cut subsequently, during one of the rounds of company layoffs, pushed out, or left on their own. At least a dozen who left fit this profile: late 40s and early 50s, with 15 to 20 years of experience at the company.
One was Haggard, who left in January and took a job as VP of patent and IP development at Rambus. Another was Guy Kelley, an HP engineer-turned HP lawyer who spent a total of 27 years at the company. He decided to retire after the IP department got shaken up with new leadership.
"I spent 20 years in the legal department. I found it a very rewarding time," said Kelley, 56, who was based in HP's Colorado office. "They reorganized the department from time to time, and after one such reorganization, I thought it would be a good time to retire."
Charnas, who left to head Apple's corporate department last year, had even served as acting GC after Baskins stepped down. He applied for the job, according to former HP lawyers, but didn't get it, and a year after Holston came on board, he left.
"To the extent that you have a lot of experienced people and there's an accelerated attrition of experience, you lose a lot of institutional memory and a lot of expertise that built the company and knows how to maintain that level of growth and success," Kelley observed.
Holston said he likes to maintain a balance of experienced and fresh attorneys, noting that three of his deputy general counsel were promoted from within HP. Ives, for instance, has been with the company for 13 years. Holston also dismissed speculation by some former attorneys that more senior lawyers are let go because of their higher salaries. He said that the total spending on legal personnel has gone up since he came on board.
Holston said the department is saving money on outside counsel, though. The company has consolidated its legal work with fewer law firms since Holston came on board and now spends less on outside counsel than it did before he came, he said. He declined to say which firms are in and which are out.
THE NEW GRIND
Some former HP lawyers say the rounds of layoffs and all the other departures changed the environment inside HP legal, with attorneys worried about being the next to go.
"There is no logic or understandable communication about this," said one former HP lawyer who was laid off. "That's why it's so tough for people who are still there." Another former attorney noted that increasingly frequent farewell e-mails grew more cryptic about why the colleague was leaving, with less detail about plans to "pursue other opportunities."
But Ives, the deputy GC, said that the department is healthier than ever. With more focus on attorneys' career goals and a new program that allows lawyers to rotate through different practices, morale is high.
Just recently, Holston surprised his charges with a visit from his friend Attorney General Eric Holder Jr. "People were just levitating," Ives said. "It was very energizing."
