Meet the 2014 ACC Value Champions
Transforming the Corporate Legal Function to Drive Value
By Jennifer J. Salopek
- ACE Group
- Caterpillar, Inc., BakerHostetler, Pangea3 US, and Heyl Royster
- CSA Group
- Embraer S.A.
- Huntington Ingalls Industries
- Hyundai Motor Manufacturing Alabama
- JP Morgan Chase
- Microsoft Corporation and Perkins Coie
- MSA Safety Incorporated and Reed Smith
- ZS Associates
The nominations received for the 2014 Value Challenge reveal an evolution that's taken place over just three years: Whereas value-based fee arrangements were front and center during the first year of our program, they are now part of a comprehensive approach that reflects a ground-level cultural change in the in-house practice of law. As legal departments align more closely with their customers and apply strategies and tactics common to the business units they serve, they are shifting their culture to one of greater transparency, solid partnerships and more sophisticated practice. The result has been a win–win: enhanced satisfaction among the lawyers and their clients.
"It's gratifying to see law department leaders put leading-edge business tactics into practice to improve and demonstrate the value of the legal department," says Catherine J. Moynihan, ACC's Senior Director of Legal Management Services. "There was intense focus on value-based pricing when we launched the ACC Value Challenge. It's nice to see that it's become mainstream, just one part of comprehensive value programs that legal departments are implementing."
The Association of Corporate Counsel created the Value Champions program to recognize law department and law firm leaders who have made great strides in improving the value of legal spending. This year's honorees include eleven law departments that delivered substantial value to their clients through value-focused legal management skills, along with five law firms and legal service providers with which some of them partnered.
As corporations continue to grapple with constrained budgets, general counsel are improving the cost efficiency of the legal function, both through how they manage internally and how they partner with their law firms and legal service providers. ACC set out to identify and highlight those who are effectively driving value by cutting spending, improving predictability and achieving better legal outcomes. Companies of all shapes and sizes, and from around the world, answered our call and submitted 83 nominations, often with robust data sets in support. Those nominations were rigorously evaluated by a panel of ACC judges: Lani Quarmby, associate general counsel and senior vice president, Bank of America; Chris Fowler, general counsel, UK Commercial Legal Services, BT plc; and Jonathan L. Block, former general counsel, Hot Topic, Inc.
One common theme among this year's ACC Value Champions was a strategic approach to sourcing and staffing of legal matters. Whether you call them lanes, buckets, or chunks, these work divisions and assignments evidence a realization that one size of legal service does not fit all; and that decisions about the resources being used — internally and externally — must be made with value in mind. The catchphrase is "disaggregation:" thinking about each kind of work and what resources might be deployed to match effort to value.
Caterpillar hit the trifecta of value engineering: decreased spending, increased predictability and improved outcomes, including employee and client satisfaction — likely a harbinger of the near future for many companies. Working with partners BakerHostetler, Pangea3 US and Heyl Royster, Caterpillar used "lane strategies" to allocate work to the right type of legal resource — that with the lowest level of expertise and cost required to accomplish the task, whether in-house attorneys, LPOs, interns, or outside counsel — and to calibrate spending based on the value and complexity of the work. The team developed tools to streamline and optimize the process.
The law department at CSA Group, a global engineering professional services firm headquartered in Canada, examined the enterprise strategic plan to identify which legal services best supported corporate goals and honed resource allocations to enhance alignment. Using a "heat map," the legal department focused its staff on high-value, cross-functional projects and outsourced and streamlined routine work, resulting in cost savings of 30 to 50 percent for certain categories of work. The effort has resulted in the department being consulted at earlier stages, permitting more effective and proactive legal solutions.
To overcome the challenge of too few resources during a time of company expansion, ZS Associates' small legal department had to be smart. They took a multifaceted approach using several value levers, pairing specialized in-house counsel with offshore attorneys and using value-based fee arrangements with legal process outsourcers to predict expenses, even when workloads grew. The result? Doing more with less, while increasing quality and results.
MSA Safety Incorporated sought lower litigation settlement costs, which it achieved through strong outside counsel partnerships to augment a small department. With Reed Smith serving as national coordinating counsel, and a phased approach, MSA's lawyers challenged their own assumptions about value and risk as they drove clear strategy objectives throughout their 30-state local counsel network. In the highest-risk jurisdictions, the company has saved millions of dollars in defense expenses.
MSA's thoughtful, considered approach to risk is an exemplar of another cultural change evidenced by this year's ACC Value Champions. Whereas in-house lawyers may have inherited a legacy as risk avoiders, their current business savvy equips them to appreciate the tradeoffs for accepting some risk. Further, they are leveraging change management approaches to drive cultural evolution and to achieve shared responsibility for risk with internal clients, thereby saving significant time and expense on lower risk categories of legal work.
When mortgage litigation against JP Morgan Chase's consumer banking division increased ninefold, the department maximized internal resources to triage based on risk and limit spending. By developing the Early Dispute Resolution Program, they redirected a large portion of the disputes to the in-house team, identified high-risk cases and worked with their business partners to modify loan terms. The program resolved 1,800 cases and saved $12.6 million in outside legal fees.
Microsoft and Perkins Coie brought predictability to one of the most unpredictable areas of legal work, mergers and acquisitions, through process improvement. The initiative, "Deal 360," guides the lawyers in analyzing the complexity of each M&A transaction, allowing outside counsel partner Perkins Coie to prepare custom budget and staffing plans. The team regrouped around classic project management principles, comparing budgets to the deal's actual worth to the company, and making changes to the work plan as a result. Microsoft has increased budget accuracy by an impressive 30 percentage points.
At Huntington Ingalls Industries, the legal department leveraged the shipbuilding industry's culture of careful planning and pride in the work to design a new compliance program that is owned by the business. Overarching principles and detailed work plans place control — and rewards — in the hands of employees, with oversight by a new chief compliance officer. Results included a $1.4 million decline in outside counsel spending on compliance.
Clients who accept shared responsibility and move willingly into a partnership model with their in-house legal departments are treated to greater transparency, more self-service opportunities, a heightened focus on customer service and, often, increased efficiency and shorter cycle time.
Lawyers at insurance giant ACE Group sought to move more work inside and signaled their new partnership with internal clients right out of the gate, adopting a new "Legal Service Coordinator" title and aligning closely with the needs of the business. This new model allows for greater collaboration among lawyers, the development of proficiency across portfolios and workload balancing. It also resulted in savings of 50 percent per service hour.
Brazilian aircraft manufacturer Embraer applied "Lean" to legal. After setting client service performance indicators, the law department empowered the business to complete contracts through a web platform, resulting in 30 percent faster completion time. The company also undertakes root cause analysis for all unfavorable litigation decisions, looking for room for improvement and routinizing risk assessments.
With the volume of contract work increasing dramatically — the Vendor team was working at 142 percent of capacity — eBay's Legal Commercial Team knew it had to re-engineer its contracting processes. They conducted risk-calibrated triage to put work into buckets, harnessed a new contract management system and established Centers of Excellence to reduce turnaround time by 100 percent for lower-risk contracts. New technology helped facilitate a cultural change to self-service among internal clients.
Partnerships forged outside as well as inside provided a strong foundation for innovation, augmenting exponentially the capabilities of in-house counsel. Whether working as technology facilitators, subject matter experts or national coordinating counsel, external law firms, LPOs and consultants extend the breadth and reach of the in-house practice of law. Several of this year's Value Champions, such as MSA Safety Incorporated, Caterpillar and Microsoft, credit their external partners enthusiastically for making their value initiatives possible.
More evidence of cultural change in the in-house practice of law? Technological bootstrapping. Rather than wait around for corporate IT departments to build them stuff, general counsel and their staffs are adapting off-the-shelf tools to create their own technology-platforms to enhance the value equation.
Members of the Office of the General Counsel at ACE Group created their own sophisticated intranet that includes a digital library, user profiles, discussion forums, news feeds, training materials and more. Known as ACEBook, this innovation delivers better value through knowledge management.
At JPMorgan Chase, the legal department created The Octagon, a groundbreaking intranet-based tool that functions as a "virtual water cooler," bringing a geographically dispersed team together for collaboration and knowledge sharing. It also reduces legal costs by eliminating duplicative work and informing efficiency-driven outside counsel hiring decisions.
Hyundai Motor Manufacturing Alabama's submission wraps all of these themes — strategic division of work, cultural change and technology adoption and leverage — into a single package. The legal department decided to develop its own legal management software program rather than purchasing an off-the-shelf solution. Adopting a startup mindset, this lean and mean team designed an online system that does it all: contract, litigation, outside counsel and workload management; and even delivers important just-in-time legal training. Automation makes tracking and reporting performance to company executives easy.
Since the launch of the ACC Value Challenge in 2008, we have witnessed increasingly sophisticated practices evolving as in-house counsel focus on the value levers of spending, predictability and outcomes. The 2014 Value Champions, and those that have gone before, have wrought cultural changes that benefit both lawyers and clients. Their leadership and willingness to share best practices, models — even course corrections — helps to create and sustain this cultural evolution across companies, industries and continents.