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Industry News 4 GCs, 4 Different Strategies for Reducing Cost Through Legal Operations

By Zach Warren

The list of curse words in a legal department is perhaps slightly different from the general public. For many companies large and small, the “B” word for legal is simple: budgeting.

Especially in an age where operational efficiencies are a mandate rather than something that’s nice to have, having at least some semblance of a legal operations function is becoming increasingly worthwhile. For small legal departments, this could even be just a single person, but the ultimate effect on the business’s bottom line could be massive.

How exactly do legal operations drive value? It’s a simple question, but there could be a number of different answers. The four general counsel at the opening keynote of the Association of Corporate Counsel’s (ACC) Legal Operations Conference in Chicago all took different roads, but ultimately arrived at the same place: finding more efficiencies for their legal departments.

Agreeing on What’s Valuable

Prior to joining medical device company Medtronic, Brad Lerman partook in a trial where it seemed that everything had gone right. Originally budgeted on a fixed fee for six weeks, the outside counsel was able to secure a dismissal with prejudice in favor of his company after only two days. It was, by all measures, a massive win.

Well, massive for everybody except a partner in finance, who came to Lerman and asked when he was receiving a refund. The trial, after all, was originally scheduled for two weeks.

“It occurred to me that the disconnect between fee for service and fee for value was so extreme that my finance partner didn’t realize the deal that we got,” he explained. To many legal experts, the idea was ludicrous: “I’d like to go back to trial now and get my money’s worth. Let’s go back to trial, sit back and enjoy it, and worry for two days about the verdict,” Lerman told a laughing crowd.

At Medtronic, Lerman likens the operations role to the company’s business as a whole: to provide and measure value by what’s ultimately being provided to the customer, be it internal business people for the legal department or outside patients for the business as a whole. Doing that requires getting everyone on the same page early about what actually matters in order to forecast where value comes from.

“There’s all kinds of ways we can reduce that expense, but if you’re not also measuring the value you deliver, you’re going to fool yourself into thinking you helped the company,” he added. “You can say you saved the company $10 million, but if you’re not looking at what value you’re adding, it may not matter. Is it the right $10 million? Should we actually be spending more?”

Legal Isn’t Special

Phyllis Harris, general counsel of legal operations at Walmart Inc., was running into a similar problem when she first joined the company. Walmart has an internal company culture of cost savings as an extension of the cost savings the company tries to provide customers. If she asked her secretary for a notepad, Harris joked, “I’d get one with about 10 pages left on it, and never a new pen.”

But the legal department didn’t see things that way. “The thing that struck me was, for whatever reason, the department thought it was special,” she explained. “The fundamental premise that we save people money so they can live better, that’s just part of the culture. … The big picture, [the attorneys] were missing it.”

Combating this required a culture change, something that Harris said she tackled directly with increased transparency. Using updated dashboards and combining the department’s data in one place, she encouraged the company’s attorneys to think about what story they would tell the business side when it comes to litigation and other decision-making.

Harris also impressed the new culture of transparency on outside counsel. She relayed that Walmart previously had 70,000 different engagement letters, and she sought to standardize them in a way similar to what the business side used.

“That process was as if I was asking the outside law firms to climb Mount Everest,” she said. “About 20 percent said, ‘We’re not doing that.’ It was this pride and ego.”

But ultimately, the process began to work, and costs came down in line with expectations. And Harris believes there is further to go: “We’ve been on this journey three and a half years, and I don’t think we’ve gotten as deep as we can go yet.”

The Power of Outsourcing

Following the creation of DXC Technology Co. in early 2016 after a merger, the company’s new GC William Deckelman said he had a single mandate: reduce costs. “We did take some time in the beginning looking at all the traditional ways of reducing costs,” he said. But ultimately, “our transactional volumes were not going down, but we were being asked to do a lot more with less.”

That’s when he decided to take a cue from the technology industry with which he was so familiar, and he turned toward outsourcing the transactional side of the department. DXC partnered with UnitedLex on a deal that has made a number of waves, with many members of the DXC transactional team being rebadged to work with UnitedLex.

While DXC kept many core functions in-house, like litigation and M&A activity, Deckelman said he was originally worried about business disruption. Ultimately, though, he called it a “complete success.” Now, he said, “we’re looking at transformation.”

True transformation, however, could only occur if you fully trust the partner taking over a large portion of the department. In the case of DXC and UnitedLex, Deckelman said the partnership wouldn’t have worked if the two sides' technology systems weren’t closely integrated, with each side having intimate knowledge of the others’ systems.

“This is classic outsourcing, and if companies have learned anything over the past 30 years, it’s that when you close the deal, it’s not over,” he explained.

Department Size Doesn’t Matter

Years ago, Cindy Abbott worked at Motorola Mobility, a large, multinational company. Then, she moved to become GC of Chicago Public Media, broadcaster of public radio station WBEZ. The size of her new legal department? One: her.

Still, Abbott told the ACC crowd, she was struck by how much finding legal efficiencies remained the same, no matter the size of the legal department. Chief among the similarities were the importance of working closely with the business side, and being able to develop plans to address key pain points in the legal process to drive efficiencies.

As an example, she told the story of working to implement a contract management system. Even the idea of contract management was nonexistent before she took the job, but through working with the business side, she was able to implement a solution that addressed the company’s two largest pain points: the ability for the CEO to sign from anywhere, and the capability to search for a contract in a quick fashion.

“It wasn’t just creative solutions, but the ability to get a project done,” she explained. “The most creative solution isn’t worth anything if nobody follows through.”

If there is a major difference, Abbott said, it’s a matter of scale. Giving advice to other small legal departments working on a tiny budget, she said, “When you have an apple, you can’t eat the whole thing, you have to take a bite at a time. You have to find the small wins.”

Source: Law.com, June 12, 2018 (https://www.law.com/legaltechnews/2018/06/12/4-gcs-4-different-strategies-for-reducing-cost-through-legal-operations/)