Bruce Bowman, vice president of legal and general counsel at Canada Safeway Ltd., says with just two lawyers working at the Calgary-based grocery giant, billing individual departments isn’t necessary. “It’s more relevant for larger operations with a [sizeable] staff of lawyers that are performing a lot of transactions. It gives a better picture of where and how legal expenses are being incurred.”

The flipside, he says, is to have lawyers accountable for their productivity and what they contribute to the overall operation. The irony is many lawyers move in-house to avoid the “drudgery” of time recording. “A lot of lawyers get in-house and say, ‘my God, you’re going to ask me to record my time? I thought I was getting away from that.’”

Bowman says there’s often an underlying irrelevancy to the amount of time taken to perform a task and its value to the firm.

“You can spend half an hour on one thing and save the company a million bucks or spend all day on something else that’s worth a few hundred dollars."

Some companies prefer not to pick one strategy over another. Manitoba Hydro, for example, uses a hybrid approach. Ken Tennenhouse, general counsel and corporate secretary, says his team of a dozen lawyers records where they spend their time, the majority of which is passed through to the electrical or natural gas sides of the business.

When they perform significant tasks for particular projects, such as negotiating a construction contract to build a new plant or handling a regulatory hearing, those costs are charged to the specific projects. “It makes sense to me that we would charge the big projects, that’s part of the cost of the project. The rest of it is just the amount of effort you want to spend recording your time and billing your time,” he says.

Gary Hannaford, CEO of the Institute of Chartered Accountants of Manitoba, says billing individual departments for legal services used is the most accurate way a company can determine the profitability of its separate parts.

“What it really does is try to get as many of the specific costs that pertain to a division allocated and properly absorbed [by the division]. It becomes a user pay system. The user of the legal services is paying for the services as opposed to the [legal department] being one giant cost for the corporation.”

Hannaford likened the situation to a company giving employees their own code for the photocopier. “As different departments use the same copier, the cost of the copies is allocated to the division [making them] as opposed to being picked up by the whole organization.”

He says the larger the company, the more likely it will want to allocate portions of all costs, including heat, light, and power, to the specific divisions using them. Finding out the true profit or loss of a department can help upper management decide whether changes are needed, such as reducing expenses to help an unprofitable division get into the black or cutting out a department altogether.

MacDonald says departmental billing has been on the rise in corporate Canada so individual divisions will recognize they are the recipients of scarce and expensive resources.

“We prefer education, so we promote that departments contact the legal department on any matter they need. We also do training on other things to [help them] recognize that we are a scarce resource, but departments need guidance on legal matters.”

He says the Investors Group legal department has considered billing separate divisions but it’s never gone beyond that stage. “Every year we put together a business plan that we review with the finance department and at no point have they said, ‘you should be billing other departments.’ We would prefer our lawyers spend time solving problems rather than billing departments we work with on a daily basis.”