The Expanding Peer Network Confronts Challenges and Identifies Solutions
Daily battles for today's general counsel continue to multiply and management responsibilities have become broader. Future success for GCs depends on their ability to improve the quality of their services and actively promote the value their function brings to the organization. At the same time, they must also implement innovative tactics without increasing the financial impact to the bottom line.
In many organizations the GC is now required to justify financial decisions and to work closely with other departments, such as Procurement, for legal business tactics, such as hiring outside firms. This means that to successfully manage certain legal operations, the GC will have to cultivate professional relationships with and earn the trust of other business executives outside of the legal department.
New challenges have made the role of the GC, and the entire in-house legal team, more complex. Simply meeting expectations in terms of managing legal business isn't enough to make a noticeable impact. In-house attorneys must be knowledgeable legal professionals and proactive and assertive business leaders.
Many in-house lawyers will discover that navigating this new business environment will take some adjustment, particularly in the area of technology. Legal technology is rapidly evolving and in some instances it's paving a path that many in-house counsel and their outside firms will be required to follow.
That is why thought-leadership events, such as Generals of the Revolution™, are essential in today's climate. Presented by Datacert, Inc., in collaboration with InsideCounsel and The General Counsel Forum, Generals of the Revolution is an exclusive network of in-house counsel interested in identifying actionable plans to confront current industry challenges and develop strategies to mitigate those likely to surface in the future.
"Datacert created Generals of the Revolution because openly sharing ideas and working with peers to cultivate action plans are critical components to driving legal and business success in this rapidly evolving environment," said Mark Poag, general counsel and senior vice president, Datacert. "Industry demands will continue to mount and in-house counsel are seeking innovative strategies that help increase the value they provide to their organizations. As a global provider of enterprise legal management solutions, it is our responsibility to foster a community of forward-thinking lawyers that have an interest in tackling the challenges presented by our modern, technology-driven world."
Generals of the Revolution was launched in 2010. During its inaugural year, events took place in multiple cities in the U.S. and Europe and included a series of seminars that featured Richard Susskind, author of "The End of Lawyers? Rethinking the Nature of Legal Services."
Representatives from more than 300 legal departments were present at the 2010 series to discuss visionary ideas and define the need for change in the legal industry.
In 2011, the event evolved into an interactive roundtable format and focused on turning strategic ideas into practical solutions. Generals of the Revolution roundtables were held in Atlanta, Chicago, Houston, and New York and senior in-house counsel from global organizations such as Barclays, Coca-Cola, and AOL discussed inventive solutions for managing risk and compliance, as well as sound ways to address new industry demands and escalating legal costs.
"We agreed it was necessary to transition to a roundtable structure because we wanted to examine issues more closely and develop practical solutions for managing risks, dealing with compliance, and reducing costs," said Tom Duggan, group publisher of InsideCounsel and a moderator of each of the sessions.
The 2011 agenda was the same in each city. Poag and Duggan led participants in a discussion that focused on global compliance, ideal staffing models, and new technology designed to support legal departments. In-house counsel from a variety of industries, geographic regions, and company sizes brought unique perspectives, viewpoints, and concerns to each session. The professional diversity contributed to lively discussions that produced strong best practices takeaways, particularly in the area of technology.
"Technology is a proven strategy for increasing efficiency in every business sector, yet I am constantly amazed by the passive resistance to this ‘force multiplier' that happens in many legal departments," said Jeffrey W. Carr, senior vice president, general counsel, and secretary for FMC Technologies, Inc., and a Generals of the Revolution panelist. "It is unclear to me if some in-house counsel ignore it because they don't get it, don't want to get it, or don't think it's part of their role. We need more leaders in this struggle, because the foot soldiers in our departments are never going to fully realize the leverage benefits that can result from exploiting technology unless the GC requires them to do so—after all, as is often said, ‘What my boss finds interesting, I find fascinating.' As such, it is the Generals of the Revolution that will have to push change through the ranks."
At each Generals of the Revolution roundtable, participants spent time discussing ongoing issues involving compliance. Companies are continuing to spread their operations globally and, as a result, compliance issues are becoming more compounded. As they do business overseas, U.S.-based in-house counsel are dealing with bribery issues, privacy concerns, and discovery laws that can be vastly different than they are domestically.
Generals of the Revolution participants agree that compliance needs to be part of a company's culture and DNA. "Compliance is not what you do, it should be innate to your role," said Joseph Walker, a partner with Squire Sanders in the New York session.
Organizations represented at the sessions have adopted a range of strategies for managing compliance. There are companies with separate legal and compliance departments, while others embed the compliance department within legal. Regardless of the strategy, participants concur that there is no one correct approach.
"I have seen a number of different compliance systems and structures," said Thomas J. Sabatino Jr., a former executive vice president and general counsel for United Continental Holdings, Inc. "A specific structure isn't nearly as important as clear definition of the required responsibilities, a culture of compliance, and constant communication."
Speaking on the panel at the New York event, Richard Smith, head of principal transactions, M&A and private equity legal at Barclays Capital in the U.S., echoed a similar idea. "If those in compliance and legal are not in constant communication you will have things quickly fall through the cracks, which is obviously unacceptable from a risk management perspective."
Managing the gaps is where technology becomes indispensible. For example, a technology platform like Datacert Passport™ is a strong tool for consolidating data across systems and making sure that the legal and compliance functions have complete visibility into what is happening within the organization. Add in the easy reporting and collaboration capabilities of the legal matter management system built on Passport, and the risk of issues slipping through the cracks or being overlooked are greatly diminished.
Participants agreed that putting tools and processes in place is important, but setting the tone at the top is also critical. One participant noted that, even with a strong culture of compliance at the top, real-world compliance concerns often involve managers outside of the C-suite and training throughout the organization should be a required element with any compliance program. For example, this company's distribution drivers need to be advised of the right course of action if, when driving through a foreign country, they are stopped by police and told a payment is required to continue down the road.
"Managers are often primarily focused on the strategic responsibilities specific to their job function, therefore we have to communicate the importance of compliance to them on a personal level," said Shannon O. Pierce, senior counsel of gas operations and interstate transactions for AGL Resources, Inc. in Atlanta. "It is our responsibility to remind them that we are a resource and they should let us know how we can be of assistance."
"The real-world issues are often the most challenging to address," said Kevin Feeney, general counsel of Air Liquide USA in Houston. "There's nothing like going out in the field because once you have opened the dialogue and had personal contact, you are more likely to get asked the questions that really matter." Dovetailing compliance efforts with other employee gatherings, such as department meetings, has been an effective tactic for David Bunker, counsel with Huntsman International in Houston. "Rather than have half-day meetings focused on compliance, we have found it's effective to talk to our employees for 20–40 minutes about their real-world issues while their boss is present. However, at some point, you often have to ask the boss to leave so you can have more candid discussions."
While one-on-one interactions are critical, some participants find it more efficient to rely on technology to create consistent, defensible global compliance programs. According to Paul Roy, who manages financial and administrative matters and handles special projects for Time Warner, a company with 48,000 employees, "Technology can be a valuable tool because, in many companies, reaching every single employee in-person is not always practical, cost-effective, or necessary. Nearly everyone in our company has Internet access and we've conducted online training."
Technology also enables companies to identify areas that can be problematic from a compliance perspective. For example, a robust business intelligence system is a good tool for tracking incidents and helping compliance officers proactively identify concerns and make adjustments to diminish the risks they pose.
"Compliance concerns are relevant in every business sector and every geographic location. Effective compliance management isn't feasible without the use of technology because the widespread nature of this practice area makes it impossible to train, track, and supervise manually," points out Poag.
Participants at each Generals of the Revolution roundtable also discussed their challenges with creating a staffing model that includes an ideal combination of in-house attorneys, outside counsel, and service providers. Tracking the data necessary to make the correct staffing decisions is an ongoing problem, according to Duggan. "One of the points that Richard Susskind made in his book was that legal process analysis is lacking. The ability to analyze and dissect the work and its related costs, particularly in litigation, is a difficult hurdle," he told participants.
Participants described unique approaches and solutions, but most noted they are attempting to move away from hourly billing. For some, the best solution has been to increase in-house staffing, while others have explored legal process outsourcing (LPOs), particularly in India. With the economic downturn of the past few years, some in-house legal departments have benefitted from the use of seconded lawyers from outside firms. Other companies have moved their work from large firms in expensive cities to smaller firms in more cost-effective locales.
"I've worked in five companies, and each one has had a different approach," said Mary Ann Hynes, senior vice president, general counsel, corporate secretary, and chief compliance officer for Corn Products International, Inc. in Chicago. "You can make your own choices about approaches, and see what works best for your department and organization."
Carrie J. Hightman, executive vice president and chief legal officer of NiSource, Inc. in Chicago, remarked that emphasis should not solely rest on the bottom line. "If you are only focused on reducing costs, you are missing the point," she said. "If you take the right approach, costs will go down."
Participants discussed vastly varied strategies for staffing legal matters. The Atlanta session provided a microcosm of examples of how approaches that work well for one company can be very different than another.
John Lewis, Jr., senior managing compliance counsel and global anti-bribery counsel for The Coca-Cola Co., has uncovered his own successful strategy for hiring top outside counsel talent to represent the company. "Big firms have trouble retaining women on the partner track. We found that this presents an opportunity for us to find talent. We've found very talented people who have, for one reason or another, taken themselves out of the big firm game."
This strategy aligns well with Coca-Cola's corporate emphasis on diversity, but Lewis stressed that the practice is more than what some might regard as a corporate feel-good initiative. "We all have to start considering different talent identification models."
While UPS is also a strong proponent of diversity, it looks to develop deep relationships with a relatively small number of outside firms. "We have a unique culture and a lean department, so we typically work with core firms where we develop a team of lawyers at various levels appropriate for our work, rather than hiring individual lawyers," said Seth Bruckner, regulatory compliance and ethics attorney for the Atlanta-based shipping company. Bruckner says the focus on firms, rather than individual lawyers, creates flexibility as well as deep, lasting partnerships. "In addition, we find that these relationships enable us to negotiate win-win alternative fee arrangements and consider succession planning."
When striving to find an ideal staffing model, AOL Paid Services relies on quantitative data. "We use Datacert's spend management and reporting tools to analyze timekeeper and rate creep," said J.L. "Jeff" Novak, general counsel for the company. "These tools provide us with comprehensive analytics and make it easy for us to identify when a law firm is over-staffing our matters. We've instituted rate freezes, but have later seen our effective rate jump. The data helps us promptly identify and address those issues."
Several participants discussed their success with preferred partnership or convergence programs that go beyond one-off matters. "We tell our panel firms that we're looking for a holistic approach," says Rose Battaglia, managing director and global chief operating officer responsible for Deutsche Bank's legal and compliance departments in New York. "A firm should no longer simply rely on its expertise or competitive bid to win the work, but instead they should focus on what differentiates them from their peers and highlight the value their firm can offer, including technology solutions which may enhance the requested service."
Many common themes emerged throughout the sessions, but the experiences were varied. Several of the participants described how they are working with their procurement departments to manage hiring initiatives. This was more common among participants in New York and Chicago who largely regarded their relationships with their procurement departments as positive.
"When it comes to procurement, strategic sourcing is my friend," Sabatino said. "Many legal executives have fears about procurement coming into the process. Initially, I shared that concern. However, I gave it a shot and it has worked incredibly well.
"Many lawyers don't have the ability, or desire, to manage metrics. Lawyers don't always view hiring outside counsel as a business process. The procurement department understands the balance between cost and quality and can reveal where the costs are and help determine if efforts were successful."
Members of the UBS legal department weighed in on their relationship between legal and procurement, which is closely entwined. "When procurement is not closely aligned it can be a challenge," said Thomas Zingale, UBS AG, managing director, global head of legal and compliance systems and strategic planning. "Our procurement representative sits in the legal department and procurement is dedicated to understanding our program and integrating with us."
According to Robert Kulesh, UBS AG executive director, global legal and compliance sourcing lead, in-house attorneys ultimately decide which outside counsel to hire, but procurement helps with the process. "Our mission is to build a solid framework so that together we can establish best practices that provide the most value to the company," he said.
"Either by choice or by corporate mandate, more and more of our clients are engaging with procurement and adopting their practices to hire outside firms," said Jim Tallman, president & CEO of Datacert. "It is important for legal technology systems to continuously evolve so they are capable of addressing new strategies. Datacert is fortunate to have collaborative relationships with our customers because they provide key information that helps us maintain a product strategy that ensures our systems are ahead of new trends."
The Role of Technology
In several sessions, Poag stressed the importance of advanced collaborative technology within the legal department. He remarked that technology is just as critical as newer tactics, such as alternative fee arrangements, in regard to helping legal departments confront new challenges.
"The legal market is increasingly realizing the potential of strong business intelligence," Poag said. "The bread and butter of spend and matter management systems is trying to figure out the ideal staffing mix for particular matters, such as which vendors to use, whether it's law firms or an outsourcing firm, and which work to bring inside. These systems lend themselves to this type of detailed analysis. Datacert is focused on equipping customers with technologies that not only uncover costs and enable budgetary analysis, but also help determine the most effective strategies and vendors for specific legal matters. In fact, the business intelligence in Passport has unique features that allow a legal department to conduct firm benchmarking from right within the system."
Confronting current issues will require legal departments to focus on more than just technology, though. They also need to consider their people and processes.
"If you have technology without a process, and vice-versa, any major initiative will be doomed to failure," said Poag. "If the process that technology is supporting is flawed or inefficient, there isn't a system available that will help a department accomplish its goals. For that reason, Datacert consistently invests in strategic resources outside of our products, such as thought-leadership events like Generals of the Revolution, which help legal professionals establish and maintain technology and process best practices."
Poag noted that it can be hard to implement effective processes when a department has too much technology. He estimates that the average legal department uses dozens of technology applications, and in some cases that number is even higher.
Jeffrey Kaplan, deputy general counsel at LyondellBasell in Houston, offered an analogy to support Poag's point. "At home, I've got my TV remote, my DVR remote, my DVD remote, and my sound system remote. All my systems can work together, but I don't have a universal remote so operating any part of the system requires more steps than necessary," he said. "That's often how I feel in the office. All the systems should work together, but I often have to take more steps than necessary to accomplish one task."
Passport, Datacert's patent-pending technology platform, is helping corporate legal departments across the globe address this very issue. Passport launched last year and already almost 30 corporate legal departments from primarily Fortune and Fortune Global 500 companies have selected the system to consolidate and integrate their legal applications. Essentially, Passport serves as a department's "universal remote."
The battles will continue and in-house counsel need to prepare for the challenges ahead. There are no silver bullets to address all of the issues lawyers face, but with the appropriate tools and knowledge, legal departments can determine the best approach for providing value to their organization.
For general counsel and chief legal officers interested in sharing ideas and learning more, the next Generals of the Revolution™ event, the Peer Conference for General Counsel, will take place Sept. 15–16 in Washington, D.C. Professor Susskind will return for this event and play a key role in leading interactive strategy sessions.
Learn more at www.insidecounsel.com/gcevent.
To learn more about The General Counsel Forum, visit www.txgcf.com.
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