119 Law Department Management: Outsourcing vs. Insourcing, Controlling Legal Costs (and maintaining sanity)

Transcription

1 119 Law Department Management: Outsourcing vs. Insourcing, Controlling Legal Costs (and maintaining sanity) Hans Albers, Senior Director and General Counsel EMEA, Juniper Networks Inc. James Bellerjeau, General Counsel & Secretary, Mettler-Toledo International Inc. David Bourdon, Head of Legal for EU Affairs, Competition Law, Societé Generale 1

2 Agenda 1. Legal Strategy How Strategy Influences Structure & Costs 2. Value Challenge In-House vs. Outside Counsel 3. Basic Sourcing Alternatives Who Will Do the Work? 4. What Can Be Done to Drive Costs Down? Efficiency Strategies Collaboration Strategies 2

3 1. Legal Strategy Allocating Resources The result of a strategy should be a clear idea of how to allocate resources Prioritized strategic initiatives drive staffing and investment Consider current and future services, and internal and external resources Foundational Questions * 1. What Services Does the Law Department Deliver? 2. How is the Value of Services Prioritized? 3. Who Should be Delivering the Services? 4. What Can be Done to Drive Costs Down? * Derived from ACC InfoPAK Strategic Planning: Why a Plan is Needed and How to Develop One 3

4 1. Legal Strategy Prioritizing Value Prioritize the entire portfolio of legal work based on the value of the work and how it supports the overall corporate strategy 4

5 1. Legal Strategy Who Does the Work? Are the skills and capacity needed available internally or should they be acquired? Can work be automated or eliminated? "Core services" are those that directly support the company's overall strategic goals. This is the most highly-valued work, where the internal legal team's understanding of the business is a critical success factor. Higher risk, higher competitive benefit. Consolidate & prioritize work at right level to drive internal efficiency 5

6 1. Legal Strategy Driving Costs Down Basic structuring opportunities: 1. Make "core" work efficient by consolidation and prioritization 2. Automate, reduce or eliminate 3. Outsource/outtask 6

7 1. Legal Strategy Mission Keep the company out of trouble and support revenue growth establish efficient problem solving culture understand where and how you add value align with corporate goals & initiatives/company strategy Define Assumptions & Operating Principles: 2013 litigation will be higher than 2012 Prioritize support for field at expense of other areas Must maintain compliance efforts Defensive oriented focus for litigation Prioritize Mission Critical work Core/context review Value Creation Metrics as basis for measuring success 7

8 1. Legal Strategy Core Context Model 8

9 Core and Mission Critical Strategy Improve staff productivity Provide automation to boost individual productivity Examples: Contract Lifecycle management, approvals, licensing Goal Enforce process Capture data versus control data Resources 75% Internal Legal Services 5% Outside Counsel 20% Automation 9

10 Core and Non-Mission Critical Strategy Provide self-service tool Examples: Non-negotiated agreements, non-disclosure agreements (NDAs), Click Accept Goals Reduce legal staff involvement Own process and content Meet company standards and requirements for business processes Resources 15% Internal Legal Services 20% Outside Counsel 65% Automation 10

11 Context and Non-Mission Critical Strategy Maximize outsourcing Trust automation/tools where possible Examples: HR Cases, Real Estate Goals Minimize internal legal oversight Retain highly efficient outside resources Resources 5% Internal Legal Services 75% Outside Counsel 20% Automation 11

12 Context and Mission Critical Strategy Out-task to the greatest extent possible Examples: High Stakes Litigation, Compliance Closely monitor strategy and status Goals Minimize internal staff Maximize efficiency of Outside staff Automate outside vendor transactions Resources 20% Internal Legal Services 60% Outside Counsel 20% Automation 12

13 1. Strategy - Metrics What is measured improves Peter Drucker 13

14 1. Strategy - Metrics Metrics at multiple levels: departmental, individual, client satisfaction, financial, specific programs, etc. Benefits of using Metrics: Communication of specific objectives/direction Demonstration of value Promotion of desired behavior Continuous improvement Allocation of resources to region or function Benchmarking Justification of current or future spending levels/needs 14

15 2. Value Challenge In-House Counsel GC face three challenges: reduce the number of lawyers and reduce spending with external law firms, while handling more (and more risky) legal and compliance work than ever before... Something has to give "In-house attorneys live under the dual swords of limited budgets and increasing client independence. The only way we can properly do our jobs is to promote commoditization and automation, bring self-service legal tools to our clients, and create efficient global systems.... We have already adapted to a business model that drives greater efficiency and lower cost." 15

16 2. Value Challenge Outside Counsel At least our outside counsel has been cost-sensitive during the economic downturn by lowering rates... * Source for statistics on these and following slides The 2012 Real Rate Report, TyMetrix Legal Analytics 16

17 2. Value Challenge Outside Counsel Well, outside counsel helped me manage costs by putting more junior lawyers on matters, who have lower rates than the partners, right? 17

18 2. Value Challenge Outside Counsel Don't know about you, but my outside counsel is transparent about the fees they charge, so that I can easily tell I am getting a good value for money... 18

19 2. Value Challenge Outside Counsel The way we control outside counsel costs is by reducing the number of firms we work with and consolidating to a preferred panel... 19

20 2. Value Challenge Outside Counsel You suckers. The smart way to manage outside counsel costs is to develop close relationships with them. The better they understand the business and our needs, the more cost-effectively they service us... 20

21 2. Value Challenge Outside Counsel Hmmm, maybe outside counsel isn't listening to us and maybe we shouldn't try to force them to be something they're not: 21

22 3. Basic Sourcing Alternatives Outside counsel (& carefully control costs) Counsel in non-metropolitan geographies In-house counsel Home-sourcing Co-sourcing Legal process outsourcing (LPO) Off-shoring in low-cost countries (LCC) Open source No source 22

23 3. Sourcing Alternatives Outside Counsel Keep an eagle eye on outside counsel It is the close monitoring of outside counsel, paying attention to the progress of a transaction, billing, and client protection, that drives cost savings, and not convergence or consolidation Steven L. Schwarcz, To Make or Buy: In-House Lawyering and Value Creation, 33 Journal of Corporation Law (2008) Or, you can try the conventional methods and see if you have better luck... 23

24 3. Sourcing Alternatives Outside Counsel Move outside the metropolitan areas Location is one of the primary factors driving lawyer rates The difference between the average partner rate in the most expensive market (New York) compared to the average partner rate in the least expensive market (Riverside, CA) is almost $500. The 2012 Real Rate Report, emphasis added 24

25 3. Sourcing Alternatives Overview Sources: In-house confidential surveys Laurence Simons Global Legal & Salary Surveys Towers Watson General Industry Reports Rees Morrison GC Metrics Benchmark Surveys Tymetrix 2012 Real Rate Report 25

26 3. Sourcing Alternatives The Question 26

27 4. Drive Costs Down do you feel like this? Here is Edward Bear, coming downstairs now, bump, bump, bump, on the back of his head, behind Christopher Robin. It is, as far as he knows, the only way of coming downstairs, but sometimes he feels that there really is another way, if only he could stop bumping for a moment and think of it. A. A. Milne 27 27

28 4. Drive Costs Down Typical challenges Do more with less budgets decreasing More complex business and legal environment Business needing more of our time Lawyers doing entire vertical stack of tasks Inability to focus on the strategic and critical issues Requiring more headcount to cope More admin work because of compliance requirements Legal Org structured after the low-touch sales model of 1990 s 28

29 4. What Can Be Done to Drive Costs Down? Efficiency Strategy Reduce costs by identifying work that can be broken into component parts and done more efficiently by lower-cost personnel or IT solutions Collaboration Strategy Share costs by working together with others (internally or externally) in novel ways 29

30 4. Drive Costs Down Efficiency Strategy Paper No, Electronic Yes 1. Law department intranets / SharePoint 2. Document management 3. Contract lifecycle management 4. Automated document assembly/c2a 5. Entity management 6. Workflow and project/matter management 7. Outsourcing - Centre of Excellence 30

31 4. Drive Costs Down Efficiency Strategy 1. E-billing 2. Automated document assembly 3. On-line legal guidance and advice 4. Electronic legal marketplaces 5. Legal open-sourcing 6. Closed legal communities/legal Onramp 31

32 4. Drive Costs Down Collaboration Strategy Knowledge Management Good Resources Available * Source Sally Gonzalez, HBR Consulting LLC, "Legal Services Management Knowledge Management," ACC

33 4. Drive Costs Down Collaboration Strategy KM It Doesn't Have to be Big, Complicated or Scary What's possible to accomplish with nothing more than An inspiration and some brainstorming time with your team A free trial 30-day trial and a willingness to work outside the box 33

34 4. Collaboration Strategy - LegalWIKI 34

35 4. Collaboration Strategy - LegalWIKI Company Benefits We improve the quality and scope of advice over time We increase the consistency of advice Know-how is captured and available for re-use We avoid know-how loss on turnover Orientation of new team members is easier Support for succession planning Legal Team Benefits Team saves time and eliminates many routine matters Lawyers are more satisfied and engaged because we are working on more important "core" topics We are less isolated, and feel like we're working as a global team We have greatly expanded the reach of the legal team Better services, delivered more efficiently, at lower cost Less work on "boring" matters, more time for interesting, strategic work, achieving better results... increased job satisfaction 35

36 Legal Spend Management Model Organise Process Strategise Monitor Review Identify & aggregate matter data Capture global legal spend data Utilise standard task & billing codes Use a single platform Establish a Panel of law firms instruction control Agree timekeeper rates Establish billing guidelines Process Invoice approval controls Track internal matter work effort Automate rsate & billing guideline enforcement In-source or outsource work? Law firm estimates and udgeting WIP & accruals Alternative fee arrangements Rate law firm performance by matter Automate enforcement of strategies Identify Legal Dept KPI s Create functional reports by role/business unit Executive Dashboards Benchmark data to assess cost effectiveness Identify savings from initiatives Analyse law firm effectiveness Compliance with billing guidelines Drive findings into business decision making Organise & gather data Establish key processes Implement strategies Monitor Effectiveness Review Analytics 36

37 Executive Summary/Key Take Aways 1. Use basic legal strategy (core/context) to make key resource allocation and sourcing decisions A strategy that is not implemented is not a strategy at all Use metrics to improve 2. Follow an efficiency strategy to reduce costs Use of IT tools must be combined with process discipline and redesign 3. Follow a collaboration strategy to share costs in novel ways Knowledge management, WIKIs, etc. 4. Take it step by step; incremental improvement is totally OK Don t boil the ocean 37