The scenario is all too common: A legal department faces substantial budget cuts while its most valued law firms are significantly raising their hourly rates—leaving in-house counsel in a quandary. Some suck up the additional costs and exceed their budgets. Others stay within budget and get less for more from these regular firms—working longer hours themselves. Either way, in-house counsel aren’t happy.
"It’s the path of least resistance," says Brandon Rudnikoff, counsel at Montreal-based CN, a multinational transportation company. "Legal departments form relationships with the sophisticated firms in their cities, and those firms become primary outside counsel."
But when CN’s outside law firms hit the legal department with yet more rate increases in 2007, the legal department came up with a four-step approach to dealing with the problem. First, it challenged the conventional wisdom that only large, sophisticated firms should service large corporations. Second, CN began cultivating relationships with small-town law firms. Third, the company consolidated its plaintiff litigation into one firm, which worked strictly on a contingency basis. And finally, it opted more for arbitration than litigation.
As a whole, the approach has reduced legal department spending substantially—and a large portion of the savings can be credited to working with small firms.
"The goal wasn’t to take all the work away from the big firms," Rudnikoff explains. "But not all our legal work is that sophisticated. I was paying for expertise I didn’t need."
So Rudnikoff, with the support of CN CLO Sean Finn and GC Olivier Chouc, set out to find quality law firms that would provide experience and expertise at a fraction of what he was paying his big name firms. The research was daunting.
"You don’t have to look around too long to find the reputable, big firms," he says. "Even if you’re at a complete loss, there are obvious indicators who the leading firms are. It’s not so obvious when you’re looking for small town firms."
With the help of CN Counsel Jody Everly, Rudnikoff and his team researched—through various means including networking, flipping through Rolodexes and reaching out to old law school buddies—which small town firms would be up to the task of handling some of the company’s less sophisticated legal work.
After much leg work, the team came up with a strong list of small firms across Canada and the U.S. For two years, they have been tapping into these firms for various types of legal work such as commercial disputes, collections and contracts, to name a few.
Rudnikoff points out that with small firms, client conflicts are virtually a nonissue. And while some companies may shy away from working with small firms, he notes that most legal work is done via e-mail or phone.
"They don’t need to be close," he says. "Do the math—even when these lawyers do have to travel, those costs are so significantly outweighed by the enormous hourly costs at the large firms that it more than pays for itself."
The results have been surprising.
"I was expecting to pay X per hour, for Y number of hours," he explains. "So according to my calculations, we should have achieved a 25 to 50 percent reduction in legal spend."
But what Rudnikoff didn’t expect was that the work at these small firms would be handled by more experienced lawyers than the large-firm associates who previously handled the company’s less sophisticated work. As a result, they complete the work much faster at a smaller hourly rate, generating closer to a 75 percent reduction in cost.
"It already has had a six-figure impact on our budget and will eventually have a seven-figure impact, including the contingency arrangements," Rudnikoff explains. "We are all very pleased."
He adds that there is less risk in this approach than many companies may think. "Because we can afford to go with the most experienced lawyers in the small towns, the risk is lower," he says.
Covance
Crossing Over
[James Lovett]
In 2002, Covance Inc. was involved in 13 pending cases and had $870 million in revenue. The drug development research and trial company since has grown substantially—revenues are expected to reach $2 billion this year. But through all this growth, one thing has stayed constant: the litigation, which has held at 13 pending cases. If you look at litigation per $1 billion in revenue, Covance has seen a 53 percent reduction.
"Any litigation is a distraction," says General Counsel James Lovett. "[When I joined the company in 2002,] we had a couple of potentially larger suits that I felt probably could have been prevented if there had been more proactivity at the front end."
Lovett, an external hire, also noticed that there were plenty of Covance lawyers with the talent to be general counsel—they just needed the right training.
So shortly after joining Covance from FMC Corp., Lovett set out to reorganize the law department in a way that would address both dilemmas by doing away with the typical centralized legal function that deploys lawyers when and where they are needed.
"You can go to a law firm for that," Lovett says. "In-house lawyers should be able to come up with a better solution because they know the business so well—but that only happens if the person really does know the business well."
Now, seven Covance lawyers work within the business units to become true partners with their clients. Meanwhile, regular legal team meetings ensure that group stays intact as well. While the model isn’t unique, Lovett pushes his lawyers further than most. They’re not lawyers placed in business units—they’re business partners who happen to be lawyers.
The lawyers had to earn their clients’ trust and their place in the business teams themselves. Lovett told them he expected them to attend all the regular business meetings, but that the setup would not be prearranged—they would have to win an invitation first. The goal was for the lawyers to be accepted as partners, not viewed as policemen, so that they can manage each division’s challenges and issues proactively. That means clients must feel comfortable bringing questions to the attorneys.
The arrangement is paying off. Recently a business manager faced a crisis overseas and called his division’s lawyer before even calling his boss. Another time, a lawyer’s early involvement helped the company avoid a potentially large lawsuit and ensured that a project continued interrupted. In crisis situations, when every second is valuable, lawyer engagement from the outset is crucial.
Lovett calls the company’s success at controlling litigation just part of the broader foundation of the legal-business partnership that the reorganization has engendered. And as a corollary, each of the lawyers is gaining career experience both as a small-scale GC within their division, and as a business person, too. Since the reorganization Lovett has become head of Covance’s nutritional chemistry and food safety division in addition to his GC duties, and another lawyer has made a similar crossover—further proof of the high regard and mutual respect Covance’s business side has for its lawyers.
"At first, the division managers may be a little uncomfortable that they have someone on their team who doesn’t report to them," Lovett says. "But over time, they can see that gives the person a kind of independence, so they can get unvarnished advice and reaction. Now that I’m in a business role myself, one of the hardest things is getting people to tell you what’s working and what’s not."
Prudential
Metrics Master
[Bob Fitzgerald, Darren Guy and Jeff Isaacs]
In the current economic climate, maximizing the effectiveness of outside legal spending is crucial. With many law firms offering unprecedented fee discounts and more firms opening up to alternative fee arrangements, new tools for managing outside legal budgets are hot items.
Witness the "executive dashboard" Prudential developed to provide real-time analysis of outside counsel spending and performance. The dashboard pulls together data from the company’s e-billing, matter management and general ledger systems to provide a snapshot of legal department spending, and a view into which firms are working most efficiently.
Peer insurance companies have asked for and received a demo, and after a presentation at a legal technology conference near Atlanta, the dashboard’s architects, Darren Guy and Bob Fitzgerald, were swamped with requests from people who wanted to know more.
"People were knocking each other over trying to get to me and give me their business cards," says Guy, vice president of strategic operations & finance. "Now I know how Brad Pitt feels."
Conference participants were impressed with how quickly Prudential developed its dashboard. Starting in October 2007, Fitzgerald, director of information systems for the legal department, had a prototype ready by the end of the year. After users tested the system and suggested changes, he deployed it in mid-2008.
"The prototype was enough on the mark that they said, ‘This is what we were imagining,’" Fitzgerald says. "Then they came back and said, ‘We don’t need this, but we want this.’ Using it caused them to find other things they wanted."
The dashboard includes screens that display an analysis of rates, staffing by level and expenditures with each firm over a three-year period. This helps Prudential negotiate hourly fee discounts and is laying the groundwork for more alternative fee arrangements.
"Now I can look at a matter and see how many hours it has taken on average for these kinds of cases," Guy says. "We have a baseline to calculate what we would like our alternative fees to be."
The dashboard goes beyond cost management. It includes "report cards," where attorneys managing outside counsel rate each law firm’s performance both numerically and with commentary. It also tracks work by minority and women lawyers on Prudential matters to assure compliance with the department’s diversity commitment.
"It allows us to have a real-time snapshot of how we are spending our money, where we are spending our money, who is delivering the services and whether we are getting a representation of perspectives from folks that are as varied as the clients we serve," says Jeff Isaacs, corporate counsel of M&A and financial management.
While the metrics themselves are not new, the dashboard allows senior law department members to obtain a quick analysis, without requesting data from various sources.
"You can get information and analyze information without disrupting the department workflow or creating concern," says General Counsel Susan Blount. "I can find out what we are spending money on without imposing on people’s time or causing people to worry about why I want the report."
The dashboard’s graphical format is easy to use. Like the dashboard of a car, access to the critical information is right in front of the user. Colors draw attention to data anomalies: Red indicates a problem area that needs to be addressed; green is an area doing well; and yellow is in between.
"Most lawyers are not technological wonder dogs," says Isaacs. "The easier a tool is to use, the more likely they are to use it, and the more likely it is to pay dividends."
Kraft Foods
Beyond E-mail
During a Kraft Foods media group meeting earlier this year, one of the group’s tech-savvy presenters declared, "E-mail is for old people."
The comment struck a cord with Deputy General Counsel Gerd Pleuhs, who decided there was no time to waste in implementing Web 2.0 tools for the company’s legal department. According to Pleuhs, lawyers tend to be very conservative with these tools, and he didn’t want his team to miss the technology train.
Starting about nine months ago, Pleuhs began experimenting with a blog, and then wiki technology, to help the corporate and legal affairs department operate more efficiently. He hoped the process would eliminate redundancy and improve communications within the global department, which has 400 employees, including 78 lawyers based in more than 25 countries.
The process was tricky at first because older department employees were skeptical of the plan’s usefulness. But Pleuhs and his team—Executive Administrator Ryan Hollingsworth, Legal Analyst Jane Emerson, Chief Counsel Rosanne Angotti, Records and Compliance Administrator Mindy Turner and Legal Assistant Yesenia Crespo—sought help from younger lawyers across the globe who already used Web 2.0 in their personal lives.
"I sent out e-mails to young attorneys—one in Argentina, one in Australia, and I don’t even know who else," Pleuhs says. "I told them, ‘I want to make this happen, and you’ve got to help me. You have to be ambassadors. I don’t want to force you—but I’m forcing you. So participate and make this happen.’"
Once the team and its ambassadors were in place, they were able to convince attorneys across different age groups that the tools were indeed useful.
But one of the first things Pleuhs learned was that he couldn’t write content for blogs or wikis the same way he would write an e-mail. Instead of giving orders, he had to stimulate interest in the new types of posts.
"If you don’t create interest, nobody will answer," he says. Pleuhs was concerned about getting responses on his blog only because his subordinates felt obligated to respond. "That’s not the kind of stuff you want to create."
Instead he wanted to bring his employees into a collective conversation, where people participated not because they had to, but because they had knowledge to contribute.
Pleuhs says the blog and wikis have helped the department in several areas, including sharing knowledge and best practices, building networks and giving consistent legal advice to the rest of the company.
For example, Pleuhs mentions the June announcement of personalized Facebook URLs. Instead of sending out lots of e-mails to different lawyers in different places, one American team member merely posted on the blog information about preventing Kraft trademarks from being used as Facebook URLs.
The new tools also have helped the department work better as a team and become more connected, Pleuhs says, especially because Kraft attorneys in many countries are geographically isolated.
"You’re sitting out there, and you’re basically alone," Pleuhs says. "Now when you have a problem, you can immediately ask an entire group of people. They weigh in, and [they] help you. That’s very encouraging."
But one of best parts about the evolving program is that it doesn’t just affect attorneys.
"It’s not for lawyers only," Pleuhs says. "You involve administrators, legal analysts. Everybody who has an interest in making it happen can participate. You broaden the base and create enthusiasm if you involve the entire department."
Accenture
Foreign Exchange
Today business expansion beyond U.S. borders is not only common but also expected. Meanwhile, college students increasingly choose to participate in study abroad programs for academic credit. Accenture’s Global Exchange Program applies the latter trend toward the former. Half secondment, half study abroad, the program allows Accenture lawyers to work for two weeks in overseas offices. Its aim is multifaceted: It encourages lawyers to gain experience outside their specialty zone and become familiar with the day-to-day operations of far-off teams while expanding cultural understanding vital to a global business.
"Given the international aspect of Accenture, the opportunity to be immersed would be helpful so I would know who to go to immediately to obtain additional insight and pointed expertise," says Daryl Jones, Accenture’s global legal lead of the Products Operating Group, who sits on the selection committee for the Global Exchange Program. "And also, I would have some general information and experience gained from the program that may be sufficient to address the issue. It goes back to one of our main objectives of helping folks be aware of who else within legal has the information that could get the job done in terms of support for the client."
For senior executives, the opportunity to travel and visit Accenture offices overseas arises more often, but more junior attorneys rarely get the chance. So every year since 2005, legal’s management team has invited Accenture lawyers to apply to the Global Exchange Program by explaining where they want to go, what skills they want to acquire there and what they hope to learn from the program. Accenture chooses eight to 10 each year to participate—this year’s exchange participants included a Chicago labor and employment attorney doing transactional contract work in Brazil and a Shanghai, China-based contract lawyer who worked in the Chicago office on regulatory matters. The program has a small footprint—annual budget is $80,000, just 0.06 percent of inside legal spending—and the time commitment is minimal for the participating offices. The visiting lawyers might observe a litigation strategizing session with outside counsel or help prepare an SEC filling as they get to see how other Accenture legal teams operate.
"I learned how the team successfully supports a large and varied practice and how it plays an integral role in enabling the Spanish business’ strong results," says Resa Labossiere, the law department’s director of business operations in Chicago. Labossiere spent two weeks in Madrid, Spain, in April 2007.
"From my perspective as part of the program selection committee over the years and seeing the responses, I’ve never heard of anyone coming back who really wasn’t glowing in terms of the experiences they had and their appreciation for the program," Jones say. "It’s really a great program in terms of not only the learning but also the cultural awareness—it’s really a great morale booster from my perspective."
The hosts introduce the visiting lawyers to key business contacts and give them a social and cultural experience—which could mean visiting Wrigley Field or the Great Wall of China. Whenever possible, they also participate in Accenture’s "extracurriculars"—the Shanghai attorney visiting Chicago, for instance, accompanied members of the law department on an outreach visit to a local classroom.
Although each program is customized, the lawyers come home with similarly positive experiences, and department management encourages them to share those experiences through a lunchtime presentation.
"Most of them are very interested in hearing the differences and similarities to other offices and to roles comparable to their own," Jones says.
Christina Schneider, a Frankfurt, Germany-based attorney who spent two weeks in Delhi and Bangalore, India, in February, says the program gave her a deep insight into Indian culture. She learned how her colleagues there live and see their countries and themselves in a global context. But at the same time, those differences often became nominal in the business context: "Although the geographies are different, we are pursuing the same goals," she says.
Xerox
Contract Consensus
Xerox Corp. does business in 160 countries, and more than half of its revenues come from outside the U.S. For General Counsel Don Liu and his legal department, supporting that decentralized global business in a seamless way is a major challenge.
One solution the department developed is a global contracting process. It meets the demands of Xerox’s multinational customers who don’t want to sign separate agreements in every country where they purchase Xerox services. It also addresses the corporation’s goal of enhancing revenue potential by speeding up the contract cycle time.
"This process of reducing cycle time means creating a process by which business decisions get resolved and concluded at a faster pace," says Liu. "If you start with a nine-month [contract] cycle time and reduce it to six months, you can generate revenues 33 percent faster."
A team headed by Roni Crichton, associate general counsel for Xerox Global Services, and Johanna Bartlett, a senior managing counsel and Six Sigma Black Belt, launched the project in 2005. Using Xerox’s "Lean Six Sigma" methodology, the team spent two-and-a-half years developing and testing a new contracting system. It includes a master contract that can be implemented globally, a playbook of backup clauses providing options for customizing contracts and a process guide for contract managers and attorneys.
An important objective was winning buy-in from attorneys and business people around the world. The playbook was a key part of that.
"We didn’t say, ‘Here is the clause we want you to use,’" Crichton says. "In creating a little bit of bureaucracy, we didn’t want people to stop thinking."
By negotiating with lawyers and business people in every country, the team developed language for the playbook that everyone was comfortable with, she adds. That substantially cuts cycle time by reducing the need for approvals during contract negotiations.
"The playbook is designed to create a faster pace at which decisions can be made because you can anticipate certain resolutions that can be implemented [in a contract] without having to get approval from the business person every time," Liu says.
The project included educating business leaders about adjusting pricing to cover unusual contract risks. "Risk Register," a software program that analyzes every Xerox contract, quantifies the risk involved in nonstandard contract provisions so that pricing can be raised accordingly. "It’s a tool to quantify the financial risks we are going to take on," says Liu. "If you are taking on higher risk, you should be paid more."
A pilot program at the end of 2007 showed that the project had met its goals of reducing contract cycle time, enhancing revenues and cutting costs. To ensure continuous improvement, the team collects feedback through a shared file drawer and interviews client managing directors. Based on that input, they recently revised the master contract and are updating the playbook, Crichton says—just in time for an expected uptick in global contracts, recently defined as a strategic imperative for Xerox.
Bartlett says the team—which included Terry O’Grady, counsel, Flor Colón, senior managing counsel, and others—drew personal satisfaction from their efforts.
"One of an in-house attorney’s favorite things is to be proactive, and so often we don’t have the time to do it," she says. "For this project, a group of eight lawyers devoted two years in a really proactive way to say [to our clients], ‘We can make this better for you.’ We as lawyers have so much to bring to the business table, and with this project we were able to do that."
Danaher
Clear-cut Compliance
Keeping employees on the straight and narrow is an issue virtually all in-house counsel face. It’s not that employees are purposely breaking the rules—more often they simply don’t know or forgot the rules.
This is what Christian Na had on his mind when he became GC of Danaher Corp.’s Product ID division, which manufactures industrial coding equipment, in 2007.
"The company has an awareness of compliance," he says. "We have a robust compliance program. But people had trouble remembering all the rules."
Danaher requires its employees to take annual compliance training courses, and thanks to that training the company’s employees understand the importance of compliance. "They just weren’t sure how to do compliance," Na explains.
So Na challenged himself to come up with a way to make the rules stick, particularly with the company’s sales staff. His solution was simple: A wallet-sized "compliance card" that listed the 10 most important rules the staff needs to remember when on sales calls.
Landing on just 10 rules wasn’t easy. So Na and his fellow in-house counsel got to thinking.
"We spent a lot of time distilling the rules and figuring out which to include," he says. "They needed to be simple and concise but not too preachy, too legal or overly technical." Na and his team were careful to create a card that served as more of a reminder of the rules the sales team should have already known, rather than create a piece that replaced important training. To help them achieve this, they started each reminder with, "Don’t forget ..."
Some examples of the included rules: "Don’t forget that giving anything of value to a gov’t. official, employee or agent to win business (‘bribing’) is a criminal offense ..."; "Don’t forget that ‘kick-backs’ to a customer, employee, agent or consultant to win business is also bribery ..."; and "Don’t forget to get proper documentation ... or authorization before disclosing or accepting any trade secrets or proprietary information."
The sales team began carrying the cards with them to sales calls earlier this year, and Na isn’t surprised they’ve garnered rave reviews. "They take a large volume of rules and distill them to a critical few that help the team keep compliance on their minds," he adds.
The "compliance cards" have been so successful, in fact, that Danaher’s legal department is now working on several other cards for company employees. Among them are "10 Tips for Contracts" and "Handling Trade Secrets"—both expected to be released later this year.