Corporate legal departments in recent years have been looking to law firm convergence in order to optimize relationships with outside firms. The idea is that by shrinking the number of outside firms used, in-house legal departments can cuts costs and increase efficiency.
At the “Law Firm Convergence Programs & AFA’s” session on May 9th at the Corporate Legal Operations Consortium’s (CLOC) annual institute in Las Vegas, Mark Smolik, general counsel and chief compliance officer of DHL’s supply chain operations in the Americas, revealed how he was able to cut his outside counsel spend by more than 50 percent with law firm convergence.
Smolik said that when arrived at DHL in 2009, the company’s legal department worked with 348 outside law firms, and “85 percent of my spend was [on] outside counsel.” Today, that the number of firms has been reduced to 19, give or take, and only 20 percent of spend is on outside counsel.
How did he do it? The goal, he said was to create a way for his internal department to evaluate outside firms, which would then inform decisions on firms used. And so a system was created to rate firms by metrics such as whether outside firms understand objectives and expectations, expertise, responsiveness, predictability of cost, and results delivered.
“It has allowed me to take objective input from my team and narrow down the number of firms,” he said.
Now firms are compared year over year by attributes such as practice groups to measure improvement. This provides benchmarking opportunities, according to Smolik, “and that’s how I began to sustain it.”
Vincent Cordo, co-panelist at the session and global sourcing officer at Shell Oil Co., said that in less than seven months, the legal department at Shell went from “several hundred firms to six global panel networks.”
To achieve this, Shell looked at firms in terms of price, AFA programs, legal project management, other added value services, diversity and specific expertise, Cordo said.
“The truth of the matter is, the drivers we were looking at are [aimed at]: How are we going to achieve savings?” he said. “So we looked at all these drivers and we did an assessment of our current panel.”
At the end of the day, “the biggest part of a convergence program…is to be nimble,” Cordo said.