Best of Breed

Author: Richard Stock - CCCA Magazine, Winter 2010, Vol 4, No 4

Continuous improvement is the key to leading a corporate or government legal department. Efficiency and effectiveness depend on it. That said, there are more than 150 distinct management practices constituting a checklist which never seems to end and which covers categories such as client relations, knowledge management, corporate governance, risk management, external counsel and technology.

One place to start is to consider what General Counsel with significant resources are doing in several areas of endeavour. I recently compiled a fairly detailed but non-financial benchmarking survey of 11 US public companies, many of them multi-national. Some, such as Microsoft, Cisco and Intel, are hi-tech, Dupont, Boeing and 3M are in the manufacturing sector while The Hartford, Aetna, Allstate and USAA are in the insurance sector.

Efficiency and Effectiveness

Each company was asked how they develop the annual objectives for their legal department. Most rely on the company’s annual objectives as a starting point to develop their own. The larger legal departments go on to develop objectives at the practice groups and country levels. Some companies with support specialties that cut across the company, like litigation, IP and labour/employment also develop key objectives for each year. One company introduced “Measures of Success” where significant matters and target results are listed. In many instances, the approved objectives are available on the intranet and shared outside the department. Microsoft Legal measures its annual goals and commitments on a quarterly basis through a departmental scorecard.

Legal departments were asked to list up to three examples of recent steps they have taken to be more efficient. Intel seconded former employees of the department, and it pushed for the use of “playbooks” for commercial legal activity as part of its knowledge management strategy. It was the only company to look at the cost of people in terms of where they live and whether re-location made sense. Ultimately, they choose to not re-locate anyone.

3M was not alone to expand its use of alternative fee arrangements (AFAs) with external counsel. It did initiate an Enterprise Records Management program to reduce unneeded documents while respecting records retention schedules, all with a view to significantly reducing e-discovery costs. The Hartford’s legal department coped with the company’s 2009 across-the-board cut in its workforce by doing less, rather than trying to “do more with less”. This was achieved by a discussion of needs with senior client representatives. The reductions affected the level of operational support in mostly non-legal activity. Support staff took a larger proportionate share of the reductions. Every effort was made to prevent demand from going to external counsel.

Despite its size, Microsoft’s legal team around the world was facing an increasing amount of work with much greater complexity but with reduced budgets. What seemed like irreconcilable differences became an opportunity to change how the legal department worked. Three goals were set: to maintain high client satisfaction levels, to maintain high employee satisfaction levels, and to meet the budget. The decision was to focus efforts on streamlining the work done by the department through process excellence initiatives and with technology solutions that leverage Microsoft’s products like Sharepoint®. There was also success in using cycle maps and standardization of contracts.

Business Processes

Service level agreements (SLAs) with clients are usually introduced to clarify timeline expectations for response and work completion. Only three of the companies have these in place. One company found that the SLAs improved the satisfaction level of their clients because they are aware of when to expect information or an answer to a question. Another company says they use SLAs because they charge their time back to users. Only two other companies charged back for legal services, but they did so annually rather than using a time-based system. Three of the 11 legal departments conduct formal client surveys regarding the efficiency, effectiveness and the overall satisfaction with the legal department. Most have informal processes to find out what they need to know. Tough economic times make these surveys optional at best.

The extent of use of business improvement techniques in legal services delivery was surveyed. Six Sigma, Lean Methodologies and process mapping were of particular interest. DuPont describes itself as having a project management company and culture, so business units respond well to such initiatives from the legal department. One such project was to better align government relations with regulatory affairs. Synergies were found, the impact measured and a value assessed. At least half of the participants Six Sigma and have members of the department certified in these methodologies. Repetitive processes, such as vendor contracting, patent filings, and employee investigations appear to benefit. Microsoft is pushing the envelope by creating a Process Academy to build skills and capabilities across the department and eventually within the company’s premier provider firms.

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Some say what gets measured gets done. Legal departments were asked to quantify any aspect of the value the lawyers create for the company. Only five companies try to do this, and the approach varies with each one of them. One in the hi-tech sector quantifies success in anti-piracy work, its contribution to product development, and its role in trying to negotiate strategic partnerships. One insurer contributes to Quarterly Business Reviews where the General Counsel meets with a group of his peers in the company to discuss how well or badly various initiatives went. One of the manufacturing companies reports on how it enables business growth with transactions, business processes, M&A, and ethical business conduct.

At least half of the companies manage very large litigation budgets, some with significant in-house teams. The survey provided few examples of efficiency and effectiveness in managing litigation. One insurer frequently invites its law firms to train legal and claims personnel on how best to respond to and manage trends for litigation in different regions of the country. A hi-tech company encourages its firms to develop creative engagement models. A very small number of firms were selected to be on the company’s list of preferred law firms, in the belief that this is critical to business success. Given the global reach of the company, these arrangements allow it to scale quickly to address legal issues that can have an impact in every country where the company has clients.

General Counsel are always on the look out for management practices that will significantly improve the efficiency or the effectiveness of the legal departments. The next step is to introduce enough of the changes in a timely fashion.