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Exelon lawyers may grouse about having to track time-but most plan to stick around all the same. Likelihood you will be at this Surveycompany two years from now Exelon Averages I won’t be here. 11% 5% I probably won’t be here. 0 5 I may or may not be here. 16 16 I probably will be here. 42 32 I will be here. 32 42 Aw firm refugee Peter Thornton relished the day he kissed his time sheet good-bye. Freedom from the almighty billable hour was one of the main lures that Exelon Corporation, as it is now known, offered the regulatory specialist when he signed on with the energy concern in 1996. Too bad it didn’t last. Today Thornton, an assistant general counsel at the Chicago-based company, is once again a slave to the clock; he tracks his workday six minutes at a time and charges the company’s various subsidiaries for his labors. It’s one of several initiatives that general counsel Randall Mehrberg has undertaken as he tries to rein in outside firms’ fees, prove his department’s worth, and comply with a federal law that requires the utility to track costs. In the two years since he joined the company, Mehrberg has centralized his 68-attorney crew and injected it with a dose of discipline. Of all his directives, though, the compulsory clock-watching has been hardest for his lawyers to swallow. For the 58-year-old Thornton, the return of the dreaded billable hour has been the only defect in an otherwise idyllic job. “When I came here I thought, ‘Wow! No billing. This is like being a kid on Christmas Day!’ ” says the attorney, who spent 17 years in private practice before moving in-house. And now? “ It’s a major hassle.” Thornton isn’t the only one who thinks the Grinch has stolen Christmas. More than a third of Exelon lawyers who responded to Corporate Counsel’s 2002 Quality of Life Survey singled out the pressure to bill hours, and the time spent on law department administration, as the nuisances they would most like to see eliminated there. In follow-up interviews, company lawyers called billable hours, of which they are expected to rack up at least 1,750 a year, a “pain,” “contentious,” “distracting”even “counterproductive.” The complaints are in stark contrast to their mostly positive survey re-sponses. Mehrberg and Exelon brass garner generally high marks from staff lawyers. The attorneys report that work at the country’s third-largest utility, with a market capitalization of $15.3 billion as of late September, is challenging and varied, that clients listen and are respectful, and that opportunities abound for them to move over to the business side (both the chairman and the CEO of Exelon’s largest division are attorneys). “What I do makes a real impact,” says assistant general counsel James Poskozim, echoing the comments of several colleagues. Man With A Plan If only, they sigh, Mehrberg would get rid of timekeeping. But the GC says that while he understands their annoyance, it’s not going to happen. The 46-year-old former Jenner & Block litigation partner won’t be dissuaded in his quest to lower Exelon’s total legal expenses, which came to approximately $56 million last yearabout $16 million less than in 2000even as his department grew about 24 percent with the addition of 13 lawyers. While his game plan has many elements, among them bringing more work inside, he says that the only way truly to gauge in-house productivity is by the clock. “I didn’t like billing hours,” says Mehrberg, referring to his former life in private practice, “but it makes you productive.” It may make lawyers efficientbut it also means Exelon is in the minority of corporate law departments. Joel Henning, a law department consultant in the Chicago office of Hildebrandt International, says he first heard of law department timekeeping and billing roughly a decade ago, but that only about one in ten law departments requires it today. Of those that do, most are in large corporations, and very few go as far as requiring billing in six-minute increments. Most, Henning says, track time by the hour or the day or will do it for a month out of the year. The consultant is a big fan of the practice and says he regularly encourages clients to do it. But, Henning adds, “a lot of [company lawyers] start to literally kick and scream.” There are other in-house barriers to hourly billing, including resistance from business managers, who may see it as a bureaucratic headache. Some GCs are dubious as to how effective hours-tracking really is, saying it’s difficult to figure out what the hours actually cost. It would be too easy, they say, to leave certain overhead costs, like technology spending, out of the equation in order to arrive at a number that makes in-house lawyers look like a better bargain than they really are. Mehrberg and M. Bridget Reidy, the deputy general counsel who oversees the law department’s operations, insist that there’s no fudging in Exelon’s figures. Taking into account hours worked and “fully loaded” costsmanagement-speak for all department overhead, from computer keyboards to storage spaceReidy says that in-house lawyers at Exelon billed out, on average, close to $170 an hour last year. Rees Morrison, another Hildebrandt consultant, estimates that fully loaded costs (including lawyers’ time) among law departments typically range from $130 to $170 an hour, which puts Exelon near the high end. That’s lower than outside counsel rates, which, according to Morrison, average about 35 percent higher. And, as Mehrberg notes, the number of former Jenner partners and other high-caliber lawyers on his staff makes a “tremendous business case” for maintaining an in-house crew. Doing Estimates There are also legal reasons why Exelon lawyers track time. As a public utility holding company, Exelon is required by federal law to account for all operating costs for purposes of setting electricity rates. That’s a fairly new mandate for the corporation, which was formed in October 2000 by the merger between Chicago-based Unicom Corporation and Philadelphia-based PECO Energy Corp. Before the merger, the two were not holding companies. The rules don’t spell out exactly how a public utility should track costs, but keeping and billing time seemed like a no-brainer to Mehrberg. He says he gave his underlings a choice of allocating time by day, hour, or project, and that they chose the law firm standard of six-minute increments. “I think it’s because that’s what they knew,” says Mehrberg. For some, the adjustment was easy. The 27 lawyers who had worked at PECO were used to watching the clock, thanks to a GC, now retired, who instituted the practice several years before. Unicom’s 28 lawyers weren’t required to do so. But for all the attorneys at Exelon there have been other vexing adjustments. Each lawyer now has to budget for every matter on his desk valued at more than $10,000. Litigators are given 60 days after the filing of a lawsuit to submit detailed cost estimates, updated quarterly, for a given case. And all lawyers are restricted in their choices of outside counsel: A beauty contest held last year pared the company’s bulky outside counsel roster down 80 percent, to 29 firms, each of which is designated to handle specific issues. If an in-house lawyer is handling a case on her own but has a quick question she wants to run by an outside lawyer, she can no longer just pick up the phone. First, she has to retain the attorney, request a budget from him, and set up an electronic invoice. Some lawyers chafe at what they see as Mehrberg’s micromanaging. As one Exelon lawyer noted, what used to take ten minutes, tops, is now a two-hour investment: “We have a lot more administrative burdens than we used to, and it’s a pain.” William Von Hoene, who joined Exelon earlier this year from Jenner and serves as deputy general counsel in charge of litigation, defends all the paperwork. He offers a hypothetical: If Exelon is fighting a relatively minor slip-and-fall case worth, say, $20,000, and he finds out that an underling spent 20 percent of his time last year defending the case, clearly it’s a matter worth settling. “If you don’t have a numeric measurement of the amount of time that’s being spent,” says Von Hoene, “then you’re making anecdotal decisions about whether to go to the mat or not.” When that happens, it’s no surprise, he says, that corporate dollars get wasted. Like it or not, Exelon lawyers had better get used to their new life. Mehrberg’s professed goal is to build a lean, full-service internal operation, and complaints over the bottom-line focus aren’t going to dissuade him. Amy Hamilton, an assistant general counsel who handles regulatory issues in Philadelphia, says she understands why it has to be done. But that doesn’t mean she has to like it. “In-house counsel say, ‘Look, we were willing to take a pay cut so we wouldn’t have to deal with all the bull,” she says. Speaking generally, she says, “If we’re going to act like private lawyers, why not go to private law firms and make twice as much money?’ “ As the survey results indicate, no one’s running back to the law firm life.

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