Corporate Law Department Management - Legal …...Part I – Corporate law department management 1....

FIRST EDITION

Corporate Law Department Management

By Caroline Poynton

Published and edited by Worldwide Legal Research Ltd

A practical guide

Part I – Corporate law department management

1. The rise of corporate counselCorporate counsel making their mark 7

Breaking through a perception barrier 7

Appealing to newly qualified lawyers 11

The challenges ahead 11

Any room at the top? 12

Managing external counsel and AFAs 12

Outsourcing 13

Compensation 13

Interviews & articles:

David Blanco, Bayer 15

Richard Wiseman, Royal Dutch Shell 19 Jon Olson, Blackbaud, Inc 23

2. The in-house department structureThe current and evolving situation 25

The impact of cost management on the in-house departmental structure 26

Evolution, not revolution 28

Project management and working in partnership with external counsel 29

Technology as an enabler of change 31

Resourcing of legal work 33

The impact of market forces on law department change 35

A fork in the road 40


Bruce Macmillan, Legal Services Board 43

Robert Cummins, Intelsat 49

Richard Tapp, Carillion 53

3. Managing the in-house legal teamGetting closer to the business 58

Back to basics: Why do lawyers choose in-house? 58

Diverse work 61

What GCs and senior in-house lawyers say they like and dislike about in-house 62

Retaining top talent 63

Ten fundamental actions to improve operations in a law department 63

LPO benchmark survey 64

Measuring value and performance metrics 65

Legal process outsourcing 66

Article:

Scott Gibson, partner, Edwards Gibson 71

4. Managing the external counsel relationshipLaw firms must respond to market demands 77

Value based pricing 77

Slow adoption of AFAs 78

Perception of value 80

Future adoption of AFAs 81

Managing expectations 83

Working in partnership 84

Role of technology 84

GCs embracing technology 85

Legal project management 86

Moving from service provider to trusted business advisor 87


Emerging trends and best practices, Eversheds Consulting 91

2 CORPORATE LAW DEPARTMENT MANAGEMENT

CONTENTS – CORPORaTE law DEPaRTMENT MaNagEMENT

CONTENTS

CORPORATE LAW DEPARTMENT MANAGEMENT 3

Jeffrey Carr, FMC Technologies 95

John Downing, Imperial Tobacco Group 103

Glen Silverstein, Leader & Berkon 107

Ian Leedham, National Grid 109

5. Risk managementIn-house lawyers as risk managers 114

Addressing ‘regulatory risk’ 116

Stepping up to the mark: The role for corporate counsel 119

The Bribery Act 2010 120

Corporate governance landscape: An in-house lawyer’s map 121

Role of technology 122

Five steps to legal risk management 123

Interview:

Humphrey M. Tomlinson, RSA Insurance Group 127

6. The leadership goal 131

PaRT II – global law Department Benchmarks

Global Law Department Benchmarks 135

About the participants 138

Understanding the metrics tables 139

All-participants benchmark table 140

Explanation of the ‘All-participants’ charts’ 141

Table I – Metrics by industry (illustrative) 143

Table II – Metrics by country (1) 144

Table II – Metrics by country (2) 145

Table III – Metrics by region (1) 146

Table III – Metrics by region (2) 147

Table IV – Metrics by revenue 148

Table V – Metrics by number of lawyers 149

Benchmarks (1-13) 151

Appendix – Explanation of the benchmarks 164

Appendix – Notes on methodology and data 165

Appendix – Participants by industry (1) 166

Appendix – Participants by industry (2) 167

Appendix – Participants by country (1) 168

Appendix – Participants by country (2) 169

PaRT III – Corporate Counsel Research surveys

What’s Hot 2011? 173

Alternative Fee Arrangements 185

Index 199

CONTENTS – CORPORaTE law DEPaRTMENT MaNagEMENT


FOREwORD – CORPORaTE law DEPaRTMENT MaNagEMENT

Corporate Law Department Management explores the challenges and opportunities that lie ahead for senior in-house lawyers. It is essential reading for anyone looking to improve departmental efficiencies and deliver cost effective legal service.

The report outlines the key issues affecting law department management: managing and measuring external and internal counsel, outsourcing and offshoring, e-discovery, pricing and fees, costs, legal risk, governance, compliance and more.

Corporate Law Department Management is structured in three parts.

Part I consists of six chapters:

n Chapter 1 – The rise of corporate counsel (introduction)

n Chapter 2 – The in-house department structure

n Chapter 3 – Managing the in-house legal team

n Chapter 4 – Managing the external counsel relationship

n Chapter 5 – Risk managementn Chapter 6 – Leadership (summary)

Each chapter (excluding Chapter 6) is followed by a series of practical articles and interviews with senior in-house lawyers.

Part II features the Global Law Depart-ment Benchmarks study, conducted by General Counsel Metrics (GCM). The study presents a new approach to law department performance benchmarks. It provides metrics that are relevant, we believe, not only to general counsel but also to law firm partners. In this

publication (p137-170), we publish the partial results of GCM’s July 2011 (Release 2.0) benchmark data.

Part III concludes with the full results of two Corporate Counsel Research surveys: ‘What’s Hot 2011?’ and ‘Alternative Fee Arrangements’.

FOREwORD


A huge thanks to all those that assisted and gave up their valuable time in preparation of this report: Liz Kelly, general counsel at Nationwide Building Society; Daniela Baker, head of legal at Honda Motor Europe; Eversheds Consulting; Richard Wiseman, chief ethics and compli-ance officer, Royal Dutch Shell; David Blanco, legal counsel Asia Pacific, Bayer; Jon Olson, vice president and general counsel, Blackbaud; Bruce Macmillan, general counsel at the Legal Services Board; Robert Cummins, assistant general counsel at Intelsat; Richard Tapp, company secretary and director of legal services, Carillion; Scott Gibson, partner, Edwards Gibson; Jeffrey Carr, general counsel, FMC Technologies; John Downing, head of group legal, Imperial Tobacco Group; Glen Silverstein, partner, Leader & Berkon; Ian Leedham, senior counsel, (commercial) National Grid; Melanie Hatton, in-house lawyer and blogger; and Humphrey M. Tomlinson, Group Legal Director, RSA Insurance Group (formerly Royal & Sun Alliance).

Special thanks goes to Rees Morrison, president of General Counsel Metrics, for contributing his company’s Global Law Department Benchmarks survey data (pages 135-170). We would also like to thank Nina Barakzai, chair of the Commerce & Industry Group’s Corporate Governance Committee, for her organisation’s contribution to Chapter 5.

aCkNOwlEDgEMENTS – CORPORaTE law DEPaRTMENT MaNagEMENT

aCkNOwlEDgEMENTS


aBOuT ThE auThOR – CORPORaTE law DEPaRTMENT MaNagEMENT

CAROLINE POyNTON is a business journalist, with particular expertise in the legal sector. Before going into freelance journalism in July 2007, she was for six years editor of Managing Partner magazine, an Ark Group publication dedicated to senior management in the legal profession. Since working as a freelance journalist, she has written numerous features, as well as in-depth reports, not only on the legal profession, but also on corporate communications and business management generally. In addition, Caroline supports several firms on their communications strategies, including legal recruitment consultancy First Counsel and management consultants KermaPartners.

aBOuT ThE auThOR


PaRT 1: ChaPTER 1 – ThE RISE OF CORPORaTE COuNSEl

There is still a long way to go before the global downturn is behind us. For corporate counsel, this critical time is an opportunity like never before to shield their organisations from the risks of on-going uncertainty.

Corporate counsel making their markAt the UK’s The Lawyer awards 2010, corporate counsel competing for the ‘In-house Lawyer of the year’ award were remarkable, not because of their technical expertise – although no doubt they have plenty of that – but in terms of their contribution to groundbreaking business projects successfully implemented in a time of economic turbulence.

Jasan Fitzpatrick, for example, who was runner up for the main prize, excelled himself as head of legal at Northern Rock by playing a vital role in one of the most high-profile and complex banking restructures of the financial crisis. And Peter Judge, head of legal services and procurement at One North East, secured the top prize for delivering the Finance for Business North East programme, the first English JEREMIE (Joint European Resources for Micro to Medium Enterprises) fund that, with the backing of the European Investment Bank, European Regional Development Fund 2007-2013 and UK government funds, is investing £125m in the North East.

“The fund was without precedent in England,” says Judge. “It was designed with great care, drawing upon the skills of a number of talented people from different backgrounds.”

He is reticent to accept too much singular praise for the project’s success, consistently crediting the team effort, but he admits that his role was to design the legal structures carrying the funds – structures that would have jeopardised the entire funding if they had not worked. That these same structures are now known as the ‘Judge Model’ and are to be used as the basis for all future UK JEREMIE funds speaks volumes.

And Judge was not just involved from a legal perspective. He helped in the preparation of a watertight business plan, so it is significant that an in-house lawyer came to the fore and played a critical role throughout the project.

Breaking through a perception barrierThat corporate counsel can make waves should not be terribly surprising. But in-house lawyers have long struggled with a perception problem, often viewed as a lowly second to the high-flying private practice partner. Even today, few manage to make an impact at the highest echelons of business leadership.

Judge agrees that many companies don’t understand the business contribution in-house lawyers can make. “you wouldn’t have a company that doesn’t acknowledge the need for a finance director, so financial qualifications are in high demand. But many still don’t recognise the value of the in-house lawyer,” he says.

Indeed, it is rare to see organisations appointing in-house lawyers to the board – although there are signs that the recession might be changing this. In 2009, for example, Mark Harding,

1. ThE RISE OF CORPORaTE COuNSEl



general counsel at Barclays Bank, was appointed to the company’s Executive Committee. At the time, the bank explained the development as part of its broadening of the Committee to ‘position Barclays strongly in an industry that is experiencing rapid change’, and to give it a ‘strong governance framework which is well attuned to the events of the last two years’.

Barclays is not alone in the financial services sector for recognising the leader-ship potential of in-house counsel. Liz Kelly, general counsel at Nationwide Building Society, has been selected to participate in Nationwide’s executive leadership programme and says that she is particularly proud of being recognised as having great potential as a leader, regard-less of her legal expertise.

Similarly, the recession seems to have helped Honda’s legal team demonstrate value. Daniela Baker, head of legal at Honda Motor Europe, joined the company as a company solicitor in 2007 – just as the financial markets

were about to implode. Honda may have withstood the global slump better than some of its rivals but the recession still hit hard, with lay-offs, cut-backs in production capacity and a sales slump of more than 30 per cent at the height of the credit crunch. But the recession did not hold back Baker. “Within 11 months I was promoted to a departmental manager and within four years was made head of legal for Europe,” she says. “I love the variety of work. Much of what I do is around strategy for business. It’s not all legal.”

If anything, Baker says that although they had to deal with the challenges of decreased budgets, the recession significantly increased the amount of work coming into the legal team – largely because they decided to take more work in-house that would otherwise have been outsourced to external counsel. But the team also seized opportunities – for example, introducing a tender policy and document, which helped the business

Figure 1.1 – CCR ‘What’s Hot 2011?’ Survey

Summary: The vast majority of respondents (79% – weightings ‘4’ & ‘5’ combined) “Renegotiated or froze rates with external law firms” during the recession to help control costs.

how did you go about controlling costs during the recession? Please indicate your responses on a scale of 1-5, with 1 being least relevant and 5 most relevant.

1 2 3 4 5Reduced headcount in the in-house team 37% 33% 22% 2% 6%

Froze internal salaries or introduced part-time working/sabbaticals 28% 1% 41% 16% 14%

Limited travel and related expenses - 12% 50% 1% 37%

Sent less work out to external counsel - 4% 9% 50% 37%

Pushed work back to business divisions 29% 37% 18% 7% 9%

Renegotiated or froze rates with external law firms - - 21% 25% 54%

Postponed projects - 26% 28% 31% 15%



benchmark suppliers and deliver value for money.

According to Corporate Counsel Research’s (CCR’s) recent survey, ‘What’s Hot 2011?’1, which canvassed the views of 107 in-house lawyers, a majority of respondents said they are cutting costs by sending out ‘less work to external counsel’ and that they have ‘renegotiated or frozen rates with external firms’ (see Figure 1.1, page 8). A staggering 100 per cent said that law firms are still failing to deliver value for money because they are ‘too expensive’ (Figure 1.2).

This view is supported by the Hildebrandt Baker Robbins 2010 Law Department Survey2, which indicates that for the first time in ten years law departments have reduced their total legal spending. More than 60 per cent of survey participants decreased their spending on outside counsel; at the same time, internal legal spending and staffing increased slightly.

“The survey results confirm what we are seeing every day in our consulting

practice with law departments of all sizes, sectors, industries and locations,” said Jonathan Bellis, who chairs Hildebrandt Baker Robbins’ Law Department Consulting practice. “As shown in our survey last year, law departments began to adopt a wide range of management practices to reduce and control internal and external legal costs. These efforts have continued, resulting in an overall decrease in total legal spending for the first time in the past ten years of the survey. The decline in total legal spending was driven in particular by a reduction in outside legal costs.”

Judge agrees the recession has given corporate counsel the opportunity to embrace a wide range of management practices. “In my experience, lawyers have a wider set of skills than most people recognise,” he says. “The recession has provided many opportunities for good in-house lawyers to demonstrate their range of abilities. At a time when difficult decisions need to be made, corporate

In what ways are law firms still failing to deliver value for money?




counsel who truly understand their businesses have a lot to offer.”

While such broad skills may exist, getting a company to recognise them is the tough part. Nationwide’s Kelly thinks that shifting perceptions of risk arising out of the recession might help.

“The recession has made organisa-tions much more risk averse and as a result in-house counsel are being naturally brought in to projects much earlier on,” she says. “This gives us the opportunity to show we can act as trusted business advisers and help shape projects right from the outset.”

Proof of this lies with Dominic Buckwell, general counsel of a shipping container company. During the recession, one of the biggest challenges his company faced was cash management.

“Key to our survival has been the ability to manage our credit terms, credit limits and payments,” says Buckwell. “Having legal input at the highest level is important when you’re looking at which customers are potential risks, and how you would go about ensuring payment or dealing with issues of non-payment. It has been hugely beneficial for the company to have a shipping and maritime litigation lawyer involved from the earliest stage.”

Buckwell has similarly dealt with issues of insolvency arising out of the downturn. “Whether it’s a supplier or customer, it’s useful to include counsel early on to plan through the impact of potential insolvency, whether that’s clawbacks or making sure payments are bankruptcy proof.”

In-house counsel are expected to have a high degree of awareness of business practices and the ability to keep abreast of legal and regulatory developments. Increased emphasis on corporate govern-

ance in recent years has also resulted in a higher expectation of in-house counsel. According to the ‘What’s Hot 2011?’ survey, the chief risk-management issues that in-house lawyers face are ‘Keeping up to date with regulatory, litigious and contractual risk’ and ‘Managing the rising number of regulations controlling corporate behaviour’ (Figure 1.3).

Is anyone listening?

Senior in-house lawyers must make their voices heard. Where senior management isn’t proactive at seeking out counsel opinion, Judge proposes that in-house lawyers find a way to get involved in every aspect of the business – whether by invitation or insistence. “Only then is it possible to start delivering the expert advice and solutions the business needs,” he says.

Judge accepts that being able to ‘push into’ the decision making process may only come from experience – and from being willing to do the jobs others don’t like, such as handling client complaints.

“Don’t go into in-house roles too early,” he warns. “In private practice you effectively wait to be given work – and then you do it to the best of your ability. But as you become more senior you learn about generating revenue for the business – this is relevant experience that you’ll need in-house.”

Judge was in private practice from 1994-2002 and specialised in corporate finance and M&A, which provided valuable exposure to a whole range of businesses. He then completed an LLM in International and European law in 2002 before joining One North East in 2003. Judge has no doubts that this experience gave him the necessary platform to succeed in-house.



Appealing to newly qualified lawyers

While most in-house lawyers have served many years in private practice, there is a new wave of lawyers that are making the switch earlier. Baker was only one-year qualified when she joined Honda, following a secondment from DLA Piper. “I really liked the autonomy I had and the fact you could see matters through from start to end,” she says. “I felt this was an opportunity I couldn’t turn down.”

Other newly-qualified lawyers are making similar moves and this has prompted some larger companies to start offering their own training contracts. Thirty per cent of respondents to CCR’s What’s Hot 2011? survey started their careers in house, while 25 per cent moved in-house at the 2-5 years PQE stage.

The commercial sector employs around 15,000 in-house lawyers and there are approximately 50 or so companies that

run in-house training contracts in England and Wales.3

The challenges aheadThe recession has provided the opportunity for in-house lawyers to shine, but it also represents the culmination of many years in which business leadership has come increasingly under the spotlight. Cases such as Enron and WorldCom rocked the corporate world, fairly or unfairly immersing all corporate leadership in a mire of scandal and corruption. Regulation increased as governments and the public called for companies to be more transpar-ent and their leadership to be held publicly accountable for their actions.

The banking crisis of 2007 little helped reputational recovery. And with the Eurozone now in crisis and the US expe-riencing its first credit rating downgrade, business nerves are wracked once more.

which areas of legal risk management are currently taking up most of your time?

Please indicate your responses on a scale of 1-5, with 1 being least relevant and 5 most relevant.

Figure 1.3 – CCR ‘What’s Hot 2011?’ Survey (this graph also appears on p114)



Any room at the top?

While some of the voices of in-house lawyers may now be reaching the ears of the boardroom, a report written in 2010 by Nabarro partners Jonathan Warne and Peter Williamson, highlights there is still some way to go.

The report, titled ‘From In-house Lawyer to Business Counsel’, reveals that only 51 per cent of the 81 in-house lawyers interviewed felt it was important for the legal function to add economic value.4 And while 38 per cent of the lawyers said their legal functions made a strong contribution to the commercial value of the company, only 14 per cent of CEOs interviewed agreed.

The Nabarro report also points to the problem that many in-house counsel face of being ‘just a lawyer’. Respondents say the traditional perception of lawyers holds them back from winning the trust of senior stakeholders and the board. Nationwide’s Kelly understands this dilemma and says

one of her greatest challenges has been changing the culture of her team “from a reactive function to a dynamic forward-thinking department that delivers first rate business solutions”.

To succeed, in-house lawyers need much more than up-to the-minute technical expertise; they need to know their companies inside-out, and have the commercial sense to come up with tailored business – not just legal – solutions.

Managing external counsel

and AFAs

Given significant budgetary constraints, in-house legal teams must extract more value from external counsel. This has given rise to renewed interest in alter-native fee arrangements (Figure 1.4). However, and as discussed in detail in Chapter 4, AFAs require a substantial rethink of negotiation terms and the implementation of project management and partnering systems.

are you using alternative fee arrangements (aFas) with external counsel?



Respondents to CCR’s ‘What’s Hot 2011?’ survey highlighted various problems with implementing AFAs. Chief among these were ‘No systematic process in place in-house for determining AFAs’, ‘Difficulty in pricing unpredictable matter’ and a ‘Lack of data/information to measure potential profitability of AFAs’.

Outsourcing

Outsourcing continues to promise new structures for legal service delivery that will impact law firms and in-house departments alike. On a simple level, legal process outsourcing (LPO) providers merely offer a more cost-effective way of doing basic, process-driven legal work. In the long-term, though, it may presage a more dramatic structural change to the legal service model, including the increas-ing use of contract lawyers both in private practice and in-house – all of which may blur the lines currently separating in-house from their external counsel.

Compensation

The biggest drivers for switching from private practice to in-house are “Better work-life balance” and wanting to be at the “Heart of business decisions” (Figure 1.5). Salary, the respondents say, is least relevant, but the rewards are improving. The Hildebrandt Baker Robbins’ 2010 Law Department Survey, which gauges in-house compensation on multiple levels, shows that total com-pensation, including base salary, cash bonuses and long-term incentives, had a median increase of 4.4 per cent among all in-house lawyers, compared to just 1.7 per cent in 2009.5

The rest of this reportIn the next chapters of this report, we look more closely into the changes impacting both the structure and management of the in-house legal team. We will examine the extent to which the experiences above are replicated across the in-house sector, and



Summary: The biggest drivers for switching from private practice to in-house are “Better work-life balance” and wanting to be at the “Heart of business decisions”.

why did you choose in-house?Please indicate your responses on a scale of 1-5,

with 1 being least relevant and 5 most relevant

1 2 3 4 5Opportunity arose with a great company 4% 10% 30% 12% 44%

Wanted to be at the heart of business decisions - 11% 13% 28% 48%

Limited travel and related expenses - 13% 37% 50% -

Good career development/training opportunities 44% 36% 8% - 10%

Great salary offer 29% 37% 18% 7% 9%

Better work-life balance/flexibility - 2% 5% 33% 60%


what steps in-house leaders can take to ensure they are managing their teams to maximise opportunities and demonstrate value. n

References

1. ‘What’s Hot 2011?’ survey, Corporate Counsel Research, January 2011.

2. http://info.hbrconsulting.com/LawDe-partmentSurvey2010

3. http://www.chambersstudent.co.uk/Content.aspx?SectionType=12&SectionId=24200

4. ‘From in-house lawyer to business counsel’; A survey and discussion paper by Nabarro LLP, 2009-10 (http://www.nabarro.com/downloads/From-in-house-lawyer-to-business-counsel.pdf)

5. The Hildebrandt Baker Robbins’ 2010 Law Department Survey



PaRT I: ChaPTER 1 – INTERvIEw (BayER)

Can you outline your career so far?

After finishing my LLM studies in Japan and a brief stint with a local law firm, I worked for the Spanish Embassy in Tokyo as foreign trade advisor. I then joined the pharmaceutical company Nihon Scher-ing K.K. in 2004 working in the strategic marketing department, before becoming the company’s legal officer.

Following the acquisition by Bayer group of the Schering pharmaceutical business worldwide, I was invited to join Bayer CropScience in 2007 and led the Law & Patents Department for CropScience.

In August 2010, I relocated to Singapore to take over a newly created role of regional counsel for Asia Pacific (APAC), directly reporting to the global general counsel of Bayer CropScience in Germany. In this new role I support our APAC regional office in all legal matters of regional relevance, and provide legal support for Bayer CropScience businesses operating in South East Asia.

What are the key challenges you face

in your current role?

The most challenging aspects of my role can be summarised as follows:

n Aligning the legal and compliance requirements between our headquarters and the APAC Region;

n Providing timely-creative (rather than late-reactive) legal solutions to safely navigate the legal and compliance landscape of the region; and

n Cultivating a team approach that transcends time zones, native languages and national boundaries, and avoiding unnecessary overlap between local in-house and external lawyers.

Many lawyers make the switch to

in-house to be closer to the heart of

business decision-making. However,

the perception is that they are there

to advise on the specifics of law, not

to support strategic decisions. What is

your view?

If corporate counsel are perceived in the same way as external lawyers – as a legal services provider, but cheaper – they will only be called in when legal or compliance problems arise.

Corporate counsel must pro-actively promote the idea that, through the provision of creative legal assessments and solutions to the organisation’s business strategy, they are a part of the management team, and as essential as other key functions such as marketing and sales. To do this, in-house lawyers must provide business recommen-dations, not just innovative legal solutions. They must minimise risk exposures and be able to balance business objectives with legal risks. This will help transform the image of corporate counsel from cost centre to source of revenue.

How can in-house lawyers break

through to leadership roles?

Most senior executives and top manage-ment teams test the performance and

INTERvIEw: DavID BlaNCO, lEgal COuNSEl aSIa PaCIFIC, BayER



implementation of their strategies based on financial figures and performance. In-house lawyers that want leadership roles also need to present the value of their legal contributions using financial metrics. An example of this could be the successful negotiation of an intellectual property licensing contract that secures an additional five million Euros for the company; or coordinating an out-of-court settlement on behalf of the company as a defendant for 35 per cent less than the original sum requested by the plaintiff.

Corporate counsel must establish relationships across the business and grasp a good understanding of how business decisions are made. A good tip is to follow the word “no,” with “but...” and offer alternatives when counselling on a legal issue with a business goal. The company’s management will appreciate lawyers that understand the business and can tailor legal advice to their needs. I always insist that at least one person from my team is present during any senior management strategic review sessions and meetings.

To what extent do you think the

recession has given corporate

counsel the opportunity to further

demonstrate their value to senior

leadership teams?

The coordination between the business functions becomes even more important during times of recession when budgets for external legal counsel are cut at the same time as contracts and other business commitments need to be revisited. While this significantly increases the in-house legal workload, it also provides the ideal opportunity for corporate counsel to present themselves as optimal legal service providers, anticipating solutions and developing countermeasures to

minimise the company’s exposure to legal risk.

What kind of leadership skills have you

developed in your role?

As a foreigner leading a Japanese team, working for a foreign company, this has enhanced my leadership skills around the following core values:

n Leading in customer satisfaction and operational excellence – I try to inspire my team to be passionate for people and performance, encouraging and empowering them to pro-actively take initiative, while being account-able for their successes and failures. However, I also realised that to accomplish this I had to develop myself as well as my team by providing opportunities for training and skill development, even in non-legal areas such as communication, management, marketing, finance and strategic management. The variety of programmes offered by Bayer’s International Training Catalog and their Orientation/Development Centers helped me achieve this without disrupt-ing the day-to-day work of the team.

n Integrity – I don’t tell my business customers why their proposals cannot be completed from a legal point of view; instead, I offer them legal alternatives in a language they can understand. As a result, I am able to build trustful relationships with my internal customers. I never forget that part of my leadership role as visible head of the legal function is to be a role model in creating and fostering a culture of compliance.

n Flexibility – as part of an evolving



business organisation such as Bayer, my team is truly cross-functional and can adapt to the future trends and needs of our internal customers. It can pro-actively drive change and challenge the status quo of our com-munications, processes and workflows. In addition, I try to promote a culture of constructive criticism when dealing with conflicts (both internal and external), recognising when to end the discussion and decide on the way forward.

n Efficiency – Managing resources smartly is already expected from any leadership role. I always try to reduce outside legal costs through alternative billing fees (unthinkable a few years back in Japan), as well as improving legal/contract management processes and productivity. Our legal function’s “Facts & Figures” presenta-tion is already part of the induction programme for new employees. Our external lawyers are also invited to attend (on a non-billable basis) ex-planatory meetings of our company’s strategy. In addition, I always encourage my team to identify how things can be done more simply and effectively, and empower them to take the necessary action to do it. Thinking “out-of-the-legal-box” and focusing on activities that create value are the two basic principles of our day-to-day work.

In your five years as Head of Law

& Patents Dept. for the CropScience

business of Bayer, what lessons did

you learn?

First and foremost, I learnt that it is important to develop a two-way dialogue with my team, to listen and understand

their level of motivation or frustration in interacting with internal clients as this can have a direct influence on the department’s level of operational excellence. It is also important to stand up and defend the team’s quality of work, especially in Japan where internal customers have a tendency to expect immediate turnarounds, or treat the legal service like it is a free and unlimited resource, on call without limit.

I also learnt the value of giving and receiving one-on-one feedback, organising team-building activities and conducting quarterly team meetings. This was essential for allocating work and resources, as well as ensuring the team understood and accepted my vision.

Finally, I learnt the importance of establishing a well-designed succession plan for each member of the team. This allows for smooth transitions and keeps team disruption to a minimum.

If you were advising an ambitious

in-house lawyer early in his or her

career, what key advice would you

give for career advancement to a

leadership role?

Having a business-oriented mindset and showing interest in learning about the work of other functions will give you a head start, but it will be a decisive attitude towards delivering results and a clear understanding of your team’s SWOT (Strengths, Weaknesses, Opportunities, and Threats) that will show your leader-ship skills. Be prepared to overcome numerous barriers with creative solutions.

On a personal level, live by example and maintain an appropriate work-life balance.



Finally, while nothing is achieved without enthusiasm, focus your energy on what you can change, not on what you can’t. n


PaRT 1: ChaPTER 1 – INTERvIEw (ROyal DuTCh ShEll)

When did you join Royal Dutch Shell?

I have been with Shell for over 30 years and made the decision to go in-house straight after qualification. There is lots of variety and responsibility working in-house, which is why private practice never appealed.

How many lawyers are there in

your legal department?

Shell is a large organisation and we have more than 600 lawyers across 60 countries.

What is the typical role of a lawyer at

Shell? How much exposure do they get

to general business processes?

Our lawyers’ first contribution is technical – without that they’ve got no place in the team. Once they have a reputation as a first-class technician, and as they become more senior, the opportunities to take part in general business processes increases.

There is no limitation to lawyers becoming corporate leaders. Our legal director, who retired at the end of last year, was the first to sit on our management board.

What are the challenges to succeeding

as an in-house lawyer?

This will vary tremendously from company to company – and it’s not directly related to the size of the company. It is, however, directly related to the size of the legal department.

Some lawyers are hugely self reliant because they handle all of the legal

work for their company. Others are less independent because they act as a go between for the business and external counsel.

At Shell, our lawyers sit more at the self-reliant end of the spectrum.

Has your relationship with external

counsel changed significantly in

recent years?

yes, there’s less emphasis on loyalty and more focus on costs. Cash control is the number one priority at the moment.

Shell, like many oil companies, faces

a lot of criticism from the public and

various pressure groups. How does

this affect the legal team?

you have to distinguish between the ethical and legal dimension. Like most responsible companies, Shell has a lot of people thinking about the ethical dimensions of the business from board level down. Lawyers have a role to play

INTERvIEw:

RIChaRD wISEMaN, ChIEF EThICS aND COMPlIaNCE OFFICER, ROyal DuTCh ShEll

“you have to distinguish between the ethical and legal dimension. like most responsible companies, Shell has a lot of people thinking about the ethical dimensions of the business from board level down. lawyers have a role to play in this, but they are by no means at the forefront of it.”



in this, but they are by no means at the forefront of it.

A lot of lawyers think they have something special to bring to the table in this area. However, lawyers are not especially qualified to advise on ethics. Like I said earlier, lawyers must first and foremost be first-rate legal technicians, otherwise they will not get a seat at the table for anything else.

What is the appeal of working for a

large organisation like Shell?

People join large companies for lots of different reasons. When recruiting, the number one issue is to be honest with people about what the job will entail, what the potential is and what the shortcomings are. Having done that, you’ve then got to live up to your promises.

Is it difficult to persuade lawyers

to switch from private practice to

in-house?

No, as we can offer other things, particularly a better work-life balance. There is no doubt that in-house roles consume less of your personal life. Of course, it is dangerous to overplay the advantage of in-house compared to private practice.

What impact has the recession had on

your department?

There has been a greater focus on costs than I can recall. Because of this we’re not recruiting much at the moment. Until the market picks up, you have to keep a close eye on staffing and get the balance right.

In your long career at Shell, are there

any projects that stand out?

One of the most satisfying was the merger of Royal Dutch and Shell Transport in

2005. Also, working in the late 1970s on North Sea oil was a huge financial and legal challenge.

Particular projects stand out because of their magnitude and the legal technical challenge – the North West Shelf Liquefied Natural Gas (LNG) project in Western Australia and the disposal at sea of the Brent Spa Oil Storage facility will always stand out.

What do you think are going to be the

major challenges facing in-house

counsel in the months ahead?

Cost-control and dealing with increasing regulation that has no material benefit to the public. The reason I mention ‘no material benefit’ is that it is much more difficult to persuade businesses to comply with regulations where the public benefit isn’t obvious.

What advice would you give to a

lawyer who is in private practice

but is thinking of making the shift to

in-house?

The first question you need to ask yourself is, ‘Why do I want to make the shift?’ you then need to make sure you are joining a company that can actually meet your requirements. you might be stuck in a large City firm where there is a huge drive to specialise in a narrow field, and this might be unattractive even if specialising means you participate in the biggest deals. But when you move and try to do something different you end up in a company where you are still largely expected to contribute to that area of expertise.

Second, ask yourself if you want to continue to be a practising lawyer or whether you want to manage other lawyers? In other words, is the legal



department you are interested in joining self-sufficient (ie, handles most work in-house), or does it outsource the bulk of its work, so the role is chiefly one of managing private practice lawyers? n


PaRT I: ChaPTER 1 – INTERvIEw (BlaCkBauD)

Please outline your career so far

I’ve been at Blackbaud (Bb) for two-and-half years (I graduated law school in 1988, went in-house in 1992, and was at Alcatel-Lucent for 11 years prior to coming to Bb). As you might imagine for a law department of four people, we handle everything – HR, transactions, M&A, IT, SEC filing, IP, board issues, insurance, data privacy, marketing, etc. I like the generalist nature of the practice, it suits my preference for variety. That said, each type of practice has a different rhythm and pace, so keeping everything in sync is always a challenge. Finding the time to do the strategic tasks, rather than the day-to-day fire-fighting is also challenging.

Why did you choose an in-house legal

career rather than private practice?

I have an MBA and I like the interplay between law and business. I like being able to add value to an enterprise more holistically and working in-house allows that. Plus, in my personal opinion, in-house work gives greater insight into law as practiced rather than law as theory.

What do you think are the most signifi-

cant obstacles to succeeding as an

in-house lawyer? And how can such

obstacles be overcome?

One aspect that many attorneys don’t get is that law departments are a cost centre whereas for law firms, the attorneys are the revenue centre. As such, in-house departments are always asked to do more with less. Separately, in the in-house setting, you deal more frequently with

non-lawyers, so it is critical to develop effective ways to communicate complex legal issues succinctly and effectively.

What particular pressures do you think

the recession brought to bear on the

corporate counsel role?

The recession has created an even greater focus on cost justification for law departments and has put a premium on the creative management and delivery of legal services.


recession has given corporate counsel

the opportunity to further demonstrate

their value to senior leadership?

Senior leadership better appreciates the role that inside counsel can play in risk management.

The economic downturn has also highlighted the importance of developing performance metrics. Lawyers often resist quantifying legal processes, but I think such measurement is not only useful but necessary.

What are the most pressing issues

facing corporate counsel in the year

ahead? And how are you going to

tackle such issues?

There are lots of areas that in-house lawyers will need to keep a close eye on: new SEC disclosure rules; outside counsel costs; managing litigation e-discovery costs; introduction of new technologies (social media, cloud computing, etc.); risk management initiatives for boards; compliance/code of conduct training;

INTERvIEw:

JON OlSON, vICE PRESIDENT aND gENERal COuNSEl, BlaCkBauD, INC


PaRT I: ChaPTER 1 – INTERvIEw (BlaCkBauD)

managing IP portfolios; and, developing effective partnership agreements.

What specific goals do you have

for your further development as an

in-house lawyer?

All of the above – staying current in legal developments, better communicating the value of the law department to the company, teaming with other departments to streamline delivery of legal products (for example, creating a self-service website), making sure my team is happy and building their skill set. n


PaRT I: ChaPTER 2 – ThE IN-hOuSE DEPaRTMENT STRuCTuRE

THE IN-HOUSE legal department consistently faces the challenge of working within budgetary constraints. One might assume that the recession has only increased that pressure, resulting in similar levels of redundancy as witnessed in private practice. But it appears to have had a far more interesting outcome; many in-house departments have held their ground, some have even grown. That’s because they have taken on more work in-house, cutting the costs of external counsel and better utilising the existing capabilities of the in-house team. This may mark the beginning of bigger and more powerful departments encompassing broader remits than ever before, and headed up by lawyers who also excel as business strategists (see Chapter 1). If this is the case, however, law departments will first have to contend with far-reaching and powerful market forces that are promising to transform the entire legal profession.

The current and evolving situationFrom 2008 to 2009, law departments reduced their total legal spending for the first time in ten years, according to the Hildebrandt Baker Robbins 2010 Law Department Survey1. But rather than those cuts falling on the departments themselves, they largely arose from the reduced use of external counsel. In fact, the survey found that internal legal spending and staffing increased slightly.

The survey polled 252 participants from 22 industries. Just under a third of those work for companies making more

than $20bn in revenues, and 65 per cent claimed revenues at or above the Fortune 500 level. The survey found that US firms decreased their total legal spending (as a percentage of worldwide revenues) by one per cent and worldwide firms by two per cent. That compares with a consist-ent rise in US law department spend of between five to nine per cent over the course of the previous nine years of the survey. In contrast, though, the survey found that internal law department spending rose by one per cent both in the US and worldwide. Compensation for in-house legal staff also rose by two per cent worldwide. In addition, for most law departments (66 per cent) the total number of lawyers worldwide increased or stayed the same between 2008 and 2009 – the median department being 21 lawyers in the UK and 31 lawyers worldwide.

Notably, the survey found that spending on external counsel decreased by five per cent in the US and six per cent worldwide – with global non-litigation spending, excluding intellectual property costs, decreasing the most at 14 per cent.

Most significantly, law depart-ments seem to think this is more than a temporary cost-cutting exercise. Inter-views conducted by Corporate Counsel Research (CCR) for this report, for instance, found many law departments agreeing that costs had to be cut during the recession. Typical cutbacks cited by corporate counsel included limiting travel and related expenses and/or postpon-ing projects. But by far the most popular recourse was to renegotiate or freeze rates with external law firms, and/or send out

ChaPTER 2: ThE IN-hOuSE DEPaRTMENT STRuCTuRE



less work to outside counsel (see Figure 1.1, Chapter 1, p8).

This is not too surprising given the findings of the first chapter. With in-house counsel keen to make their way up the corporate value chain, and the expertise of in-house lawyers only increasing, it seems fitting that there should be less need and perhaps incentive to outsource work to expensive third parties.

Businesses are also demanding speedy business advice and legal inputs, so there is a real need for corporate counsel to take on the work themselves.

“I think the speed and breadth of electronic communications, and the cross-border dimension of today’s commercial transactions, combined with the ease of access to information on the internet and on in-house systems, have all increased the pressure on in-house legal depart-ments to deliver rapid, robust advice and practical solutions,” says Robert Cummins, assistant general counsel at Intelsat. “For me, this accelerated demand for legal inputs, and the unrelenting scrutiny of operating expenses, means that consulting outside counsel is rarely an option.”

The impact of cost management on the in-house departmental structureThe in-house lawyer is the ultimate jack of all trades. They are expected to naturally have business acumen and understand their company’s business inside out. They are also expected to be instant legal experts across a range of diverse fields, from intellectual property to employment law, company law to litigation. And this is before tackling the increasing range of risk management and corporate governance issues that are a growing part of corporate life. Given this diversity, and as noted

earlier, many in-house teams are increas-ing the size of their own internal depart-ments. This corresponds with a decrease in outsourcing work to external law firms (see Figure 2.2, p27).

Most companies spend from 30 to 50 per cent of their legal budgets on law firms (see Figure 2.3, p28). While few would argue that corporate counsel can do away with external counsel just yet, it’s reason-able to predict that many legal departments will drive law firm use into the 20 to 30 per cent range, particularly as in-house counsel further develop their specialist knowledge. And even where companies continue to rely on external law firms, there are signs that in-house teams are taking far more control of the relationship, particu-larly in the way in which external costs are applied. This in itself has the power to transform a law department’s future structure and ongoing management.

So instead of just accepting the hourly fee, which has long been the staple method of charging by the legal profes-sion, law departments are demanding cost ‘innovation’, often translating to some kind of alternative fee arrangement (AFA), such as fixed or capped fees (see Figure 2.4, p29). For some, this may culminate in a full-scale review of the way in which the department operates. For others, pricing innovation seems to be more of an outcome of major internal restructur-ing. Either way, pricing structures will play a pivotal part in the evolution of the in-house department.

The Pfizer Legal Alliance is a prime example of this. The Alliance was devised by Amy W. Schulman, Pfizer’s executive vice president and general counsel, with the aim of delivering better value and quality in the delivery of legal services via improved collaboration with external firms. This was achieved by radically



overhauling the billable-hour model so that all 18 alliance member law firms operate on a fixed annual fee for all work.

It is noteworthy that shortly before launching the Alliance, Schulman had already led a major reorganisation of Pfizer’s legal division, to reflect the new business-unit structure of the company following its $68bn acquisition of Wyeth. This restructuring included broadening the scope of the in-house legal division to include lawyers in all markets. At the same time, Pfizer reduced the number of external law firms it was working with, from 85 to less than 20. With this set-up in place, it was no doubt easier to implement a new fixed-fee system of working with the company’s external firms – partly because the smaller number of external firms would allow for better partnership, but also because of the increased capacity of the in-house lawyers to manage the legal demands of each market.

In the UK, Nationwide Building Society is another company that took control of its legal budget via a major restructuring project undertaken by Liz Kelly after she was appointed general counsel in 2007. The department was overhauled following Kelly’s decision that the in-house legal group should focus on high-end, high-value work, such as treasury and capital markets, corporate and outsourcing. The restructuring resulted in some redundancies, which Kelly recently explained to The Lawyer2, but the shift in mind-set also enabled the legal division to rethink its ongoing relationship and spend with external counsel. There followed a dramatic reduction in the number of firms advised (from more than 100 down to a core panel of just five firms, plus a commercial lending panel of 17 firms). Kelly then worked out a new, rationalised legal spend with the remaining firms, together with the implementation of clear performance indicators. Again, getting

To what extent has the recession caused you to consider the following issues? Please indicate your responses

on a scale of 1-5, with 1 being least relevant and 5 most relevant.

Figure 2.2 – CCR’s ‘What’s Hot 2011?’ Survey

Summary: In-house counsel have used the recession to renegotiate fees of external counsel for the long term. A majority of respondents said they intend to outsouce less work to external counsel.

1 2 3 4 5Renegotiating fees of external counsel in the long term - 1% 12% 50% 37%

Outsourcing less work to external counsel in the long term - 7% 11% 23% 59%

Pushing law firm clients to outsource process-driven tasks to improve cost-efficiencies

42% - 11% 42% 5%

Directly outsourcing process-driven elements of the in-house role 41% 16% 12% 25% 5%

Using more contract lawyers, as and when the need arises 12% 44% 28% 2% 12%



legal spend under control seemed to go hand in hand with an internal restructure.

It remains to be seen how far other corporate law departments will prove willing to overhaul their operations in the spirit of Pfizer and Nationwide. With many having benefitted from cutting their external costs, the recession may prove a catalyst for broader internal reviews and restructurings that deliver permanent cost savings.

Evolution, not revolutionWhile in-house lawyers are keen to bemoan the billable hour, most depart-ments are still accepting this traditional way of charging. As many as 96 per cent (weightings ‘4’ and ‘5’ combined) of law department respondents to CCR’s survey, for instance, claimed to be working with external counsel on a form of discounted hourly billing (see Figure 2.4, p29). This concurs with other research in this area

that suggests the chargeable hour is far from exhausted, and nor are the processes that go with it. Indeed, some departments appear to even be describing ‘discounted hourly billing’ as a form of alternative fee arrangement, so potentially skewing true alternative-fee adoption rates.

There are genuine reasons why the billable hour is still widely used. Twenty-two per cent of respondents to CCR’s AFA survey said that hourly billing reflects the true value of legal services. Respondents also pointed to a number of benefits of the billable hour, such as transparency and ease of use (see Figure 2.5, p30). They also highlighted a number of risks and challenges when using alternatives to the billable hour (see Figures 2.6 and 2.7, p31 and p32 respectively).

Encouragingly, the CCR survey did find a significant number of respond-ents that are working with their external counsel on either a fixed-fee basis on

what percentage of your legal budget do you spend on the following?

Figure 2.3 – CCR’s ‘Alternative Fee Arrangements’ 2011 Survey



certain matters (57 per cent, weightings ‘4’ and ‘5’ combined) or on capped fees by stage or whole of matter (69 per cent, weightings ‘4’ and ‘5’ combined).

This rising fixed-fee adoption rate may not transform all in-house departments overnight, but there is no doubt that to successfully manage fixed fees there will have to be some adaptation to what is a different pricing regime. At the very least there will have to be an increased understanding and application of project management across in-house and private practice teams, which will require a different approach to work-flow management. Project management applies in two ways:

n The effective scoping out of fixed-fee projects to ensure that fees are ap-propriately aligned to the most likely outcomes of each transaction; and

n Better resourcing of legal work – both for the legal department

and external law firm – to ensure maximum cost efficiencies for mutual cost savings and profitability.

Project management and working in partnership with external counselIt is perhaps ironic that as in-house counsel take more control of their external counsel relationships they will have to partner more closely with private practice lawyers to better scope out projects and negotiate fee arrangements. Closer partnering also ensures any changes to project scope can be caught early and dealt with.

DLA Piper, for instance, is one of the firms that make up Pfizer’s Legal Alliance. Sir Nigel Knowles, DLA Piper’s joint chief executive and managing partner, recently wrote in The Telegraph3:

“DLA Piper is part of the nearly two-year-old Pfizer Legal Alliance – an arrangement focused on achieving better value and higher quality for the client through greater collaboration between

what type of aFas and fee arrangements are you using? Please indicate your responses on a scale of 1-5, with 1 being least relevant and 5 most relevant.

Figure 2.4 – CCR’s What’s Hot 2011? Survey

Summary: While respondents use a wide variety of AFAs, a majority (96% – weightings 4 and 5 combined) still rely heavily on “Discounted hourly rates”

1 2 3 4 5Fixed fee per matter - 32% 11% 26% 31%

Capped fees either per stage of matter, or for whole matter - 14% 17% 55% 14%

Moving away from retainers 11% 18% 28% 20% 23%

Conditional fees 8% 36% 13% 28% 15%

Blended hourly and fixed rates for each matter 28% 42% 8% 10% 12%

Discounted rates, but with bonus - 13% 33% 37% 17%

Discounted hourly rates - - 4% 46% 50%



firm and client and among the 18 participating firms.

“In the alliance, each participating firm is paid one annual flat fee for all of the work that it does for the entire year – from phone calls to closing arguments, from product liability suits to government investigations. The firms are encouraged to partner closely with Pfizer and, by developing a greater understanding of its business, to provide more effective and often proactive counselling. This arrange-ment has been pioneering and I would actively encourage other corporates – and law firms – to explore this way of doing business. When managed effectively, it is mutually beneficial.”

Unsurprisingly, given this glowing report on fixed fees, DLA Piper has gone beyond the Pfizer relationship to implement several mechanisms for managing alternative fees more broadly. Andy Williams, group business manager

Finance & Projects, at DLA Piper, told CCR that his team rarely uses traditional hourly billing: “In terms of my own group (Finance & Projects), which is a trans-actional group, we very rarely use the billable hour. Over 90 per cent of our work is conducted in the AFA space.”

The team has also implemented a pricing tool, through which every major piece of work is tested prior to proceed-ing with a client. “We have created a tool which we use to help scope and price matters profitably. It allows us to define the various stages of a transaction and then structure a team based on the available resources. The software can handle the variables for any deal, such as the size and structure of the team, along with any corresponding agreed rates... the key focus of the tool is on establishing the cost of doing the work so partners can quickly determine how much the job is going to cost beforehand and what profit margin

which of the following do you deem the strengths of hourly billing?




they can achieve subject to the type of fee arrangement required,” says Williams.

Crucially, this kind of development also needs to happen on the corporate counsel side. In 2009, two veteran lawyers, Ben W. Heineman Jr., former GC for General Electric, and William F. Lee, co-managing partner for WilmerH-ale, wrote an article titled ‘Two Veteran Lawyers Say Now Is The Time for Fixed Fees’4. The editorial has since been liberally quoted in online blogs, but one paragraph particularly stands out and is worth repeating:

“Communications between the law firms and the client on a continuing basis will be the key to fixed-fee success. Law firms must develop project management capacity that combines sensitivity to quality with sensitivity to productivity. The time invested in a project will be managed as the project proceeds, rather than discussed after the fact. It will require

that firms, like corporations in fiercely competitive environments, learn to do more with less: the real definition of productivity. By the same token, in-house law departments must also develop project management capacity (and productiv-ity measures for in-house lawyers) that mirrors the firms’ efforts: focusing on working seamlessly with the outside firms to ensure efficiency on the merits. For both in-house and outside lawyers, connective technology (eg, general and specific deal documents, databases, or general and specific litigation documents) and selective outsourcing to third parties can help drive real productivity.”

Technology as an enabler of changeTechnology will play an important role in the transformation of law departments. In recent years, for example, many corporate law departments have implemented

what are the main risks of using aFas?




sophisticated systems to improve the management of their legal spend. E-billing software, for example, links law firms and in-house departments via the internet, enabling law departments to automatically approve bills that are submitted electroni-cally by the law firm.

In an interview with Team Capital5, Gene Landoe, former president and CEO of Wolters Kluwer, Corporate Legal Services, wrote:

“By capturing itemized billing detail, the corporation can generate sophisticated reports on legal expenses at a granular level: total cost of litigation, results by law firm, case type and geography. This revolutionary advancement provides corporate law departments with a real-time view and running history of

litigation costs. Better financial informa-tion improves decisions and can help drive both costs and inefficiency out of the litigation process in a structured and controlled manner.”

Combined with law departments’ rising use of matter management systems – which record and track the develop-ments of each matter – Landoe argued that law departments for the first time can be assured of “command and control of complex litigation events and costs”. In the same feature, he concluded:

“An interesting dynamic shift is taking place between corporations and the outside law firms that serve them. Corpo-rations install solutions that drive revenue production or reduce costs. Systems that manage legal spending, matter

which of the following internal challenges have you faced when implementing aFas?




tracking and control, and new technology employed by corporate law departments for early case assessment, all reduce costs to the corporation by substituting internal capability for services provided by law firms. In short, many benefits of automa-tion, which are realized by a corporation, reduce income opportunity previously realized by outside law firms.”

The above all points to an evolution in the law department. The recession may have accelerated this shift – and certainly seems to have done so in some forward-thinking in-house teams. At the very least there is a desire to take more control of legal spend, which is primarily incurred using external law firms.

But not all corporate counsel are willing, or able, to change. We have seen, for example, that many law departments continue to accept the hourly rate. Addi-tionally, despite the availability of sophisti-cated technology that would support more effective management of legal spend, many departments are relatively slow to adopt it. A 2011 Law Department Technology Survey conducted by the International Legal Technology Association (ILTA) concluded that law departments may be “underutilizing technology”. In particular, 38 per cent of respondents admitted to not having an e-billing system, and just under a third (30 per cent) of respondents indicated that they do not have a matter management system (although 87 per cent of these re-spondents came from smaller departments of 10-49 attorneys).6 Similarly, a majority of respondents (67 per cent) to CCR’s AFA survey said that they do not use IT systems to help reduce costs (see Figure 2.8, p34).

Many private practice firms like DLA Piper are coming up with ways to dif-ferentiate themselves by implementing systems and processes to effectively control costs and deliver alternative fee packages.

Similarly, some corporate law departments are breaking the mould and radically re-thinking the way they structure and manage their departments, including their external firms. These are the departments that are also most likely to fulfil the ambition of better managing costs and demonstrating their value to senior management. Others that take a more superficial approach to managing legal spend may find them-selves struggling to keep up, especially when broader market forces come into play in the next few years that promise to transform the legal profession altogether.

Resourcing of legal work One area where some in-house legal departments are making real strides is in the use of project management to better manage internal resourcing. As depart-ments have taken on more work them-selves, the question of resourcing that work has naturally arisen. And just as with private practice firms, law departments are realising that the process-driven elements of legal work are often best outsourced to lower level legal professionals or even to non-lawyers within other business areas of the company.

Carillion overhauled its law firm panel way back in 2002 – reducing its near 50 law firms by two-thirds. Today, that Legal Network, as Carillion calls it, remains just 13 firms. But while this move no doubt helped secure Carillion’s aim of reducing costs and improving service by building closer partnerships with fewer firms, it also seemed to set the department more generally onto a path of innovation. More recently, for instance, the construction company has entered into its own legal process outsourcing (LPO) arrangement with CPA Global. The LPO provider conducts some of the firm’s lower level legal work, including



due diligence, from India. The company also encourages its law firm network to use the resource; Carillion holds the LPO contract, and covers any risks via its own insurance policy. As Carillion’s head of legal Richard Tapp says in his case study published later in this report (p53):

“Legal process outsourcing is with us and it works. In Carillion, we have used LPO successfully in both corporate and disputes work, and have involved our Legal Network law firms in the process. We have cascaded work successfully within the network from firm to firm. Law firms must re-engineer the way they work, using lawyers for elements requiring the intellect and application of lawyers, and providing the rest by the lowest-cost and most efficient solution.”

Robert Cummins, deputy general counsel at Intelsat, has followed a similar

trend through his in-house career. Although he doesn’t see the LPO trend as having a major impact on in-house departments, he agrees that reallocating work internally – ie, insourcing – can be hugely beneficial. This outlook arises from his in-house legal experience at several companies, including Sapient, MTV and now Intelsat. At Sapient, for instance, Cummins was part of a company-wide efficiency drive, which included redeveloping the legal intranet as a “user friendly source of best-practice guidelines and tools”. In particu-lar, he rewrote all the standard contract templates so they could be easily used by non-lawyers to complete revenue generat-ing contracts. Backed up with training, it enabled the department to increase the number of contracts completed, while reducing the amount of time spent by lawyers on routine legal tasks.

how do you control costs?

Figure 2.8 – CCR’s Alternative Fee Arrangements 2011 Survey



When Cummins moved to MTV, his experience in improving internal efficiencies gave him an immediate advantage. He worked closely with the company’s lawyers in emerging markets – in particular, Poland and Hungary, where he trained English-speak-ing legal staff in those regional offices to handle legal matters that had formerly fallen to London-based lawyers.

“I took the view that English law qualifications, or physical presence in London, were not necessary for the bulk of the legal department workload, provided regional lawyers were given clear guidelines on what issues to report to headquarters, and close support when it was required,” he says. “This ‘distributed capability’ approach enabled the legal department to support the growth of the business, without increasing the London legal headcount. The same approach was in due course adopted by several other functional departments in the emerging markets division.”

By the time he joined Intelsat in 2008, Cummins was used to creating cost efficiencies through clever resourcing. Paralegals manage much of the company’s high volume, high sales contracts, albeit under the supervision of a smaller number of experienced lawyers. This is supported by a workflow management system through which each deal is processed to completion. “With the right people and processes and ‘light touch’ legal supervi-sion, great efficiencies can be achieved in an in-house legal function by harness-ing the skills of non-lawyers, or lawyers in more cost-effective locations, without giving rise to unsustainable risks,” says Cummins.

Such innovative resourcing of in-house legal work may not radically alter the size of legal departments (unless

in-house LPO arrangements take off significantly), but may ultimately result in fewer highly experienced lawyers and more paralegals or junior-level lawyers making up the in-house team.

As noted in Chapter 1, many companies will look to recruit directly from law schools. This view is supported by Mike Evers, a career advice columnist for Inside Counsel. Evers predicts that law departments will routinely hire straight out of law school in 2020 and that mid-level management roles will evolve to include mentoring of junior lawyers. For individual lawyers, Evers believes the future will offer a more interesting playing field as corporate employers emphasise experience and business skills over name brand law firm pedigree.7

This trend could help general counsel better manage their legal spend. It will also lead to a clearer hierarchy in the in-house team – with higher level lawyers freed up to take on far more strategic and leadership work. This might also resolve one of the challenges raised by several in-house counsel in the research for this report: that the existing flat hierarchy of in-house teams can make it difficult to attract ambitious lawyers looking for clear career development programmes (see Figure 2.9, p36). We will look at this in more detail in the next chapter.

The impact of market forces on law department changeThe UK Legal Services Act continues to be viewed as relevant only to private practice firms, with little impact on in-house departments. But as Bruce Macmillan of the Legal Services Board argues in his article published in full in this report (p43), the Act may transform many in-house legal departments too.



Macmillan says that law departments need to consider the repercussions of deregulation as it may impact the status of in-house lawyers and bring in to question the need for a ‘legal department’ at all. He also points to various opportunities that might arise from the introduction from October 2011 of alternative business structures (ABSs). For instance, a law department might enter into an ABS joint venture with other law departments to offer advice in specific areas; or it might “extend the company’s business advisory proposition through adding a legal alterna-tive business structure” to the group.

Overall, Macmillan thinks that sig-nificant structural change may be afoot. “It is possible that the shape of the law department of the future may increasingly be polarised with the model being either a ‘small group of niche players’ depart-ment that is on top of the ‘black letter law’ affecting their business and nothing more;

or the all-encompassing ‘it’s a little bit ‘legalish’ so we will do it’ mega depart-ment, which handles everything from data protection compliance to contract management. The regulatory changes that are coming may help or indeed drive such polarisation.”

Cummins forecasts similar change with the advent of ABSs. He says that in-house departments of the near future may decide to engage in a joint venture with other in-house departments to conduct certain types of work – perhaps forming a company or captive law firm.

Alternatively, Cummins sees increased opportunities for multidisciplinary practices – for example, legal advice built into financial services. He thinks it’s unlikely this will result in the outsourcing of in-house legal departments (because of the continued need for lawyers that truly understand the business in which they operate). But it is notable that some firms

what do you think are the biggest downfalls of working in-house? Please indicate your responses on a scale of

1-5, with 1 being least relevant and 5 most relevant.



are taking advantage of this opportunity. UK firm Berwin Leighton Paisner (BLP), for instance, launched its Managed Legal Services (MLS) function in early 2010, with the aim of taking over the entire legal department of major clients. It launched the service off the back of a deal with Thames Water, in which the client agreed to outsource its in-house legal function to BLP. The solution comprises a BLP team that works on site at the client office, as well as in partnership with other law firms – including Ashfords and Pannone – to carry out commoditised work. The whole relationship, including partner firms, is managed by BLP.

Since this first deal, MLS has expanded to include other clients. Towards the end of 2010, for example, BLP took over the management of all employment law services for Colt, a European informa-tion delivery platform operating across 21 countries. The aim is to provide the client with significant savings and greater budgetary control; guaranteed perfor-mance standards; a consistent approach to risk management across Colt’s 13 EU operating companies; and simpler processes across the board. At the time, Robin Saphra, group general counsel at Colt, said: “We are working towards an ambitious timetable with BLP and believe that this service will provide us with an enhanced quality of employment legal advice, delivered in a more accessible and responsive way... ensuring that [Colt’s European business] receives consistently high quality legal services, managing risk whilst controlling cost and ensuring value for money.”

Nor is BLP alone in seeing the potential business opportunity here. Axiom Law was founded in 2000 with the idea of contracting out top-quality lawyers to in-house departments. Axiom’s

main client base is within the financial sector, so there were fears the company’s business model was in danger of collaps-ing along with the market. But in fact the recession pushed Axiom to diversify – not only in terms of its client base, but also its model. Rick Teague, who heads up the firm’s managed services division, recently explained to The Lawyer:

“About three years ago some of our clients who’d been using us for projects and various different engagements started to say they’d be interested in working with us in a different way, with us providing teams of people that would be managed by us. This was a natural response to the economic downturn.”8

Axiom’s largest managed legal services deal is with online payment provider WorldPay. The firm supported the company’s interim legal head Lisa Shurdom in building her own standalone legal team – at one point supplying a team of 25 Axiom lawyers.

New businesses are also entering the market hoping to capitalise on these op-portunities. One of those is Radiant Law, a firm that launched in January 2011 and charges only fixed fees. The firm outsources all legal process work to LPO provider Pangea3, so it has no assistant lawyer rank and only employs senior lawyers. In the long-term, the firm has spoken of bold plans to enter the in-house legal space, possibly taking on an in-house legal department of a large corporate or bank9. If successful, it would reinforce the case that in-house legal teams of the future are set for major transformation.

For law firms, the opportunities of in-house law departments are obvious. But it is not only law firms that might challenge the traditional way in which companies source their legal advice. Outsourcing company Capita proved its



interest in the legal space when it agreed to invest in Optima Legal Services in return for the firm outsourcing its adminis-trative, payroll, HR and IT functions. The firm ended up being ‘severely reprimand-ed’ by the Solicitors Regulation Authority (SRA) for engaging in an ABS relation-ship with Capita ahead of time. Of course, any prevailing restrictions will disappear come October 2011, meaning that companies like Capita can engage in any number of legal relationships along this line – perhaps setting up their own legal teams as another string to their outsourc-ing capabilities. Having already proved its interest in the legal sector, it can only be assumed that Capita and companies like it will soon be exploring these opportunities more actively and broadly.

In response to this kind of challenge, some law departments are taking steps to get ahead of the curve. The law division at Kent County Council (KCC), for instance, gives some sense of what law depart-ments themselves can do. In 2010, Geoff Wild, director of law and governance at KCC, spearheaded a joint venture (JV) with regional law firm Geldards, forming Law: Public. The JV has the capability to take over entire local authority legal departments, offering advice in areas such as adult and children’s social services, em-ployment and planning. It is also hugely cost-effective. According to The Lawyer, it charges an average of £150 an hour, sig-nificantly less than most private practice firms.10 In addition, its combined force can offer public sector clients something new: the depth of expertise of a large local authority legal department with the com-mercial capacity and geographic breadth of a top-100 law firm.

The JV won its first deal with South Derbyshire District Council. The authority previously had four in-house lawyers, but

will now outsource its legal function to Law: Public, retaining just one non-lawyer as a monitoring officer. Wild’s long-term ambition is to turn Law: Public into a franchise operation. “My longstanding dream is of a jointly-owned legal service in the public sector,” he told The Lawyer. “It has the potential to be a vehicle in which all local authorities could invest through local franchises.”10

These outsourcing developments are likely to increase in the wake of last year’s decision in the European Court of Justice (ECJ) in Akzo/Akcros. This decision confirmed that Legal Professional Privilege (LPP) does not apply to communications between management and in-house counsel. This sparked considerable debate at the time, concerning the implications for the current and ongoing status of corporate counsel. Many were critical, arguing that the rationale – which was based on the fact that corporate counsel as employees cannot be independent – was flawed.

However, some also saw the opportu-nities arising from the decision. Michael Roch, CEO of management consultancy firm KermaPartners, wrote at the time (September 2010)11: “We believe that this opinion, unless changed by legislation, provides a significant opportunity for law firms and non-law-firm legal service providers alike, particularly in light of alternative business structures for law firms coming into effect in the UK by October 2011.”

Roch said that the opinion would reinforce the trend for companies to outsource parts of their legal function to law firms and to legal service providers. “Some companies may even go as far as to spin off their legal departments,” he wrote. “This is in stark contrast to the recent trend of increasing in-house legal



staff to counteract rising cost pressures (as in-house resource, as a cost centre, is almost always less expensive than outside counsel resource).”

Respondents to CCR’s ‘What’s Hot 2011?’ survey are divided on the issue, with 35 per cent unsure about the impact the ECJ ruling will have on their team, 44 per cent saying it will have ‘some impact’ and 12 per cent a ‘serious impact’ (see Figure 2.10).

Roch believes the ruling will create an opportunity for law firms to work on sensitive, internal investigation work. But he also says that law firms could end up taking on more of the general in-house work too, meaning that staffing models would change as more lawyers with less experience and paralegals would be brought in to handle process driven work. “Firms may also consider building or investing in custom-made ‘service depart-ments’ and contract with their clients

specifically for this ‘resource’ work. In this context, law firms may indeed be buyers of parts of legal departments that are spun-off by corporates – all to ensure that privilege may be maintained.”

While the decision might support the outsourcing trend discussed so far, Roch also points to some structuring alterna-tives for in-house teams in the wake of the court decision: “The question will revolve around how literal the context of ‘employment’ is to be read. For example, should general counsels be engaged as self-employed contractors? Is it worth exploring whether LPP would apply if the legal advice came from a general counsel in a different company within the same group (such as Company Legal Services Limited)? Or does a firm need to have more than one ‘client’ (even within the same corporate group) to be ‘independ-ent’ to satisfy this opinion?” For proactive minded law departments, the ECJ decision


To what extent do you think the recent ECJ ruling on legal privilege will impact your team?

Figure 2.10 – CCR’s What’s Hot 2011? Survey


could further incentivise the kind of alternative business ideas we have already seen at KCC.

Roch concluded: “The price pressure for this resource work will be intense. Partner-level resource is not usually required to deliver this day-to-day resource work. External financing and corporate ownership, available through alternative business structures in the UK as of October 2011, will make it easier to implement the above types of cost-effec-tive service structures now that the legal privilege position of in-house counsel – rightly or wrongly – has been clarified. Whether law firms will take advantage of this opportunity or leave this field to legal service providers (who don’t require as much costly partner-level resource) remains to be seen.”

a fork in the roadFor law departments, there appears to be a fork in the road. On one side, we have seen how the recession has bolstered many law departments, as cost-cutting has fallen on external counsel rather than in-house lawyers. Indeed, recent research has shown that if anything in-house departments have grown slightly during the economic downturn. At the same time, many have used budgetary constraints as an opportunity to take control of their external counsel relationships, demanding greater innovation from a much smaller number of law firms with whom they work.

Elsewhere, developments in the marketplace are raising new challenges for in-house departments. Outsourcing may become more commonplace, as may innovative ideas for the advisory capabili-ties of law departments themselves. This may include joint ventures and/or captive law firms as in-house lawyers realise their

potential to offer broad ranging services to a wider market. Some of this may stem from more restrictive legislation – the European decision regarding in-house privilege, for example. But for those who use these developments wisely, especially against a backdrop of increased opportunity under the Legal Services Act, there may be exciting re-structuring times ahead.

Even for those departments that remain relatively traditional in their outlook, there are signs senior in-house lawyers are becoming more valuable – not just as lawyers but as business advisors. That may be in demonstrating their business value internally (as discussed in Chapter 1) or by asserting control of internal and external resourcing and budgeting.

With so much potentially changing in the in-house landscape, the next chapter will look at how law departments are attracting and retaining talent. n

References1. Hildebrandt Baker Robbins 2010

Law Department Survey; http://info.hbrconsulting.com/LawDepartment-Survey2010

2. ‘Savings grace: Liz Kelly, Nationwide Building Society’, The Lawyer, May 2011

3. ‘The financial crisis means that the billable hour has had its day’, The Telegraph, October 2010

4. Heineman, B. W. Jr., and Lee, W.F., ‘Two Veteran Lawyers Say Now Is the Time for Fixed Fees’, published by Corporate Counsel, August 2009

5. Landoe, G., ‘The Changing Face of the Legal Industry’, published by Team Capital (http://www.teamcapitalgroup.com/feature7.html)

6. 2011 Law Department Technology



Survey, International Legal Technol-ogy Association (http://www.iltanet.org/MainMenuCategory/Publications/WhitePapersandSurveys/2011-Law-Department-Technology-Survey.aspx)

7. ‘Law Department Hiring 2020’, Inside Counsel (http://www.insidecounsel.com/2010/01/08/law-department-hiring-2020)

8. ‘Counsel services’, The Lawyer, July 2011

9. ‘Fixed fees, senior service, outsourc-ing: is that enough to make Radiant shine?’, The Lawyer, January 2011

10. ‘Competition: Kent County Council’, The Lawyer, March 2011

11. Roch, M., ‘No Legal Professional Privilege for In-house Counsel: Opportunity for Law Firms and Legal Service Providers’, published at http://www.kermapartners.com/no-legal-professional-privilege-house-counsel-opportunity-law-firms-and-legal-service-providers



PaRT I: ChaPTER 2 – aRTIClE (vIEw FROM ThE lEgal SERvICES BOaRD)

IF NOTHING in the above letter to the CEO raised your pulse then you can probably safely skip to the next article – you are either on top of matters, about to retire – or deserve what you get!

If your pulse was raised then please think carefully about the next 1,300 or so words – they may impact both you and your department over the coming years. It

is sensible to become and remain informed and to take advantage of the opportunities that are presented to you, your department and your employer.

Stepping back in time The regulation of legal services provision in England and Wales has evolved from the 13th century in a haphazard, incon-

vIEw FROM ThE lEgal SERvICES BOaRD

Bruce Macmillan, general counsel at the Legal Services Board, assesses the impact of the Legal Services Act on in-house legal departments in the UK.

Dear CEO,

Please find attached my legal department budget submissions for the 2013 financial year. you asked me to include commentary on the 2012 year focusing in particular on, to quote you: “Why and how my law department can justify its existence as a trustworthy guide to the firm’s regulatory and statutory compliance given the undeniably catastrophic year that we have just experienced?”

I feel your comment that: “I struggle to work out why I should trust advice on business regulations from a legal department that does not understand the regulations applying to the legal department itself,” is unduly harsh.

However I recognise that we:– Lost a key piece of litigation because I turned out not to have legal privilege and my

advice to you was disclosed in court;– Had a team member prosecuted for not having a current practising certificate;– Hired an Australian lawyer to conduct our litigation work without realising what I

would need to do to re-qualify them under English law, and I had to give them notice as a result;

– Used a legal process outsourcing provider without regard to privilege on litiga-tion cases while also being criticised by the management consultants for not using cheaper legal providers (in particular Bar Supply Cos and boutique firms);

– Failed to suggest how you could extend the company’s business advisory proposition through adding a legal alternative business structure to our group; and

– Failed to recommend that the group buy in cheaply to the new ABS joint venture for employment law matters with the law departments of the other three companies on the business park.It looks like, as you put it, “a litany of career threatening failures”. However, on the

plus side...”



sistent and unstructured way. Stephen Mayson has written an excellent article1 that summarises the history of legal services development so I will not attempt to do so here.

However, from this unstructured framework several things emerged around the turn of this century – initially in an Office of Fair Trading report2, and subse-quently in a series of public documents that led to the Legal Services Act 2007 (the LSA)3.

where we are now?The LSA was designed to achieve a series of core outcomes in relation to legal services provision in England and Wales:

n To find a way to drive through and ensure the delivery of the LSA’s requirements This is handled via the creation of the Legal Services Board (LSB) as the oversight regulator and custodian of delivery of the outcomes required of the LSA through the LSB’s own actions and through the LSB’s supervision of the actions of the ‘Approved Regulators’ – the Law Society (through the Solicitors Regulation Authority), the Bar Council (through the Bar Standards Board), etc.

n To address the perception that a representative body, such as the Law Society or the Bar Council, in having the statutory power to regulate its membership could result in self-serving rather than pro-user and pro-competition based regulation This has been addressed by creating ring-fenced regulatory subsidiaries of these representative bodies, such as the Solicitors Regulation Authority and the Bar Standards Board, with legally entrenched provisions that are

supervised by the LSB to ensure their independence of regulatory action.

n To address the absence of logic in saying that an entity’s ownership or management will necessarily make that entity fundamentally incapable of providing a legal service This will be addressed through the ability, from October 2011, for non-lawyer-owned and/or managed law firms (ABSs) to exist – including, potentially, law departments as law firm subsidiary companies within their corporate groups or inter-law department joint-venture suppliers coming into existence as is already happening among local authorities.

n To address issues in the way that the legal representative bodies handled escalated complaints from private individuals (and small charities and small businesses) about the service quality provided by the legal service suppliers they had used This has been addressed through the creation, under the supervision of the LSB, of the Legal Ombudsman to handle all such complaints.

n To address the lack of clarity in what legal services regulation should be about and how it should be applied by the legal services regulators This has been addressed through the creation in the LSA of Regulatory Objectives and Professional Principles; through requirements imposed on the regulators in the LSA and supervised by the LSB on how those regula-tors act; and through a mechanism that now requires changes to their proposed regulatory arrangements to be approved by the LSB for compli-ance with the new LSA principles before implementation.



n To address the muddled situation about what needs regulation and why – incidentally, this also ties into what activities should attract legal privilege This is addressed through require-ments in the LSA on the LSB to look at the basis upon which regulation is imposed currently (and the associ-ated requirements for education and training) and to make recommenda-tions for change.

n To move progressively from the current incoherent structure of regulation by title (solicitor, barrister, conveyancer, notary etc) to a structure that recognises that issues, and conse-quently regulation, should apply to the activities that people perform rather than the titles that they carry. Additionally, to recognise that, in reality, many activities are conducted by entities rather than simply the individual people within them This is addressed through require-ments imposed on the legal regulators in the LSA and supervised by the LSB; and

n To address a ‘tick box’ regulatory regime that has emerged in some parts of the regulated community, which misses the real issues and loses a culture of accountability and responsibility The LSB is encouraging the Approved Regulators to develop an ‘Outcomes Focused Regulatory’ approach that seeks to specify the outcomes that are required to deliver the Regula-tory Objectives and the Professional Principles specified in the LSA and offers guidance (rather than mandatory rules) as to how those outcomes might (not must) be delivered. This should increase lawyer discretion in how to act compliantly and help provide

more practical outcomes on issues like conflicts, solicitors accounts rules etc. The Solicitors Regulation Authority is in the process of moving its code of conduct in this direction.

Coming soonThe LSB has just finished consulting on its business plan for 2011/124 and, within it, we have outlined how we will look at our strategy and the regulation of the legal services sector over the coming years.

Over the next 24 months some of the most important structural changes to the regulation of legal services will be catalysed. These will affect the meaning and relevance of your qualification, your role and your privileges (literally), and those of the people you hire and the people you instruct in outside law firms to help and support you. This is not merely an abstract idea that will affect lawyers in law firms and future lawyers – it can and will affect you.

what will be happening?On the agenda for the next couple of years are:

n What legal activities should and should not be regulated and why? Will anything that you do today be a regulated activity in the future? If nothing needs to be regulated then what happens to your status? To the need for your department, or at least for the level of qualification and cost that you have in your department at present? To your need for, and entitlement to, legal privilege?

n Which types of organisation and individual can provide legal services and what, if any, legal regulation will they need?



We all know the mantra: ‘more for less!’ In looking at your 2011 budget and beyond what opportunities will these changes present? If lines about what is a regulated legal service are redrawn, how will the new boundaries affect what you can and should outsource more cheaply? Is LPO better than BPO? When do you need a City lawyer? Or perhaps a directly instructed barrister? Or a non-lawyer?

n What initial and ongoing education is needed to be a lawyer? What does that mean for your cost base on training (CPD), your hiring and staffing profile (ratio of lawyers vs non-lawyers, solicitors vs convey-ancers vs trainees vs paralegals vs non-lawyers) and your use of lawyers from overseas?

n The arrival of non-lawyer owned businesses and the opportunities they may present to your department and employer

The proactive, forward-looking business lawyer that you feel that you are, and that your business wants you to be, may look favourably on cost savings or business opportunities to be gained from this unprecedented level and intensity of legal regulatory reform.

It is possible that the shape of the law department of the future may increasingly be polarised with the model being either a ‘small group of niche players’ department, which is on top of the ‘black letter law’ affecting their business and nothing more; or the all-encompassing ‘it’s a little bit “legalish” so we will do it’ mega department, which handles every-thing from data protection compliance to contract management. The regulatory

changes that are coming may help or indeed drive such polarisation. Are you ready?

And?

“Very interesting – but what has this got to do with me?”

If you are still asking this question then you ought to be concerned as to what you are missing. If you have the answers, please spend some time reviewing the websites referred to in the references at the end of this article.5

Finally, please engage with the regulatory process and help shape your future. In-house lawyers are noticeably absent in responding to the regulators on changes that are proposed. It is hard to believe, based on levels of engagement with regulators, that up to 25 per cent6 of the total legal community is working in-house and potentially up to 50 per cent7 of spend on legal services in England and Wales is made by or controlled by in-house lawyers. If regulators do not have your objectively reasoned comments as to why things should occur in a certain way, to help shape their knowledge and thinking, then please do not be surprised if the regulations they produce in coming years do not suit you. n

References1. http://www.college-of-law.co.uk/

About-the-College/Institute-Papers-PDFs/LSI-(2010)-Reserved-legal-activities-final-100820/

2. March 2001: http://www.oft.gov.uk/shared_oft/reports/professional_bodies/oft328.pdf

3. July 2002:“In the Public Interest?”: Lord Chancellor’s Dept.

– July 2003: Conclusions on “In the Public Interest?”

– December 2004: “Clementi”(Report



of the Review of the Regulatory Framework for Legal Services in England and Wales)

– October 2005: “Putting Consumers First” (Dept for Constitutional Affairs)

– May 2006: Draft Legal Services Bill – July 2006: Joint Report (both Houses

of Parliament) on the draft Bill– October 2006: Full Bill published – October 2007: Royal Assent 4. http://www.legalservicesboard.org.

uk/what_we_do/consultations/closed/business_plan_2011.htm

5. Solicitors: http://www.sra.org.uk/solicitors/solicitors.page

Barristers: http://www.barstandards-board.org.uk/

Legal Executives: http://www.ilex.org.uk/ips/ips_home/about_ips.aspx

Patent & Trade Mark Attorneys: http://www.ipreg.org.uk/

Law Costs Draftsmen: http://www.alcd.org.uk/

Notaries: http://www.facultyoffice.org.uk/Notaries1.html

Licensed Conveyancers: http://www.clc-uk.org/

Accountants: http://www.icas.org.uk/icas/; and http://www.uk.accaglobal.com/

6. Bar Council website & Law Society Annual Statistical Report 2008

7. The Lawyer survey 2008; PLC 2009 Benchmarking Survey; IRN Research: The UK Legal Services Market 2008


PaRT I: ChaPTER 2 – INTERvIEw (INTElSaT)

How would you describe your in-house

career so far and any obstacles

you have encountered?

My in-house career started in 2000 when I made the jump from private practice litigation in the City to commercial work at BBC Worldwide. I spent five interesting years with BBC World, the international television news channel. It was a time of major news events like 9/11, Afghani-stan and Iraq, and major organisational upheavals like Greg Dyke’s ‘cut the crap’ crusade, and the fall-out from the Hutton inquiry. In the meantime, I learned a great deal about the practical implications of legal verbiage, and the paramount importance of being ‘commercial’.

In 2005, I moved to Sapient, a thrusting consulting company in the interactive technology ‘space’. At Sapient, there was a huge emphasis on corporate values, con-sensus-building, project management and process improvement. In-house lawyers were expected to walk and talk with the same drive and discipline as the consult-ants. It was unnerving at first, and later liberating. It was also my first experience of a SOX-based revenue reporting regime, with the inexorable mounting pressure to close contracts before the end of each quarter. I handled a bunch of big-ticket out-sourcing deals. I also worked on ‘Velocity’, an internal initiative aimed at accelerating the contracts process by enabling non-lawyers (including a specialist admin team in India) to take ownership of a large part of the legal paperwork, whilst freeing-up lawyers and other support teams to focus on ‘make or break’ opportunities or risks.

After eighteen months at Sapient, I was hired as head of business and legal affairs for the Emerging Markets division of MTV Networks International. The pace of expansion in Emerging Markets, not to mention the youthful energy of the management, was breathtaking. Each year we were launching an average of four new local-language TV channels in Eastern Europe and the Middle East. Experienced project managers were in short supply, and each head of department was also tasked with overseeing business development in a different territory. My task was Ukraine: through the perseverance of local partners and MTV’s channel operations experts, a new channel was built from scratch in less than nine months, and the launch was celebrated at an all-night event in a former Soviet submarine base near the Black Sea.

In 2008, I left MTV to become assistant general counsel at Intelsat, which operates a fleet of 55 satellites enabling TV, radio, phone and broadband com-munications anywhere in the world. Intelsat’s general counsel, Phil Spector, has responsibility for the global business development team, as well as more familiar legal functions. The company uses salesforce.com, and small teams of very knowledgeable paralegals to drive hundreds of complex revenue-generating contracts to completion each month.

In terms of obstacles to career development, the most significant ones I’ve encountered (besides my own undeniable shortcomings) have been: the time it takes a new in-houser to un-learn the mannerisms of private practice; the

INTERvIEw:

ROBERT CuMMINS, aSSISTaNT gENERal COuNSEl, INTElSaT



‘flatness’ of in-house legal teams; the enduring perception of in-house lawyers (even those who contribute demonstrably to the growth of a business) as a necessary evil, rather than an asset.

One of the trends that has been much

discussed among private practice law

firms is outsourcing or offshoring legal

service functions. How do you see this

trend impacting in-house departments,

both in terms of their relationships with

external law firms, and their own direct

outsourcing initiatives?

I’ve followed all the talk about LPO in the legal press with enormous interest. However, I personally don’t see the LPO trend impacting most in-house depart-ments, let alone their relationship with outside counsel, in the next few years. For major law firms with a big back office, or large corporations with a predictable, high-volume of laborious legal tasks, I can see that outsourcing (to a third party vendor or an offshore ‘captive’) would be worthwhile. But for a great many smaller in-house legal departments, I don’t think that outsourcing to a remote service provider would bring significant savings or efficiencies, especially when weighed against the loss of control outsourcing implies. Not all business processes lend themselves to outsourcing.


role of in-house legal departments is

changing in terms of responsibilities

and influence?

The continuing emergence of new markets, new technologies, new risks and new opportunities, combined with the economic downturn of the past few years, has increased the need for commercially minded in-house legal advisors to secure new deals, implement

new business models and deal with disputes or defaults.

I think the speed and breadth of electronic communications, and the cross-border dimension of today’s commercial transactions, have all increased the pressure on in-house legal departments to deliver rapid, robust advice and practical solutions. I often find it’s not viable to review documents or to analyse matters as thoroughly as I feel I ought, because the business demands that I make judgement calls in ‘real time’.

For me, this accelerated demand for legal inputs, and the unrelenting scrutiny of operating expenses, means that consulting outside counsel is rarely an option. Hiring additional in-house staff to help handle the workflow is rarely an option either – instead, I find I’ve been polishing up my meagre project manage-ment skills, going with my gut on tricky issues, and constantly figuring out how to do more with less.

What is your experience of ‘insourcing’

(i.e., reengineering and/or reallocating

in-house legal tasks to non-lawyers or

other members of the workforce)? How

do you see this trend developing?

Substantial up-front investment in process improvement seems to me to be a pre-requisite of successful LPO – exporting a malfunctioning process offshore does not necessary fix it. If a company is ready to make that investment but doesn’t have the scale of a major firm or multinational that makes remote outsourcing a ‘no-brainer’, they would be better off finding efficiency savings closer to home.

Reallocating elements of the in-house legal workflow to your internal clients, or to more cost-effective resources within the legal department, are ways of achieving this. Another is to leverage provincial



law firms, or barristers, on matters that demand external help but don’t warrant the services (and costs) of a top London law firm.

At Sapient, as part of a company-wide efficiency drive, I redeveloped the legal intranet site to work as a user-friendly source of best-practice guidelines and tools. I rewrote all our standard contract templates in plain English, and in a form which made them easy for non-lawyers (eg, sales directors) to complete. I ran training sessions to teach colleagues outside the legal department how to avoid unnecessary legal risks, and I posted simple checklists to enable them to identify when to seek specialist legal input. This initiative accelerated the process for issuing and concluding revenue-generating contracts, reduced the amount of time spent by lawyers on routine or low-risk legal matters, and allowed the legal team to focus on significant issues and opportunities.

At MTV, as the Emerging Markets business grew, I leveraged English-speaking legal staff in our regional offices in Poland and Hungary to handle legal matters that had formerly fallen to Lon-don-based lawyers, in addition to support-ing their regional business units. I took the view that English law qualifications, or a physical presence in London, were not necessary for the bulk of the legal department workload, provided regional lawyers were given clear guidelines on what issues to report to headquarters, and close support when it was required. This ‘distributed capability’ approach enabled the legal department to support the growth of the business, without increasing the London legal headcount. The same approach was in due course adopted by several other functional departments in the Emerging Markets division.

Intelsat, meanwhile, makes extensive use of paralegals to manage high-volume, high-value sales contracts, under the supervision of a smaller tier of experi-enced lawyers. This is not a new thing – in fact, I think it’s been the approach of several leading telecoms and technology service providers for many years. At Intelsat, it’s facilitated by a workflow management system that solicits and captures inputs from a range of specialist departments from the inception of each deal through to completion. With the right people and processes and ‘light touch’ legal supervision, great efficiencies can be achieved in an in-house legal function by harnessing the skills of non-lawyers, or lawyers in more cost-effective locations, without giving rise to unsustainable risks.

In the long-term, how do you think the

above trends will impact the structure

of in-house legal departments and the

way in which they deliver legal advice?

I would guess that in medium to large-sized commercial organisations, legal department headcounts will remain more-or-less stable, but the continuing automation of legal workflow, information management and best-practice training will enable companies to employ a higher proportion of more junior lawyers and/ or paralegals, thus reducing overall legal budgets.

Also, I anticipate that a minority of forward-thinking private practice firms will sooner or later work out how to woo general counsels away from offshore LPOs, which will suffer from staff churn and salary inflation. Firms could do this by adopting a more results-oriented consultancy model, rather than striving to maximise fee income from individual matters.



Finally, I hope that more general counsel will make it to the top tier of management, and that more in-house lawyers gain frontline involvement in business development projects. Combined with tailored training, this will bring out the best in us. n


PaRT I: ChaPTER 2 – CaSE STuDy (CaRIllION)

In recent years Carillion has led the way in terms of its law department manage-ment. Richard Tapp, Carillion’s company secretary and director of legal services, explains the department’s development so far.

THE GENERAL counsel’s relation-ship with the law firm is an unusual one. Elements of the traditional adviser-client model remain, of course, but the challenges of economic downturns, new business models, cost pressure and increasing regulation have brought other, compelling demands.

The challengesSimplistically, the challenges for delivering legal services have been seen as time and cost. Quality has been taken for granted – although it is not clear that it always should have been. But because business is increasingly complex and innovative, and because we exist in a competitive market with demanding customers, there is a need to seek ever more innovation from law firms to allow us to deliver against affordable timescales and costs.

In Carillion, since we began the process of reviewing legal needs in the early years of the century, the challenges of time and cost have meant that we have followed a consistent process of consolidation, reducing our law firms from more than 50 to the current 14 in our Legal Network. At the same time, we have incorporated the work from the major acquisitions that we have made along the way – and the 100 or

more law firms utilised by the acquired organisations.

EvolutionCarillion’s philosophy is to develop value through high-quality, long-term relation-ships with a limited number of firms in our Legal Network. In developing our relationships, we have focused on innovation from law firms to help us meet these challenges of time and cost – and to help us be one step ahead. In our last review, we brought through a range of more than 100 innovations; each one was developed with our Legal Network firms, and they were prioritised and delivered against defined goals and timescales.

Some – many, even – have been a real success; others have proved not to be worth pursuing. But the process of identification, development and collaboration has brought with it real value. We have learnt that we must be open-minded to new developments – to try, perhaps even to risk, alternatives or improvements, and to allow new ideas to incubate within our business.

The futureFor the future, the challenges of the economic landscape, the pressures of client change and the weight of regulation translate into four challenges that will colour the law firm relationship into the future:

n Affordability;n Structural resourcing;n Technology; andn Knowledge management.

gENERal COuNSEl aND ThE law FIRM: ChallENgES, EvOluTION aND ThE FuTuRE



affordabilityHistorically, like many organisations, we would often use a large number of different law firms, frequently on the basis of individual relationships. Firms expected to be paid on the basis of the input – that is to say the hours spent at a defined rate. Over the past decade, there has been increasing consolidation, with many organisations now having a defined panel of firms, usually much smaller than before, and agreeing pricing arrangements – although often as a discount to hourly rates, which remain as the basic unit of cost.

What has now changed, though, is the issue of affordability. No business sets out to spend more than is necessary to achieve regulatory compliance, to fulfil its corporate objectives and to deal with challenges to the business. As a result, organisations struggle to find value in the legal services offered by a traditional route. Strategic decisions about business opportunities include careful analysis of the cost of resourcing – including legal resourcing. Dispute management seeks to engineer out legal cost wherever possible.

There is a growing pressure to examine the cost of every element of corporate life: if it is not affordable, quite simply it will be bought only where essential – not simply because it is desirable. In many sectors, if anything the pressure is greater still – and resourcing is secured not on the basis of the resources needed at the lowest cost, but rather on the basis of a defined cost that can be afforded.

Structural resourcing This issue of affordability carries through directly to the way in which legal resources are procured and provided. Much has been written about the nature

of legal services and the over-supply of traditional resources.

In good years, law firms have taken advantage of increasing demand for their services to adhere to a corporate pricing model that sees both cost and margin as elastic. On the other hand, value-added services have not always addressed the underlying value of the legal work itself. Even firms offering value-based billing are tempted to take as their starting points their current cost and margin, seeking upside in the equation, rather than identifying the true value of the service.

However, real alternatives – or at least useful additions – have begun to develop. Legal process outsourcing (LPO) is with us and it works. In Carillion, we have used LPO successfully in both corporate and disputes work, and have involved our Legal Network law firms in the process. We have cascaded work successfully within the Network from firm to firm. Law firms must re-engineer the way they work, using lawyers for elements requiring the intellect and application of lawyers, and providing the rest by the lowest cost and most efficient solution.

TechnologyIf structural change in the legal field is a key driver, the opportunities presented by technology are equally exciting – the more so if law firms are able to link them with their re-focused structures to provide value to the client.

In Carillion we have undertaken a number of initiatives. We have an online portal, C-Net, which allows us to com-municate openly with all the firms in our Network. We are taking our matter-management system to a new level with a state-of-the art resource that will also provide e-billing and a range of other services. Currently in implementation, this



will be ready in 2011 and will continue to help us build more effective, more efficient – and by implication – more cost-effective relationships with the Network.

In other areas, we have introduced a single, real-time system to allow all professionals involved with our claims process to view our liability status and communicate and resolve issues accordingly. This will help us better allocate resources to minimise claims, manage out claims earlier and more efficiently, and reduce the inputs needed from all parties – reducing cost and allowing us to learn from our experiences.

Finally, in the area of corporate governance, technology has brought with it very significant change, and is continuing at pace. In common with much of the industry, we have adopted online management and filing. Board evaluation is carried out with an online analysis tool, while board papers are delivered electronically and provided to board members on Apple iPads.

All of these developments, taken individually, are evolutionary steps, but together they pave the way for law firms to take the initiative, and so take the client relationship forward.

knowledge managementFinally, there is the issue of knowledge management. At the most basic level, knowledge management is the real reason for providing legal resource in-house: embedded teams understand the requirements of the organisation better than anyone, and are best placed to predict and follow trends, and to lead strategies for law in the organisation. In doing so, they need to have specialist and up-to-date knowledge of the areas of law impacting them, as well as information

about current market practice and trends in their field. Critically, all of this needs to be translated into practical training, documentation and procedures that will assist the company on a daily basis.

At the same time, in-house teams need to equip their people with the practical skills to use organisational know-how and their own legal knowledge in a way that is focused on meeting the objectives of the organisation. Here, there are significant opportunities for law firms to facilitate knowledge management in their client teams, which could be a key differentiator in future.

An online portal provides a platform for knowledge sharing, which is an excellent basis, but just a start. We need to know not just what the legal issues are, but how the market is developing in the areas in which we operate – forward-looking market intelligence is as important to us as reactive law.

The theme common to all these challenges is that of irrevocable change, which will have a significant impact on the relationship between corporate legal departments and their external counsel. n

Richard Tapp is company secretary and director of legal services of Carillion plc, having previously held the same role in Blue Circle Industries plc. Carillion is a FTSE listed support services business with revenues exceeding £5bn and more than 50,000 people across operations in the UK, the Middle East and North Africa and Canada. Carillion’s in-house team specialises in the core legal functions of construction, outsourcing and projects work, and procures its external UK legal work through a formal network of some 14 law firms, which is known as the Carillion Legal Network. © Richard Tapp 2011


PaRT I: ChaPTER 3 – MaNagINg ThE IN-hOuSE lEgal TEaM

IN CHAPTER 2 we discussed the various trends impacting the growth, structure and likely future developments of the in-house legal team. From the number of forces impacting in-house lawyers – from both internal and external sources – there is a sense that the legal department is in a state of flux. While it is difficult to say with any certainty what the in-house department will look like in, say, ten years’ time, there are some noteworthy trends that have been discussed so far:

n In-house legal departments have actually expanded during the economic downturn, due largely to less work being outsourced to external law firms;

n Outsourcing process-driven work may flourish as departments look to drive down costs further – whether that’s to external LPO providers or internally to other business units;

n As alternative business structures (ABSs) come into force under the UK Legal Services Act, some law departments may take advantage of the opportunities to broaden their own offering, perhaps setting up joint ventures and ABSs of their own;

n Some of the largest companies may opt for the cost-efficiencies brought about by outsourcing the law department altogether – just as they have their HR, IT and other admin functions.

Whatever the future holds companies need talented in-house lawyers as

much, if not more, than ever. To have legal advice from lawyers who intimately understand the business – both strategi-cally and operationally – has proved vital to many companies navigating the choppy waters of increased regulation and corporate risk. Indeed, the corporate scandals of recent years – such as Enron and WorldCom – highlight the importance of sound corporate governance and effective risk management (see Chapter 5).

In-house versus private practiceChapter 1 demonstrated the rising profile of in-house lawyers. Numbers of in-house lawyers have also grown. As Scott Gibson (see full article, p71), partner at recruit-ment consultancy Edwards Gibson, notes, the number of qualified lawyers working in commerce and industry in England and Wales has risen by 140 per cent in a decade. The employed sector accounts for nearly a quarter (23 per cent) of solici-tors holding practising certificates, with the largest sector being commerce and industry, which employs about 15,000 in-house counsel.1

Although this rise is significant, obviously the vast majority of lawyers qualify and work in private practice. This feeds a perception that private practice is the place to be – especially when combined with better compensation and a more defined career path. In-house may have its stellar performers, but on the whole it can also be seen as offering little career opportunity due to a flat hierarchy (and smaller department size); less financial compensation; and less respect because many corporate leaders under-

ChaPTER 3: MaNagINg ThE IN-hOuSE lEgal TEaM



value their legal teams, at worst viewing them as necessary cost-centres.

getting closer to the businessThe Nabarro report ‘From In-house Lawyer to Business Counsel’2, discussed briefly in Chapter 1, reveals that many in-house lawyers aspire to business decision-making positions within their companies. But few as yet seem to have got there. Only three per cent of the 81 lawyers interviewed claimed to have board influence and to be involved in strategic-level planning decisions. And while 38 per cent of the lawyers polled believed their team makes a very strong contribution to the commercial value of the company, only 14 per cent of the CEOs interviewed agreed. Report authors Jonathan Warne and Peter Williamson, both partners at Nabarro, wrote:

“Relatively few senior managers believe their in-house legal function delivers significant economic value to the business. Instead, lawyers are often felt to be there only to make sure the commercial team do not mess up – in other words, to avoid negative outcomes rather than to generate positive ones. Without action on the part of GCs, this is unlikely to change.

“At the moment few GCs hold a position in the upper tier of their company’s strategic, managerial or planning functions. Most perform a quasi-risk management and legal management function, with little understanding in the business of how truly successful they are. Some are content with this. Others, who want to move up the business ‘value pyramid’, face a problem. They are confident of their worth, and they know they contribute commercially, but they don’t have a way to show it. And in-house lawyers who cannot show that they add

value to a business are unlikely to become strategically influential.”3

This poses two problems in terms of managing a highly effective and valued legal department:

n How do you attract talented lawyers to your in-house legal team if they perceive the problems outlined above?

n How do you retain those same lawyers if you can’t offer them long-term career-development opportunities?

In this chapter, we discuss how senior in-house counsel can attract and retain the best lawyers.

Back to basics: why do lawyers choose in-house?Much as stories of high-flying in-house counsel might appeal to ambitious and business-minded lawyers looking for the big career break, it is unlikely to be enough to pull talent away from the well understood career path and rewards of private practice. After all, despite the growing size of in-house teams they remain relatively small compared to their private practice counterparts (see Figure 3.1), resulting in fewer available positions to advance. Where law departments are undervalued or seen as little more than regulatory tick-box functions, the appeal is less. This creates a real problem: if in-house leaders cannot attract the right lawyers, they are also unlikely to be able to fulfil a key aim – to prove their team’s worth and move up the value chain, so creating positions to rival private practice.

But understanding why lawyers choose to go in-house may help shape a law department’s recruitment strategy and provide important clues as to how those same lawyers can be effectively managed. In a two-part article recently


PaRT I – ChaPTER 3: MaNagINg ThE IN-hOuSE lEgal TEaM

published by Corporate Counsel, Jason Mark Anderman, former counsel at a large Fortune 500 company, gave a familiar reason for moving from private practice to in-house:

“…I was a senior associate at an Am Law 25 firm. Nothing summed up the job like the fact that I was completely thrilled when I left the office at 9pm. Because I often worked until 1am, leaving with even a fraction of the day left felt like slipping out early.

“My girlfriend at the time told me my perspective was, to be diplomatic, rather warped, and, agreeing with her, I decided to look for a better work/life balance. At this point, life as an in-house attorney beckoned.”4

While not all lawyers choose in-house for a better work/life balance, it is a factor. Richard Wiseman, chief ethics & compliance officer at Royal Dutch Shell, says that he has never struggled to

attract good lawyers to the in-house team because they can offer different things – particularly work/life balance. “In-house consumes less of your personal time,” he says. “There are times when working for a company isn’t as intrusive into your personal life as working in private practice. That may not just be in terms of the long working hours, but also in terms of travel or working away from home.”

Anderman agrees: “While you do take a significant pay cut, you are often much happier with your lot in life because many in-house lawyers usually leave work between 5pm and 6pm each day, and rarely work on the weekends.”5

However, it’s important not to overplay the work/life balance card. In the UK, according to a study by The Law Society into pay and conditions of corporate counsel6, in-house counsel work as many hours, on average, as in private practice. Although three quarters said a

how many lawyers are there in your in-house legal department?




move back was “not very” or “not at all” likely.

There are plenty of ambitious lawyers who are still prepared to sacrifice their personal time and lives to commit to the incredibly long hours of private practice. Their eventual reward may be much- coveted partnership, with all the compensation and status that goes with it. But there is a dual development in the legal landscape right now that is seriously impacting this trend:

n Many law firms have tightened their equity partnership structure making it far more difficult for lawyers to make partnership, regardless of the amount of time and effort they are willing to put in; and

n Considerable research points to changing career expectations in younger generations – namely, the rising importance of work/life balance. This is reinforced by the rise of women in the workplace for whom career flexibility (to accommodate childcare) is a must.

There is no doubt that GCs can, and do, capitalise on these trends to attract talent in-house. There is no better proof of this perhaps than in the quality of the in-house lawyers that we have already seen in Chapter 1, combined with the statistics that in-house departments are growing. In addition, while it would be difficult to argue that in-house lawyers are com-pensated on a par with private practice, companies offer their own compensatory perks. Anderman, for example, mentions the appeal of a “host of non-cash com-pensation and generous benefits that are rarely offered at law firms, such as stock options, stock-based bonuses, pensions, on-site gyms and commissaries, tuition

reimbursement, business education, and superior health insurance”.7

Even without the perks, the compensa-tion isn’t all that bad either, particularly in the US. The latest 2011 GC Compensation Survey conducted by Corporate Counsel showed total cash payments for chief legal officers in the US increased by 18 per cent in 2010, with 93 of the 100 top-paid GCs receiving non-equity incentive compen-sation (extra cash tied into performance related goals)8. The top earner’s salary also made for enticing reading for any ambitious lawyer considering in-house. Denise Keane, executive vice president and general counsel at tobacco giant Altria, took home $6.5m in total cash compensation. She is also the first woman to take the survey’s ‘top prize’ in terms of GC compensation – and as such reinforces the idea that in-house holds particular opportunities for women.

In the UK, The Law Society found that the median salary for all full time corporate counsel, irrespective of position, was £80,000 for 2007/8. However, it identified a pay gap between male and female in-house solicitors and substantial differences in salaries outside London.9

This finding is supported by regional salary surveys. According to a 2009 survey conducted by UK recruitment consultancy BCL Legal10, average salaries for newly qualified in-house lawyers in the north-west of England fell from £40,000 to £37,000 in 2009, while more expe-rienced in-house lawyers saw their pay unchanged at £43,000 to £60,000 for one to five years’ post-qualification experi-ence (PQE), rising to £65,000 to £100,000 for six to ten years’ PQE. Almost three-quarters of the lawyers polled received a bonus, ranging from less than one-tenth of salary for the least experienced to one-fifth



of salary for those with 11 or more years’ PQE. However, there were other perks including car allowances, pension contri-butions of, on average, one-tenth of salary, and private medical insurance. The results from the same survey for 2011 remain largely unchanged11 suggesting that many in-house lawyers do not enjoy the sub-stantial year-on-year pay-rises of private practice lawyers – albeit even those were temporarily thwarted by the recession.

To be fair, in-house salary surveys are probably unreliable sources of information about in-house opportunities in general. Businesses vary dramatically in terms of their size, geography and requirements – making it impossible to compare like with like. Respondents to CCR’s surveys show the broad differences, with revenues and sizes of department varying drastically (see Figure 3.2, as well as the participat-ing companies of The Global Law Depart-ments Benchmark Study, conducted by

Rees Morrison and published in Part II of this report – p135). This sits in contrast to private practice where law firms in the same tier can easily benchmark against each other, across well-publicised metrics, and proactively set their salaries to ‘beat’ the competition.

As a general rule, when it comes to in-house recruitment, salary is not the deciding factor (see Figure 1.5, p13). Of course, it does no harm to advertise the salaries of the highest earning GCs, if only for aspirational reasons. But all the research suggests it is the non-financial perks that attract talent.

Diverse workThe nature of in-house work has great appeal – the ability to engage in commer-cial operations and the promise of varied work arising from whatever the needs of the business happen to be at any one time. While this has led to the common

what is your company’s global annual revenue?Turnover in £




assertion that in-house lawyers are a ‘jack of all trades and master of none’, it’s worth noting that many in-house departments have also increased their specialist knowledge to cope with rising workloads, particularly as they are outsourcing less work to external law firms. Dispute resolution, the traditional preserve of private practice, is also handled in-house by many companies that possess their own litigators.

Some law departments have grown to a sufficient size that a degree of specialisation now features in depart-

mental structuring. For example, French construction company Colas has five lawyers operating in France (the business boasts 80 lawyers worldwide) that spe-cialise in several areas, such as corporate law, IP, real estate, tax and competition. The majority of the company’s work is managed in-house. Similarly, online grocery shop Ocado has quickly built a nine-strong legal team that specialises in employment, corporate, commercial, IP, real estate and construction.

For law department managers, the key will be getting the balance right of meeting the needs of the business while

what gCs and senior in-house lawyers say they like and dislike about in-house

likesn Work-life balance – not having or being expected to work weekends.n Being able to delegate work to outside counsel.n Not having to obsessively monitor time and bill a minimum number of hours.n Variety of work.n Acting as both a business and legal adviser.n Getting involved in projects from the very start, not just when things go wrong.n Helping the company navigate complex legal risks.

Dislikesn Corporate bureaucracy and politics, which is very different to private practice.n Endless volume of meetings and calls – as you are “on site”, you are at the beck and

call of the business.n Having to compromise standards because the business imperative overrides

the legal risk.n Too many administrative tasks and expected to be “jack-of-all-trades”.n No paralegal support.n Flat hierarchy and limited opportunities to advance.n Regarded as a cost centre, as opposed to a “revenue generator”.n Lack of respect from other business departments.... often viewed as a barrier to the

business and sales teams.n Viewed as a “free” legal service with unlimited resource, expected to be on call

without limit.



appealing to a new generation of lawyers. Structural changes in the legal profession discussed in Chapter 2 may well give in-house teams an advantage too. With the promise of new kinds of legal businesses entering the playing field, lawyers will have more choice to tailor their careers in an environment that best suits them. The traditional law firm with its relatively rigid partnership structure will no doubt continue to appeal to a certain type of lawyer. But for many others, the partner-ship ladder has lost its appeal. Instead, they want a career that gives them broader

opportunities and greater flexibility. In-house departments might be best placed to deliver on both fronts.

Retaining top talentAttracting talented lawyers is of course only one part of the equation. GCs obviously need to retain those lawyers.This will certainly require the ongoing delivery of interesting, varied and chal-lenging work. A typical fear for lawyers moving in-house is that the work will be less challenging, but this is often proved unfounded. The CCR ‘What’s Hot 2011?’

Ten fundamental actions to improve operations in a law department

Rees Morrison notes that the single most flagrant obstacle to improvement in law department operations is a “refusal to stop and think about how work is done”. His ten “bedrock foundations” to improve operations are:

1. Push clients to clarify their requirements. Train clients how to request services and what they can do to help get the service.

2. Define and differentiate legal services. If work streams in as an undifferentiated blob, no law department can pick out what parts of it to treat differently.

3. Track metrics about services. Until you count some things or have a sense of time demands, you can’t do a good job of improving productivity.

4. Analyse steps in processes. you need to understand what is done, how often it is done, how long it takes, and who has a finger in the pie.

5. Set priorities. Some tasks are more important than others. 6. Triage. Stop doing lower value work or change how it is done. Overall, match your

effort to the matter’s importance.7. Delegate work. Ideally, if a lower cost person can get something done efficiently,

they should handle it. 8. Refer to checklists. Make sure you are reminded of the essential tasks and their

best order. 9. Use software. As simple as word processing, as complex as document assembly,

software can boost productivity.10. Standardise and reuse work product. Someone has already invented the wheel.

The following tips are taken from Rees Morrison’s Law Department Management blog – www.lawdepartmentmanagementblog.com/law_department_management/2011/07/ten-fundamental-actions-to-improve-operations-in-a-law-department.html



survey indicates that respondents are generally happy with the range of work and training opportunities available, although “Limited career development opportunities” scored slightly above average.

Of course, there is a danger that high-value, complex work is outsourced to private practice firms. In such instances, it will be more difficult for in-house teams to demonstrate their value at the highest levels of the business and to sell the benefits of in-house work to prospective candidates.

Encouragingly, Chapters 1 and 2 have shown that legal departments are finding

ways to outsource their process-driven work, whether internally or externally. The recession has accelerated the trend for in-house lawyers to take on the high-value work themselves – as they have decreased the amount of work being outsourced to expensive law firms (a trend that looks set to continue for the long term – see Figure 2.2, p27).

In-house teams need to decide what they want to be – either chiefly taking on the high-value legal work themselves or largely allowing external firms to do the legal work and focusing instead on managing those relationships. The latter strategy might result in a reduction in size

lPO benchmark surveyIn May 2011, Legal Week published a benchmarking report on legal process outsourcing, produced in conjunction with LPO provider Integreon.

The key findings are as follows:

n “Lack of consistent quality is the main barrier to using LPO (cited by over three quarters of private practitioners and more than half of in-house lawyers).

n Data security is a major concern, with 40 per cent of lawyers worried about sensitive data being kept beyond the control of their own networks.

n LPOs are being used as cost-saving measures by nearly 15 per cent of law firms and 6 per cent of in-house legal teams.

n Repetitive low-cost work should be supervised by law firms if it is outsourced, say 52 per cent of private practice lawyers. Their in-house colleagues are less convinced, with only 29 per cent thinking this is necessary.

n Litigation document review is the area most suited to outsourcing, say 65 per cent of lawyers in private practice and 44 per cent of in-house counsel.

n Contract management is an area that 44 per cent of in-house lawyers see as being ready for LPOs, while only 26 per cent of private practitioners agree.

n Debt recovery is a potential LPO area, according to 42 per cent of in-house lawyers and 26 per cent of those in private practice.

n Alternative fees (75 per cent) are used in five times as many firms as LPOs (15 per cent) as a way of cutting costs.

n Use of LPOs has a negative effect on the brand, according to only 10 per cent of private practitioners. Nearly four-fifths (79 per cent) say there is no deterioration, and another 10 per cent think the brand can be enhanced by LPOs.”12



of the in-house team. While this might appeal to some business leaders – espe-cially those who have a strict cost-centric view of legal departments – it might also result in highly-skilled lawyers becoming mere procurement managers.

Measuring value and performance metricsA significant percentage of GCs want to be more influential within their busi-nesses, but first they need to demonstrate how they add value. To do this, they must adopt performance measurement criteria Unfortunately, the Nabarro report cited at the beginning of this chapter suggests that legal teams are currently failing in this regard.

“To climb the value pyramid, GCs need to show more clearly how they add value,” write the authors Warne and Williamson. “But to do this they have to be able to measure what they do, and lawyers as a whole have not rushed to embrace performance measurement. Only 32 per cent of the GCs we surveyed use formal performance measurements and fewer than half of these were directly involved in creating the measurements they use. However, nearly everyone who had metrics in place thought they were either quite effective or very effective.”13

Strategy and performance management consultant Bjarne Rugelsjøen contributed to the same report, suggesting several steps legal departments can take to 1) Align their outputs with business strategy; 2) Engage the legal team to drive behav-ioural change; and 3) Measure success. The article makes for interesting reading and can be found on page 27 of the Nabarro report,14 but the author provides an excellent summary of the study, which is worth mentioning here:

“There is no single approach that suits all companies and industry sectors, and there are many performance management models to choose from. However, the Kaplan and Norton ‘Balanced Scorecard’, developed in the 1990s, is the most highly regarded and widely implemented perfor-mance management tool. Over half of all Fortune 500 companies use it to execute strategy and measure success. I have adapted the scorecard and subsequent research by Kaplan and Norton to describe six practical steps GCs could follow to create their own performance management strategy:

n Define the legal team’s mission, vision and values.

n Create a high-level strategy map.n Define strategic objectives.n Identify one or two metrics for each

objective and set targets.n Align existing projects to the strategy

and define new projects if necessary.n Establish a governance structure to

realise the potential.”

Early adoptersThere are signs that some forward- thinking law departments are implement-ing sophisticated management methods. Liz Kelly became GC at Nationwide Building Society in 2007 – not an easy time for the financial services sector. But far from allowing the shaky climate to stall change-management initiatives, she worked hard to overhaul the legal department. Kelly explained to Nabarro how she helped shift the team from a traditional legal department model of lawyers clocking in and out and giving “non-commital, legalistic advice” to employing “lawyers who will challenge and who are commercial and ambitious”.19 Reflecting the change in mind-set, the



The impact of lPO on the in-house teamAs companies fight for survival, growing legal costs have come under fire and GCs around the world have been charged with reducing legal spend. To contain costs, it is no surprise that some companies are exploring the possibilities of legal process outsourcing (LPO).

Forrester Research predicts that $4bn (£2.6bn) worth of legal work will be outsourced to India in 2015. A report by ValueNotes15, veteran analysts of the Indian LPO market, summarises the market as follows:

n India’s revenues from legal services offshoring were expected to grow from $146 million in 2006 to $640 million by end 2010.

n The industry employed around 7,500 people in the legal offshor-ing space in India in 2006. The number of employees is expected to reach 32,000 by end 2010.

n The services provided by the more than 100 LPOs include: “Legal tran-scription, document review, litigation support, legal research, intellectual property, contract related services, and secretarial and legal publishing services.”

n The Indian vendor space has over 100 service providers that can be categorised into three groups: Captive centres of corporate; third-party niche service providers (stand-alone LPOs); and, third-party multiservice providers. Third party vendors dominate the LPO space by employing the majority of the workforce in the sector.

n The list of frontrunners includes Evalueserve, Integreon, Office-Tiger, CPA Global, Mindcrest, Pangea3 (now owned by Thomson Reuters) and Quislex. Emerging players that have potential to emerge as winners within their chosen niches, include LawScribe, New Galexy, SDD Global Solutions, Tusker Group, Aptara, Lason and Quattro BPO.

n Integreon boasts eight facilities, Pangea3 has four facilities and four sales and marketing offices, while CPA Global has 16 centres in eight countries.

According to Arun Jethmalani, CEO, ValueNotes, “While most vendors start by offering lower value services and gradually move up the value chain by demonstrating domain skills and gaining client confidence, there are others who focus on specific high-end services or niches.”

“High volume services like document review, e-discovery and legal publishing, as well as niche areas in intellectual property and contract services, will drive future growth in legal services offshoring,” says Neeraja Kandala, analyst and co-author of the report, which provides an in-depth analysis of the Indian vendor space along with profiles of all the major industry players.

The international mining group Rio Tinto was one of the first high-profile companies to enter into an LPO agreement with CPA Global. It has been widely publicised that the partnership is projected to save Rio Tinto up to 20 per cent of its annual legal spend.



team developed the motto ‘Partnering Business Success’.

To support greater integration with the business, Kelly also implemented programmes to improve measurement and feedback. When lawyers complete a project, they have to send out an e-feedback form to solicit views from the rest of the business on the quality of service. This helps integrate the lawyers into the broader functions of the company.20 Kelly told CCR: “The greatest challenges have been around changing

the culture of the team, changing it from a reactive function to a dynamic, forward-thinking department that delivers first rate business solutions.”

Mercedes-Benz UK implemented specific key performance indicators (KPIs) to measure the success of its legal team in achieving key objectives. For instance, it has specific targets for delivering training. KPIs assess how many people across the company both attend such training and how satisfied they are with the quality. From this, they quickly discovered that while the

“We took a long hard look at our internal costs and the amount we were spending with outside counsel and saw an opportunity to make significant changes to the way we deliver legal services to the group,” said Rio Tinto’s managing attorney Leah Cooper. “We have developed a ground-breaking legal model with CPA Global that will generate tremendous savings.”16

While US corporates are outsourc-ing more work than their UK coun-terparts, proportionally, the levels are not that far apart. Some companies are asking their procurement teams to identify LPO providers to perform transactional legal work so that the in-house legal department can focus on more specialised activities. In other instances, legal departments are using LPO providers instead of more expensive outside counsel for certain legal tasks.

Similarly, law firms, either on their own accord or by instruction by their clients, have started to outsource. Allen & Overy (A&O) was the first magic circle firm to outsource legal work to reduce overheads. The

firm partnered with LPO provider Integreon in 2009 to outsource basic litigation document review to teams in New york and Mumbai, in what could generate a 30-50 per cent cost saving. Integreon says it undertakes work for 32 of the 50 biggest law firms, including magic circle firm Clifford Chance and national firm DLA Piper, and 11 of the world’s biggest companies.17 That same year, The Lawyer revealed Pinsent Masons became the first firm to outsource work normally conducted by UK-based lawyers to a dedicated offshore team through a deal with LPO company Exigent (22 June 2009), while Clarke Willmott launched an LPO pilot in its Birmingham office with the aim of rolling it out across its UK network (12 October 2009).18 More recently, Allen & Overy and Herbert Smith centralised non-core support functions in the lower-cost location of Northern Ireland.

As a recent Legal Week report shows, there is a healthy, if conserva-tive, approach to LPOs (see box, ‘LPO benchmark survey’, p64). n


training quality was deemed good, attend-ance was poor. The team is now looking at bringing in new targets around the “volume of commercial contracts dealt with, speed of turnaround and outcome”, as well as team and individual scorecards.21

“We manage our department by a set of principals, rules and tools,” says Jeffrey Carr, senior vice president, general counsel and secretary for FMC Technologies (see full interview on p95). “If our lawyers do not follow these then they take a hit on their compensation – either in their annual review or in their bonus calculations.

“you can be an excellent lawyer, but frankly this is just the price of admission. We don’t hire anything but excellent lawyers, either in-house or externally. To be an excellent lawyer at FMC you also have to be a manager. A large part of our evaluations is based on how our lawyers follow these rules.”

David Blanco was for five years head of the law and patents department for the CropScience business of Bayer Group in Japan (see full interview on p15). He agrees that it is important to develop a feedback-oriented communication culture.

“I learnt the value of proactively giving and receiving one-on-one feedback, organising team-building activities, and conducting regular quarterly meetings with my team. This was essential for allocating work and resources, as well as ensuring the team understood and accepted my vision,” he says.

Some of this may seem like common-sense, but in legal teams that have grown relatively quickly in recent years, in a direct but sometimes piecemeal and reactive response to the needs of the business, it can be easy to forget that one of the most important elements of effective management is treating the

department as a team, with its own strategy, united vision and objectives. Such goals need to be agreed and communicated effectively. Only then can they be tied into specific KPIs so that success can be measured.

As we have seen in this chapter, the real challenge of managing a law depart-ment may actually lie with an internal review. That’s when the team will need to decide how it is going to be structured and how it is going to resource/allocate the work. There is an awful lot of change going on in this respect, and legal teams and in-house lawyers are by no means agreed on the best way forwards. Some see law departments increasingly out-sourcing their legal work; others think their department needs to hold onto high-value work, and use it as part of a broader strategy to demonstrate value to internal clients.

One thing is clear, though. Senior in-house lawyers need to decide on a strategy, communicate it to their teams and manage their people accordingly. That will help align the team with the law department’s objectives, which in turn will enable success to be more easily measured. Ultimately, a successful team will be its own PR for attracting talented lawyers. n

References1. Junior Lawyers, The Law Society

(http://juniorlawyers.lawsociety.org.uk/node/528)


3. Ibid.4. Anderman, J.M., ‘Going In-House



and the Effect on Work/Life Balance’, published by Corporate Counsel, March 2011

5. Ibid.6. Earnings and work of corporate

counsel in 2007-08, The Law Society (http://www.lawsociety.org.uk/aboutlawsociety/whatwedo/researchandtrends/research-pubs/view=researchpubsarticle.law?PUBLICATIONID=411265)

7. Anderman, J.M., ‘Going In-House and the Effect on Work/Life Balance’, published by Corporate Counsel, March 2011

8. ‘The 2011 GC Compensation Survey’, Corporate Counsel, July 2011

9. Corporate Counsel - A Profile, June 2008, The Law Society (http://junior-lawyers.lawsociety.org.uk/node/528)

10. ‘In-house salaries fall for newly quali-fieds, Law Society Gazette, June 2010

11. Ibid.12. Legal Process Outsourcing sup-

plement, Legal Week, May 2011 (http://www.legalweek.com/digital_assets/2897/LWIBenchmarker-May2011.pdf)


14. Ibid. p2715. ‘Offshoring Legal Services to India’,

Value Notes (http://www.sourcing-notes.com/content/view/71/54/)

16. http://www.cpaglobal.com/newlegal-review/3384/lpo_rise_unlikely_sway_uk_staf

17. Dean, J, ‘How legal process outsourc-ing is changing the legal landscape’, Law Society Gazette, February 2010, (http://www.lawgazette.co.uk/in-

business/a-first-hand-look-a-legal-process-outsourcer-provider-india)

18. McLeod-Roberts, Luke, ‘A&O signs outsourcing deal with LPO provider Integreon’, The Lawyer, 2009 (http://www.thelawyer.com/1002662.article)

19. ‘Case study: Liz Kelly, GC at Nation-wide Building Society’, published in ‘From in-house lawyer to business counsel: A survey and discussion paper by Nabarro LLP’, page 9

20. ‘Savings Grace: Liz Kelly, Nationwide Building Society’, The Lawyer, May 2011

21. ‘Case study: Iain Larkins, GC at Mer-cedes-Benz UK’, published in ‘From in-house lawyer to business counsel: A survey and discussion paper by Nabarro LLP’, page 15



PaRT I: ChaPTER 3 – (aRTIClE) aTTRaCTINg aND RETaININg TalENT

Scott Gibson, a partner at legal recruit-ment consultancy Edwards Gibson, looks at the particular recruitment and retention challenges facing in-house legal teams.

LAWyERS ARE expensive; they epitomise high-value human capital. If you are the head of legal in a commercial concern you will doubtless be aware that your department is usually the most, or among the most, expensive per-head cost of any in the organisation. This axiom, combined with the fact that legal is nearly always perceived as a cost centre in most companies, makes justifying existing legal headcount, let alone trying to increase it, politically problematic for heads of legal. Unfortunately, as the need for quality in-house lawyers continues to increase, so too will the challenge of justifying legal headcount and ensuring your lawyers are paid ‘market rate’ compensation relative to their law-firm peers.

The growth of in-house commerce & industry legal departmentsOver the past decade the number of qualified lawyers within commercial organisations and financial institutions in England and Wales (defined by The Law Society as Commerce & Industry (C&I)), has grown at an astonishing rate. In the UK, between 2000 and 2010 the number of solicitors with practicing certificates in C&I grew by more than 140 per cent so that by 2010 nearly 11 per cent of all qualified solicitors were working in-house in C&I1. Moreover, whereas 15 years ago the majority of in-house lawyers in the

UK were sole counsel, today that applies to less than a quarter of legal departments.

Regardless of what happens in the wider economy the number and propor-tion of lawyers in C&I, relative to those in commercial law firms, will continue to increase for the foreseeable future because of three main reasons:

1. Increased regulation, in particular large set-piece governance legislation – such as the UK Bribery Act (2010) or the US Sarbanes-Oxley Act – has demanded that companies review their legal risk;

2. Increased enforcement of pre-existing regulations, as UK and European regulators are now imposing severe sanctions on companies and, crucially, individual directors and officers; and

3. Cost. Generally, but not always, in-house lawyers save costs by reducing external legal spend on law firms.

The importance of quality over costThe traditional role of the in-house lawyer is primarily to save costs. If the cost of necessary external legal spend (on law firms) exceeds the projected compensa-tion of an in-house lawyer, most finance directors would agree there is a prima facie case for hiring or maintaining the latter. Of course, commercial lawyers will often save costs in a much more funda-mental way; depending on the organisa-tion, a well-drafted contract can save hundreds of millions of pounds (although this may never be tested in court if the

aRTIClE aTTRaCTINg aND RETaININg TOP TalENT



contract is truly watertight). Thankfully over the past 20 years there has been a move away from the simple cost-saving criteria above and it is increasingly recog-nised by more sophisticated organisations that the real purpose of an in-house lawyer is to:

(i) Speed up management decision-making processes;

(ii) Increase management options; and, most importantly

(iii) Reduce legal risk.

In large part, this shift has come about because the sanctions, both civil and criminal, imposed on individual directors and officers of companies has forced management to focus on the hiring and retention of quality in-house legal and compliance personnel and on what their real function should be. Indeed, it is ironic that a good in-house lawyer will often significantly increase external legal spend, at least in the short term, because, by fully understanding the business, they discover ticking time bombs (in the form of illegal practices), which require outside legal assistance to remedy.

In spite of the above, most commer-cial organisations still expect their legal departments to justify themselves on a costs basis and this remains a significant challenge for heads of legal.

where to find talentIn the UK, nearly 90 per cent of qualified solicitors working in C&I have previously worked in a law firm and currently fewer than three per cent of trainee solicitors are in C&I. Because most C&I teams remain very small (in the UK, 70 per cent have five or fewer legal personnel2) by far the most common place to source talented lawyers is from law firms. This will

remain so for the foreseeable future. This inexorable link has profound implications for both hiring and retaining specialist lawyers and, for that reason, it is important to keep abreast of developments in law-firm compensation because, however obliquely, this sets C&I compensation in both the UK and the US.

Benchmarking compensationBecause in-house legal departments are generally small and legal hires relatively infrequent, one of the greatest difficulties is accurately benchmarking salaries for existing and new legal personnel.

you should not overly rely on industry salary surveys such as those produced by the larger recruiters or benchmark-ing companies. Unlike with law firms, the range of factors affecting in-house legal compensation is so varied as to make drawing a line of ‘best fit’ on a graph almost impossible. The result is that surveys of in-house salaries tend to be less accurate than those for law firms. Moreover, law firms will generally make salary information public or will have reliable, detailed data to respond to surveys; the same is generally not the case for in-house legal departments unless they are highly localised and ‘of a type’, such as investment banking, whose legal de-partments tend to be large and comprised of capital markets lawyers based in major trading centres.

For accurate benchmarking you will need to take into account: industry sector, the size of the organisation (this only really impacts senior-level compensation), the physical location of the role, seniority (or scope of the role) and, increasingly, the specialisation of the lawyer you require.

Of these factors most will be self-evident; however, specialisation is



one that usually takes some explaining to those HR teams inexperienced in legal hires. Twenty years ago C&I lawyers were nearly always hired to undertake and oversee commercial contracts. While this is still largely true, it has become more common than not for C&I departments to hire specialist lawyers. The reason for this change is the same as that driving the improvement in quality of all in-house legal teams – increased and sustained governance legislation and enforcement by regulators. Moreover, legal risk is elevated with the increasing complexity of the products and services being offered by corporations.

The relative cost of specialist lawyers is determined by two main factors: (i) supply and demand; and (ii) the com-pensation paid to the specialist in private practice law firms.

Exceptions aside, the main problem with hiring legal specialists is that they tend to be found in law firms that typically pay at least ten per cent more than in-house for virtually all industry sectors, except investment banking and certain niche financial services.

Among more experienced company officers and heads of legal the need for ‘A-grade’ specialists is increasingly acknowledged – so much so that it is now not unheard of to find a specialist within a legal department earning more than the general counsel or head of legal.

Benchmarking and law firms From a retention and benchmarking per-spective, it is as well to remember that the concept of assistant level lockstep in law firms (where compensation automatically rises with every additional year of post-qualified experience) is still largely intact, so that, most years, compensation at UK and US law firms increases faster than at

even very high performing corporations. Generally, even where lawyers moving in-house are initially paid the same as they are in private practice, after two or three years their compensation inevitably starts to trail that of their law-firm contemporar-ies – a situation that if unchecked can lead to morale issues and elevated attrition rates in your department. In relation to incoming hires, a very real danger in failing to secure sufficient budget is that you will get a second rate lawyer who, although initially less expensive, will eventually need their work corrected by others within the depart-ment or an outside law firm. Worse still, they may fail to undertake their primary role – reduction of legal risk – for which you will ultimately be held responsible.

how to benchmarkBecause benchmarking of compensation is very important and should not be confined to ‘incoming hires’ you should take this as a regular part of your role and avoid out-sourcing it to HR. After reading any generic salary surveys in relation to law firm or in-house compensation, you should take time to speak to industry rivals, peers and switched on recruiters. After you have done this, present your edited findings to the business – ideally, you should try and get another company officer, such as the FD, onside before presenting your findings to HR. If recruiting, always benchmark before the budget is set because the alternative will often be a time-consuming recruitment process followed by the withdrawal of the headcount, or the politically clumsy need to apply for additional budget.

Retention Usually, the undoubted lifestyle benefits of C&I outweighs, at least for lawyers already pre-disposed to move in-house, a ten to 15 per cent compensation differ-


PaRT I: ChaPTER 3 (aRTIClE) aTTRaCTINg aND RETaININg TalENT

ential with law firms. However, once in, the (generally small) size and necessarily flat structure of most C&I teams makes meaningful promotion for lawyers impos-sible. This is probably the single greatest source of lawyer dissatisfaction and takes considerable management imagination and input to overcome.

getting buy-in from the businessThe challenges in protecting yourself from both voluntary and involuntary departures of good people are vast and there is, of course, no simple answer. Nevertheless, one factor that can help mitigate against both is to prove your department’s value to the business. Essentially, this involves you sitting down with the main company officers and business heads, and agreeing with them what it is they want from their legal department. Once you have this you can formalise these objectives against measurable departmental benchmarks or key performance indicators (KPIs). you can then set agreed objectives for each of your legal personnel based on these KPIs and measure them against these criteria.

If properly implemented, the approach outlined above can be hugely energising both for your lawyers and, I would suggest, yourself. Moreover, it elevates the prestige of the department – automatically highlighting its all-important ‘value’ to the business. Once established, you will find this assists in retention, recruitment, general morale and operational efficacy. However, a more detailed explanation of this process is beyond the scope of this article.

There are many claims made for the benefits of this form of proactive manage-ment; some notable legal departments within sizable global companies have

extrapolated this further – with the result that they purport to be net sustainable revenue generators for their organisations3.

ConclusionUnfortunately, the uniquely expensive per-head cost of non-revenue-generating legal departments makes your role of attracting and retaining top talent particu-larly challenging and labour intensive. It requires that you spend a great deal of down time educating the business and your own team as to the real value of the legal department. It requires you to:

1. Regularly benchmark your team against both market peers and law firms;

2. Constantly ‘prove’ your value to the business by demonstrating to manage-ment that the legal department speeds up management decision-making processes, increases management options, reduces legal and reputational risk and, where possible, saves cost; and

3. Agree with management what it is they want from their legal team, and then establish KPIs and set measurable objectives.

None of this is easy and it will, at times, appear a completely thankless task. However, lawyers rarely leave their position for money alone – by far the most common reason is because they feel ‘undervalued’. Indisputably, legal departments that are headed by individu-als who have taken the actions above, find that they have lower attrition rates and exert a much stronger pull for incoming lawyers who sense that the department is regarded as a ‘value add’ rather than a ‘cost’. n



References1. The Law Society, ‘Trends in the

solicitor’s profession Annual statistical reports, 2000-2010’

2. The Law Society, 2008, ‘Corporate counsel – a profile’

3. Martindale-Hubbell/ LexisNexis 2010: ‘The Profitable Legal Department’


THE GLOBAL economic downturn has reshaped the legal profession, as law firms and corporate legal departments have shed thousands of lawyers to contain costs. In previous recessions, these jobs returned once economies recovered, but there is a general consensus that the legal landscape will look very different this time around.

New York Times columnist and author Thomas L. Friedman recently posed this question: “What if the crisis of 2008 represents something much more funda-mental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply un-sustainable economically and ecologically and that 2008 was when we hit the wall – when Mother Nature and the market both said: “No more.”1

Frankly, the legal industry, like most corporate companies, has learned to do more with less. This is being fuelled by legal departments that are demanding cost-efficiency and actively seeking lower rates. As discussed in Chapter 3, to help drive down costs and reduce legal spend, many legal departments are outsourcing commodity legal work and using contract lawyers for one-off projects.

law firms must respond to market demandsLaw firms must get better at mirroring the many qualities that are commonly found in-house – better understanding of clients’ products, priorities and finances, and more commercial sense. Legal marketing consultant Larry Bodine sums this up perfectly in an excellent blog post.

He says firms that survive the recession will:

n “Have ‘customers’ not ‘clients’.n Offer flat fees per project or per

procedure.n Have rates that are markedly lower

than in 2008.n Will routinely produce budgets for all

legal work.n Be run like real businesses, which

know their costs, can calculate a profit margin, and offer customers “just in time” services at the best price possible.

n Realise that customers are fickle and expect personalised service.

n Have lawyers that know their clients’ businesses, their goals, strategies and objectives, and work to help them make more money or cut their costs.”2

value based pricingThe economic downturn has led to a shift in balance in the client/law firm relationship, with a client-led market fast becoming the norm. The days of the billable hour as autocratic appear numbered as businesses demand more value, accountability and creativity from law firm fee structures.

Hourly billing was originally justified because of its objectivity and efficiency. That is, hourly billing allows clients to compare the rates of attorneys/lawyers and know in advance how much they will be charged for time expended. And it has some advantages (see Figure 2.5, Chapter 2, p30): it’s simple and easy to break down on a bill and provides the ultimate

PaRT I: ChaPTER 4 – MaNagINg ThE ExTERNal COuNSEl RElaTIONShIP

ChaPTER 4: MaNagINg ThE ExTERNal COuNSEl RElaTIONShIP



comparison tool between firms. But it has also come in for endless criticism, which has intensified in recent years: it doesn’t deliver value for money (see Figure 2.6, Chapter 2, p31) nor reflect the true value of the legal service provided; it encourages inefficiency and padding; and, it’s an open-ended cost (see Figure 4.1).

To make the move away from exclusive hourly billing, legal work needs to be seen as a service provided by the law firm, not hours spent doing the work. Those ‘services’ need to be broken down and a value attached to each. This puts alternative fee arrangements (AFAs) firmly back on the agenda, driven by a need on both sides for an economic efficiency not necessarily found under the billable hour.

Slow adoption of aFasAlternative fee arrangements take many forms – fixed fee, success/conditional fee, capped fee, value-based fee, risk collars, portfolio pricing, capacity-based pricing, etc. And while there are clear signs in-house

counsel have started to explore many of these options (see Figure 4.2, p80), the uptake has been slower than predicted.

There are many reasons for this. Respondents to CCR’s AFA survey point to numerous barriers, but chief among these are “Reluctance by external counsel”, “Difficulty in how to price and structure” and “Unpredictability of matter type”. A lack of basic understanding also gives rise to numerous concerns. Which AFAs suit which types of matter? What is the potential impact on the legal depart-ment and its internal processes? Also, hourly billing is based on years of metrics and data, AFAs are not, so there is a lack of information to measure the potential profitability of such arrangements.

Rees Morrison, who has advised in-house counsel for the past 24 years on management issues, suggests several reasons why in-house counsel are not hitting their external providers hard. In particular, he points to a typical GC argument: They like the services they get

which of the following do you deem the weaknesses of hourly billing?


u



a new dawn?According to a new report from the Financial Times and the Managing Partners’ Forum (MPF), law firms are failing to understand their clients’ needs, whilst sig-nificant gulfs in expectations risk straining the client/adviser relationship. Starkly illustrating this finding is the fact that while 75 per cent of CEOs surveyed say they are primarily responsible for selecting a law firm, less than five per cent of law firms surveyed see building links with C-level executives at their clients as important.

Entitled ‘A New Dawn: Lessons for Law Firm Management in the Post-crisis World’3, the report is the result of a collaborative global research project by the Financial Times and the MPF. It is based upon a survey of partners and senior executives at 100 law firms and 333 clients (including many at C-level) and explores the effectiveness of the corporate relationship between law firms and their clients by comparing the views of both audiences across a range of common attributes (the full report and supporting materials can be downloaded free at http://ftcorporate.ft.com/resources).

Other contrasts revealed by the research include:

n 50 per cent of clients consider the ability to solve problems quickly as the most important factor for a healthy client/adviser relationship. However, this is something that only a third of law firms regard as a top priority.

n Clients consider a broad range of attributes when instructing law firms on complex work, including an un-derstanding of the client’s industry, transparency in pricing and interna-tional expertise. By contrast, law firms

believe their clients see the attributes in much narrower terms, overly focussing on legal expertise.

n CEOs and Chairs are far more influ-ential in selecting legal advisers than most firms appreciate. Seventy-five per cent of this audience described themselves as primarily responsible for selecting a law firm, compared with just 11 per cent choosing general counsel. The C-Suite at clients is also seven times more likely than law firm management to regard C-Suite mutual engagement as an important factor in a healthy client/adviser relationship.

n Firms have yet to fully embrace a digital world. While 46 per cent of firm leaders agree that their firm is being encouraged to share its know-how with clients through non-traditional channels, more than 50 per cent of clients consider law firms to be ineffective in their use of social media and over a third of clients say firms’ use of intranets, extranets and digital media is ineffective.

n Neither firms nor clients see outsourc-ing as being a net benefit for the client/adviser relationship.

“Clients are looking for deeper, more strategic conversations and law firms could do more to understand the nature of each client’s business and its specific chal-lenges,” says Simon Lord, head of B2B marketing, Financial Times.

Sir Nigel Knowles, MPF chair and joint CEO of law firm DLA Piper, echoes this view: “This survey is a clear call to arms to management across all professional firms to get to know their equivalent at clients as part of a leadership strategy to shape the overall client experience.” n



from firms and feel the value delivered for the cost paid is acceptable, particularly as quality and outcomes matter more than cost4. Morrison adds that some companies make poor excuses for changing the status quo, with board members favouring certain law firms and blocking the law department from taking measures, or maintaining that their legal spend is not large enough to wield much influence over firms.

Perception of valueWhen exploring the dynamics of any in-house/external counsel relationship, the thorny issue of how legal services should be priced invariably comes to the fore. The dilemma for the law firm lies in pricing services that are based on the seemingly unquantifiable expertise and acumen of their partners. For the client, how do they know that they are getting value for money? It is a challenge that lies at the heart of why the imperfect hourly

billing approach has been accepted for so long.

According to Jay Shepherd, who runs Prefix, a firm that helps lawyers value and price legal services, the current business model (created in 1919 by Hale and Dorr) bluntly rewards lawyers for the sheer mass of hours worked, without regard to the profitability (or even quality) of the work. “The old model also creates perverse incentives: associates are encouraged to bill more hours in total, while partners are often responsible for keeping clients’ bills limited to a certain amount. Staffing decisions also fall prey to this. Where it might be the right decision to have three lawyers on a particular call, that often doesn’t happen because the particular client won’t pay to be ‘triple-billed’.

“The problem for the client is that the old model creates uncertainty and distrust. Uncertainty because the client doesn’t know what it is going to be charged to have its problem solved; it has to rely on

To what extent have you adopted any of the following payment mechanisms?

1 = Not at all , 2 = <25% , 3 = 25-50% , 4 = 50-75% , 5 = >75%




estimates that are often optimistic. Distrust because it shifts the focus to the time spent, and encourages clients to scrutinise bills instead of focusing on the real value of the knowledge they buy.”

Many law firms are claiming to offer alternatives but in reality these are only variations on the billable hour: discounted hourly rates, with/without bonus, and volume discounts, for example. None of these address the crux of the matter – the need for a fee structure based on value and not on time. Conversely, discounted rates are still heavily used by corporate counsel (see Figure 4.1).

According to Jeffrey Carr, senior vice president, general counsel and secretary for FMC Technologies (see full interview on p95), an alternative fee is one that is based on a budget that matters. “A fixed price is a budget that matters because if you go over it you do not get more money, if you stay

under it then you get more than you would normally get for that amount of effort.”

Future adoption of aFasA survey in 2010 by Eversheds5 suggests the recession has accelerated change in the legal sector by 10 years and that these changes include a move towards value billing. In 2008, the first year of its ‘Law firm of the 21st century’ report, Eversheds found that only 22 per cent of clients and 48 per cent of partners saw value billing as a trend for the future. Two years later the survey found that 86 per cent of clients and 88 per cent of partners use value billing ‘sometimes’ or ‘often’.

Interviews for this report support these findings, with most senior in-house lawyers agreeing that AFAs are being more widely used. Indeed, respondents to Corporate Counsel Research’s AFA survey highlight numerous drivers (see Figure 4.2, p81).

which of the following drivers have you encountered/would you envisage encountering in the adoption/implementation of aFas?



FMC’s Carr is a staunch advocate of what he calls value-focussed fees. “The inherent problem with hourly billing is that outside lawyers have figured out that they can maximise revenue without taking much risk... There is also a feeling that everything has to be custom made, but law is no different to other businesses and services (making a machine, providing accounting services, doing engineering drawings, etc) and it can be priced on the basis of value. you have to switch your mindset and say the value of the service is not defined by the number of hours it took; the value is defined by the customers’ perception of what the work is worth.”

FMC has been working with value-focussed fees since 2001, and although Carr would struggle to specify how much money such fees have saved his team in that time (“It’s impossible to measure avoided costs”), he can put forward figures based on the company’s bench-marking against other companies of a similar size in manufacturing. “We spend

about 0.19 per cent of our revenue on legal services. That is significantly below the norm, which is about 0.4 per cent in our sector,” he says (for a complete breakdown of law department metrics, see the ‘Global Law Department Benchmarks study’, conducted by General Counsel Metrics and published in Part II of this report – p135).

Additionally, Carr thinks the value approach has enabled his team to keep a lid on legal spend, despite the growth of the company. “In 2001, FMC turned over $1.8bn – today, revenues have tripled to approximately $4.6bn. In that same period, law firm hourly rates have increased annually by approximately ten per cent, while internal costs have risen five per cent annually. My legal spend in 2001 was $14m, but last year it was $11m. This year the budget is $12m and I expect that we will come in under budget.”

Even where FMC uses hourly billing, there is a system in place to ensure value. The company’s Alliance Counsel Engage-


1 2 3 4 5 6 7 8Antitrust 25% 50% - - 12% - - 13%Bankruptcy & collection - - 100% - - - - -Contract & commercial - 11% 22% - 10% 12% - 44%Corporate governance; Regulatory compliance 11% 35% 21% - 20% - - 13%

M&A; Securities; Tax 24% - - - 14% - 12% 50%Fraud 29% 14% 27% - - - - 30%Health & safety; Insurance & risk 12% 25% 39% - - - - 24%

IP 12% 16% 43% - 14% - - 15%Labour & employment 12% 25% 51% - - - - 12%Litigation & ADR - 21% - 23% 25% - - 31%

which types of fee structure do you see as being most effective for:

1 = hourly billing, 2 = Discounted hourly rate, 3 = Fixed fee, 4 = Success/conditional fee,

5 = Capped fee, 6 = value-based fee, 7 = Risk collars, 8 = Combination



ment System (ACES) starts with hourly billing. In its most simple form, the system pays external firms 80 cents on the dollar, keeping back 20 from the overall fee. At the conclusion of the matter (or annually depending on which comes first) the legal team reviews the service delivered based on several factors (see box, p98). The firm is then paid between zero and 200 per cent of the amount withheld or 80 to 120 per cent of their invoice. This helps ensure value in the hourly bill, says Carr.

John Downing, head of group legal at Imperial Tobacco, also heads up a team that favours AFAs (see full interview, p103). “If you include caps, abort fees and retainers, then about 75 per cent or more of our work would probably come under the banner of AFAs. Our mainstream litigation counsel operates on a fixed monthly fee, which we reassess annually. This means we are more likely to pick up the phone, which improves the dialogue between the company and the firm. For the law firm, this means they get more insight into our business, which is important.

“But we do not sit down at the start of every piece of work and try to agree a fixed fee. We have different methods for different law firms and processes. On an M&A transaction, for example, we like the abort and success fee model, so we share the pain of any aborted transaction. It’s less painful when you know you’ve got a 40 per cent discount – of course, if the deal goes ahead there is an upside, but you just work that into your investment calculation.

“On a bolt-on acquisition or smaller M&A deal, I might be more inclined to opt for a fixed fee. Even on a bigger deal there will be a fixed fee on certain elements of the transaction, such as conducting due diligence or issuing a 10b-5 letter. Law firms are well enough briefed on M&As

to understand what a typical due diligence exercise will cost, for example, and can model it easily.”

Respondents to CCR’s survey point to AFAs being suitable for a wide range of matters (see Figure 4.3, p82).

Managing expectationsBilling and fees are top priorities as they form the very basis for a successful or failed engagement. But nothing is more damaging to the relationship than a client who feels over-charged or gets a nasty shock when the bill arrives. The law firm, meanwhile, may feel understandably nervous of agreeing a fixed fee in an untested market, where it would be all too easy for the matter to run into unforeseen complications.

Carr says there should be no excuses and that law firms should be able to effectively scope out projects in advance. “If a lawyer tells me that he cannot predict how a piece of litigation is going to go, for instance, my reaction is that you are in my office pitching to me to do this work because you have done hundreds of these – I’ve done none. So in the allocation of risk and uncertainty and the time it is going to take, you are in a far better place than I am. And if I pay you by the hour you have no incentive to work efficiently.”

Pharmaceutical giant Pfizer is a well-publicised example of a company that has turned its back on hourly billing. In 2009, general counsel Amy Schulman spear-headed the Pfizer Legal Alliance (PLA), an innovative approach to engaging outside counsel. Now in its third year, the PLA is a partnership of 18 law firms that handle 75 per cent of Pfizer’s legal work. The firms are paid flat yearly fees that cover everything from telephone calls to major litigation to government investiga-tions. At the end of the year, each firm’s



performance is reviewed – those that have collaborated with other firms in the alliance to reach creative solutions are rewarded with bonuses.

The PLA measures performance by using a balanced scorecard approach that evaluates both financial and non-fi-nancial measures. Information on firm and Pfizer’s performance is collected in real time through an online system and used as part of formal mid-year and annual evaluations. Alliance firm members are evaluated by peer firms with whom they work, by Pfizer lawyers and through self evaluation.6

For Pfizer, the PLA has generated costs savings of between 10-15 per cent. But Shulman warns that you cannot approach AFAs halfway. “If you reject the billable hour, you really have to reject it,” she says. “Otherwise you are undermining the very thing you are trying to do.”7

working in partnershipAs discussed in previous chapters, the success of value-based billing requires greater partnership between in-house teams and external counsel – and better project management (see p86). Essentially, both parties have to be in agreement on how the billing will work in advance of the engagement – and each party has to be willing to take a share of the risks involved.

A great example of a partnership is that of Chicago-based law firm Aronberg Goldgehn, which featured in a case study in Inside Counsel magazine.8 What makes this case even more noteworthy is that the firm was somewhat forced into AFAs when a major client sent a letter that was in essence an open-ended RFP (request for proposal). The client wanted to move away from the billable hour, so asked law firms to make their best offer. Of the

35 firms that received the letter, only 15 responded, and Aronberg Goldgehn was successful. The firm subsequently agreed a pricing structure for litigation based on flat fees with a success-based bonus. In one complex case, Aronberg Goldgehn exceeded client expectations by finalis-ing way ahead of schedule. It received a sizeable bonus for its efforts, but was nervous about how the client would react given the fee. John Riccione, the firm’s litigation chair, recalls the moment: “The client called us up that night and said they were ecstatic, but they were worried about whether we thought we did OK. It’s one example of being on the same page with your client and partnering and succeeding with your client.”9

Role of technologyLegal departments should implement new technology to increase the value they provide to their organisations. But the reality for most corporate counsel, unlike private practice firms, is that their companies will have a range of IT infrastructure already in place that does not necessarily suit the needs of the legal department. And this infrastructure can range widely from just a basic network to a sophisticated system incorporating such elements as project management groupware, databases, document manage-ment, records management, intranets, extranets and corporate portals.

As discussed briefly in Chapter 2 (p33), the latest research from the Inter-national Legal Technology Association and Hyperion Research confirms that, compared to other business functions, law departments may be underutilising technology. In their 2011 Law Department Technology Survey, only 16 per cent of respondents said they have a dedicated legal IT budget, 39 per cent submit



requests to the corporate IT budget and 45 per cent have a hybrid legal department/corporate IT budget. When asked about their legal IT budget for 2011, 50 per cent reported the same or reduced budgets.

Technologies widely praised by users, like e-billing, don’t necessarily have high penetration rates. The survey found that 38 per cent are without an e-billing system, which appears to contrast with the general discussions about the importance of managing legal spend.

According to consultant Ron Friedman of Prism Legal, without the business intelligence provided by e-billing, it’s not clear how GCs can intelligently choose and allocate work among outside counsel. Friedman, a non-practicing lawyer, and an active blogger and writer on topics relating to corporate law department management, has long worried that general counsels are not using e-billing software properly. In an article entitled ‘E-Billing Goes to Waste – GCs Flying Blind’10, he wrote: “I would have thought that by now, large law departments would have pooled e-billing data (suitably anonymised) to assess law firm cost-effectiveness and provide ‘how much should it cost’ reference points. Instead, we learn that many companies do not even use e-billing.

“Until outside counsel management becomes data driven, general counsels will be missing huge opportunities to reduce cost.... Next time you hear a GC whine about outside counsel cost, ask him or her (1) if the department uses e-billing and (2) if so, what types of analysis they have run on the data.”11

gCs embracing technologyEmbracing the latest technologies is a formidable challenge for many law depart-ments, particularly those that have no

dedicated legal IT budget or are having to make do with significantly reduced budgets. But for many legal departments, technology has helped increase productivity and reduce costs, and is changing the relationship dynamic with outside counsel.

Richard Tapp, Carillion’s company secretary and director of legal services, is a firm believer in using technology to improve management processes and the company’s relationship with external counsel. “We have an online portal, C-Net, which allows us to communicate openly with all the firms in our Network. We are taking our matter-management system to a new level with a state-of-the art resource that will also provide e-billing and a range of other services for us. Currently in implementation, this will be ready in 2011 and will continue to help us build more effective, more efficient – and by implica-tion – more cost-effective relationships with the Network.

“In other areas, we have introduced a single, real-time system to allow all professionals involved with our claims process to view our liability status and communicate and resolve issues accordingly. This will help us better allocate resources to minimise claims, manage out claims earlier and more efficiently, and reduce the inputs needed from all parties – reducing cost and allowing us to learn from our experiences.”

Each September, Inside Counsel publishes its ‘IC 10’, the annual winners of the magazine’s top ten innovative law departments. Among the winners, a few are noteworthy for their use of technology: AGCO, a Fortune 500 farm-equipment manufacturer; NetApp, a storage and data management company; and Newegg, an online retailer of IT and electronic products.



Newegg

“Newegg Inc. decided to bring document review in-house in order to cut down on discovery costs. Seeking to defend itself from a suit from a patent troll, Newegg’s legal department collaborated with an e-discovery vendor and outside counsel to bring the process in-house. They spent $17,000 less than they would have if they had outsourced the project to a document-review provider.”12

AGCO

“Debra Kuper, VP, general counsel and corporate secretary at AGCO, developed a preferred-provider network of law firms that were open to flexible billing. The project saved the company an average of $4 million per year.”13

NetApp

“The company recruited law students to redesign and develop its website, as well as build an internal social-networking site for NetApp employees. The Web 2.0 initiative allows in-house lawyers to create profile pages, communicate with other lawyers and better manage their documents and workload.”14

The full list of winners can be viewed here: http://www.insidecounsel.com/2011/09/01/slideshow-the-2011-ic10-winners

legal project managementLegal project management (LPM) is the application of the concepts of project management to control the provision of legal services. It modifies project management techniques and practices to fit the legal world.

Legal marketing and technology expert Timothy B Corcoran describes the process clearly in his ‘Business of Law’ blog:15

“Simply put, it’s the process of adapting business process improve-ment, resource allocation and predictable budgeting techniques to the delivery of legal services. Some lawyers believe that the practice of law is not like other professions or business disciplines, and that therefore project management prin-ciples which work in other areas do not apply. These lawyers are wrong. That’s not to say one can manage a complex legal matter as if it were an automotive assembly line. But every legal matter doesn’t have to be treated as a completely unique confluence of steps that has not occurred before and will not occur again. Each of these steps can be broken down and analysed, and when the opportunity arises for this step to be included in an engagement, there can be a greater understanding of the cost drivers. Understanding the assumptions that influence the cost of delivering legal services is critical to setting fees, and clients understand this. After all, they go through a similar process when establishing their own cost and revenue budgets.”16

FMC’s Carr is also an advocate of project management. “We are very rigorous in the use of project management tools and techniques. We call our particu-lar approach one degree law. This signifies a removal of the barriers to the efficient delivery of right size legal services. There are two key elements to this philosophy. One is performance based pay. The second is rigorous matter management (and that encompasses billing, status administration, reporting, benchmarking, etc).

For each engagement, GCs should make sure all parties are aligned with the agreed goals, timelines and how and when updates will be communicated. These can then be referred to as the matter progress-



es, and at the end to assess how well the engagement went. This process includes discussion in advance over who will be staffing the matter – it may be the case that associates are cheaper but not if they require an undue amount of supervision from the in-house team.

Andy Williams, group business manager finance & projects, DLA Piper, provides a law firm perspective: “AFAs have undoubtedly driven the need to develop pricing and project management skills in the industry. Without these skills the risk of loss making is high and if you do not understand the drivers of profitabil-ity and how they impact your practice then you are operating more by luck rather than informed judgement.”

There is also a difference between being kept abreast of matters and constant supervision – expectations about preferences on communication should be set out. How should the law firm present their advice? Is an executive summary more preferable to begin with instead of reams of legal advice? It may be obvious

to an overburdened general counsel that they are not going to have time to read through a thick document but when a law firm is covering every possible legal eventuality, this is sometimes what they get.

Moving from service provider to trusted business advisor Many GCs view their external law firms as an extension of the in-house department. Such a notion suggests a cohesive legal team, with external advisors meshing into the fabric of the corporate law department as and when needed. For this to succeed, however, external law firms must be aligned with the company’s cultural values.

There are also steps general counsel can take to help cement these relation-ships and ensure mutual respect. Inviting external counsel to annual company conferences is a great way of team-build-ing and provides an opportunity to share company strategy. This also puts the onus

Relationship breakersn Money matters: misunderstandings over fees and billing are a major cause

of disenchantment. n Arrogance: a ‘Them vs. Us’ mentality. Internal and external teams need to

work collaboratively.n Lack of commercial nous: the law firm needs to understand what keeps their client’s

management board awake at night, and take a proactive approach in helping to solve it.

Relationship buildersn Trust: strong personal relationships developed through mutual respect. n Reactivity and effectiveness: quick initial response from the law firm; diligence and

determination to find the right resolution. n Transparency: the need for a client to let their law firms into the business, the need

for the law firm to be accountable.



on external providers to innovate and be more proactive.

Whether communicating company strategy is carried out in such forums or on a more individual level, it is integral to the process of moving the external lawyer away from simply being a service provider.

Inviting law firms on-site to meet directly with the management team is also hugely beneficial. This will provide them with a more rounded view of the business and demonstrate that the company takes an active interest in its legal advisors.

It goes without saying that a good law firm should not only understand their client’s business but also have a solid grasp of the regulatory and industry challenges it faces. The job for the external lawyer is to help their client make a decision and not simply state what the law is. They should be prepared to go the extra mile, offering genuinely useful ‘value added’ services, whether providing associates for secondments, free seminars on pertinent legal matters or management consultancy.

Finally, it’s worth remembering that developing supplier relationships is a two-way process. With many corporate counsel having had experience of working in private practice, it can only benefit the relationship if they remember the pressures external lawyers are also under. n

References1. Friedman, Thomas L, ‘The Inflec-

tion Is Near?’, New York Times, 2009 (http://www.nytimes.com/2009/03/08/opinion/08friedman.html)

2. Larry Bodine, Law Marketing Blog, ‘Recession Will Forever Change the Legal Profession’, March 2009 (http://

blog.larrybodine.com/2009/03/ articles/current-affairs/recession- will-forever-change-the-legal- profession/)

3. ‘A New Dawn: Lessons for Law Firm Management in the Post-crisis World’, Financial Times and the Managing Partners Forum

4. See Rees Morrison’s Law Depart-ment Management blog at http://www.lawdepartmentmanagementblog.com

5. ‘Law firm of the 21st century – an Eversheds report’, at http://www.eversheds.com/21stcenturylawfirm

6. Association of Corporate Counsel, Pfizer Legal Alliance: Balanced Scorecard Approach (http://www.acc.com/valuechallenge/upload/Pfizer-Sample-PLA-balanced-scorecard-designed.pdf)

7. Inside Counsel, ‘The 2011 IC10 winners’, September 2011 (http://www.insidecounsel.com/2011/09/01/the-2011-ic10-winners?page=3)

8. ‘A Matter of Time: Part One in a Two-Part Series on Alternative Fee Arrangements’, Inside Counsel, February 2010, (http://www.inside-counsel.com/2010/02/01/a-matter-of-time)

9. Ibid.10. Friedman, Ron; Prism Legal (http://

www.prismlegal.com/wordpress/index.php?cat=7)

11. Ibid.12. ‘The 2011 IC10 winners’, Inside

Counsel, September 2011, (http://www.insidecounsel.com/2011/09/01/slideshow-the-2011-ic10-winners)

13. Ibid.14. Ibid.15. Corcoran, Timothy B, Corcoran’s

Business of Law Blog, ‘Legal Project Management’, March 2010



(http://www.corcoranlawbizblog.com/2010/03/legal-project-manage-ment/)

16. Ibid.



PaRT I: ChaPTER 4 – (aRTIClE) EvERShEDS CONSulTINg

AS LEGAL costs continue to climb, financial pressures are leading many companies to instigate spend reduction programmes and demand more from their legal functions. In a lot of instances, the message to general counsel (GC) could hardly be clearer from senior manage-ment: “Get the costs of your legal department down and under control or face the consequences.” Unfortunately, this is forced upon GCs who often lack the time, data and analysis to justify their own internal spend.

a starting pointMeasuring value is often seen as a challenging process for an in-house legal team. There may be concerns around resourcing, the introduction of bureaucracy or inadequate returns for the department. But it does not need to be this way. Simple and practical approaches with the right systems and collective approach can be introduced to clarify objectives, improve performance and measure the value of legal spend. This will make it easier to run an in-house legal department, and may also make it simpler to identify areas where GCs and other senior in-house lawyers can attain leadership.

The rest of this article will examine:

n Shared challenges and ways to reduce legal spend;

n Behaviours to enhance client service delivery;

n Increased operational effectiveness;

n Legal spend health check and moving from cost to profit centre.

Increasingly, legal teams and law firms are compared, evaluated, judged, categorised and ranked, with best practices subsequently born. It’s the fated con-sequence and side effect of a rich and opaque market coming to maturity.

To be clear, there is no single formula or template for measuring value. Business strategies, operational structures and corporate cultures vary enormously, and measurement needs to reflect this. However, there are common themes many companies, including the likes of Tyco and DuPont, have implemented very success-fully, which provide some starting points.

Insight leads to better business decisions It’s no surprise that one of the most prevalent trends in the legal industry during the past few years has been the adoption of legal management systems and

aRTIClE

gETTINg MORE FROM yOuR lEgal SPEND – EMERgINg TRENDS aND BEST PRaCTICES

By Eversheds Consulting

“Metrics are an integral part of

the continuous improvement

process, helping ensure that

objectives are being met and

that the organisation is succeed-

ing, and, just as importantly,

identifying which programs are

not working and where changes

should be made.”

Thomas L. Sager and Gerald G. Boccuti – DuPont


PaRT I: ChaPTER 4 – (aRTIClE) gETTINg MORE FROM yOuR lEgal SPEND

implementing the right dashboards. This not only allows legal departments to efficiently process and approve spend, but also to budget matters and benchmark internal and outside counsel performance, which ultimately drives the right behaviours.

According to research, over 30 per cent of Fortune 500 legal departments now employ some sort of legal spend management system. However, we would question how effectively they are utilising these systems – when introduced correctly and with the right framework, they can deliver a return on investment in three core areas: process improvement; outside counsel guideline compliance; and, proactive data analysis for performance measurement and approval.

legal project management moving in-houseAt a time when many organisations are demanding more from their in-house legal function, the need to keep control of legal budgets is vital. Achieving quality in a legal department requires a systematic approach to define quality and measure whether it has been achieved.

At the sophisticated end, companies are beginning to utilise and adapt man-agement methods, such as Lean Six Sigma, with great success. These tools have helped redesign legal functions so that they are able to demonstrate real and measurable value to senior management.

The key is redefining the value of work. This will enable GCs to turn matters that are currently seen as high-end strategic into ‘business as usual’.

Culture change may also be crucial in creating a cohesive team where staff are productive in the roles they are given and the team is seen as a proactive part of the company, rather than a drain on costs.

getting the right relationship with outside counselStrategic relationships with outside law firms can provide the cornerstone around which the corporate law department can build programmes and initiatives to achieve significant cost savings, improve legal services and deliver better bottom-line results. Partner firms should be viewed as an extension of the legal department and part of the team. Historically, this relationship has been somewhat tenuous in nature. On the one hand, both parties share a common goal – to effectively manage matters and achieve a successful outcome by applying their legal expertise. On the other hand, their goals and priorities can conflict, especially when it comes to cost reduction and utili-sation of resources.

Corporate counsel should not simply hand over matters to outside counsel with little to no oversight. Internal teams should take control over the process and manage matters internally while effectively partnering with outside counsel to mitigate risk and reduce costs.

To accomplish these goals, in-house counsel must clearly and effectively communicate their needs and priorities to outside counsel. They must also provide regular feedback to improve results and maintain productive relationships.

Performance metrics – becoming what you measureAn area of particular importance is to set value-based performance measures that are aligned with the business. US and UK cultures are generally fond of rankings and statistics and have been dealing with the phenomenon for a number of years, but now it is also hitting the rest of Europe at full strength. Metrics, numbers, bench-marks, ratios and targets will become



increasingly important in the management of both internal and external law firms.

Of course, key performance indicators (KPIs) should be meaningful and relevant, but you would be surprised to hear this is often not the case. KPIs should be used for learning and improvement, and extracting meaningful insights to inform evidence-based decision making.

As with all the above sections, one thread is clear – metrics must be clearly linked to strategy. Only when the senior management team has agreed on the content of the strategy map should they progress to the design of metrics which are company specific. The purpose of metrics and related targets is to monitor progress towards the achievement of strategic goals, and ultimately the delivery of the organisational strategy.

Metrics are not an end in themselves and it is essential they go beyond simple financial metrics. Staff satisfaction and loyalty are important to the long-term objectives of the legal function. A metrics strategy ignoring these will be incomplete and ill fated.

KPIs are one of the most powerful tools available to organisations in helping deliver a step-change in perfor-mance improvement – which should be a core goal of any performance-manage-ment system. But using KPIs appropri-ately comes replete with challenges, as this paper has demonstrated. KPIs should be primarily deployed for learning and improvement and not for command and control. When KPIs are used inappropri-ately, they become the most ‘resisted’ of management tools.

The process of implementing the right metrics is tough and will take time and energy. However, it’s the price of entry to compete in today’s evolving legal environment.

Optimising the internal legal team and law firm relationshipAs the mandate to reduce legal spend continues to accelerate, senior manage-ment may now have the leverage they need to overcome resistance to change. In this climate, general counsel should be more comfortable saying to the law firm partner, “We can’t afford to pay your rates anymore.” This is an opportunity for companies to rethink old relationships. Through convergence programmes, RFPs and value-based alternative fee arrange-ments, many general counsel are already significantly altering the balance of power between client and law firm.

It is also an opportunity to change corporate mindsets. Too often the role of in-house legal teams is seen as reactive. People think you are there for when the bad things happen or when contracts need to be checked. In short, you are a necessary cost to the business. However, this view is changing. A number of progressive companies are investigating the potential of in-house teams to actually generate income through a proactive recoveries service. It’s an idea that might seem counter-intuitive – can your team actually create income? But it’s an approach that has been shown to work. Having worked with some of the pioneers of this approach such as Tyco and DuPont, what is required is a new mindset where in-house lawyers and external legal suppliers are constantly looking at areas where they can add financial value. Breaches of contract, stolen IP, damaged goods – the possibilities for recoveries are many.

In conclusion The practice of managing your legal spend embraces a number of strands which we



have briefly highlighted. The creation of a strategy map is probably the single most important step in building a legal performance management system, which is a starting point to getting more from your legal spend.

Metrics are essential for understand-ing, planning, controlling and even reducing a company’s overall legal spend. They should be supported by technologies that can provide process improvements and automate workflow wherever possible. Data analysis can then be turned into knowledge, providing value and a return for the company’s legal function.

A common complaint GCs have about legal services is how expensive they are. However, there is much that can be done to generate more from your legal spend, without jeopardising the quality of service from your external providers. n


PaRT I: ChaPTER 4 – ( INTERvIEw) FMC TEChNOlOgIES

What is you annual revenue?

$4.1bn

How many people are in your team?

We currently have nine lawyers, although we have three open positions, so we should be staffed at 12.

What is your legal budget?

$12.4m. We spend 73 per cent of that on outside counsel.

Do you utilise project

management tools?

We are very rigorous in the use of project management tools and techniques. We call our particular approach one degree law. This signifies a removal of the barriers to the efficient delivery of right size legal services. There are two key elements to this philosophy. One is performance based pay. The second is rigorous matter management (and that encompasses billing, status administration, reporting, benchmarking, etc).

What are the pros and cons of

hourly billing?

When you pay for a service by the hour, what you buy is hours not service. you do not buy either quality or results. There is obviously a built in bias to inefficiency when the service provider is being paid by the hour.

This reminds me of a story with my son. He was about 15 years old at the time and he wanted a new video game. I told him that unless he had the money for it we were not buying it, but I could let him

do some work to earn the money. We had an iron fence in our backyard that needed painting, so I suggested that he could paint that and I would pay him. He agreed and I asked him how much he would charge me. He said he had no idea, maybe just the cost of the video game. I suggested that I could either pay him by the hour for however long it would take or we could do a fixed price, so he would shoulder the risk of how long it would take to paint the fence. He said, maybe we should do it by the hour because I think I could make more money that way. I said you are absolute right, but that’s why we were not going to do it by the hour.

Even a kid can understand this. It’s amazing to me that we as lawyers, on the buy side, convince ourselves that the work is so complicated and so uncertain that hourly billing is the best way to do things.

Another analogy I use relates to what FMC does. The company makes highly sophisticated, sub-sea equipment for the oil and gas industry – it goes into 8,000 feet of water and is supposed to work for 20 years in conditions harsher than the surface of the moon. We do this every day on a turn-key, fixed-price basis. As a company, we make a lot of money doing this – we take the risk of uncertainty because we are good at what we do. So if a lawyer tells me that he cannot predict how a piece of litigation is going to go, for example, my reaction is that they are pitching for the work because they have handled hundreds of similar cases – I’ve done none. So in the allocation of risk and uncertainty and the time it is going to take,

INTERvIEw JEFFREy CaRR, SENIOR vICE PRESIDENT, gENERal COuNSEl aND SECRETaRy, FMC TEChNOlOgIES



external lawyers are far better placed than I am. And if I pay by the hour they are not incentivised to work efficiently.

External lawyers will, of course, say they have the incentive of repeat business. But we only have nine pieces of litigation right now, so the chances of repeat work in this area are slim.

The inherent problem with hourly billing is that outside lawyers have figured out that they can maximise revenue without taking much risk. Inside lawyers must manage this better – for those that say they are not accountants or managers, or believe that such administrative work is beneath them, they are simply being lazy.

There is also a feeling that everything has to be custom made, but law is no different to other businesses and services (making a machine, providing accounting services, doing engineering drawings, etc) and it can be priced on the basis of value. you have to switch your mindset and say the value of the service is not defined by the number of hours it took; the value is defined by the customers’ perception of what the work is worth. The customer has to define their objectives and then decide if their lawyers helped achieve these efficiently and effectively. That’s the definition of value.

Most in-house lawyers come from a

private practice background, so this

way of valuing legal services is deeply

entrenched.

It is, but I tell my staff that if we can save one million dollars either by avoiding costs or managing a matter more effi-ciently, that is the same as a half a penny per share in earnings. If I am not focussed on that, then frankly I am breaching my fiduciary duty to the shareholders. The job of my team is to manage the effective delivery of legal services for the company

– if we over pay for those services then we are not doing our job properly. Those that don’t understand this should not be in-house lawyers.

How did you change the mindset of

your own team?

We manage the department by a set of principals, rules and tools. If our lawyers do not follow these then they take a hit on their compensation, either in their annual review or bonus calculations.

you can be an excellent lawyer, but frankly this is just the price of admission. We don’t hire anything but excellent lawyers, either in-house or externally. To be an excellent lawyer at FMC you also have to be a manager. A large part of our evaluations is based on how our lawyers follow these rules.

I was asked to be general counsel in 2001. At that time I had eight attorneys. Today I have nine, and of those nine, only one was with me in 2001. Some left by choice, others were encouraged to leave because they didn’t fit into the company culture. It wasn’t that they were not good lawyers – they were just not good lawyers at FMC.

The focus on value and using alterna-tive fee arrangements (AFAs) means that GCs have got to take a stand and say this is the way the legal function is going to operate. If they don’t, their staff won’t because it’s not intuitive to most lawyers. In fact, it’s very counter-intuitive to them. It’s worth remembering here the old adage: “What my boss finds interesting, I find fascinating.”

Is there a danger that some companies

treat AFAs like a tick box exercise?

This is certainly a problem and a challenge. There is also an issue concerning the definition of AFAs.



We don’t like the ‘alternative’ tag and prefer the use of the terms ‘value focussed fees’ or ‘performance-based fees’. It doesn’t matter what you call them, but my definition of an effective alternative fee is very simple – an alternative fee is one that is based on a budget that matters. A fixed price is a budget that matters because if you go over it you do not get more money, but if you stay under it then you receive more than you would normally get for that amount of effort.

I can tell you what an alternative fee is not – it’s not a discount from hourly rates. Empirical research conducted by the General Counsel Roundtable revealed that companies that rely on discounted hourly rates spend as much if not more on aggregate. So it’s a false saving.

However, I cannot tell you how much money I have saved because it’s impossible to measure avoided costs. What I can tell you is that benchmarked against other companies of a similar size in manufacturing we spend about 0.19 per cent of our revenue on legal services, which is significantly below the norm of 0.4 per cent.

In 2001, FMC turned over $1.8bn – today, revenues have tripled to approximately $4.6bn. In that same period, law firm hourly rates have increased annually by approximately ten per cent, while internal costs have risen five per cent annually. My legal spend in 2001 was $14m, but last year it was $11m. This year the budget is $12m and I would expect that we will come in under budget. So our legal spend has stayed relatively flat but as a percentage of revenue it has declined. In a world where both law firm and internal fees have risen, the only way to achieve this is by more effectively managing and delivering the services you are providing and buying.

How have you achieved these savings?

We use a range of different tools: performance-based pay; early case assessments; after actions and lessons learned; preventative law, etc. Alternative or performance based fees are a big part of this. We spend over 70 per cent of our budget on outside counsel – in 2001 we spent about 40 per cent on IP, 40 per cent on litigation and 20 per cent on the rest (general compliance, deals, etc). Today those numbers have drastically changed – 30 per cent on litigation, 30 per cent on IP, and about 40 per cent on other areas. The latter category is where all the preventa-tive law is, so it doesn’t bother me that we are spending a higher percentage here. Having a reduced spend in litigation is a very good thing.

Are there any instances where hourly

billing is effective?

yes, and we still use hourly billing. Our two performance-based fee arrangements start with the hourly rate. We use a model called the Alliance Counsel Engagement System (ACES), and there are two iterations of this.

In its most simple form, the system pays external firms 80 cents on the dollar, keeping back 20 cents from the overall fee. At the conclusion of the matter (or annually depending on which comes first) the legal team reviews the service delivered based on several factors (see box, p98). The firm is then paid between zero and 200 per cent of the amount withheld or 80 to 120 per cent of their invoice.

Our litigation model is a little more complex but essentially the same. There is a holdback and payment is based on a series of factors. This has proved an incredibly powerful tool – not because we are holding money back from the firms,



The legal team reviews the service delivered based on several factors(These are ranked on a scale of 1-5: 1 – Unacceptable; 2 – Mediocre; 3 – Good; 4 – Very Good; 5 – Excellent)

UNDERSTANDS GOALS: n Understands the business and its objectivesn Contributes to business strategy; is relied upon as a trusted counsellorn Helps eliminate “red tape” to accomplish business objectiven Elevates team goals over individual interests

EXPERTISE:n Demonstrates substantive knowledge, including legal and business trendsn Continually seeks to make things easier and simplern Continually improves own knowledge and use of technological toolsn Provides practical, real world advice and counselling

EFFICIENCY:n Effectively manages fees and expenses against business objectivesn Determines when to incur expensesn Leverages past work product of firm and othersn Exploits technology to deliver value-added legal solutions fast and responsively

RESPONSIVENESS:n Available and responsive; “Owns” responsibilities and meets them timelyn Takes initiative and is proactiven Communicates in desired formats and methods n Leverages technology for speed, efficiency and accessibility

PREDICTIVE ACCURACY:n Provides meaningful expense estimates n Provides meaningful exposure and risk assessmentsn Timely communicates any changesn Understands and accepts that value delivery involves accepting some risk

EFFECTIVENESS:n Focuses on how to accomplish the client’s goal practicallyn Takes initiative and is proactiven Assembles and manages best team for task at handn Participates as a good team member PROFESSIONAL RESPONSIBILITY:n Continuously improves service and proactively manages risk through after actionsn Builds an open, supportive and diverse environment n Encourages and supports pro bono activities n Develops and retains personnel



but because it forces us to communicate with them about what our expectations are and how much risk we are willing to take. At the end of each matter we then have a follow up conversation about how the firm performed.

This is the most valuable part of what we do. Of course the money is important, but what is really important is the dialogue. years ago there was a study conducted by the firm I worked for at the time which stated that 85 per cent of outside counsel said they do a great job for their clients. In the same survey, 25 per cent of GCs said they would recommend their primary outside counsel to others. So if 85 per cent of firms think they are doing a good job but 75 per cent of GCs would NOT recommend them, then there is a problem. Inside counsel must tell their outside counsel what they expect and how they are performing.

It’s important to give external firms a chance to improve. We don’t fire people in companies without giving them an op-portunity to improve, so we should do the same with outside counsel. We need to tell them what we expect and explain how they are performing against these expectations. We are very rigorous about this. We have over 1,400 individual lawyer evaluations in our database – my lawyers are required to conduct evaluations at least quarterly and at the close of every matter. We have a discus-sion with the outside counsel at the close of each matter about how they performed, and then we have an annual discussion with the firm that includes all of these evaluations, so we can rate how the firm is performing for us overall. This is a lot of work, but it is incredibly valuable.

If you want to unleash a lawyer’s competitive instinct, show that lawyer his/her evaluation vis-a-vis another lawyer, or firm to firm. If another lawyer or firm is

ranked above them, explain how they can improve their performance.

You are a large organisation

so have the power to influence your

outside counsel. What about smaller

companies?

A lot of senior in-house lawyers feel that they cannot dictate terms. But I only have a $7m outside counsel spend. That’s not a lot of money. And that’s divided among ten firms. So we are not leveraging volume to get this performance. Of course, when you have a lot of volume, that’s when you can do fixed price deals, because firms are willing to take more risk as the volume helps them manage the portfolio. If I had the volume I would probably look more at fixed fees instead of the system we use.

If small law departments think they do not have leverage then they are not talking to the right firms. The legal services sector is almost a perfectly competitive marketplace because there are thousands of choices, so there is no need to make buying decisions as if there is no alternative. The problem is that a lot of legal departments stay with firms just because they have long standing relationships. This is fine, but they also need to take a step back and ask some honest questions. Is it necessary, for example, to use a magic circle firm for matters that are not company threat-ening or sophisticated? I think in-house lawyers are starting to understand that not every job is the death of the company. While you obviously need firms in your portfolio that are capable of handling the big, threatening matters, you should not handle every legal matter as if it is company threatening, because most are not.



How often do you update your panel,

and how formal is the process?

It’s formal in the sense that we conduct annual evaluations of firms. We add firms to our panel as and when we need them, but we are actually trying to reduce the numbers. Last year we worked with 85 law firms, but fifteen of these made up 85 per cent of our spend. Five years ago it was probably 30 firms that made up 85 per cent of our spend.

Outside the US, we use Eversheds almost everywhere in the world with the exceptions of Norway and Brazil. We like Eversheds’ firm culture, the way they take responsibility for their sub contractors. Frankly, while I might have to pay a bit of premium for Eversheds to manage a law firm in Russia, for instance, the firm is taking the responsibility of finding the right lawyers locally, so they are taking over the management process from us, which is important.

Our last formal process was for a litigation panel about two-and-a-half years ago. We did what I call a non-RFP because it was very simple – it had four steps. The first was a questionnaire with 17 questions, which we posted on the internet allowing any firm to get involved (55 firms responded). All of the questions had to be answered ‘yes’ or ‘no’, and there was no room for explanation or comments. The questions were very straightforward, such as:

n Do you accept Visa for payment?n Do you carry out early case

assessments?n Do you conduct after actions?n Do you have an office in Houston?

If not, do you have an affiliation?

These questions did not ask if they were good at personal injury (PI)

litigation, because frankly everyone is good at PI.

We asked 32 firms to participate in the second stage, which consisted of a one-page spreadsheet with ten types of litigation listed. Firms had to force rank themselves against each type of litiga-tion in descending order. Analysing our previous litigation over the past ten years, we knew that our work typically falls across five types of cases, so we provided all the relevant data for this – number of cases, average case budget, average case actual cost, average cycle time, etc. The law firms then had to provide their numbers for this same dataset. It was fascinating how many struggled to provide this.

For the third stage we asked each firm to send us a Tweet on Twitter (140 characters) about why we should spend two hours meeting with them. From this, we invited 13 firms to come in. We told them all up front that we were keeping an open mind and had no preconceived ideas about how the process would pan out – for example, we might select one firm to handle all of our litigation, a series of firms for particular types of litigation, or we might try something completely different and have a panel of firms where we conduct a fast track auction.

For the final stage we shortlisted six firms to come back in. We gave them two options:

n An auction approach, which we call the shark tank (ie, when a new piece of litigation comes in we throw it in the water and the firms bid on it, and we choose the firm that has the lowest cost).

n A joint venture (JV) with all six firms. For every new piece of litigation we form a team that is best capable of



handling the work – it may be lawyers from one firm, or lawyers from all six firms.

The final decision was to run with the JV model. It has worked very well so far. However, we only had three new pieces of litigation last year, so it’s too early to tell how successful the model will be in the future. n


PaRT I: ChaPTER 4 – ( INTERvIEw) IMPERIal TOBaCCO gROuP

JOHN DOWNING is head of group legal at Imperial Tobacco Group plc, a FTSE-30 global tobacco company head-quartered in Bristol, United Kingdom. It is the world’s fourth-largest international tobacco company.

Downing manages a team of ten lawyers, which includes two in-house litigators. He joined the company in 2005, having worked for seven years in Linklaters’ corporate department.

Highlights of his career include being lead counsel and head of deal execution on the €15 billion public takeover of the Franco-Spanish tobacco company Altadis in January 2008, followed-up by Imperi-al’s £5 billion back-stop acquisition rights issue, as well as its follow-on takeover offer for Logista S.A.

Which areas of your work do you

typically outsource?

The main areas that we outsource are corporate, litigation, finance and tax. Operating in the tobacco industry, we use specialist boutique advisors when it comes to product liability. For general com-mercial work and mainstream regulatory issues (ie, regulation as it affects selling or marketing tobacco rather than the product itself), we keep this in-house.

What is the size of your team?

At group level there are ten members in my team. For a large FTSE-listed company, I believe we are slightly unusual in being so small. Most of my staff joined the company directly from private practice, mainly from magic circle firms,

so this is their first switch to the corporate side.

Given the profile of team, we do not run trainee programmes.

Your department costs have remained

roughly the same over the past two

years. You mention ‘Sign-off processes’

as a way of controlling costs. Can you

elaborate on this?

Put simply, bills must be relevant and proportionate. We never pay an invoice unless we have seen a draft invoice that has been pre-approved, so the team can check if it’s in line with the original quote.

On larger matters, we have a forensic approach to the billing verification process. On a major corporate transac-tion, we receive the unabridged, weekly timelines of the law firms and staff who have worked on the project. At this stage, there will often be things that we want to challenge, particularly as the firms themselves have not had a chance to vet this information yet.

If you are doing a massive transaction that runs into hundreds of thousands of pounds or more, it’s important you check the charging is right on a weekly basis, while it’s fresh in your mind.

Many legal departments have been

criticised for being ‘sign-off depart-

ments’. What is your view?

As a legal team it is important that this criticism is not meted out at you or your team. If there are legal teams where this is the case, then they have probably lost credibility. If all you are is a legal

INTERvIEw JOhN DOwNINg, hEaD OF gROuP lEgal, IMPERIal TOBaCCO gROuP PlC



accounts clerk, then you needn’t have completed an LPC or trained as a lawyer.

What’s your view on shadow billing?

A fixed price deal is a fixed price deal, so I don’t think GCs or law firms should total up the hours to see if they have won or lost. It becomes a bit self fulfilling, because you’re telling your procurement department whether you’ve gained or not based on a benchmark which you claimed at the outset was spurious.

Of course, the problem is that everyone’s benchmark is the hourly rate, so when trying to work out a fixed rate there is a danger you estimate how many hours the work will take. It’s a bit like changing the brake pads on your car – if you estimate it will take a mechanic an hour to complete the work, you will expect the quote to reflect the garage’s hourly rate, rather than the objective value that you/the garage attach to that task.

What are the downsides of

hourly billing?

Uncertainty is the biggest downside. If you are operating on standard hourly billing with no modelling, then the final bill will always be uncertain. As mentioned earlier, you can help mitigate this by undertaking regular checks. However, while this will help avoid any nasty surprises when you receive the final bill, it won’t necessarily create more certainty.

Hourly billing can also be inefficient as there is often no incentive to perform, so when working on this basis it is doubly important that you manage your lawyers closely on a transactional basis. This will help ensure work is completed within agreed timeframes.

What volume of your work

utilises AFAs?

If you include caps, abort fees and retainers, then about 75 per cent or more of our work would probably come under the banner of AFAs.

Our mainstream litigation counsel operates on a fixed monthly fee, which we reassess annually. This means we are more likely to pick up the phone, which improves the dialogue between the company and the firm. For the law firm, this means they get more insight into our business, which is important.

Does the billable hour

encourage churn?

We have to give the law firms some credit. There is an important distinction between efficiency and churn – to suggest that everyone is churning is clearly not the case. If as a client you believe this is happening then you should do something about it.

What are the advantages of AFAs?

The main advantages are ‘cost predict-ability’, (potentially) ‘lowering costs’ and providing an ‘incentive to perform’. There is also the internal sell – as an in-house lawyer you can show your finance director that you are controlling costs, which is the number one priority.

Some evangelists like to tell the world that they have saved X million by using AFAs. But they need to be careful because this comes back to the paradox that they are presumably benchmarking against an hourly rate, since very little of the work that we outsource is vanilla, repeat instructions.

Another advantage is that AFAs require law firms to think about each transaction in greater detail because they are sharing some of the risk.



What are the downsides to AFAs?

One danger is that law firms start cutting corners to maintain their leverage.

On a complicated cross-border trans-action, for example, I would want to know that my lawyers are exploring all angles. If a large transaction is costing us millions, to pay another £10,000 because the external lawyers have checked something that could have otherwise ended up with a securities regulation breach is a small amount to pay. They may not have done this if we had agreed a smaller, fixed fee.

AFAs can also be difficult to engage in, as there is generally a lack of precedent for much of our work, but I am conscious that more fervent supporters of fixed fee billing regard that as a lazy excuse.

In which instances do you use AFAs

and can you provide any examples?

We do not sit down at the start of every piece of work and try to agree a fixed fee. We have different methods for different law firms and processes. On an M&A transaction, for example, we like the abort and success fee model, so we share the pain of any aborted transaction. It’s less painful when you know you’ve got a 40 per cent discount – of course, if the deal goes ahead there is an upside, but you just work that into your investment calculation.

On a bolt-on acquisition or smaller M&A deal, I might be more inclined to opt for a fixed fee. Even on a bigger deal there will be a fixed fee on certain elements of the transaction, such as conducting due diligence or issuing a 10b-5 letter. Law firms are well enough briefed on M&A to understand what a typical due diligence exercise will cost, for example, and can model it easily.

At the commoditised end of the spectrum (ie, property deals, trademark

registrations, etc) there are more opportunities to use fixed fees.

What has been your most

demanding project?

We completed a complicated and time consuming acquisition in 2008 that doubled the size of the business. The deal had a backstop rights issue attached to it, various divestments, follow on tender offers, etc – it was the takeover of a Franco-Spanish company, which posed a number of challenges in terms of under-standing a new takeover code in Spain, rights issue modelling, dealing with public regulators, etc. It basically had the whole gamut of corporate work. n


PaRT I: ChaPTER 4 – ( INTERvIEw) lEaDER & BERkON

Are alternative fee arrangements (AFAs)

here to stay?

Alternative fee arrangements (AFAs) and value driven relationships will start to become the norm. However, I don’t think any particular type of AFA has really taken hold yet, so the format and structure of these arrangements is still very much undetermined.

Law firms and in-house lawyers frequently say they are using AFAs, but in many instances they are referring to discounted rates. Discounted rates are not really alternative fees and often turn out to be a false saving – it is pointless securing a 10 per cent discount on rates if you are then billed an additional 10 per cent on the hours. Frankly, the alternative fee that best lowers costs is a capped, fixed or flat fee.

What are the advantages of AFAs?

The main advantages are predictabil-ity, lower costs and better incentives. And this is where I think both law firms and in-house counsel are not going far enough. If the projected budget (based on traditional budgeting measures) for a matter is $1,000,000, why can’t the fee be negotiated down to $900,000? If a particular law firm does not want the work for that price, there are many other excellent firms that will. The number of firms with profits per partner numbers over one million dollars is staggering. It is hard to believe there is no room for greater compromise on fees.

What are the main barriers to AFAs?

The law constantly evolves. Seventy years ago in the US you might not have known

if there was strict liability or not in a particular case. Or you might not have known how a court would rule on a contract or corporate issue. Today we have the answers to many of the most common questions and those cases can now be handled on more of a commodity type basis. Cases outside of these better defined confines occupy what I call the ‘unknown zone’. Complex commercial and corporate cases more often sit in this zone where it is more difficult to structure AFAs due to the uncertainty and lack of precedent.

It’s also important to note that in-house counsel can sometimes be reluctant to agree to fixed fees. This is driven, at least in part, by concern that they could end up paying more compared to hourly billing. A common case is one where the case is settled or dismissed very quickly. In instances like this, however, it is sensible for both parties to agree to some sort of early resolution fee. This also explains why capped fee proposals may have some benefits over fixed and flat fees. Under a capped fee programme, the client pays the lessor of the amount billed by the hour or an agreed cap.

Ultimately, both law firms and corporate counsel need to take a transactional view about legal services. Whether it takes 18 months or two years to complete a piece of work, or if the work would have been 20 per cent cheaper under the billable hour, this shouldn’t matter. A fee needs to be agreed that reflects the true value of the legal services provided and one that works for both parties.

INTERvIEw glEN SIlvERSTEIN, PaRTNER, lEaDER & BERkON


PaRT I: ChaPTER 4 – ( INTERvIEw) lEaDER & BERkON

What are the downsides to the

billable hour?

Some of the biggest problems with the billable hour relate to the perfectionism of lawyers and the fact that they are risk averse. Of course, diligence and precision is a good thing, but clients shouldn’t have to pay for excess perfectionism.

I will give you an example. A partner at a law firm has an issue about whether something is privileged or not. The partner already believes they know the answer from experience and knowledge of case law. For most clients in most situations, this answer would be more than sufficient. But a lot of lawyers would not stop there – they would double check everything and have an associate conduct additional research. Clients should not necessarily have to pay for this.

Should law firms being doing more to

encourage the use of AFAs?

Law firms should certainly do more. Even when they agree to an AFA, frequently all they are doing is estimating what the billable hours are. Whether the fee is flat or capped, they are locking themselves into this price or, at best, a discount off the price. While this is an improvement, it is still tied to the billable hour.

As outside lawyers, we are the experts and should be able to judge how long matters will take and what type of team structures need to be in place. We should also be able to calculate the utilisation of each team member, which will vary widely during the course of the work. From this, law firm partners need to understand what profitability means to the firm by weighing up costs and arriving at a fee that is com-petitive within the marketplace.

Prudent use of project management tools and techniques can help greatly in the mechanics of providing legal services. This is in-line with what I call a ‘trans-

actional’ view. So, if a piece of litigation is going to take place over the next three months and is budgeted at $100,000, the law firm could agree to only being charged 50 cents on the dollar for anything above this figure. This incentivises the firm to manage the project carefully and deliver on time, and ensures the client is not penalised for inefficiency or cost overruns.

In a recent CCR survey, a majority of

respondents stated that the bulk of

their work is still priced using the bill-

able hour. Does this surprise you?

This is true across the board and is partly due to the dissatisfaction with alternative fees that have been used so far. Law firms and corporate counsel have tried bonuses, holdbacks, partial contingency etc, but they do not solve every problem.

The billable hour is deeply entrenched in the mindset of all lawyers, whether in-house or external. And for most ordinary types of work, hourly rates have already been reduced and scrutinised, which is why they are still heavily relied upon.

What volume of your work is

based on AFAs?

The industry as a whole still relies heavily on the billable hour. Some clients will only operate on an hourly basis, while others prefer alternative fees at least some of the time. you have to assess things on a matter by matter basis and apply AFAs accordingly. Wherever possible we try to be creative and use a variety of structures, such as flat or fixed fees, capped fees, budgets with proportional reductions, time related bonuses, performance/success incentives and bonuses, etc.

Sometimes, a good AFA proposal can make a case economically viable to the client – and the law firm – when under the traditional billable hour it would not be. n


PaRT I: ChaPTER 4 – ( INTERvIEw) NaTIONal gRID

Can you outline your career so far at

National Grid, and highlight the most

challenging aspects of your role?

I’ve been with National Grid for about 12 years – but thinking about the changes, mergers and reorganisations it often feels like I have worked for a different company every year! It has always been a fresh and exciting place to work, with lots of challenges and an interesting workload. The company has changed so much that your internal client is constantly reinventing itself and, of course, you’re exposed to that change. Reacting and predicting changes is often the hardest part of my role.

I assume your department must have

changed too, within that organisational

development?

There have been a number of reorganisa-tions, so the department structure is vastly different than when I first joined the company. Personally, it has allowed me to develop and progress, but overall the team has reduced with economies of scale, which means we have to be innovative and efficient; furthermore, we have to demonstrate that to the business and our regulators. We have got subject matter specialism in-house but we’ve had to rethink how we allocate work and become more analytical about how we can add value to the business.

How has this impacted your

relationship with external counsel?

Ten years ago, few companies had formal panel arrangements, but they are much

more common now. National Grid has always operated a panel structure since I joined, but today it is a smaller panel and our processes and analysis of tenders is far more technical. There has been an increased drive towards encouraging project management and problem solving by our panel firms, which has resulted in better communication.

In terms of pricing, the recession has increased the demand for fixed fees. This is symptomatic of in-house counsel being asked for fixed budgets by the business, so they’re pushing the same out onto their law firms. With budgets being squeezed, clients do not want bills they weren’t expecting.

Are fixed fees here to stay?

Many companies are looking into AFAs in order to reduce cost. As an example, Andrew Garrard [legal director] at ITV operates very well on fixed fees for every-thing, but that involves setting out a clear scope for pieces of work and then agreeing variations, which is a very good discipline.

Ironically, fixed fees used to be how things were priced. The origin of the hourly fee comes from the US and from people thinking they weren’t getting fair billing from lawyers offering fixed fees. It’s come full circle and I think the recession has played a part in this. A lot of lawyers still quantify things by time and then associate a cost – changing this perception of the overall value of a transaction is going to be hard.

While every transaction is different there are tasks that you do regularly,

INTERvIEw IaN lEEDhaM, SENIOR COuNSEl – COMMERCIal, NaTIONal gRID



particularly elements of property, contracts or litigation work. These routine elements are where you could bring in fixed fees because you know what the average trans-action costs are. Using a panel and a set of specific providers enables you to explore fixed or blended rates because firms have a regular throughput and you can set up processes, document automation and governance to lower fees, speed up the process and create metrics and visibility. It will be interesting to see how the Legal Services Act and the legal outsourcing providers make inroads into this area in the next few years. With the less ‘normal’ transactions such as M&A, complex litigation or regulatory issues, it is far harder to predict time and costs. That said, project planning, outsourcing of laborious tasks to other providers and setting budgets can help create better cost visibility and discipline.

So fixed fees are more complicated

than hourly rates, in that they require

more project management?

It’s similar to how you might approach mobile phones. Do you choose ‘pay as you go’ or do you sign up to a contract/fixed-fees arrangement. If you look at how the mobile market has changed – ten years ago, contract deals were a lot more expensive. Today, the markets have become more competitive as providers want you as a long term customer, so you can get a better deal. you also learn over time what your usage profile is, which allows you to select the most appropriate payment plan. Pay as you go, meanwhile, gives you flexibility but you have to pay a premium for this. Similarly, with your legal costs, you need to ask: What is my spend? What am I spending on? How long will I carry on spending on this? Is this a continual trend or curve and can we do it

cheaper or package it differently? While people are demanding fixed fees, there has to be a degree of self-analysis behind it, looking at what you do and how you do it.

Are there tools that assist with the

management of AFAs?

There are lots of vendors such as Datacert and Serengeti that offer billing software that shows the resource levels on the billing matter. These solutions are popular in the US and will produce graphs that show what amount of money is being spent, areas of overbilling and/or dispurse-ments, or trends on particular matters. However, billing analysis software will not look at why you’re spending that money in the first place or analyse what is routine and what isn’t. Often your internal financial systems, your billing guides from law firms or even an Excel spreadsheet can give you some good analysis, but you have to keep the records and be able to look at them in ‘real time’ and interpret what they mean.

Has the recession impacted the

allocation of work to external counsel?

If you look at high volume, low value work, then you generally outsource that. Equally, if you have high value, high com-plexity, low volume work, you’d outsource that too because it requires expertise. Work that is high value in terms of value to the business is usually kept in-house, often because the ability to understand and manage the risk is best done by in-house lawyers. The key is maintaining a balance. There’s no point in having lots of people in-house doing routine, low value work – law firms and LPOs should be able to do it cheaper and improve the process, given the right incentive. Equally, it wouldn’t be worth having an in-house expert in, say, Uruguayan tax law in our business.



What’s your view on legal process

outsourcing (LPO)?

Companies like Microsoft and Rio Tinto are actively engaged in this space. Most LPO providers can deal with transactional matters, which may have previously been carried out by paralegals. I believe Microsoft uses LPOs in relation to license enforcement.

In my opinion, it depends on the legal work that is being pushed through the department and its adaptability, impor-tance to the business and complexity as to whether an LPO arrangement will work.

There has been a lot of discussion

in private practice firms in the UK

about the impact of the Legal Services

Act. But how far does it affect

in-house counsel?

I am not sure to what extent in-house lawyers have looked at this. I sense they see it as affecting external firms more, so haven’t considered the opportunities or risks.

There will clearly be some opportunities for in-house departments to partner with other companies, perhaps even forming a company or captive law firm with other organisations with similar needs, but with no competition or confidential information issues. This area lends itself to property, debt recovery, simple enforcement issues, etc.

Elsewhere, opportunities lie with multidisciplinary practices which may consider expanding their model to provide integrated services – for example, legal advice built into financial services. Will this lead to the outsourcing of the in-house legal department? No, because businesses will always need trusted internal advisers, but it may change the dynamic and mix. As to the impact of the Legal Services Act, only time will tell.

What are the key challenges for

making the external counsel

relationship work?

One word: communication. you’ve got to have dialogue because unless law firms know your challenges they can’t help. And if they can’t help you, it means that either you’re not communicating effectively or they’re not listening. It’s also about communicating what you’re willing to pay for and what you’re not. This means having a discussion about the level of throughput they can expect from you, the types of work and the regularity of it, so they can plan accordingly.

It’s not for law firms just to create and deliver – you have to be upfront about what you expect from them and how you would like them to share risks or allocate costs differently. n


IN-HOUSE LAWyERS’ responsibili-ties vary widely depending on the size and structure of their organisations, but in today’s environment, their ability to mitigate risk has never been more vital. With the financial crisis blamed on a reckless appetite for risk-taking in the financial sector, the issue of effective risk management has once again taken centre stage. And the spotlight – and opportunity – has fallen on lawyers.

In the wake of the banking collapse, regulatory pressure on companies remains intense – with new legislation forcing businesses to spend increasing manage-ment time ensuring compliance. Research for this report found the vast majority of in-house lawyers claiming that a major part of their role was keeping up with new regulation and ensuring compliance (see Figures 5.1 and 5.2, p114 and 155 respectively) – a challenge when internal resources and budgets remain, at best, static.

Within this environment, corporate governance issues also loom large. The financial crisis compounded a general distrust in business leadership that started with Enron. Sarbanes-Oxley (SOX) was an early reflection of the regulatory outcome of this. Among other rules, SOX aimed to make CEOs and CFOs more responsible for the financial on-goings in their companies. In-house lawyers in the US have had an increasing role to play in ensuring that such business leaders understand their new corporate governance liabilities.

But it is not just the US that has been affected by scandal and ensuing regula-tion. SOX may be a US federal law, limited to US public companies (and

other companies outside the US that have a dual-listing on the US exchange), but it would be hard to deny its global influence in reinforcing a trend to improve corporate governance. In the UK, numerous corporate governance reports were published in the wake of SOX’s enactment, including the Cadbury and Higgs reports; they culminated in the UK Corporate Governance Code 2010. While the code is not as rule-based as US legislation, listed companies are required to report on how they have applied the main principles of the Code and, if they have not, explain why.

Quite apart from the official line, it is perhaps reputational damage that directors fear most. Where directors once enjoyed a certain anonymity, the public and media are now keen to expose those that have breached regulations or transgressed corporate ethics.

We have already seen in Chapter 1 of this report that increased risk has given

PaRT I: ChaPTER 5 – RISk MaNagEMENT

ChaPTER 5: RISk MaNagEMENT

Defining legal riskThe International Bar Association defines legal risk as: “the risk of loss to an institution which is primarily caused by (a) a defective transaction, (b) a claim (including a defence to a claim or a counterclaim) being made or some other event occurring which results in a liability for the organisa-tion or other loss (for example, as a result of the termination of the contract), (c) failing to take appropri-ate measures to protect assets (for example, intellectual property) owned by the institution, or (d) change in law.”1



corporate counsel an important means to prove their value. But it is also a more challenging environment for lawyers, in that blame for unforeseen exposure to risk may well fall heavy upon the legal team’s shoulders. Randal Barker, company secretary and general counsel at Eurasian Natural Resources Corporation (ENRC), recently resigned his post in the midst of concerns over its corporate govern-ance (described as a “shambles” at Prime Minister’s Question Time in the House of Commons).2 The company has now launched a corporate governance review, but it’s too late to save the GC.

More recently, the intense scrutiny of Rebecca Brooks and the Murdochs in relation to the News of the World phone-hacking saga may well have diverted attention from the fact that the scandal decimated the legal team. Jon Chapman, director of legal affairs, Tom Crone, head of legal, and Lawrence Jacobs,

group general counsel, all lost their jobs. During the House of Commons steering committee James Murdoch also implied that his lawyers had failed to inform him of the extent of the phone-hacking problem.3

In-house lawyers as risk managersRisk management should be managed top down, bottom up. Boards rely heavily on their senior management, who in turn rely on middle management to inform them of the risks which exist in the organisation, and to recommend policies, systems and controls to manage those risks. This is especially true with legal risk, as senior management are unlikely to be legally trained and will therefore require guidance from their lawyers.

The Commerce & Industry Group (C&I Group), a recognised Law Society group run by in-house solicitors in the

which areas of legal risk management are

currently taking up most of your time?

Please indicate your responses on a scale of 1-5,

with 1 being least relevant and 5 most relevant.

Figure 5.1: CCR’s ‘What’s Hot 2011?’ Survey (this graph also appears on p11)



UK, provides excellent advice in this complex area. In a guide called ‘A Fine Line’ (hereafter called the ‘guide’), the C&I Group divide legal risk into two sub-categories.4 These are:

n “enforceability risk”, meaning risk to the validity and enforceability of an organisation’s contracts and property rights, for example because of uncer-tainty in the law or its interpretation, incapacity of a counterparty, a change in law, ambiguity, inaccuracy or uncertainty in the terms of a contract due to negligence of the legal function or elsewhere in the organisation, or a “battle of the forms”, or claims (whether valid or invalid) by a third party of one of the above; and

n “regulatory risk”, meaning risk of legal or regulatory sanctions, material financial loss, or loss to reputation that an organisation (or individuals within

it) may suffer as a result of its failure to comply with laws, regulations, internal or external rules, related self regulatory organisation standards, and codes of conduct applicable to its activities.

The ‘guide’ recommends legal heads develop procedures for reducing, transfer-ring and avoiding ‘enforceability risks’, ensuring they are embedded in the organi-sation. A summary of the analysis of these risks should then be incorporated in an overall risk review for the board and senior management. The following is a list of what some of the basic procedures might include:

n Limiting the individuals in the organisation who can commit the organisation financially and legally to transactions, by means of an authorised signatories list.

n Providing training and education, materials and tools to inform all

1 2 3 4 5Ensuring leadership teams understand and comply with rules of governance and ethics

- 14% 43% 28% 15%

Managing the rising number of regulations controlling corporate behaviour

- - 36% 25% 39%

Managing the general counsel’s relationship with leadership, including directors and non-exec directors

- 20% 23% 41% 16%

Dealing with conflicts of interest at board director level 31% 11% 40% 18% -

Agreeing the purpose and remit of audit and remuneration committees 50% 50% - - -

Effective involvement of non-exec directors 51% 16% 33% - -

Reporting on corporate governance compliance - 10% 29% 46% 15%

what are your chief challenges in terms of corporate governance? Please indicate your responses on a scale of 1-5, with 1 being least relevant and 5 most relevant.




relevant staff on enforceability risks and issues.

n Providing guidance on structuring, analysing and managing current and prospective relationships with third parties, and on the negotiation process leading up to the making of such com-mitments, and instituting processes to ensure that contracts are kept updated, post-signing, to reflect changes in the ongoing relationship to which the contract relates.

n Requiring staff to consult with the legal function and/or to follow defined processes and/or to use standardised documents and guidelines before making a binding commitment on behalf of the organisation or signing a contract.

n Promptly informing you of any situation which might result in litigation (including arbitration, ombudsman claims, regulatory sanctions, etc) and requiring all litigation to be managed by you.

n Maintaining a panel of approved external law firms and channelling all instructions to those law firms through you (excluding, perhaps, those areas where it is agreed that others have responsibility within the organisation, e.g. HR contracts and disputes).

n Capping and controlling contractual liabilities, taking account of your organisation’s individual and aggregate insurance cover limits and exclusions.

n Monitoring legal developments in relevant jurisdictions for any changes which may affect the organisation’s legal rights.

Addressing ‘regulatory risk’, which is relevant to all organisations, not merely financial institutions, the ‘guide’ covers

several areas (published in full below with the kind permission of C&I Group):

The board’s responsibility for

establishing a compliance culture

Regulatory risk is relevant to all organisa-tions, not merely financial institutions, and many of the recent corporate governance scandals have involved regulatory failures. The board is primarily responsible for setting a compliance culture that empha-sises standards of honesty and integrity. It and the senior management should lead by example in their own behaviour and in supporting the in-house lawyer (or a specialist head of compliance) in managing the regulatory risk at lower levels of the organisation. The independent non-exec-utive directors (if any) should ensure that this occurs. These basic concepts do not require specialist knowledge, training or experience in regulation. If the organisation is formally regulated, the regulator should also ensure that this corporate governance process is really working – and not wait until a serious regulatory breach occurs in the organisation.

Delegation of the board’s responsibility

If the organisation is highly regulated, or if guarding its reputation is key to its business model, it may appoint a specialist head of compliance whose role is to take proactive steps to identify and manage the regulatory risks facing the organisation so that they do not result in significant loss or damage. In other organisations, this role may be part of the head of legal’s role. However, in all cases, this role will be far easier to perform if the board and the senior management are performing their own responsibilities properly.

Clarifying the scope of the delegation

A single person cannot be expected to take



primary responsibility for identifying and managing all of the areas of regulatory risk that an organisation faces. In practice, therefore, responsibility for employment rules is often allocated to the head of the HR function, responsibility for tax and ac-counting rules to the head of finance, and so on, with the head of compliance (actual or de facto) being responsible for the rest. The organisation may, however, want a single person to have oversight over the entire range of regulatory risks that apply to the organisation (i.e. including rules for which another individual has primary re-sponsibility), so that nothing falls between the cracks.

If you are the head of compliance (actual or de facto), you will need to agree with senior management which areas of regulatory risk you are primarily respon-sible for, and whether you are expected to have oversight over the other areas of regulatory risk.

Identifying and assessing the

regulatory risks

First of all, you should identify the specific regulatory risks that the or-ganisation faces in the areas that you are primarily responsible for. This is a major task, and one which you may well need help with from colleagues in other departments, from senior management and from outside counsel, as it will involve a very broad range of rules in each jurisdiction in which the organisation operates. Only then can you begin to assess the significance and probability of each regulatory risk, using the history of previous incidents within your organisation, your competitors, or legal opinions etc, as a guide.

Discussions with colleagues and senior management are particularly important in assessing regulatory risk, as it requires a

very detailed understanding of both the rules and their application to the organisation’s business. For example, they may be aware of conflicts of interest that exist in the business, and they should alert you to them – if you have not already identified them.

Developing procedures for

managing the risks

Once you have identified and assessed the risks, you can then start develop-ing procedures for managing them. This is essentially a process of training the organisation’s staff on the relevant rules and how to comply with them, monitoring that they do so, investigating suspected breaches and (if you find that there has indeed been a breach) reporting them to senior management. Occasionally, you may have to intervene in a transaction to prevent a breach from occurring. The rigour and degree of caution with which you perform this role will depend on the nature of the organisation, the extent to which it is regulated or for other reasons is very concerned about its reputation, and whether it already has a good compliance culture. Obviously you should ensure that you have or are given sufficient independ-ence, authority, resources and access to information and personnel, to perform this role to the required standard.

Your status, authority

and independence

If your organisation expects you to retain oversight over the entire range of regula-tory risks that apply to the organisation (i.e. including rules for which another individual has primary responsibility), you are likely to require an even higher level of independence, authority, resources and access to information and personnel. Attending the organisation’s executive



committee meetings as an observer is a particularly useful way to achieve this, as then you will be aware immediately of business developments, and can advise if there is a regulatory risk that needs to be addressed. In addition, all members of staff should be required to report actual or suspected regulatory breaches to you. The same should apply to any outside counsel instructed by the organisation (i.e. including any outside counsel instructed by the HR function).

“Sufficient independence” requires you to have access to such information and personnel as you consider necessary to investigate any suspected regulatory breaches, and freedom to report significant breaches directly to the board (or the audit committee) and any regulator, as well as to senior management. If the organisa-tion has an audit committee, you should have unfettered access to it, and a private meeting with it at least annually, so that you can raise any concerns with it.

Providing comfort to the board as part

of the risk management process

As with enforceability risk, you may be asked to provide some comfort to the board that you have identified, and are managing, the key regulatory risks in the organisation. you should respond with the same helpful attitude, without detracting from the board’s and senior management’s own primary responsibilities for corporate governance.

This area is particularly sensitive, as you are likely to have very little personal control over the behaviour of other staff (your influence being limited to advising, training and monitoring), and you will depend heavily on the board and senior management to instil a good compliance culture and to discipline staff who break the rules.

Again, a reasonable response is to provide the board with an explanation of the risks that you have tried to manage, how you have gone about it, and any sig-nificant failings that you have observed; and your recommendations for remedying any such failings (including any further resources you require). you should ensure that the specific areas that you are responsible for are defined (excluding, for example, tax, accounting, employment and/or health & safety laws if you are not responsible for them). you should review the record of regulatory breaches, and how they have been dealt with by senior management once reported to them.

Again, you should resist giving any form of guarantee that all the risks have been identified and managed, as this could well expose you to criticism, increase your risk of personal liability, and give you an actual or perceived conflict of interest if a breach which you may not have been aware of later emerges or a new breach occurs. As with enforceability risk (or even more so), regulatory risk manage-ment and compliance should be a col-lective effort, and as with all corporate governance the board is ultimately responsible.

Handling difficult regulatory risk issues

you will have to challenge staff if they have already committed a regulatory breach or if they are embarking on a course of action which is likely to lead to a breach. If you can make your challenge as constructive as possible in the circum-stances, then this can go a long way to smoothing the process.

Sometimes though, despite your best efforts, investigations can be perceived as unwanted “interfering with the business”. This should not matter provided that senior management supports you, and they



should normally do so in order to protect the reputation and long-term viability of the organisation.

But what if you are sure that you are right, and the senior management do not support you? you should appeal to the in-dependent non-executive directors (if your organisation has any) and, if that fails, in extreme circumstances you may have to threaten to – or actually – “blow the whistle” internally and/or externally and/or resign. However, before doing so, you should take independent legal advice.5

Stepping up to the mark: The role for corporate counselAs discussed, legal risk management is the dominant issue today among in-house counsel. Many GCs and senior in-house lawyers shoulder both the legal risk and corporate governance functions of their businesses. Respondents to CCR’s man-agement survey revealed that “Managing the rising number of regulations control-ling corporate behaviour” and “Keeping up to date with regulatory, litigious and contractual risk” are the main challenges.

Debra Kupra, vice president, general counsel and corporate secretary for AGCO Corporation, is a good example of the multi-faceted role that legal department leaders fulfil. She is responsible for all the company’s legal matters, including litigation, regulatory and securities filings, executive compensation, mergers and acquisitions, joint ventures, corporate records and minutes, and resolutions and consents of AGCO’s board of directors.

Kupra’s most notable achievement was revamping AGCO’s ethics and compliance programme, which enabled her to settle a major investigation by the US Securi-ties and Exchange Commission (SEC) and the US Department of Justice (DOJ)

into the company’s involvement in the Oil for Food Programme. In an interview with International Law Office6, an online resource for senior international corporate counsel, she reflects that it was her work on Sarbanes-Oxley and other regulatory compliance matters in her prior role at Caterpillar that helped her deal with the investigation at AGCO.

“While at Caterpillar, I co-sponsored a 6 Sigma project comprised of a multi-functional global team, which focused on complying with the amendments to the US Federal Sentencing Guidelines,” she tells International Law Office. “In order to ensure compliance with the guidelines, we conducted 18-months of benchmarking, data analysis and Board approval, before implementing a fulsome ethics and com-pliance programme led by a chief ethics and compliance officer and supported by regional and local staff. All was in place at Caterpillar by the time I left to join AGCO in January 2008.”7

Kupra’s first task at AGCO was to implement a similar structure: “I began with the board of directors to ensure the appropriate ‘tone at the top’. They understood and were fully committed to the implementation of a new, effective and robust ethics and compliance programme.... I also asked them to designate regional and local ethics and compliance officers and controllers to form a steering committee of sorts in order to implement the new processes and proce-dures, and to provide training. They did, and now I chair a multi-functional ethics and compliance committee responsible for the design, implementation and oversight of the ethics and compliance programme.”8

AGCO went on to win several awards, including 2010 Best Overall Governance, Compliance & Ethics Programme’, by Corporate Secretary magazine.


Fortunately, most GCs will not have to support their companies through such investigations. But this example shows how in-house lawyers are being drawn into the process of corporate risk manage-ment. Depending on the size and structure of the organisation, the in-house lawyer may have to wear different hats and work across both risk management and legal functions. In larger organisations, these functions may be separate, but there is a clear synergy, as noted by Humphrey M. Tomlinson (see full interview on p127), group legal director, RSA Insurance Group):

“Our risk and legal teams are separate functions within the business, so we have both risk managers and lawyers across our global operations. However, in some of our smaller operations and regions, lawyers may also act as part of the risk function. The legal teams often work very closely with the risk team, and there are several policies that are legal specific.”

The latest uk compliance challenge: The Bribery act 2010In the UK, the latest regulatory challenge comes in the form of the 2010 Bribery Act. The Act modernises UK law in relation to corporate corruption, putting it on a par with anti-corruption legislation in other parts of the world (particularly the US). It applies to both public and private-sector companies and makes no exemption for facilitation payments – in both respects, this actually makes it harsher than the US Foreign Corrupt Practices Act (FCPA).

The UK Bribery Act also makes companies criminally liable for the acts of those performing services on behalf of the company, whether they are employees, subsidiaries, agents, distributors or joint ventures – and it applies not only to

UK companies but those that carry on a business or part of a business in the UK.

The scope for in-house lawyers to cover this area is very broad, ranging from the important field of mergers and acquisi-tion due diligence to a broader focus on corporate culture and governance. In short, the Act will:

n Introduce a corporate offence of failure to prevent bribery by persons working on behalf of a business. A business can avoid conviction if it can show that it has adequate procedures in place to prevent bribery.

n Make it a criminal offence to give, promise or offer a bribe and to request, agree to receive or accept a bribe either at home or abroad. The Act also covers bribery of a foreign public official.

n Increase the maximum penalty for bribery from seven to 10 years imprisonment, with an unlimited fine.

UK government guidance on the type of procedures businesses can put in place to prevent bribery has been available since March 2011, allowing businesses to familiarise themselves with the new legislation and ensure they are prepared. The guidance is available here: http://www.justice.gov.uk/guidance/making-and-reviewing-the-law/bribery.htm

A survey by global accountancy firm Ernst & young showed that British corporates are significantly unprepared for the implementation of the Act, with only about a quarter of responding employees having received anti-bribery training. However, that figure compared favour-ably with the position on the continent. Only 17 per cent of employees in France had received training, while the figure for Germany was 15 per cent.9




Corporate governance landscape: an In-house lawyer’s Map

n The system by which companies are directed and controlled

n A system which safeguards a shareholder’s investment in a company by regulating directors and management

n Directors’ duties to the company 1(a)

n Rules governing the set of relationships between a company’s management, its board, shareholders, employees and other stakeholders

n Management of legal risk (regulatory and contractual enforcement)

n Exercise of effective control over a company’s operations

n Behaviour with integrity and responsibilityn Transparency to shareholders and other

stakeholders 1(a),2,3,5,9 n Promotion of better boardroom behaviour and

encourage diversityn Understanding the concept of public interestn Checks and balances which ensure that

individuals do not have too much power

n Consider the legal, regulatory and governance framework in which the company operates 7,8

n Ensure the company’s contracts and property rights are valid and enforceable 8

n Apply professional judgment in carrying out dutiesn Act as the board’s advisor on corporate governance 2, 8

n Policies, procedures and codes of conductn Apply comply or explain approachn Agree corporate governance responsibilities with the

board and/or senior managementn Balance corporate governance duties responsibilities

with professional conduct requirementsn Encourage employees and directors to highlight and

report problems

n Manage resources to establish best corporate governance practice

n Hold training sessions for employees and directorsn Monitor legal developments closely (both relating to

regulation and enforceability of contracts)n Initiate company-wide risk analysis and management

programmen Seek external advice relating to enforcement and

regulatory risk n Chief risk officer will be a key appointment (financial

services sector)

This document provides guidance on key principles of corporate governance and steps an in-house lawyer might wish to take in promoting good corporate governance. It was created by the Commerce & Industry Group with assistance from Slaughter and May.

what is corporate governance?

n Helps company to thrive and ensures long term continuity and success for its stakeholders 2(a),4,5

n Adds value to the business and boosts its reputation n Protects the interest of shareholders and

stakeholders 4

n Helps build investment by attracting shareholdersn Helps gain respect of key external stakeholders, such

as employees, customers and potential financiersn Aligns remuneration with the long-term interests

of the company 2(a),4,5,9

n Encourages use of internal control systems 2(c),4,6

n Encourages management of legal risk (regulatory and contractual)

n Brings benefits to society through corporate social responsibility

n Encourages accountability 2(a),5,9

n Encourages collective decision-making 2(a),4,6

n Encourages regulatory compliant activitiesn Encourages responsible and strong leadership

from board 2,4

n Encourages transparency 2,3,5,9

why does corporate governance matter?

how does an in-house lawyer address corporate governance?

Key Sources1. Statute - (a) Companies Act 2006( sections 170-238),(b) Bribery Act 2010, (c) Data Protection Act 1998,(d) Corporate

Manslaughter and Corporate Homicide Act 20072. Financial Reporting Council - (a) UK Corporate Governance Code 2010, (b) Guidance on Board Effectiveness, (c) Turnbull

Guidance on Internal Control, (d) Going Concern and Liquidity Risk: Guidance for Directors of UK Companies, (e) Audit Firm Governance Code, (f) Guidance on Audit Committees

3. FSA Rules - Listing Rules (Chapter 11) and Disclosure and Transparency Rules (DTR 1B, 3, and 7), FSA conduct of business rules (COBS, ICOBS, MCOBS etc)

4. Investor Protection Committee Guidelines - Association of National Insurers (ABI), National Association of Pension Funds (NAPF) and Pensions Investments Research Consultants (PIRC)

5. Rules for AIM listed companies - AIM Rules for Companies, Corporate Governance Guidelines for Smaller Quoted Companies, NAPF Corporate Governance and Voting Guidelines for AIM Companies

6. Panel on Takeovers and Mergers - City Code on Takeovers and Mergers

Starter Toolkit7. Commerce and Industry Group - “Reconciling the Irreconcilable? Best Practice Guidelines for In-House Lawyers in England and

Wales in the new corporate governance environment” (11 March 2005)8. Commerce and Industry Group - “A fine line. Further guidance to In-House Lawyers in England and Wales on ensuring good

corporate governance in your organization” (24 July 2006)9. Institute of Directors - Corporate Governance Guidance and Principles for Unlisted Companies in the UK


The potential problem with the Act is that there are several grey areas where in-house lawyers will have to be extremely careful in educating their boards on potential liability, while ensuring company-wide compliance. Much will depend on how strict the courts are on issues like “associated persons” or on the territorial scope of the Act, and this will only become clear once courts provide some case law.

The issue of gifts and hospitality under the Act have also caused alarm, with many fearing it would criminalise corporate hos-pitality. Vivian Robinson, former general counsel to the SFO Serious Fraud Office (SFO), led the development of the SFO’s enforcement policy under the UK Bribery Act. Now a partner in the London office of McGuireWoods LLP, in a posting on the firm’s blog (Bribery Library), he dispels this myth and explains how companies can comply10:

1. Does the company have a clear issued policy regarding gifts and hospitality?

2. Did the scale of the expenditure in question fall within the confines of such policy and if not, had special permission for it been sought at a high level within the organisation?

3. Was the expenditure proportionate with regard to the recipient?

4. Is there evidence that such expenditure had been recorded by the company?

5. Was the recipient entitled to receive the hospitality under the law of the recipient’s country?11

The implications of the Bribery Act for corporate counsel are obvious and many have already been working hard to under-stand its ramifications. At RSA Insurance Group, for instance, group legal director Humphrey Tomlinson, says: “In terms

of the Bribery Act 2010, we considered the area carefully. We enhanced our training and launched an online training programme at the beginning of the year and rolled this out across our global opera-tions. The training is split across a number of modules, which includes specific testing to ensure people have properly understood the training. We also run bespoke workshops on legal issues that we feel require more detailed explanation or focus, which allows participants to ask specific questions and for there to be an in-depth discussion.”

The role of technologyIn order to mitigate risk, management must first be able to measure and monitor it. This will help indicate how risk in one part of the enterprise may cause ripple effects through other areas and jeopardise the company as a whole.

The principle tasks of risk manage-ment are made far easier with the use of business-intelligence systems that can consolidate data throughout the company, allowing management to monitor key risk indicators through scorecards, dashboards and other reporting vehicles.

However, law departments have been slow to adopt these technologies. Many lawyers have been reluctant to give up paper reports and often rely on flat spread-sheets. As discussed in Chapter 4 (p86), legal departments must start to embrace new technologies.

adapting to a changing world: Steps for gCsIn the wake of the financial crisis, the changing corporate governance and risk landscape has never been greater. Indeed, many of the largest corporate failures can actually be attributed to failures in corporate governance.




Five steps to legal risk managementMelanie Hatton, in-house lawyer and blogger, recently wrote a useful five-step guide for in-house legal teams addressing the increasing challenge of effective risk management. The following is a condensed version of her post*:

1. Conduct a legal audit

To be effective, legal risk management must

be based on a thorough understanding of the

business’s key activities, stakeholders and ob-

jectives, and this can only be achieved by con-

ducting regular legal audits and working with

the business’s management team to analyse the

risks, prioritise their management and anticipate

the legal requirements of the business.

2. Communicate, educate, co-operate

In-house counsel cannot manage legal risk

single-handedly. It’s imperative that the

legal risks are communicated to the wider

business to ensure they are supported and,

vice versa, that the wider business objectives

and demands are facilitated in the legal risk

management strategy.

One way to achieve this communication is

through legal risk awareness training sessions

tailored to the audience within the business

which is either most exposed to or best placed

to handle the risk being communicated.

3. Compliance and governance policies

Underpinning any legal risk management

strategy is the requirement for a compre-

hensive set of compliance and governance

policies. Policy making is a key tool which

in-house counsel have within their remit to

positively influence the way in which business

is conducted and to set the standard for

expected behaviour. It is essential that all such

policies have the buy-in and support of the

management team, and that the legal depart-

ment has a defined role in implementing and

ensuring compliance with the policies.

4. Operations

The daily operations of a business always prove

to be the most fertile ground for legal input.

An abundance of legal consequences can be

found in supply, manufacturing and distribution

chains, protection of intellectual property rights,

brand protection (online and offline), pending

and threatened litigation, product liability, sales

and marketing practice, insurance, property

matters, employment and HR practice, industry

regulation as well as company secretarial, board

and shareholder matters.

Good working relationships with col-

leagues operating in each of these areas are

essential for in-house counsel to play an

effective and valued role within the business;

the challenge is for the lawyer to be seen as

part of the team, and not as an obstacle to

achieving operational outputs and objectives.

5. Legal resource

The individual character of each business

will determine its exposure to legal risk and

the management tools required to best handle

that risk. Inherent to that is the balance of

matching and managing internal and external

legal resource, and indeed other professional

suppliers to the business. A core skill of the

in-house lawyer in today’s world is their

ability to manage the risks in this more intense

climate by better clarifying the role of the legal

function within the business, demonstrating

value-add and selecting, managing and

getting the most out of their internal and

external legal resource. n

*For the full posting, visit http://in-house-lawyer.blogspot.com/2010/02/5-steps-to-legal-risk-management.html


Corporate counsel responsibility for ensuring good corporate governance is also reflected in PLC’s Legal Risk and Compliance Survey 200912. The survey found, for instance, that general counsel are principal advisers to the board on corporate governance (74.6 per cent of respondents); legal risk (92.3 per cent); business ethics (73.1 per cent); and compliance (75.4 per cent).

Other survey findings included:

n An increase in new legal risks arising out of the financial crisis. Over 50 per cent of the respond-ents expected new key legal risks to emerge, with half saying that it had already increased their business’s focus on risk management;

n Key areas of legal risk moving up the risk agenda – such as operational/contractual issues, general compliance, and fraud/money-laundering;

n A rise in formal methods to identify, measure and review legal risk, including the use of risk maps/matrices (58 per cent of respondents); surveys or registers completed by the business (56 per cent); meetings with manage-ment (nearly 50 per cent compared to only seven per cent in 2008); and the use of formal risk committees (again nearly 50 per cent compared to six per cent in 2008);

n A vast majority of respondent GCs report directly to the CEO or chair of the company. Most are not board members, but the majority attend board meetings and are the principal advisers to the board across a range of areas.

In-house legal teams have long had responsibility for ensuring effective risk management processes in their businesses,

but the research outlined above also points to an environment that is exerting additional pressure on law departments to meet both general changes in the market as well as specific legislation.

We have already seen what happens when GCs fail in this respect. With this in mind, it is hardly surprising that law departments have held firm during the financial crisis (see Chapter 2). Indeed, it could be argued that companies have never been so in need of a good team of lawyers. For those seeking to push out of the law department and into business leadership positions, the environment has never been more favourable. n

References1. International Bar Association Working

Party on Legal Risk, February 2004, cited at para 4.40 of Legal Risk in the Financial Markets, by Roger McCormick, Oxford University Press 2006.

2. ‘ENRC general counsel steps down amid controversy over corporate gov-ernance’, Legal Week, June 2011

3. ‘NoW phone-hacking saga: the legal line-up’, The Lawyer, July 2011

4. The Commerce & Industry Group (C&I Group), ‘A Fine Line’ (http://www.cigroup.org.uk/images/file/fine_line.pdf)

5. Ibid.6. ‘In-house Counsel Q&A: Debra

Kupra, Vice President, General Counsel and Corporate Secretary, AGCO’, published by International Law Office at http://www.internation-allawoffice.com/InHouseCounsel/Detail.aspx?g=82d05d06-78b2-491d-ae2c-e5ee3e11e8fd

7. Ibid.8. Ibid.9. ‘European general counsel not



ready for UK anti-bribery law’, The European Lawyer, May 2011, (http://www.europeanlawyer.co.uk/page_333.html)

10. http://www.briberylibrary.com/gifts-hospitality/gifts-and-hospitality-and-the-bribery-act/

11. Ibid.12. PLC Benchmarking Survey: Legal

Risk and Compliance 2009’, available at http://ld.practicallaw.com/9-422-4134



PaRT I: ChaPTER 5 – ( INTERvIEw) RSa INSuRaNCE gROuP

Can you outline your career to date?

I started out in private practice as a corporate lawyer working for international law firm Ashurst. I joined what is now RSA 15 years ago, initially on second-ment. I started as legal manager and I am now the group legal director in RSA’s Group Corporate Centre, reporting to the group’s general counsel.

What is the size of your

legal department?

We have 70 lawyers across the group and I work within the Group Corporate Centre. The company employs 22,000 people in total.

What are the typical transactions and

legal areas you engage in?

It’s hugely varied. As a large corpora-tion, we cover high-end M&A, bond and share issues, internal capital management and restructurings, reinsurance, major commercial agreements and cross-border procurement contracts, etc. Then there is the plethora of legal compliance and risk-management issues – including anti-brib-ery and corruption, competition law, data protection, corporate governance, etc.

What are the key challenges your

department faces?

There are three key challenges that most in-house counsel leaders have to meet head on: managing legal risk and getting the legal aspects of the business properly dealt with; resourcing the function (both internally and externally); and business

engagement (getting proper alignment with the business).

What risk management systems do

you have in place, and do you conduct

legal audits?

We have a number of policies that are adopted by our risk committee at board level. There is also an advisory committee, which I sit on, that looks at what policies need to be implemented and upgrading existing policies. These policies have to be adopted by all of our operations across 32 countries and every local chief executive has to sign off on these quarterly, acknowledging they have been adhered to. If there has been a breach, they need to provide the relevant details so these can be addressed.

We also, of course, have an internal risk function and an internal audit function. We work with the risk function closely in introducing and maintaining policies.

What is the relationship between your

company’s corporate risk function and

legal department?

Our risk and legal teams are separate functions within the business, so we have both risk managers and lawyers across our global operations. However, in some of our smaller operations and regions, lawyers may also act as part of the risk function. The legal teams often work very closely with the risk team, and there are several policies that are legal specific.

INTERvIEw:

huMPhREy M. TOMlINSON, gROuP lEgal DIRECTOR, RSa INSuRaNCE gROuP (FORMERly ROyal & SuN allIaNCE)



How do you ensure risk and legal

policies are communicated to the

wider business?

We have identified the key legal risks to our business and these are set out in formal policies. As noted earlier, chief executives have to make sure these are adhered to, so they are embedded in our infrastructure and form an intrinsic part of our corporate governance procedures. Also, as an international insurance group, we operate in a highly regulated industry with detailed regulatory requirements in every country in which we operate. So the whole gamut of compliance, risk and legal is an integral part of the fabric of the group.

How did you prepare your organisation

for the Bribery Act 2010? What training

did you provide?

We use a variety of training methods, including making the most of online training tools and resources, which is an effective and efficient way of training, particularly for a large number of staff.

In terms of the Bribery Act 2010, we considered the area carefully. We enhanced our training and launched an online training programme at the beginning of the year and rolled this out across our global operations. The training is split across a number of modules, which includes specific testing to ensure people have properly understood the training.

We also run bespoke workshops on legal issues that we feel require more detailed explanation or focus, which allows participants to ask specific questions and for there to be an in-depth discussion of the issues, which can help further embed a proper understanding of the issues.

How do you demonstrate your

worth to the company?

It’s important that the value of the legal team and its work is championed and made clear at a senior level, including in front of regional heads and board directors. So it’s not just about ‘adding’ value, but ‘demonstrating’ it. It is important to highlight the financial implications of the work your team undertakes – for example, emphasise the value that has been added by the legal team in addition to what has been saved on a given project and what it would have cost if you had to use external lawyers on an hourly basis.

How do you conduct your

panel reviews?

On the corporate and commercial side, we run a panel review every three years. We are very selective when short-listing firms. For firms that have performed great work for us we would usually expect to invite them to resubmit.

In terms of the process, the reviews are conducted jointly between our legal team and sourcing colleagues. Once we have identified the firms we want to work with, a formal request for proposals is sent out, detailing what we are looking for. At this stage, firms outline their areas of expertise and score themselves accordingly. We then conduct formal interviews, while our sourcing team assist in negotiating fee proposals. There is a lot of discussion within the organisation about external lawyers and we rank them internally. We also make sure we have properly canvassed the opinions of relevant non-lawyer business colleagues.

We have about eight firms on our non-claims panel, three for our UK operations and five for our Group Corporate Centre requirements, which



can include non-UK matters. Obviously, we use other specialist firms when required, particularly in overseas locations and smaller jurisdictions.

what makes a good senior

in-house lawyer?

In addition to having the right legal technical skills, the basic requirements are being a good manager of people, projects and external lawyers. In-house lawyers also need to show good leader-ship, understand the wider picture and the business needs, and be able to inspire and galvanise collaboration across the company.

How do attract and retain the

best talent?

The in-house world is arguably much more attractive today than in previous times. Legal teams are now at the heart of important business decisions, so the work is varied and standards are high. In terms of attracting the best talent, if you already have high-calibre lawyers, others will follow.

If I have a preferred candidate they will meet the rest of the team on an informal basis – they have to be comfort-able that this is the right culture for them.

What are the main misunderstandings

that occur between in-house counsel

and their external advisors?

Talk to your external legal services providers regularly to keep the relation-ship up to date. Meet for a coffee, even if there is no direct matter to discuss – this is a great opportunity to informally discuss business issues that are coming up and which may require their input. But strike the right balance between developing a strong working relationship but not becoming too cosy.

What are the pros and cons of hourly

billing versus AFAs?

There is a lot of talk around hourly rates. Sometimes alternative fee arrangements (AFAs) are appropriate and sometimes less so. It depends on the particular matter and it’s down to the in-house team to help navigate through this. Some people are very vocal about banning the hourly rate and only working on the premise of value-based billing. This sounds wonderful, but it may be difficult to define ‘value billing’ in practice. The reality is that somewhere behind every deal there is hourly billing because the external law firms will always look at their time and cost per hour at some stage of the process. They will then look at the margin on this and seek to price accordingly. While it is certainly a mistake to slavishly use hourly rates in all areas, they can on occasion be a useful starting point, even for those firms and companies that have banned hourly rates. And if you say you never want to see a timesheet, you may be depriving yourself of some transparency.

Law firms could sometimes do more in terms of building up a clearer picture of costs for projects. If a law firm has completed 100 deals in a particular area, they should know what the average cost is for those deals. Even if your deal turns out to be more complicated, things will average out for the law firm over time. On the flipside, many in-house lawyers may not be happy with a fixed price that is based on an ‘average’, because this means they are subsidising others.

We look at AFAs across the board and frequently work on a capped or contingency fee basis. Equally, we may still use hourly rates if they are more appropriate for a given matter. n


PaRT I: ChaPTER 6 – ThE lEaDERShIP gOal

IN THIS report, we have assessed ways in which in-house lawyers – and their departments – can demonstrate their value as advisory partners, integrating legal expertise with an intimate understanding of the specific commercial priorities of the business in which they work.

This would be a pointless task if in-house legal teams didn’t themselves want to move up the value chain. Nor would it be much use if some in-house counsel weren’t already proving their worth at this higher strategic level.

If the job were largely about ensuring cost efficiency in legal service procure-ment, we could have done a better job writing a report on managing legal spend – especially where evidence suggests this is the number-one priority for in-house legal teams. The Deloitte Forensic Corporate Counsel Survey 2010, for instance, asked 200 corporate counsel to identify the top three ways in which a legal team could best demonstrate value. The top strategy, chosen by 61 per cent of respondents, was ‘reducing external legal expenditure’. In the same survey five years ago, the most popular choice was ‘achieving the best legal outcome for their organisations’ (60 per cent of respondents)1. Such a result may not be terribly surprising given the current financial climate, but it is a timely reminder of the key challenge facing legal teams: to be seen as anything but a cost-centre.

Ultimately, law departments advise their businesses on avoiding potential problems, so they have no obvious means to contribute directly to revenue gen-eration and business growth. Because of this, it can be difficult to prove that

all-important return on investment. CEOs might not want to get rid of their lawyers (particularly if they can save costs on sourcing external advice), but that doesn’t mean they view them as anything more than a necessary drain on the finances. At worst, they might even see their legal team as stifling innovation and growth.

But the fact is that most in-house lawyers do not just want to manage external lawyers and/or control legal budget. They join the corporate world to be at the heart of strategic business decision making. They want to be more than a support function; the best want a seat at the top table and the ear of the most senior leadership – or, even better, to be senior leaders themselves. And this is hardly an over-reaching ambition.

In Chapter 1, Peter Judge, head of legal services and procurement at One North East, made an excellent point that’s worth repeating: “you wouldn’t have a company that doesn’t acknowledge the need for a finance director, so financial qualifications are in high demand. But many still don’t recognise the value of the in-house lawyer.”

Why should finance directors hold such high office and so rarely the in-house lawyer? Law department consultant Rees Morrison recently posted a blog that aptly reinforces this. He had just read an article in Fortune magazine (25 July 2011), in which a CFO was described as a CEO’s best secret weapon, because he has to be “part numbers whiz, part general manager and part consiglieri”. In a cutting riposte, Morrison asks: “Isn’t that the forté of the general counsel, the wisdom behind the throne?” He continues:

ChaPTER 6: ThE lEaDERShIP gOal



“What threw me further was the rave about the CFO of Mittal Steel who ‘fought off a poison pill and a Russian rival in the hostile $38 billion takeover of European rival Arcelor.’ Smacks of unauthorized practice of law, not that there were any M&A issues a good bean counter couldn’t handily take care of. Who needs a lawyer when you have a CFO?”2

There are signs, however, that the situation is changing. In the same Deloitte survey cited earlier, the balance of influence between general counsel and a partner in a law firm appears to have shifted. Five years ago, 76 per cent of respondents indicated that a partner of a large law firm would “be perceived to carry greater influence in a business environment, when compared to a general counsel of a large organisation”. Today’s survey shows that 71 per cent of those polled now believe that a general counsel of a large organisation has “greater influence in a business environment when compared to a partner in a large law firm”. Seventy-seven per cent of respondents also said the standing of corporate counsel had improved in both the legal profes-sion and in the corporate community; and 70 per cent believed their standing had improved within their own organisations.3

Such a favourable trend for in-house lawyers may well be down to departments better proving their worth – not just in terms of meeting the budget, but in terms of quantifying their direct contribution to the business. Susan Diehl, vice-president, general counsel and corporate secretary at US talent management firm Bartech Group, recently explained to the Law Society Gazette how law departments could prove their worth, not by taking a cost-cutting approach (which may just cause leadership teams to assume such teams cost too much in the first place), but

by advertising the savings the team has made to the company and the amount of revenue generated. This could be done, she suggests, by showing money saved for the company by avoiding, say, costly litigation. Alternatively, it could show revenue generated by pursuing late or non-payments from companies; pursuing companies that have infringed the company’s copyright, business terms and other agreements; selling off assets the company does not need; or not renewing insurance policies that are no longer required, or that can be bundled into one cheaper policy. She goes on to tell the Gazette that with such a ‘value-based model’, her department “contributed $30m in earnings before interest, tax, deprecia-tion and amortisation, and an additional $50m in cash-flow”. This was against an internal investment of “just $1m for the legal department and $4m for outside legal resources”.4

Strategies such as these will certainly help a law department’s cause.

The environmentOver the past decade, business has become ever more complex. Scandals have also tarnished the reputation of not just the affected businesses, but of corpo-rates – and their leadership – as a whole. Governments have responded by cracking down on corporate risk-taking behaviour, with new regulations scrutinising business transactions.

Of course, it is lawyers that can best understand rapidly changing legisla-tion, the heightened risk climate, and the dangers of poor corporate governance. And it is the in-house lawyers who can best apply the legal environment to the unique considerations of the business in which they work. The stakes are higher – those that fail to rise to the challenge



risk losing their jobs. But the rewards are undeniably greater too.

This is the reason why increasing numbers of in-house lawyers are getting ahead and making it to the boardroom. We have seen examples in this report of lawyers who are not just the legal equiva-lent of the financial number-crunchers. They are indeed becoming, if they are not already, consiglieri to their CEOs.

For the coming years, we have looked at the kind of challenges in-house departments will face, particularly from new businesses entering the legal market and increased levels of outsourcing. The overall structure of the in-house legal department may be subject to further change as these forces come into play. But for those key lawyers who can really prove their advisory worth, the gates of opportunity are well and truly open. n

References1. ‘Deloitte Forensic Corporate Counsel

Survey 2010: Do today’s corporate counsel hold all the cards?’

2. Morrison, R., ‘Cutting observa-tions about ascendant CFOs, in relation to mere-mortal CLOs’, July 2011, at http://www.lawdepart-mentmanagementblog.com/law_de-partment_management/2011/07/cutting-observations-about-ascendant-cfos-in-relation-to-mere-mortal-clos.html

3. Ibid4. ‘How lawyers can demonstrate their

worth’, Law Society Gazette, June 2011


PaRT I I – glOBal law DEPaRTMENT BENChMaRkS

PaRT II – glOBal law DEPaRTMENT BENChMaRkS

Part II of this report details the results of the Global Law Department Benchmarks survey, a global study of law

department spend conducted by General Counsel Metrics. The benchmark study is updated on a quarterly

basis, and in this report we publish the latest results (July 2011) on pages 137-170.


The Global Law Department Benchmarks study, conducted by General Counsel Metrics (GCM), presents a new approach to law department performance benchmarks. The metrics are relevant, we believe, not only to general counsel but also to law firm partners.

Benchmark metrics help a general counsel know how well their law departments are managed compared to other law departments.

“Is my spending in line?” “Do I have a typical number of paralegals?” With the most current metrics in hand, in-house managers can respond confidently when the CEO asks, “Do you deliver value?”

An astute general counsel uses benchmarks to argue for more staff, to defend against staff cuts, to get more out of the resources available, and to promote the contributions of the legal team.

New approachLet’s consider what GCM’s benchmark survey, a cost-free offering, adds to what other surveys have accomplished and why it provides innovations in benchmark methodology and results.

1. With 1,000-plus respondents, analyses are much more finegrained, reliable, and persuasive.

2. Reports are available in the spring and throughout the year.

3. Graphical display of results for ease of comprehension.

4. Global basis for comparison. Since companies compete in the global marketplace, their legal teams need

to match themselves against industry peers from other countries.

In this report (p137-170), we publish the partial results of GCM’s July 2011 (Release 2.0) benchmark data. The next survey (Release 3.0) will be published by GCM in October 2011, and approximately quarterly thereafter.


glOBal law DEPaRTMENT BENChMaRkS

get involved

If you would like to receive up-to-date metrics about your law department and industry sector, take part in GCM’s next benchmark release. Simply visit GCM’s online, confidential survey – https://novisurvey.net/n/4ka.aspx

For further information about GCM, please visit www.reesmorrison.com



aBOuT ThE PaRTICIPaNTS

Industries and revenue range $50-490m $490m-1.9bn $1.9-5.8bn >$5.8bn Totals

Aerospace/Defence 2 0 2 4 8

Business Services 2 3 5 1 11

Construction/Engineering 2 3 1 0 6

Consumer Products 4 6 3 0 13

Energy 4 1 2 5 12

Extractive, Mining, Chemical 0 4 5 5 14

Financial Services 7 6 5 7 25

Food & Beverage 1 2 6 4 13

Healthcare 3 4 4 1 12

Insurance 7 7 2 5 21

Leisure/Entertainment/Media 4 3 0 1 8

Manufacturing 8 13 13 16 50

Medical Devices 3 5 7 6 21

National Lab 0 3 3 1 7

Not for Profit/Gov’t 4 3 0 1 8

Pharmaceutical 2 1 0 0 3

Retail 2 1 5 4 12

Technology 10 3 5 3 21

Telecomm 4 0 1 4 9

Transportation 3 2 1 2 8

Utilities 3 2 2 3 10

Grand Total 75 72 72 73 292

n Departments: This study covers 317 law departments from 23 countries (2/3 North America, 1/7 Europe). A full list of participants is available at the end of the Appendix (p166), separated out by 21 industries and by country.

n Revenue: One quarter of the participants reported revenue below US$500 million. One quarter reported revenue greater than US$5.8 billion. The median revenue was US$1.5 billion.

n Spend: The participants reported US$8.5 billion in total legal spending in support of US$3.1 trillion in revenue.

n Staff: At the end of 2010, the partici-pants had a total of 8,154 lawyers and

6,783 other legal staff (medians of 8 and 6 respectively). In the smallest “quartile”* are 94 participants who reported from one to three lawyers. The next “quartile” of 77 participants reported more than three lawyers but fewer than eight. Twenty-two departments have more than 100 lawyers.

The table below shows how many participants are in each industry by four revenue ranges. In the smallest range, 75 participants reported between US$50 million and US$490 million in revenue. The next to last column shows 73 participants with more than US$5.8 billion in revenue.

*For an explanation of “approximately one quarter” and “quartiles”, see page 139



n Metrics Tables: After the first table, which shows data for all the participants in this study, each table thereafter presents median benchmarks for one of five characteristics:

I. Industry [Table 1 - for illustration purposes, contains data across four industry sectors],

II. Country [Tables 1-2, those with 6 or more participants so far], III. Region [Tables 1-2], IV. Revenue, and V. Number of Lawyers.

n Benchmarks: In each table, the left column lists the 25 fundamental benchmarks. This study does not list them in any particular order of priority or importance other than to pair related metrics.

n Columns: Other than the All-Participants Benchmark Table, each column of a table displays median benchmark metrics. The “N= ” at the top tells how many law departments are included in that column. The charts that start after the last Table give quartiles, averages, and trimmed means for the All-Participant group.

n Special “Quartiles” for Revenue and Number of Lawyers: To calculate medians for Revenue and Number of Lawyers, we divided the participants into four groups as equal in size as possible. The groups are not precisely equal because we kept together the departments at the highest number in a group. Thus the first “quartile” group for revenue (the companies with the least revenue) has 80 participants because there were some extra with $300 million which we kept together.

uNDERSTaNDINg ThE METRICS TaBlES



all-PaRTICIPaNTS BENChMaRk TaBlE*

Benchmarks for Companies N=317

25% QuartileN=317

MedianN=317

MeanN=317

Trimmed MeanN=317

75% Quartile

Total Legal Spending % of Revenue 0.22% 0.41% 1.01% 0.67% 0.86%

Revenue $ per Total Legal Spending $117.17 $247.40 $430.43 $359.32 $455.36

Lawyers per $B Revenue 2.50 5.52 26.20 10.39 13.27

Legal Staff per $B Revenue 4.48 9.82 77.09 19.00 22.80

Lawyers per Legal Staff 0.46 0.57 0.57 0.57 0.67

Lawyers % of Legal Staff 45.96% 56.76% 57.46% 57.35% 66.67%

Lawyers per Paralegal 1.87 2.82 3.89 3.43 4.50

Lawyers per non-Paralegal 0.58 0.71 0.71 0.72 0.86

Revenue per Lawyer $75,357,142 $181,159,420 $357,031,004 $280,440,456 $400,000,000

Revenue per Legal Staff $43,859,022 $101,773,203 $209,351,142 $152,423,322 $222,969,444

Internal Spending per Lawyer $208,365 $300,000 $511,710 $332,127 $450,000

Internal Spending per Legal Staff $113,772 $166,666 $270,621 $179,321 $233,016

External Spending per Lawyer $183,708 $440,000 $781,609 $615,210 $897,678

External Spending per Legal Staff $100,000 $223,083 $446,683 $331,383 $460,606

Total Legal Spending per Lawyer $435,000 $794,021 $1,283,861 $957,593 $1,291,666

Total Legal Spending per Legal Staff $234,571 $424,242 $711,988 $517,230 $710,541

Internal Spending % of Total Legal Spending 28.09% 42.96% 45.70% 45.43% 60.87%

Internal to External Spending Ratio 28/72 43/57 46/54 45/55 61/39

Internal Spending % of Revenue 0.08% 0.17% 0.43% 0.27% 0.33%

Revenue $ per Internal Spending $300.00 $607.69 $1,159 $937.38 $1,250

External Spending % of Revenue 0.11% 0.23% 0.59% 0.39% 0.45%

Revenue $ per External Spending $222.22 $458.40 $1,343 $947.09 $932.20

External Spending % of Total Legal Spending 40.00% 57.14% 55.14% 55.36% 72.37%

Cost per Lawyer Hour $115.76 $166.67 $284.28 $184.52 $250.00

Cost per Legal Staff Hour $66.92 $98.04 $159.19 $105.48 $137.07

*For an explanation of each benchmark, please see the see first page of Appendix (p165). For definitions of the quartile and terms at the top of the columns, see page opposite.



ExPlaNaTION OF ThE all-PaRTICIPaNTS’ ChaRTS

IntroductionGraphs help many people quickly grasp a benchmark metric and the dispersion of that metric. Accordingly, the graphs that follow the sets of tables provide visual insights for each of the 25 fundamental benchmark metrics.

n Each chart displays a column for five key metrics from the number of departments specified by the “N=” figure. At the top of the column is the metric.

n These are the columns: 1. 25% Quartile - all figures are sorted low to high and you select the figure 25 per cent

up from the bottom (smallest) figure. 2. Median - the middle figure in a sort, with half the figures above it and half below. 3. Mean (average) - Adds all law department figures and divides by the number of

departments (N). 4. Trimmed Mean - calculated like the Mean, but drops the lowest and highest 2.5 per

cent of the figures (where data may be missing or extreme). 5. 75% Quartile - All figures are sorted low to high and you select the figure 25 per

cent of the way down from the top (largest) figure.

n This study presents the charts, two per page, in the order they are listed in the sets of tables.



TaBlE I – METRICS By INDuSTRy (IlluSTRaTIvE)

BenchmarksN=317

Aerospace/Defence

N=8

Business Services

N=12

Construction/Engineering

N=7

Consumer Products

N=15

Total Legal Spending % of Revenue 0.34% 0.45% 0.26% 0.32%

Revenue $ per Total Legal Spending $301.08 $229.10 $380.95 $317.91

Lawyers per $B Revenue 3.51 5.66 8.90 5.00

Legal Staff per $B Revenue 5.14 14.99 15.50 11.90

Lawyers per Legal Staff 0.57 0.58 0.67 0.41

Lawyers % of Legal Staff 56.61% 57.47% 66.67% 40.91%

Lawyers per Paralegal 4.75 3.31 3.00 2.00

Lawyers per non-Paralegal 0.66 0.78 0.86 0.62

Revenue per Lawyer $327,043,940 $177,972,354 $114,125,000 $200,000,000

Revenue per Legal Staff $204,901,960 $69,718,005 $64,583,333 $84,000,000

Internal Spending per Lawyer $478,571 $282,804 $195,000 $166,666

Internal Spending per Legal Staff $200,850 $157,369 $111,111 $90,909

External Spending per Lawyer $464,866 $208,267 $70,000 $400,000

External Spending per Legal Staff $238,235 $97,916 $26,315 $181,818

Total Legal Spending per Lawyer $1,063,124 $574,505 $265,000 $592,904

Total Legal Spending per Legal Staff $506,200 $287,948 $175,000 $310,000

Internal Spending % of Total Legal Spending 47.48% 51.05% 66.67% 27.75%

Internal to External Spending Ratio 47/53 51/49 67/33 28/72

Internal Spending % of Revenue 0.14% 0.18% 0.15% 0.10%

Revenue $ per Internal Spending $763.09 $565.47 $657.69 $1,076

External Spending % of Revenue 0.19% 0.20% 0.05% 0.27%

Revenue $ per External Spending $550.00 $501.33 $1,832 $377.50

External Spending % of Total Legal Spending 52.53% 48.96% 33.33% 72.25%

Cost per Lawyer Hour $265.88 $157.12 $108.33 $92.59

Cost per Legal Staff Hour $118.15 $92.57 $65.36 $53.48

© 2011 General Counsel Metrics, LLC – All Rights Reserved.



TaBlE II – METRICS By COuNTRy (1)

BenchmarksN=317

AustraliaN=9

BrazilN=22

CanadaN=30

GermanyN=6















Total Legal Spending per Lawyer $736,676 $266,666 $600,000 $840,495





Revenue $ per Internal Spending $495.53 $1,165 $613.63 $740.38


Revenue $ per External Spending $559.37 $1,016 $738.05 $468.55








TaBlE II – METRICS By COuNTRy (2)

BenchmarksN=317

SwitzerlandN=6

UKN=14

USAN=197

Total Legal Spending % of Revenue 0.55% 0.27% 0.44%

Revenue $ per Total Legal Spending $321.37 $375.97 $228.73

Lawyers per $B Revenue 9.22 6.88 4.83

Legal Staff per $B Revenue 22.57 9.36 9.17

Lawyers per Legal Staff 0.68 0.71 0.54

Lawyers % of Legal Staff 67.55% 71.43% 54.29%

Lawyers per Paralegal 3.76 4.85 2.67

Lawyers per non-Paralegal 0.82 0.75 0.70

Revenue per Lawyer $124,313,725 $145,454,545 $207,182,608

Revenue per Legal Staff $57,364,532 $106,811,523 $109,090,909

Internal Spending per Lawyer $235,437 $200,000 $351,666

Internal Spending per Legal Staff $164,696 $122,070 $185,535

External Spending per Lawyer $344,397 $325,000 $500,000

External Spending per Legal Staff $231,185 $169,230 $251,270

Total Legal Spending per Lawyer $581,918 $560,000 $921,000

Total Legal Spending per Legal Staff $395,882 $273,333 $470,588

Internal Spending % of Total Legal Spending 50.39% 39.02% 41.91%

Internal to External Spending Ratio 50/50 39/61 42/58

Internal Spending % of Revenue 0.22% 0.10% 0.18%

Revenue $ per Internal Spending $560.45 $1,000 $545.45

External Spending % of Revenue 0.20% 0.20% 0.25%

Revenue $ per External Spending $561.13 $497.16 $393.80

External Spending % of Total Legal Spending 49.62% 62.85% 59.17%

Cost per Lawyer Hour $130.80 $111.11 $195.37

Cost per Legal Staff Hour $96.88 $71.81 $109.14



TaBlE III – METRICS By REgION (1)

BenchmarksN=317

Asia/PacN=6

Aust/NZN=8

EuropeN=28

LatAmN=24




















Revenue $ per Internal Spending $168.78 $657.69 $711.53 $1,080


Revenue $ per External Spending $625.00 $626.00 $676.92 $1,032








TaBlE III – METRICS By REgION (2)

BenchmarksN=317

North AmericaN=229

UK/IrelandN=18

Total Legal Spending % of Revenue 0.43% 0.44%

Revenue $ per Total Legal Spending $235.26 $228.57

Lawyers per $B Revenue 5.01 6.95

Legal Staff per $B Revenue 9.51 9.37

Lawyers per Legal Staff 0.55 0.71

Lawyers % of Legal Staff 54.55% 71.43%

Lawyers per Paralegal 2.67 4.85

Lawyers per non-Paralegal 0.70 0.75

Revenue per Lawyer $199,753,521 $143,934,954

Revenue per Legal Staff $105,160,352 $106,739,094

Internal Spending per Lawyer $335,585 $200,000

Internal Spending per Legal Staff $180,761 $142,857

External Spending per Lawyer $499,484 $496,453

External Spending per Legal Staff $238,331 $249,554

Total Legal Spending per Lawyer $900,000 $583,333

Total Legal Spending per Legal Staff $452,074 $424,242

Internal Spending % of Total Legal Spending 43.15% 35.29%

Internal to External Spending Ratio 43/57 35/65

Internal Spending % of Revenue 0.18% 0.11%

Revenue $ per Internal Spending $559.00 $937.50

External Spending % of Revenue 0.25% 0.23%

Revenue $ per External Spending $406.44 $426.67

External Spending % of Total Legal Spending 57.05% 65.34%

Cost per Lawyer Hour $186.44 $111.11

Cost per Legal Staff Hour $106.33 $84.03



TaBlE Iv – METRICS By REvENuE

BenchmarksN=317

Quartile 1MedianN=80


















Total Legal Spending per Lawyer $486,111 $612,500 $943,750 $1,025,209





Revenue $ per Internal Spending $242.12 $596.00 $1,000 $983.33


Revenue $ per External Spending $255.00 $471.50 $502.65 $627.60








TaBlE v – METRICS By NuMBER OF lawyERS

BenchmarksN=317
























Revenue $ per Internal Spending $475.79 $800.00 $800.00 $547.01


Revenue $ per External Spending $373.87 $642.86 $471.24 $465.29






BENChMaRkS (1)

Total legal Spending % of RevenueBenchmark for law departments, N=317

Revenue $ per Total legal SpendingBenchmark for law departments, N=317




BENChMaRkS (2)

lawyers per $B RevenueBenchmark for law departments, N=317

legal Staff per $B RevenueBenchmark for law departments, N=317

The mean is quite high for these charts because of two or three departments that have very high figures. This is why medians are better figures to benchmark against than means (averages).




BENChMaRkS (3)

lawyers per legal StaffBenchmark for law departments, N=317

lawyers % of legal StaffBenchmark for law departments, N=317




BENChMaRkS (4)

lawyers per ParalegalBenchmark for law departments, N=317

lawyers per non-ParalegalBenchmark for law departments, N=317




BENChMaRkS (5)

Revenue $k per lawyerBenchmark for law departments, N=317

Revenue $k per legal StaffBenchmark for law departments, N=317




BENChMaRkS (6)

Internal Spending $k per lawyerBenchmark for law departments, N=317

Internal Spending $k per legal StaffBenchmark for law departments, N=317




BENChMaRkS (7)

External Spending $k per lawyerBenchmark for law departments, N=317

External Spending $k per legal StaffBenchmark for law departments, N=317




BENChMaRkS (8)

Total legal Spending $k per lawyerBenchmark for law departments, N=317

Total legal Spending $k per legal StaffBenchmark for law departments, N=317




BENChMaRkS (9)

Internal Spending % of Total legal SpendingBenchmark for law departments, N=317

Internal to External Spending RatioBenchmark for law departments, N=317




BENChMaRkS (10)

Internal Spending % of RevenueBenchmark for law departments, N=317

Revenue $ per Internal SpendingBenchmark for law departments, N=317




BENChMaRkS (11)

External Spending % of RevenueBenchmark for law departments, N=317

Revenue $ per External SpendingBenchmark for law departments, N=317

The mean is quite high for these charts because of two or three departments that have very high figures. This is why medians are better figures to benchmark against than means (averages).




BENChMaRkS (12)

External Spending % of Total legal SpendingBenchmark for law departments, N=317

Cost per lawyer hourBenchmark for law departments, N=317




BENChMaRkS (13)

Cost per legal Staff hourBenchmark for law departments, N=317




aPPENDIx – ExPlaNaTION OF ThE BENChMaRkS

Benchmark How Calculated

Total Legal Spending % of Revenue (Internal plus External legal spend) divided by Revenue

Revenue $ per Total Legal Spending Revenue divided by (Internal plus External legal spend = Total Legal Spend [TLS]

Lawyers per $B Revenue Lawyers divided by (Revenue divided by one billion)

Legal Staff per $B Revenue Legal Staff [Paralegals plus Other Staff] divided by (Revenue divided by 1B)

Lawyers per Legal Staff Number of Lawyers for each Legal Staff

Lawyers % of Legal Staff Lawyers divided by Legal Staff

Lawyers per Paralegal Number of Lawyers for each Paralegal

Lawyers per non-Paralegal Number of Lawyers for each non-Paralegal (Other Staff)

Revenue $K per Lawyer Revenue divided by Lawyers – in thousands of dollars, e.g., 600 = $600,000

Revenue $K per Legal Staff Revenue divided by Legal Staff – in thousands of dollars, e.g., 600 = $600,000

Internal Spending $K per Lawyer Internal Spending/Lawyer – in thousands of dollars

Internal Spending $K per Legal Staff Internal Spending divided by Legal Staff – in thousands of dollars

External Spending $K per Lawyer External Spending divided by Lawyers – in thousands of dollars

External Spending $K per Legal Staff External Spending divided by Legal Staff – in thousands of dollars

Total Legal Spending $K per Lawyer Total Legal Spending divided by Lawyers – in thousands of dollars

Total Legal Spending $K per Legal Staff Total Legal Spending divided by Legal Staff – in thousands of dollars

Internal Spending % of Total Legal Spending Internal Spending divided by Total Legal Spend

Internal to External Spending Ratio Internal Spending over External Spend where they total 100

Internal Spending % of Revenue Internal Spending divided by Revenue

Revenue $ per Internal Spending Revenue divided by Internal Spending

External Spending % of Revenue External counsel spend divided by Revenue

Revenue $ per External Spending Revenue divided by External Spending

External Spending % of Total Legal Spending External Spending divided by Total Legal Spend

Cost per Lawyer Hour Internal Spending divided by (Lawyers times presumed 1,800 chargeable hrs.)

Cost per Legal Staff Hour Internal Spending divided by (Lawyers times 1,800 hrs., Other Staff times 1,700)




n Currency Conversion: The survey asked participants to convert their spending and revenue figures into US dollars at the exchange rate in effect at the end of 2009. But, since the survey accepts all currencies, we converted the data of several participants at an exchange rate for 2010.

n Unusual Data: When data submitted to us appeared questionable, we emailed the respondent for clarification and corrected their data accordingly.

n Incomplete Data: All participants submitted staffing data but not all of them submitted complete financial data. For example, some did not provide a revenue figure. Where data were incomplete we emailed respondents to ask them to supplement their responses. We revised their data accordingly. Benchmark calculations omit those respondents who did not provide data for one or both components of the benchmark.

n Region or Country Data from Larger Law Department: When a respondent provided data only for a regional or country portion of a worldwide law department, we included that data.

n HQ Country: For tax or other reasons some companies are headquartered in a country different from the one most people would consider their “true” home country. This report uses the country chosen by the respondent.

aPPENDIx – NOTES ON METhODOlOgy aND DaTa



Aerospace/Defense

BoeingCNAEMBRAERPratt & WhitneyRockwell CollinsRolls-RoyceSEAKR Engineering1 Anonymous

Business Services

AccentureAdeccoApex SystemsApplied Industrial Tech.AvayaBooz Allen HamiltonCONBRAS ENGENHARIAEbbingeEriksServicemasterUnited Stat. SupplyW.W. Grainger

Construction/ Engineering

AusencoBoral IndustriesGolden State LumberLedcor GroupSikaStantec ConsultingTECHINT ENG. E CONSTR.

Consumer Products

BrunswickCamperCloroxDBApparelDoux FrangosulGrendeneGuthy-RenkerMotorola IndustrialNewell RubbermaidPoltrona FrauUnicasa Industria MoveisUnilever BRASIL3 Anonymous

Energy

BoralexBruce PowerCITGO PetroleumDragon OilEDP Energias do BrasilEDP RenovaveisEl PasoMainstreamNexen

NiSourceSuncor EnergyVeolia Energy2 Anonymous

Extractive, Mining, Chemicals

Air LiquideAshlandCamecoDuPontFMCGoldcorpImerysLindeLyondellBasellMethanexMinerals TechnologiesNyrstarOrica Mining ServicesSud-Chemie

Financial Services

AonBanco PopularBB&TCB Richard EllisCIA EXCELSIOR DE SEGUROSCIT GroupCUNA MutualCWCapitalDesenbahiaDeutsche BankDICDuke RealtyEarly Warning ServicesEcofinEuroclearFirst Financial BancorpFreitasLeiteGulf InvestmentLadcoNat. Australia BankNEA’s Member BenefitsNewmark Knight FrankPiper JaffrayRoyal Bank of CanadaSymcorTD BankThe HartfordTrihorse InvestmentWright Express1 Anonymous

Food & Beverage

B&G FoodsBrown-FormanChiquita BrandsCorner Bakery CafeDot FoodsHershey

InBev ItaliaKraft FoodsNestle Purina PetCarePepsiCoRalcorpSolaeWisdom Natural Brands1 Anonymous

Healthcare

Aurora Health CareBlueCross BlueShield NCCarolinas HealthCareFenwalHallmark HealthKaiser PermanenteL.A. Care Health PlanLloyds Pharmacy LimitedMaricopa Integ. HealthNationsHealthNW Mem. HealthCarePalomar Pomerado HlthVancouver Coastal Hlth

Insurance

Affirmative Insur.AgricorpAmerisure Mut. Ins.Assumption LifeCapitale assurancesCountry FinancialFlorida Peninsula Ins.Golden CrossHomesite GroupICW GroupIndependent HealthMaiden HoldingsMassMutualMutual of OmahaNationwidePalisadesPhoenix LifeSelective Insurance3 Anonymous

Leisure/Entertainment/Media

Australian BroadcastingCBC/Radio-CanadaCBS OutdoorEconomist GroupEntertainment Public.PoolSpanish BroadcastingThomson Reuters Mkts

Manufacturing

3MAffiniaAltra Holdings

aPPENDIx – PaRTICIPaNTS By INDuSTRy (1)



aPPENDIx – PaRTICIPaNTS By INDuSTRy (2)

A.M. CastleAmsted IndustriesArcelorMittalBrasilBeldenBlueScope SteelBriggs & StrattonBRPCIRCOR InternationalCNH GlobalCraneCRM Industria e ComDanaDeere & CompanyDoverEaton (China) Invest.EllwoodEnviro. TectonicsEssex EuropeFMC TechnologiesGerdauHonda Am. Mfg.HORIBAIllinois Tool WorksIndustreaJohnson ControlsKennametalMetsoMicrelNordsonOneSteelPilkington NAPPGRaritanSimmons BeddingTemple-InlandTextronThermadyneTI AutomotiveToroTrinity IndustriesTycoUnileverVesuviusV&M do BrasisW. R. Grace2 Anonymous

Medical Devices

AbiomedAm. Medical SystemsBaxter HealthcareBecton DickinsonBoston ScientificCareFusionCaridianBCTCernerCovidienDENTSPLY InternationalEdwards LifesciencesIntegra LifeSciencesJ&J Medical DevicesLifeLabsMedtronicQIAGENRoche Diagnostics

Salient Surgical Techs.Sigma-AldrichSynergetics USA1 AnonymousZimmer

National Lab

Argonne Nat’l Lab.Caltech/JPLJHU Applied Physics LabLANSLawrence LivermoreSandia Nat’l Lab1 Anonymous

Not for Profit/ Government

BC AssessmentChester Housing Auth.City of Detroit Law DeptColumbia Assoc.CSADeVryVesuvius Forest Prods. Sect. CouncilGSM AssociationLegal Services BoardNature ConservancyTechSoup GlobalUCAR1 Anonymous

Pharma

MedichemNoven PharmaceuticalsRoche Products

Retail

7-ElevenBig LotsBurlington Coat FactorydELiA*sEugenio Raulino KoerichFollettGapGrupo ItavemaKingfisherOffice DepotPaode AcucarTargetWolverine World Wide

Technology

AgilentAkamaiBlackbaudCatho OnlineCDWCrimson LogicCSC

Earth NetworkseCircleFlexera SoftwareFreescale Semicon.Innovation GroupInsight EnterprisesInternational RectifierMA Info&Comm.MincomMotorola MobilityNetappNexidiaNovellPicselRadiant SystemsStamps.comVishay Intertechnology

Telecom

BroadSoftComverging Techs.Nokia Siemens NtwrksNorthwestelNSSQualcommSiemens EnterpriseSprintTelstraVoxboneXchange Telecom

Transportation

American AirlinesCanadian Nat’l RailwayDHLFallbrook Techs.K-SeaKuehne+Nagel ServisosTransurbanVancouver Fraser Port

Utilities

Allegheny EnergyDenver WaterFirstEnergy ServiceFortisAlbertaIntegrys EnergyOntario Power Gen.PennonPortland General ElectricSalt River ProjectSaskEnergyMA Info&Comm.MincomMotorola MobilityNetapp



Argentina

CloroxNSS

Australia

AusencoAustralian BroadcastingBlueScope SteelIndustreaMincomNat. Australia BankOneSteelTelstraTransurban

Belgium

EuroclearVesuviusVoxbone

Bermuda

Maiden Holdings

Brazil

ArcelorMittal BrasilCatho OnlineCIA EXCELSIOR DE SEGUROSCONBRAS ENGENHARIACRM Industria e ComDesenbahiaDoux FrangosulEDP Energias do BrasilEMBRAEREugenio Raulino KoerichFreitasLeiteGerdauGolden CrossGrendeneGrupo ItavemaMetsoMotorola IndustrialPaode AcucarTECHINT ENG. E CONSTR.Unicasa Industria MoveisUnilever BRASILV&M do Brasis

Canada

AgricorpAssumption LifeBC AssessmentBoralexBRPBruce PowerCamecoCanadian Nat’l RailwayCapitale AssurancesCBC/Radio-CanadaCSA

Forest Prods. Sect. CouncilFortisAlbertaGoldcorpLadcoLedcor GroupLifeLabsMethanexNexenNorthwestelOntario Power Gen.Royal Bank of CanadaSaskEnergySuncor EnergySymcorTD BankVancouver Coastal HlthVancouver Fraser Port2 Anonymous

China

Eaton (China) Invest.Trihorse Investment

Finland

Nokia Siemens Ntwrks

France

Air LiquideDBApparelImerys

Germany

Deutsche BankeCircleLindeMA Info&Comm.QIAGENSud-Chemie

Ireland

AccentureCovidienMainstream

Italy

InBev ItaliaPoltrona Frau

Japan

HORIBAKuwaitGulf Investment

Lebanon

1 Anonymous

Netherlands

CNH GlobalDHLEbbingeEriksLyondellBasell

Puerto Rico

Banco Popular

Singapore

Crimson LogicOrica Mining Services

Spain

CamperEDP RenovaveisMedichem

Switzerland

AdeccoKuehne+Nagel ServisosNyrstarSikaTyco1 Anonymous

UAE

DICDragon Oil

UK

CBS OutdoorEcofinEconomist GroupGSM AssociationInnovation GroupKingfisherLegal Services BoardLloyds Pharmacy LimitedPennonPhoenix LifePicselRoche ProductsRolls-RoyceUnilever

USA

3M7-ElevenAbiomedAffiniaAffirmative Insur.AgilentAkamaiAllegheny Energy

aPPENDIx – PaRTICIPaNTS By COuNTRy (1)



Altra HoldingsA.M. CastleAmerican AirlinesAmerisure Mut. Ins.Am. Medical SystemsAmsted IndustriesAonApex SystemsApplied Industrial Tech.Argonne Nat’l Lab.AshlandAurora Health CareAvayaBaxter HealthcareBB&TBecton DickinsonBeldenB&G FoodsBig LotsBlackbaudBlueCross BlueShield NCBoeingBooz Allen HamiltonBoral IndustriesBoston ScientificBriggs & StrattonBroadSoftBrown-FormanBrunswickBurlington Coat FactoryCaltech/JPLCareFusionCaridianBCTCarolinas HealthCareCB Richard EllisCDWCernerChester Housing Auth.Chiquita BrandsCIRCOR InternationalCITGO PetroleumCIT GroupCity of Detroit Law DeptCNACogentrix EnergyColumbia Assoc.Comverging Techs.Corner Bakery CafeCountry FinancialCraneCSCCUNA MutualCWCapitalDanaDeere & CompanydELiA*sDENTSPLY InternationalDenver WaterDeVryDot FoodsDoverDuke RealtyDuPontEarly Warning ServicesEarth NetworksEdwards Lifesciences

EllwoodEl PasoEntertainment Public.Enviro. TectonicsEssex EuropeFallbrook Techs.FenwalFirstEnergy ServiceFirst Financial BancorpFlexera SoftwareFlorida Peninsula Ins.FMCFMC TechnologiesFollettFreescale Semicon.GapGolden State LumberGuthy-RenkerHallmark HealthHersheyHomesite GroupHonda Am. Mfg.ICW GroupIllinois Tool WorksIndependent HealthInsight EnterprisesIntegra LifeSciencesIntegrys EnergyInternational RectifierJHU Applied Physics LabJ&J Medical DevicesJohnson ControlsKaiser PermanenteKennametalKraft FoodsK-SeaL.A. Care Health PlanLANSLawrence LivermoreMaricopa Integ. HealthMassMutualMedtronicMicrelMinerals TechnologiesMotorola MobilityMutual of OmahaNationsHealthNationwideNature ConservancyNEA’s Member BenefitsNestle Purina PetCareNetappNewell RubbermaidNewmark Knight FrankNexidiaNiSourceNordsonNovellNoven PharmaceuticalsNW Mem. HealthCareOffice DepotPalisadesPalomar Pomerado HlthParker HannifinPepsiCoPilkington NA

Piper JaffrayPoolPortland General ElectricPPGPratt & WhitneyQualcommRadiant SystemsRalcorpRaritanRoche DiagnosticsRockwell CollinsSalient Surgical Techs.Salt River ProjectSandia Nat’l LabSEAKR EngineeringSelective InsuranceServicemasterSiemens EnterpriseSigma-AldrichSimmons BeddingSolaeSpanish BroadcastingSprintStamps.comStantec ConsultingSynergetics USATargetTechSoup GlobalTemple-InlandTextronThe HartfordThermadyneThomson Reuters MktsTI AutomotiveTIBCO SoftwareToroTrinity IndustriesUCARUnited Stat. SupplyVeolia EnergyVishay IntertechnologyWisdom Natural BrandsWolverine World WideW. R. GraceWright ExpressW.W. GraingerXchange Telecom12 AnonymousZimmerRalcorp

aPPENDIx – PaRTICIPaNTS By COuNTRy (2)



glOBal law DEPaRTMENT BENChMaRkS

get involved

If you would like to receive up-to-date metrics about your law department and industry sector, take part in GCM’s next benchmark release. Simply visit GCM’s online, confidential survey – https://novisurvey.net/n/4ka.aspx. It is free to participate and you will receive the full 65-page standard report, at no cost.

The next survey (Release 3.0) will be published by GCM in October 2011, and approximately quarterly thereafter.

gCM contact details:

Address: General Counsel Metrics, 4 Hawthorne Avenue Princeton, NJ 08540 USATel: (US) 973.568.9110Fax: (US) 609.964.1737Email: [email protected]: ReesMorrison.comBlog: LawDepartmentManagementBlog.com


PaRT III – CORPORaTE COuNSEl RESEaRCh SuRvEyS

Part III of this report details the full results of two Corporate Counsel Research surveys:

‘What’s Hot 2011?’ and

‘Alternative Fee Arrangements’

PaRT I I I – glOBal law DEPaRTMENT BENChMaRkS


PaRT I I I – CCR SuRvEy (whaT’S hOT 2011?)

This survey covers 107 law departments across Europe (3/4) and North America (1/4), separated across the following industries: Agriculture/Mining; Finance & Banking; Telecoms/Media/Technology; Manufacturing; Property; Retail/Distribution; Business services; Transportation; and Utilities/Energy. Twenty-seven per cent of participants reported revenue below £50m, 40 per cent reported revenue between £51m-£99m and the remaining 38 per cent had revenues in excess of £100m. The survey was conducted over a three-month period between November 2010 and January 2011. Respondents were invited to complete 18 multiple choice questions – the results are published on pages 175-183, two graphs per page.

CCR SuRvEy – whaT’S hOT 2011


PaRT I I I – CCR SuRvEy (whaT’S hOT 2011?)

1. when did you decide to move in-house?

Summary: The biggest drivers for switching from private practice to in-house are “Better work-life balance” and wanting to be at the “Heart of business decisions”.

2. why did you choose in-house?Please indicate your responses on a scale of 1-5,

with 1 being least relevant and 5 most relevant

1 2 3 4 5Opportunity arose with a great company 4% 10% 30% 12% 44%

Wanted to be at the heart of business decisions - 11% 13% 28% 48%

Limited travel and related expenses - 13% 37% 50% -

Good career development/training opportunities 44% 36% 8% - 10%

Great salary offer 29% 37% 18% 7% 9%

Better work-life balance/flexibility - 2% 5% 33% 60%


PaRT I I I – CCR SuRvEy (whaT’S hOT 2011)

3. what do you think are the biggest downfalls of working in-house? Please indicate your responses on a scale of

1-5, with 1 being least relevant and 5 most relevant.

Summary: “Lack of recognition within the company” and “Reduced salary opportunities” are cited as the biggest downsides of working in-house. A majority of respondents also point to a lack of recognition within the broader legal profession, although these were rated as 3 and 4 on a scale of importance.

4. what is your company’s global annual revenue?Turnover in £



5. how many lawyers are there in your in-house legal department?

Summary: The vast majority of respondents (79%) “Renegotiated or froze rates with external law firms” during the recession to help control costs, while 87% sent less work to external counsel.

6. how did you go about controlling costs during the recession? Please indicate your responses on a scale of 1-5, with 1 being least relevant and 5 most relevant.

1 2 3 4 5Reduced headcount in the in-house team 37% 33% 22% 2% 6%

Froze internal salaries or introduced part-time working/sabbaticals 28% 1% 41% 16% 14%

Limited travel and related expenses - 12% 50% 1% 37%

Sent less work out to external counsel - 4% 9% 50% 37%

Pushed work back to business divisions 29% 37% 18% 7% 9%

Renegotiated or froze rates with external law firms - - 21% 25% 54%

Postponed projects - 26% 28% 31% 15%



7. To what extent did the previous question (Q6) cause you to consider the following issues?

Summary: In-house counsel have used the recession to renegotiate fees of external counsel for the long term. 82% of respondents (weightings ‘4’ and ‘5’ combined) said they intend to outsouce less work to external counsel in the long term.

1 2 3 4 5Renegotiating fees of external counsel in the long term - 1% 12% 50% 37%

Outsourcing less work to external counsel in the long term - 7% 11% 23% 59%

Pushing law firm clients to outsource process-driven tasks to improve cost-efficiencies

42% - 11% 42% 5%

Directly outsourcing process-driven elements of the in-house role 41% 16% 12% 25% 5%

Using more contract lawyers, as and when the need arises 12% 44% 28% 2% 12%

8. are you currently implementing alternative fee arrangements (aFas) with external counsel?



10. what are the chief problems with implementing aFas? Please indicate your responses on a scale of 1-5, with 1 being least relevant and 5 most relevant.

1 2 3 4 5Knowing which AFA is appropriate for each matter - 13% 14% 43% 30%

No systematic process in place in-house for determining AFAs - 16% 31% 18% 33%

No systematic process in place for determining AFAs on the law firm’s side

- 16% 34% - 50%

No internal desire to change14% 71% - 15% -

Resistance from external counsel to negotiate AFAs - 25% 24% 37% 13%

Difficulty in pricing unpredictable matter - - 16% 18% 66%

Challenge of needing to establish a new working relationship with exter-nal counsel, including partnering and shared project management

- - 1% 48% 51%

Lack of data to measure profitability - 9% 14% 35% 42%

Lack of data/information to measure potential profitability of AFAs 4% 7% 10% 32% 47%

9. what type of aFas and fee arrangements are you using? Please indicate your responses on a scale of 1-5, with 1 being least relevant and 5 most relevant.

Summary: While respondents use a wide variety of AFAs, a majority 96% (weightings ‘4’ and ‘5’ combined) still rely heavily on “Discounted hourly rates”

1 2 3 4 5Fixed fee per matter - 32% 11% 26% 31%

Capped fees either per stage of matter, or for whole matter - 14% 17% 55% 14%

Moving away from retainers 11% 18% 28% 20% 23%

Conditional fees 8% 36% 13% 28% 15%

Blended hourly and fixed rates for each matter 28% 42% 8% 10% 12%

Discounted rates, but with bonus - 13% 33% 37% 17%

Discounted hourly rates - - 4% 46% 50%



11. In what ways are law firms still failing to deliver value for money?

Summary: All respondents say external counsel do not deliver value for money and are too expensive. Just under half say external law firms are unwilling to negotiate alternative fee arrangements.

12. which areas of legal risk management are currently taking up most of your time?

Please indicate your responses on a scale of 1-5, with 1 being least relevant and 5 most relevant.

Summary: Not surprisingly, 87% (weightings ‘4’ and ‘5’ combined) say “Keeping up to date with regulatory, litigious and contractual risk” dominates their work time.



13. how are you currently managing your e-discovery process?Please indicate your responses on a scale of 1-5, with 1 being least

relevant and 5 most relevant.

Summary: While the majority of respondents use KPIs to measure internal performance, no respondents ranked this as being highly relevant.

14. how do you measure the effectiveness of your in-house team?Please indicate your responses on a scale of 1-5, with 1 being least relevant and 5 most relevant.

1 2 3 4 5We have developed specific KPIs to measure internal performance and spend

35% 17% 32% 16% -

By tracking internal and external legal spend against revenue and total expense

14% 57% 13% - 16%

With the use of matter management systems/tools to generate reports on efficiency

29% 43% 15% 13% -

By seeking feedback from businesses services and leadership on the in-house department’s contribution/value

- - 15% 14% 71%

By your ability to attract top-quality legal talent to the in-house team - - 44% 40% 16%

1 2 3 4 5Outsourcing aspects to a third-party e-discovery provider 17% 27% 22% 34% 0%

Leaving it to our external counsel 60% 25% 7% 8% -

Leaving it to external counsel but with strict controls over cost 55% 1% 17% 22% 5%

Using a mix of external vendor and law firm 16% 46% 2% 16% 20%

Using contract attorneys 20% 19% 24% 27% 10%

Doing it all in-house 14% 14% 12% 40% 20%



15. To what extent do you think the recent ECJ ruling on legal privilege will impact your team?

Summary: For companies in Europe, The ECJ ruling on legal privilege has clearly impacted in-house counsel, with 56% saying it will have ‘some’ or a ‘serious’ impact.

16. If you answered ‘will have some/serious impact’ to question 15, how do you think it will impact your department?

Summary: A significant 38% of in-house counsel say they will outsource more work to external law firms as a result of the ECJ ruling on legal privilege, with 19% noting that it will require an internal change to protect privilege.



17. what are the top three management challenges that your department faces in the year ahead?

1 2 3 4 5Ensuring leadership teams understand and comply with rules of governance and ethics

- 14% 43% 28% 15%

Managing the rising number of regulations controlling corporate behaviour

- - 36% 25% 39%

Managing the general counsel’s relationship with leadership, including directors and non-exec directors

- 20% 23% 41% 16%

Dealing with conflicts of interest at board director level 31% 11% 40% 18% -

Agreeing the purpose and remit of audit and remuneration committees 50% 50% - - -

Effective involvement of non-exec directors 51% 16% 33% - -

Reporting on corporate governance compliance - 10% 29% 46% 15%

18. what are your chief challenges in terms of corporate governance? Please indicate your responses on a scale of 1-5, with 1 being least relevant and 5 most relevant.


This survey covers 94 law departments across Europe (86%) and North America (16%), separated across the following industries: Agriculture/Mining; Finance & Banking; Telecoms/Media/Technology; Manufacturing; Property; Retail/Distribution; Business services; Transportation; and Utilities/Energy. Twenty-four per cent of participants reported revenue below £100m, 50 per cent reported revenue above £1bn. The survey was conducted over a three-month period between December 2010 and February 2011. Respondents were invited to complete 21 multiple choice questions – the results are published on pages 187-197, two graphs per page.

CCR SuRvEy – alTERNaTIvE FEE aRRaNgEMENTS 2011

PaRT I I I – CCR SuRvEy (alTERNaTIvE FEE aRRaNgEMENTS 2011)



1. what is your company’s global annual revenue (£)?

2. how many lawyers are in your legal department?



3. what is your overall legal budget (£)?

4. what percentage of your legal budget do you spend on the following?



5. what is your external counsel budget?

6. how has your spend on each area changed over the past 2 years?

1 = Increase slightly, 2 = Decrease slightly, 3 = Increase a great deal,

4 = Decrease a great deal, 5 = Remain the same

1 2 3 4 5Internal counsel 55% 12% - 10% 23%

Support staff 11% 27% 7% - 55%

External counsel 12% 44% 11% 33% -

Outsourcing 38% 12% - 10% 40%

IT 19% 6% - - 75%

E-discovery 14% 8% 16% - 62%



7. how do you control the costs listed in question 6?

8. Do you use a single fee structure to pay external counsel for all types of work?



9. how would you categorise the value of the following work types for your company?

1 = high, 2 = Medium, 3 = low

1 2 3Antitrust 56% - 44%

Bankruptcy & collection - 23% 77%

Contract & commercial 67% 22% 11%

Corporate governance; Regulatory compliance 79% 21% -

M&A; Securities; Tax 83% 8% 9%

Fraud 10% 25% 65%

Health & safety; Insurance & Risk 11% 44% 45%

IP 7% 47% 46%

Labour & employment - 77% 23%

Litigation & ADR 59% 11% 30%

10. when instructing outside counsel, which of the following do you value in terms of service?

1 = high, 2 = Medium, 3 = low

1 2 3Price 45% 55% -

Value-add services & innovation 56% 24% 20%

Costs savings 39% 61% -

Quality of technical legal advice 100% - -

Commercial understanding of priorities 68% 32% -

Accessibility & feedback 44% 56% -

Comparative cost with other firms 14% 79% 7%

Billing transparency 42% 58% -

Previous working relationship 66% 11% 13%



11. how often does hourly billing reflect the true value of legal services?

12. which of the following do you deem the strengths of hourly billing?



13. which of the following do you deem the weaknesses of hourly billing?

14. how familiar are you with aFas?



15. Do you feel you are more or less informed on aFas than your external counsel?

16. To what extent have you adopted any of the following payment mechanisms?

1 = Not at all , 2 = <25% , 3 = 25-50% , 4 = 50-75% , 5 = >75%



17. which of the following drivers have you encountered/would you envisage encountering in the adoption/implementation of aFas?

18. which of the following barriers have you encountered/would you envisage encountering in the adoption of aFas?


1 2 3 4 5 6 7 8Antitrust 25% 50% - - 12% - - 13%Bankruptcy & collection - - 100% - - - - -Contract & commercial - 11% 22% - 10% 12% - 44%Corporate governance; Regulatory compliance 11% 35% 21% - 20% - - 13%

M&A; Securities; Tax 24% - - - 14% - 12% 50%Fraud 29% 14% 27% - - - - 30%Health & safety; Insurance & risk 12% 25% 39% - - - - 24%

IP 12% 16% 43% - 14% - - 15%Labour & employment 12% 25% 51% - - - - 12%Litigation & ADR - 21% - 23% 25% - - 31%

19. which types of fee structure do you see as being most effective for:

1 = hourly billing, 2 = Discounted hourly rate, 3 = Fixed fee, 4 = Success/conditional fee,

5 = Capped fee, 6 = value-based fee, 7 = Risk collars, 8 = Combination


20. what are the main risks of using aFas?



21. which of the following internal challenges have you faced when implementing aFas?


A

ABSs (alternative business structures) 36, 38, 40, 44, 57ACES (Alliance Counsel Engagement System) 83, 98AFAs (alternative fee arrangements) 12-13, 26, 28-32, 34, 78, 80-4, 87, 89, 97, 104-5, 107-8, 129-30, 178-80, 185, 187-97AGCO 85-6, 119, 125Alcatel-Lucent 23Allen & Overy 65Alliance Counsel Engagement System (ACES) 83, 98Alternative fees 64, 81, 97, 107-8Anderman, Jason Mark 59-60Antitrust 82, 191, 196APAC (Asia Pacific) 15Appendix 138, 140, 164-9Aptara 64Aronberg Goldgehn 84Ashfords 37Association of Corporate Counsel 88Attorneys 23, 33, 67, 96-7Audit Committees 118, 121Axiom Law 37

B

Baker 8, 11Baker, Daniela 5, 8Balance, work-life 18, 62Bankruptcy 82, 191, 196Bar Council 44, 47Bar Standards Board 44Barclays Bank 8Bayer 5, 15-18Bayer CropScience 15Bellis, Jonathan 9Benchmark data 4, 137Benchmark metrics 137, 141Benchmarking 72-3, 86, 95, 104, 119Benchmarking Survey 47Benchmarks 3, 93, 137, 139-40, 143-9, 151-64

INDEx

INDEx


Billable hour 28, 30, 41, 77-8, 81, 84, 104, 107-8Billing, value-based 12, 54, 81, 84, 129Blackbaud 5, 23-4, 169Blanco, David 5, 15, 68BLP (Berwin Leighton Paisner) 37Board 12, 23, 37, 55, 108, 114-16, 118, 121-4, 130Board meetings 124Board members 55, 124Boccuti, Gerald G. 91Bodine, Larry 88Bonuses 84, 108Bribery Act 3, 120-2, 128Brooks, Rebecca 114Buckwell, Dominic 10Budget 16, 46, 73, 77, 81-3, 85, 97-8, 108, 113, 132Business acumen 26, 65Business advisors 40Business decisions 13, 16, 88, 175Business intelligence 85Business leadership 7, 11, 113Business leadership positions 124Business of Law Blog 86, 89Business processes 50

C

Capita 38Captive law firms 40Career 11, 15, 17, 23, 40, 43, 49, 63, 103, 109, 127Carillion 5, 33-4, 53-6Carillion Legal Network 56 Carr, Jeff 82-3, 95Caterpillar 119CCR (Corporate Counsel Research) 8-9, 11-14, 25, 27-32, 34, 36, 39, 59, 61, 63, 67, 78, 80-2, 114-15CCR SURVEy 28, 108, 173, 175-83, 185, 187-97CCR’s AFA survey 28, 33, 78, 83Centres, captive 64CEOs 12, 43, 58, 64-5, 79, 113, 124, 131, 133, 137CFO 113, 131-2Chapman, Jon 114China 167-8C&I 71-3C&I Group 114-16, 124

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Clarke Willmott 65Clients 29-31, 37, 39, 54, 65, 77, 79-81, 83-4, 86-8, 93, 99, 104, 107-9Colas 62Colt 37Commerce & Industry Group 121Commerce and Industry Group 121Commoditised work 37Companies Act 121Compensation 13, 25, 60, 67, 73, 96Compliance 4, 17, 45, 115, 118-19, 123-5, 128, 183, 191Compliance culture 17, 116Compliance officer 5, 19, 59, 119Compliance programme 119Contracts 16, 34, 39, 63, 72, 82, 93-4, 107, 109-10, 113, 115-16, 121, 191, 196Control costs 8, 33-4, 177Corporate counsel 3-4, 7-16, 23, 25-6, 33, 38, 41, 59-60, 69, 81, 88, 92, 107-8, 113, 131-3Corporate governance 10, 55, 57, 82, 113-15, 118, 121, 124, 127, 133, 183, 191, 196Corporate Governance Guidance and Principles for Unlisted Companies 121Corporate Governance Guidelines for Smaller Quoted Companies 121Corporate secretary 86, 119, 125, 132Corporate social responsibility (CSR) 121, 132Cost centre 15, 23, 39, 62, 71, 122Costs 4, 8-9, 25-6, 32-3, 53-4, 71, 77, 80, 85-6, 91-3, 103-5, 107-10, 128-9, 143-9, 162-4 external 26, 28 internal 65, 82, 98 reducing 33, 55, 85Counsel, general 4-5, 8, 10, 23, 26, 34-5, 39, 49, 51-3, 81, 85-8, 93, 114, 131-2, 137Counsel costs 23, 85CPA Global 33, 64-5Crone, Tom 114CropScience business of Bayer 17CropScience business of Bayer Group in Japan 68CSR (corporate social responsibility) 121, 132Culture 12, 17, 45, 67, 93-4, 97Cummins, Robert 5, 26, 34-6, 49

D

Delegate work 62, 66Deloitte Forensic Corporate Counsel Survey 131, 133Department of Justice (DOJ) 119Director of legal services 5, 53, 85Directors 38, 113-15, 121, 183 board of 119

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Disputes work 34, 54DLA Piper 11, 29-30, 33, 87Document review in-house 86DOJ (Department of Justice) 119Downing, John 5, 83, 103DuPont 91, 93, 166, 169

E

E-billing 55, 85ECJ (European Court of Justice) 38ECJ ruling 39, 182Edwards Gibson 5, 57Employment 37-9, 62, 82, 118, 123, 191, 196ENRC (Eurasian Natural Resources Corporation) 114, 124Enron 57Eurasian Natural Resources Corporation (ENRC) 114, 124European Court of Justice (ECJ) 38European Lawyer 125Evalueserve 64Evers, Mike 35Eversheds 81, 91, 101-2Eversheds Consulting 91Exigent 65Expenses 8, 13, 25, 175, 177External counsel 8, 12-13, 19, 25-9, 40, 84-5, 109-10, 177-9, 181, 189-90, 194External law firms 8, 25-7, 33, 50, 57, 62, 87-8, 93, 116, 129, 177, 180, 182External Spending 140, 143-9, 157, 161-2, 164

F

FCPA (Foreign Corrupt Practices Act) 120Fee arrangements 29, 31, 98, 179Fee structure 81-2, 196Fees 4, 29, 82-4, 86-7, 107-8 Capped 26, 29, 78, 82, 108, 179, 196 Value-based 78, 82, 196Finance director 7, 104, 131Financial institutions 71, 116Financial Times 79, 88Firms, external 9, 27, 33, 65, 83, 111Fitzpatrick, Jasan 7Fixed fees 29-31, 37, 41, 78, 82-3, 100, 105, 107-10, 179, 196

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Flat fees 77, 84, 107FMC Technologies 5, 67, 68, 81-3 95-102, 166, 169Fraud 82, 191, 196Friedman, Thomas L 85, 88-9

G

GC Compensation Survey 60, 69GCM’s benchmark survey 137GCs 58, 60, 62-3, 65-6, 85, 91-2, 97, 99, 104, 119-20, 122, 124General counsel (GC) 4-5, 8, 26-7, 34-5, 49, 51-3, 81-3, 85-8, 97, 114-15, 124-5, 131-2, 137, 143-9, 151-64General Counsel Metrics (GCM) 4-5, 82, 135, 137, 143-9, 151-64, 170General Electric 31Gibson, Scott 57Gifts 122Global Law Department Benchmarks 3, 135, 137-41, 143-9, 151-71Global Law Department Benchmarks study 4, 82, 137Global Law Department Benchmarks survey 135Global Law Departments Benchmark Study 61Governance 4, 38, 115, 119-20, 183GSM Association Innovation Group Kingfisher Legal Services Board 168Guidance for Directors of UK Companies 121

H

Harding, Mark 8Hatton, Melanie 123Heineman Jr, Ben W. 31Herbert Smith 65Hildebrandt Baker Robbins 9Hildebrandt Baker Robbins 13-14, 25, 40Hiring 46, 50, 71-3Honda Motor Europe 8, 11, 167, 169Hospitality 122Hourly billing 28, 30, 77-8, 82-3, 95-6, 98, 104, 107, 129, 192, 196 discounted 28Hourly rates 33, 54, 97-8, 104, 108-9, 129-30 discounted 29, 81-2, 97, 179, 196HR 23, 38, 57, 73, 164

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I

IC10 winners 89Imperial Tobacco Group 5, 103-5Imperial Tobacco Group PLC 103In-house compensation 73In-house counsel 8, 10, 12, 20, 26-7, 29, 35, 38, 40-1, 50, 57, 64, 77-8, 107, 123In-house department structure 4, 25-37, 39-41In-house lawyers 5, 7, 9-16, 19, 23-4, 26-8, 46, 49-50, 57-64, 68-9, 71-2, 113-14, 120-4, 128, 130-3In-house leaders 58In-house litigators 103In-house managers 137In-house roles 10, 20, 27, 50, 63, 93, 178In-house salaries 69, 72In-house staff 50In-house teams 8, 25-6, 35, 39, 55, 58-9, 63, 65, 84, 87-8, 93, 129, 177, 181Index 199-216India 33, 49, 63Industry sectors 67, 72-3, 137, 139, 170Integreon 64-5Intelsat 5, 26, 34-5, 49-52Internal Spending 140, 143-9, 156, 159-60, 164Internal to External Spending Ratio Benchmark 159International Bar Association Working Party on Legal Risk 124International Law Office 119, 125International Legal Technology Association (ILTA) 33Interviews 4, 25, 81IP 23, 62, 82, 98, 191, 196

J

Jacobs, Lawrence 114Japan 15-17, 68, 168JEREMIE 7Jethmalani, Arun 64Joint venture (JV) 36, 38, 40, 43, 57, 102, 119-20Judge, Peter 7, 9

K

Kaplan 67KCC (Kent County Council) 38, 40-1

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Kelly, Liz 5, 8, 27, 40, 67, 69Kent County Council (KCC) 38, 40-1KermaPartners 38Key performance indicators (see KPIs)KPIs (key performance indicators) 67-8, 74, 93, 181Kupra, Debra 119

L

Landoe, Gene 32Lason and Quattro 64Law Department Survey 9, 13-14, 25, 40Law Department Technology Survey 33, 41, 85Law departments 9, 23-6, 31-3, 35-6, 38, 40, 43-4, 57-8, 66, 68, 85, 124, 131-2, 137-9, 151-63Law firms 9, 23, 30-4, 37-40, 53-7, 60-1, 64-5, 71-4, 77, 79-81, 83-4, 86-8, 91-2, 101-5, 107-10Law schools 35Law Society 44, 59-60, 68-9, 71, 75, 114Law Society Gazette 69, 132-3lawdepartmentmanagementblog.com 88, 170LawScribe 64The Lawyer 37Lawyers 19-20, 25, 34-41, 45-6, 57-69, 71-4, 85-6, 95-100, 102-5, 108-9, 131-3, 138-40, 143-9, 152-4, 164 contract 13, 27, 77, 178 junior 35, 51, 68Leader & Berkon 5, 107-8Leadership 4, 8, 11, 18, 91, 115, 132, 181, 183Leadership roles 15-17Lee, William F. 31Leedham, Ian 5, 109Legal budgets 26-8, 51, 92, 95, 131, 188Legal costs 9, 17, 54, 91, 110Legal departments 19-20, 25-6, 35-9, 43, 50-1, 57, 65-7, 71-2, 74, 77-8, 84, 91-2, 122, 127, 132-3Legal functions 12, 17, 35, 37-8, 49, 51, 56, 58, 91-4, 115-16, 120, 123Legal Network 33-4, 53-4Legal process outsourcing see LPOsLegal Professional Privilege (LPP) 38-9Legal Project Management 86, 89, 92Legal project management (LPM) 86, 89, 92Legal risk 4, 15-16, 51, 62, 71-3, 113-15, 119, 121, 123-4, 128Legal risk management 3, 11, 114, 119, 121, 123, 180Legal risk management strategy 123Legal service providers 38, 40-1Legal services 5, 17, 28, 37, 44-7, 53-5, 62, 65-6, 68, 78, 80, 85-6, 94-6, 100, 107-8

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Legal Services Act 40, 43-4, 111Legal Services Board see LSBLegal services offshoring 63, 65Legal services providers 15, 45Legal services regulation 44-5Legal Staff 25, 35, 51, 138, 140, 143-9, 152, 164Legal Staff Benchmark 153, 155-8Legal Staff External Spending 164Legal Staff Hour Benchmark 163Legal Staff Hour Internal Spending 164Legal Staff Internal Spending 164Legal Staff Number of Lawyers 164Legal Staff Revenue 164Legal Staff Total Legal Spending 164Legal structures 7Legal teams 8, 12-13, 37-8, 50-1, 57-8, 66-8, 73-4, 82, 91, 103, 120, 123-4, 127-9, 131, 137Legal Week 64-5Litigation 26, 32, 43, 83-4, 96, 98, 101-3, 108, 116Litigation & ADR 82, 191, 196Litigation costs 32London 35, 51, 60, 72LPO providers 65LPOs (legal process outsourcing) 13, 33-4, 46, 50, 54, 63-5, 69, 110LPP (Legal Professional Privilege) 38-9LSA 44-5LSB (Legal Services Board) 5, 35, 43-7, 167

M

M&A; Securities 82, 191, 196Macmillan, Bruce 5, 35-6, 43Magic circle firms 102-3Managed Legal Services (MLS) 37Management 13, 16, 26, 32, 37-8, 44, 49, 52, 72, 74, 79, 84, 88, 93, 121-4 knowledge 55Managing Partners Forum (MPF) 79, 88Marketing 15-16, 23, 79M&As 10, 16, 23, 83, 105, 109-10Measurement 23, 66-7, 91Measuring value 65, 91Mergers 20, 119-21Metrics 3-4, 66-7, 78, 91, 93-4, 137, 139, 141, 143-9, 170Metso 167-8Mindcrest 64

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Mittal Steel 132MLS (Managed Legal Services) 37MPF (Managing Partners Forum) 79, 88MTV 34-5, 51

N

Nabarro LLP 14, 68-9Nabarro report 12, 58, 66-7NAPF (National Association of Pension Funds) 121National Association of Pension Funds (NAPF) 121National Grid 5, 109-11Nationwide Building Society 5, 8, 27, 67, 69NetApp 86New Galexy 64Non-lawyers 23, 33-4, 38, 46, 49-51

O

OfficeTiger 64Olson, Jon 23Ontario Power Gen 167-8Optima Legal Services 38Outsource 27, 37-8, 46, 63, 65, 103-4, 110, 178, 182Outsourcing 4, 13, 27, 36, 40-1, 50, 56-7, 62, 64-5, 68, 73, 79, 111, 133, 178

P

Pangea3 64Pannone 37Paralegal 140, 143-9, 164Paralegals 35, 39, 46, 51, 110, 137, 164Part-time working/sabbaticals 8, 177Partnership 29, 33, 37, 60, 65, 83-4Performance 15-16, 60, 86, 91, 95, 98-100Performance metrics 65Personnel 117-18Pfizer 26-30, 84Pfizer Legal Alliance see PLAPinsent Masons 65PLA (Pfizer Legal Alliance) 26, 83-4, 88Policies 114, 120-3, 127Post-qualification experience (PQE) 60-1

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Price, fixed 81, 95, 97, 100, 130Private practice 10-11, 13, 19-20, 23, 25, 40, 57-62, 64, 73, 88, 103, 111, 127, 175Private practice firms 33, 35, 49, 63, 84Privilege, legal 39, 43, 45-6, 182Productivity 17, 31, 66, 85Profit centre 91Project management 12, 29, 33, 49, 86, 109Project management tools 86, 95, 108Projects 7, 10, 20, 25, 29-31, 37, 62, 67, 77, 83, 86, 98, 103, 105, 128-9

Q

Quislex 64

R

Rates 8, 30, 71, 77, 93, 107, 177Recession 7-11, 16, 20, 23, 25, 27-8, 33, 37, 40, 61, 63, 77, 81, 109-10, 177-8Rees Morrison’s Law Department Management 66, 88Regulations 10-11, 43, 45-6, 53, 103, 113, 115-16, 119, 121, 129, 183Regulators 44, 46, 73, 116, 118Regulatory Framework for Legal Services in England and Wales 47Regulatory risks 115-18, 121Report card 98Resourcing 33, 35, 54, 91, 127Revenue 3, 15, 25, 55, 61, 82, 96, 98, 132, 138-9, 141, 148, 173, 181Revenue 138-40, 143-9, 151, 155, 160-1, 164Rio Tinto 65Risk function 120, 127Risk management 4, 23, 26, 37, 113-25Risk team 120, 127Risks 7, 10, 28, 31, 34, 49, 82, 95-7, 99-100, 110-11, 114-15, 117-18, 122-3, 127-8, 196Roch, Michael 38-41Royal Dutch Shell 5, 19-21, 59RSA Insurance Group 5, 120, 122, 127-30

S

Sager, Thomas L. 91Salaries 13, 60-1, 175Saphra, Robin 37Sapient 34, 49, 51

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Sarbanes-Oxley (SOX) 113, 119SDD Global Solutions 64Senior management 6, 10, 16, 33, 91-3, 114-19, 121Serious Fraud Office (SFO) 122SFO (Serious Fraud Office) 122Shareholders 96, 121Shell 19-20Silverstein, Glen 5, 107Slaughter and May 121Software 30, 66Solicitors Regulation Authority (SRA) 38, 44-5SOX (Sarbanes-Oxley) 113, 119Spending 9, 25, 65, 98, 110, 137, 140, 143-9, 165Spending Ratio 140, 143-9SRA (Solicitors Regulation Authority) 38, 44-5Staff 39, 92-3, 96, 103, 116, 118, 128, 137-8, 140, 143-9, 164Survey 8-14, 25, 27-32, 34, 59-61, 68-9, 72, 78-82, 99, 114-15, 124, 131-2, 165, 173, 185

T

Tapp, Richard 5, 34, 53, 55-6, 85Teague, Rick 37Team 8, 12, 14, 16-19, 30, 37, 39, 58, 67-8, 74, 82-3, 92-3, 95-6, 102-3, 128Technology 3, 31, 33, 53-5, 84-5, 102, 122, 138, 167, 173Telstra 167-8Thames Water 37Thomson Reuters 64Tomlinson, Humphrey M. 120, 127Total Legal Spend 164Total Legal Spending 9, 25, 138, 140-1, 143-9, 151, 158, 164Total Legal Spending Benchmark 151, 159, 162Total Legal Spending Revenue 164Training 16, 34, 45-6, 55, 67, 110, 115-19, 122, 128-9Transparency 28, 79, 87, 121, 129Tusker Group 64

U

UK 7, 25, 27, 37-8, 40, 55, 59-60, 65, 69, 71-2, 92, 102, 113-14, 120-1, 145UK Corporate Governance Code 113UK Legal Services Act 35, 57

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V

Value billing 81, 129ValueNotes 63-4Ventures, joint 36, 38, 40, 43, 57, 102, 119-20V&M 167-8

W

Warne, Jonathan 58What’s Hot 2011? 9, 114-15Wild, Geoff 38Williams, Andy 87Williamson, Peter 58Wiseman, Richard 5, 19, 59Wolters Kluwer 32Work 16-17, 25-7, 30, 33-4, 39-40, 53-5, 61-3, 65-6, 68-9, 83-7, 95-7, 99-100, 102-5, 107-10, 127-31Work/Life Balance 59-60, 69Worldcom 57

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