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Managing external cost
Partnering for efficiency
Stephen Hopkins Partner, Eversheds
Martin English, Thomson Reuter
18 December 2014
Eversheds LLP . . .
• One of the largest full service law firms in the world with over 4,000 people including more than 500 partners and almost 2,000 legal advisors
• 55 offices in major cities across Europe, the Middle East, Africa and Asia
• Relationship lawyers – pioneers of partnering in the legal market through the original DuPont wheel and Tyco
• Providing control over costs - championing the cause closest to clients’ hearts: prevention not cure
. . . around the world
The golden age . . .
“Looking back on the period before the 2008 Crisis
it is hard not to conclude that the legal market was
experiencing a ‘Golden Age’. This era has now
passed and may not return.”
. . . for law firms
Jomati Consulting 2011
Law firms . . .
“While the difference between the mid-80s and
mid-90s in average PEP was just $140,000, the
difference between PEP in the mid-90s and 2007 peak
was a difference of $910,000, which is a remarkable
rise in remuneration over such a short period.”
. . . never had it so good
Jomati Consulting 2011
The new order
New challenges
• More enforcement of alternative and fixed fees
• Demand that law firms share more of the risk
• Increasingly tough panels
• Growth in tenders and consolidation
• Cheaper and new forms of production are developing
New competitors
= }
Business customers
In-house legal team services:
• A
• B
• C
Big law New law
Business customers
In-house legal team services:
• A
• B
• C
LPO
Contract lawyers
Projects
Online services
Virtual firms
Research
Legal analytics
Collaboration
Firm A
Firm B
Firm C
New law
New market entrants
1. Legal process
outsourcing (LPO) 2. Insourcing and
secondments
3. Complex projects/ managed
legal services
4. Alternative/ virtual law firms
• Outsourcing of entire functions or parts of functions
• Low-cost work with low complexity/criticality
• E.g. contract review, litigation support, E-disclosure/discovery, IP-related work, due diligences
• Temporary staffing of lawyers to cover peaks at legal departments
• Management of more complex/critical projects with extended responsibilities (in a consultancy-manner)
• E.g. complex contracts projects; regulatory and compliance projects & arbitral proceedings
• "Traditional" legal advice, without typical overhead costs and with fixed price
• Lawyers virtually connected (supported by sophisticated online platforms)
Providers
Inte
rnati
on
al
5. Self Service Platforms
6. Research & Information
Services
7. Quantitative Legal Analytics
8. Networking Platforms
• Platforms tailored to legal needs & questions
• Offer partly legal document generation services
• Partly supplementary legal advice and Q&A
• Online resolution platforms
• Customized legal research on demand
• Based on databases and libraries
• High-tech statistical products
• E.g. law suit statistics to predict chances
• IP statistics to predict application chances
• IT-based management of billings
• Structured to enable the exchange of legal information
• e.g. collaboration system for in-house counsel (form of closed communities)
Providers
Inte
rnati
on
al
New Law
New market entrants
Are you using new alternative providers?
Yes
No
Your legal team
Re-aligning to achieve success
• Review of internal department
• Process mapping
• Focused KPI’s linked to objectives/strategy for the team
• Benchmarking
• Clear management information relating to financial performance
• Monthly reporting on KPI’s, strategy and legal spend
Taking a ‘health check’
Are you making the most
of the new market dynamics?
• Taking you through a health check measuring your team performance
• Be honest in your appraisal – ensure you score ‘as-is’ and not ‘hope-to-be’
• Score each step out of ten
0 5 10
I know we do not have procedures in place
I know we have some processes – but we could improve
I am positive we have excellent protocols in place
Legal department strategy
The plan to achieve your goal
• No defined strategy
• No alignment to wider business strategy
• No communication buy-in from team
• Ad-hoc reactive - fire fighting
• Clearly defined and communicated strategy
• Buy-in from team, wider business and senior management
• Aligned to wider business objectives
• Regularly reviewed and progress measured
0 5 10
Managing external firms
Who to engage
0 5 10
• No written protocols
• No regular meetings
• No minimum standards
• Written protocols
• Regularly reviewed and monitored
• Clear strategy – communicated and understood by firms
What is your greatest frustration with private practice law firms?
“ Frequently failing to work effectively with in-house counsel; forever
trying to reach the business and push internal legal aside”
Do you have a formal panel process?
Effective supplier management
0 5 10
• Business units choose law firms
• Vast array of firms providing piecemeal advice
• No consistent rationale behind firm choice
• Defined and structured tendering process
• Defined panel lifespan
• Tender process aligned with legal and wider business goals
Do you have a system in which you regularly capture information about the performance of your law firms?
My memory. Nothing more complex than that.
“My memory. Nothing more complex than that.”
Poll
• Are you currently using e billing?
• Yes
• No
Serengeti tracker Legal e-billing, matter management
and data reporting
Outputs
The Serengeti approach / workflow
Serengeti puts everything in one place and provides a collaborative workspace for both in house counsel and all external law firms
Management KPI’s
Law Firm Management
Accounts Payable
Global Offices
In House Legal Team
Legal Work
Law Firm
Law Firm
Law Firm
Law Firm
Law Firm
Law Firm
Law Firm
Law Firm
Law Firm
Serengeti
E-Billing
Matter Management
Reporting
21
Using data to unlock the value of the legal department
Value of Legal Function
Defend current staff, budget,
structure
Better manage legal resources
Triage matters Act/think/speak like a CEO/CFO
Aid “make vs. buy” decisions
Control costs
DATA
Management data
External budget to actual Metrics
Month YTD 2013
General (All)
Matters Open
Spend £US
Var to Bud (unfav) £
Total £/£M Sales
Training
Ethics Complaints
Litigation
Active
New
Closed
Cycle Time (days)
Spend £
Var to Bud (unfav) £
Liti £/£M Sales
Settlement £
Dev Exp Val (unfav) %
TOTAL
0
500000
1000000
1500000
2000000
2500000
20
10
20
11
20
12
Bu
dge
t
Jan
-11
Feb
-11
Mar
-11
Ap
r-1
1
May
-11
Jun
-11
Jul-
11
Au
g-1
1
Sep
-11
Oct
-11
No
v-1
1
Dec
-11
20
13
Bu
dge
t
External Prior Year Budget
23
Power of data analytics in the legal department
0
5
10
15
20
25
30
2002 2003 2004 2005 2006 2007 2008 2009 2010
Company-wide HR trainings
Employment Matters Number of Trainings
Law department increased
the number of trainings in
response to rising number of
HR matters
Legal KPI’s
Key Spend Measurements Other Departmental Metrics
Top 10 firm spend Training
Spend by month Contract management
Average billing rates Instant NDA , eSignature
Law firm staffing Compliance
External vs. internal spend IP metrics
Legal spend as % of revenue Litigation
Spend by matter Headcount metrics
# of law firms used Records management
Preferred vs. non-preferred Privacy and security
% Alternative fees Weekly newsletter clicks
The metrics Steps to success
Project management – the basics
Principles The zig zag approach
Senior lawyer
Experienced lawyer
Junior lawyer
Paralegal / admin
Senior
lawyer
Paralegal / admin
As - Is To - Be
cost o
f locatio
n
com
ple
xity o
f w
ork
legal process
Experienced lawyer
Junior lawyer
legal process
SHINE The ten key challenges for in-house teams:
1. Define scope, role, ensure relevance
1. Risk management...
The next chapter The challenge of implementing
solutions to create change and add value
Optimised
•KPI’s driving behaviour
•Forecasting and monitoring
•Eliminated the barriers
Efficient
• Consistent approach
• Tracked outputs
• Controlling majority of barriers
Emerging
•Identified needs
•Defined processes and requirements
Little to no implementation
•Undefined challenges
•Inconsistent approach
•Minimal investment
Breaking the cycle
• Comms and PR on successes
• Case studies of value add
• External help and resource to maintain momentum
• Expand the pilot
• Credible thought leadership
Breaking the cycle
• Experiment/pilot
• External resource and expertise
• Peer groups
• Health check and wider adoption of need for change
Recognition of the challenges and the need for change.
Why doesn't change happen?
Barriers •Time •Understanding •Senior team buy in •Motivation •Where to start •Team structures •Budgets
Law firms . . .
“That some will fail here is certain. That others will
understand the new rules of ‘the game’ and use them
to remould their business model is also certain. But,
accepting the rules have changed is perhaps the most
significant step of all.”
. . . accepting the rules have changed
Jomati Consulting 2011
Further information
• For further information, please contact:
• Stephen Hopkins – Eversheds LLP [email protected]
• Martin English – Thomson Reuters
SHINE events
• To view our latest events and webinars, please
visit our webpage:
http://www.eversheds.com/global/en/what/services/in-house-counsel/events.page
© EVERSHEDS LLP 2014. Eversheds LLP is a limited liability partnership.
