Tag Archives: law departments

Efficiency Key to Cost-Effective In-House Legal Departments

Posted on February 20, 2013 by | Leave a comment

An efficient in-house legal department is a cost-effective one. That’s the finding of a recent analysis by CEB, a member-based advisory company that took a look at the budgets of 180 legal departments to understand “trends across industry, revenue band, and complexity.” They discovered nine efficiency trends that may help you streamline your own department.

1. Perform more legal work in-house. As CEB states, “it’s just simply more cost-effective to have in-house staff do the work that we often ask outside counsel to manage.”

2. Use non-lawyer professionals more often. An efficient, streamlined workload means you’re able to delegate routine tasks to paralegals or non-lawyer professionals. The CEB report therefore urges you to have enough support staff for your lawyers.

3. Invest in legal operations capabilities. Do you have a legal operations manager? You may need one. They manage “budgeting, technology selection, vendor management, and career development—all vital activities to manage costs and drive to greater outcomes,” the CEB report states.

4. Invest selectively in legal technologies. Technology is a beautiful thing, but only if your department can use it to its full capabilities. The CEB advises that you “push forward with technology initiatives, but demand more from providers and don’t underestimate the workflow and change management requirements.”

5. Unbundle legal services. Administrative and information-intensive activities can often be outsourced to non-law firms, leaving your department better able to handle the rest of the workload.

6. Focus on litigation matter budgeting and oversight. If you don’t budget for it, you can’t truly manage it. “There is huge variation in even basic litigation management techniques,” the CEB found. “The average company does not budget for roughly a third of its matters; and while a quarter of legal departments budget for all or almost all matters, just as many almost never create budgets.”

7. Use smaller law firms more often. In general, smaller firms charge lower rates while providing the same expertise, experience and coverage of their larger brethren. The CEB found that many companies are “reducing their reliance on large law firms in favor of midsized law firms … that permit them to consolidate their legal spending.”

8. Reduce the number of law firms. CEB members that consolidate legal work to a smaller number of firms have lower outside counsel costs. The CEB analysis states that “companies that concentrate 98% of their costs in their top-10 suppliers are most effective in reducing costs.”

9. Be judicious with alternative fee arrangements. “Although our research suggests that alternative fee arrangements are useful in reducing costs,” the CEB writes, “the way in which legal departments administer and monitor fee arrangements is far more important than simply having them.”

Read the CEB’s full analysis here.

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Monday Clicks: Law Firm Diversity

Posted on February 18, 2013 by | Leave a comment

Despite a pervasive and stubborn bias against anyone who isn’t a white male,  law firms are slowly becoming more diverse and inclusive. In fact, if you’re in the market for outside counsel, there are several women- and minority-owned firms from which to choose. Also: Mississippi just proved that it’s never too late to get something right—even if it takes 147 years.

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The New Normal: Collaboration between Corporates, Law Firms and LPO providers

Posted on November 15, 2012 by | 2 Comments

The concept of companies streamlining the number of law firms they hire is not a new one.  Over the past decade, in-house legal teams have sought to reduce legal spend, improve service and develop closer relationships with outside counsel through such means as panel reviews and convergence strategies.  However, the trend has grown due to the length of the economic downturn, which has pushed many general counsels to more seriously consider the strategy:

“[We’ve] selected advisers who appreciate the challenges we face. We need lawyers who have the necessary industry expertise to handle the large, complex projects and initiatives we have at TfL but, at the same time, have a pragmatic approach to enable effective delivery. Across TfL, we have to manage our costs ever-more cautiously and the legal directorate has a big part to play in that, so we need to ensure that the external firms we work with meet our expectations to maximise the value they deliver.” – Andrea Clarke, Director of Legal, Transport for London

Over the past few weeks, the UK legal market has seen an up-tick in this activity – six major UK and European operations have announced or completed panel reviews over a three week period, according to The Lawyer. All of the companies involved have looked to reduce the number of legal advisers they hire, as well as reduce overall legal spend:

  • October 23:  The Royal Bank of Scotland (RBS) announced that it has reduced panel appointments in its Group and UK Legal panels with a 36% reduction in the number of firms utilized on its panels;
  • October 29: General Electric announced plans to review its European panels, which cover a broad range of work across all business areas, including GE Capital;
  • October 30: Transport for London concluded its panel review which saw the public sector organization reduce its legal panel to 11 firms;
  • November 2: following a protracted panel review process, Lloyds Banking Group significantly reduced its roster of outside counsel on its 8 sub-panels covering the bank’s own-account work;
  • November 7: UK construction giant, Balfour Beatty announced plans to begin a panel review with the aim of reducing legal spend by 30%;
  • November 8: UK house-builder, Taylor Wimpey, announced a reduced roster of legal advisers from 13 to just 6.

The RBS panel review is among the most radical revamp. The bank, which is now majority government-owned following its bail-out in 2009, overhauled its review process, reduced the number of sub-panels from 13 to 5, and reduced the number of law firms on panels from c. 100 to less than 60. Strengthening relationships with fewer key advisers was one goal, as was collaborating with external advisers during the redesign process to improve the functionality of the panels:

“As we had so many firms to manage and are such a large user of legal services we wanted to do something intelligent to improve the overall relationship with our law firms…We didn’t want it to seem as if the relationship didn’t matter, so we asked firms to help us to design key components of our panels. Some colour and texture around the deconstruction aspect of the panel was achieved by asking firms what they thought we could do in order to work more efficiently,” – John Collins, Deputy General Counsel

Another key focus was on the use of alternative providers:

“After taking into account law firms’ views, we decided to focus our more complex own-account work toward a select group of firms and then drive behavioural change so that matters such as management of large due diligence exercises and document production work can be handled by alternative service providers who have both scale and enhanced project management capacity” – Rushad Abadan, Corporate M&A General Counsel

While some firms may be resistant to collaborating with alternative providers, RBS was optimistic that the wider market is moving in the direction of such changes:

“Law firms understand what we’re proposing and we’ve started to see moves in the market but firms are yet to get fully on board and embrace it. We wanted to create structural solutions that will help educate firms so they recognise how the market is maturing. The legal profession isn’t immune from process re-engineering: it needs to flex and keep changing and law firms need to embrace that change if they are to remain competitive.” – John Collins, Deputy General Counsel

The Scottish bank was not the only company to place outsourcing of low-end legal work as an important focus of panel reviews. Balfour Beatty also announced plans to increase outsourcing of work such as repetitive employment, construction and property contracts. The company has plans to package and tender this work out to the lowest bidder, whether an LPO provider or a law firm.

As corporates strive to gain greater control and predictability over their legal spends, the preference towards formal panels, reduction in the number of panel firms, and stronger endorsement of collaborations between firms and alternative service providers is only going to grow.

Posted by Tricia Pelton

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Compliance Teams: At the Saturation Point?

Posted on March 22, 2012 by | Leave a comment

The explosive growth in regulation in the U.S. and abroad has made it a very tough environment for compliance professionals, who often struggle to keep up with rapidly changing regulations and increasing responsibilities, according to a new survey by Thomson Reuters.  Eighty-four percent of compliance officers in financial services companies believe that the amount of regulatory information published by regulators and exchanges will increase in 2012 and nearly half expect the amount to be significantly higher. Drivers of this growth include:

[T]he splitting apart of the UK Financial Services Authority, an increase in the direct regulatory power of the European Supervisory Authorities and the expansion of several new and existing regulatory agencies in the U.S. as a result of the Dodd-Frank Act. For [financial services] firms, fundamental changes range from the proposed shift of the regulatory perimeter to include shadow banking to the forcible separation of wholesale and retail business for many banks and the increasingly global reach of regulations such as the UK Bribery Act and the U.S. Foreign Account Tax Compliance Act.

Nearly 70% of compliance officers foresee an increase in the amount of time spent interacting with regulators, with more than a quarter expecting the amount of time to increase significantly in 2012.  And as the regulatory burden grows, resources are becoming constrained, limiting the ability of the compliance team to perform vital compliance functions.  Over one-third of respondents spend more than an entire working day each week simply tracking and analyzing regulatory developments.

Increasing demand for experienced compliance professionals is also pushing up the cost of senior staff.  Seventy percent of respondents expect the cost of senior compliance staff to be higher this year. At the same time, only 11% of respondents are expecting a significant increase in their budget for this year, despite the rise in demand for compliance resources.

In addition, many compliance teams are finding it hard to carve out time to coordinate with other parts of the company involved with managing regulatory risk.  Over half of the respondents reported spending less than one hour per week with internal audit teams, while 30% reported spending less than one hour per week consulting with their legal and the risk teams.

And legal departments do have an increasingly important role to play.  The 2011 Law Department Survey from HBR Consulting reports that respondents are forecasting a significant increase in their demand for legal services in regulatory, international and labor & employment practice areas. Fifty-four percent of participants expected an increase in demand in the regulatory practice area, up from 44% last year and “consistent with the continuing focus on regulatory reform and compliance requirements around the world.”

A recent article in Australasian Legal Business notes that one of the major concerns for in-house lawyers is dealing with regulatory issues. One Australian in-house lawyer with more than fifteen years of experience explains the important role that lawyers play in the organization when it comes to regulatory affairs:

 “When they [regulatory affairs] deal with a regulator they’ll have a specific group – so there’s a regulatory affairs area as opposed to it necessarily [going through] the lawyers. How do we keep in check these ‘eager beavers’ keen to appease the regulators? As we know our role is to ensure regulators don’t overstep their authority,” she said.

The Thomson Reuters compliance survey also polled compliance officers on the greatest challenges they faced in the year ahead.  Overwhelmingly, their top two concerns were resources and keeping on top of regulatory changes.  “However, this survey indicates that rather than gaining the upper hand in managing compliance functions, many companies are increasingly struggling to keep up.” said Scott McCleskey, global head of financial services regulation, Thomson Reuters GRC.  It is clear that compliance officers are under severe pressure and it is also equally clear that a company will only thrive if it incorporates a strong compliance ethos into its corporate culture and builds a strong corporate compliance function.  Firms with compliance teams “at the saturation” point should not be the norm.

Posted by Marianne Purzycki

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Survey Projects Legal Hiring Increase in First Quarter

Posted on January 6, 2012 by | 1 Comment

The latest Robert Half Legal Hiring Survey reveals that for the first quarter of 2012, lawyers are still cautious about hiring, but “optimistic enough” to want to add personnel in key positions, both legal and support staff.  And while the survey canvassed relatively small firms and corporations – 100 lawyers at law firms with 20 or more employees and 100 corporate lawyers at companies with 1,000 or more employees – approximately one-third of the lawyers interviewed plan to add legal staff in the next three months, while only 4 percent plan to reduce personnel.  The net 27 percent increase in projected hiring is up three points from the previous quarter’s forecast.  

Key findings include: 

  • Lawyers plan to add an average of two full-time positions.
  • Lawyers will most likely hire lawyers (88%), paralegals (39%) and legal secretaries (35%).
  • Twenty-nine percent identified bankruptcy and foreclosure as the area of law that will experience the most growth, followed by litigation (23%) and labor and employment (12%).
  • Fifty-one percent said it is challenging to find skilled legal professionals, up two points from the previous quarter. 
  • Seventy-three percent are somewhat or very confident in their companies’ prospects for growth in the first quarter, representing a nine-point decline from the fourth quarter of 2011.

Charles Volkert, executive director of Robert Half Legal reports that: 

“Law firms and corporate legal departments place a premium on candidates with proven skills and relevant experience who can fill gaps in expertise and make immediate contributions.  Experienced lawyers continue to have a hiring edge, while employers also value seasoned paralegals and legal secretaries.”

With respect to law departments, the survey reports that general counsel are hiring full-time legal staff and project professionals to handle more work in-house in an effort to reduce outside legal spend, a trend that has been widely discussed and that we reported on last November.

The survey was developed by Robert Half Legal and was conducted by an independent research firm based on telephone interviews. All of the respondents have hiring authority within their organizations.

Posted by Marianne Purzycki

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2012: Year of the Whistleblower?

Posted on December 8, 2011 by | 1 Comment

According to data from the Association of Certified Fraud Examiners, fraud in companies is more likely to be discovered by tips (40%), than any other detection method.  And while it was only in August that the new whistleblower provisions in the Dodd-Frank Act took effect, the SEC quickly recorded 334 whistleblower tips in just seven weeks of the program for fiscal year 2011, which ended September 30. The most common complaints were market manipulation (16.2%), offering fraud (15.6%) and corporate disclosures and financial statements (15.3%).  Submissions came from individuals in 37 states, with the highest number coming from California (34), New York (24), and Florida (19) as well as from foreign countries, including China (10) and the United Kingdom (9). 

So it is no wonder that a number of market commentators are predicting that 2012 might just become “the year of the whistleblower” and that perhaps whistleblowing will become a “global industry.”  Thanks to the global economic crisis, some predict that countries will strengthen protection for whistleblowers and governments, mindful of misuse of public dollars, will devote more resources to rooting out fraud in public programs and military spending. 

The SEC’s Office of the Whistleblower administers its whistleblower program and while the rules encourage internal reporting, they also provide strong protection to employees who want to report the fraud directly to the SEC.  The Commission is authorized to provide monetary awards of up to 30% of the money collected, to eligible individuals who come forward with tips that lead to a Commission enforcement action in which over $1,000,000 in sanctions is ordered.

The SEC also reported in November that its past fiscal year saw the agency file a record 735 enforcement actions, including many cases of insider trading as well as those related to the financial crisis, often involving highly complex market practices and products. 

And while the DOJ has not released fiscal year 2011 data for False Claims Act activity, in 2010 the DOJ recovered $3 billion in civil settlements and judgments, including a record $2.5 billion health care fraud recovery.  Most of the cases resulting in recoveries were brought by whistleblowers under the False Claims Act’s qui tam provisions, and they are entitled to recover between 15 and 30 percent of the proceeds of a successful suit.  Recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, now total more than $27 billion. Recoveries in qui tam cases have exceeded $18 billion, and whistleblowers have obtained more than $2.8 billion in awards.

So what do the new SEC whistleblower provisions mean for in-house attorneys?  Corporate Counsel magazine recently interviewed Paul Leder, a partner at Richards Kibbe & Orbe, who specializes in securities compliance and enforcement, and previously served as a deputy director at the SEC.  According to Leder:

A key issue for companies in 2012 is going to continue to be the enhanced whistleblower provisions that the SEC now administers. And the reason for that is twofold. One is that companies need to focus on their internal mechanisms for dealing with whistleblowers to encourage internal reporting at the earliest possible stages. In those cases where they receive a complaint, they need to be prepared to deal with that in a timely and credible fashion. The other piece . . . is that whistleblowers would be likely to make allegations related to financial fraud issues and illicit payments. Whistleblowers may believe, rightly or wrongly, that they have insights into the company’s activities in these areas that might point to potential misconduct.

Leder further explains that companies must develop a culture that encourages internal reporting, and the message needs to be clearly communicated and re-communicated by all levels of management. Companies must also have a mechanism, such as a hotline or an ombudsperson, to receive the complaints, and then finally, the complaints must be acted upon in a timely and effective manner, so it is apparent to employees that they have been heard and are being taken seriously.

Posted by Marianne Purzycki

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Law Departments Growing as Outside Legal Spending Falls

Posted on November 3, 2011 by | 1 Comment

In September, we highlighted a recent poll of Australian law departments that indicated companies were shifting legal work in-house as a means of cutting and controlling costs.  According to new data from HBR Consulting, the phenomenon is growing in the U.S.  Results from the 2011 HBR Law Department Survey showed a 6% increase in in-house legal spending from 2009 to 2010.  Over the same period, outside legal spending declined 3%.  The numbers reflect a trend towards larger, more robust law departments taking a more prominent role in not only shaping a company’s legal strategy, but carrying it out.

Although the argument that law departments can reduce legal spending by moving more work in-house is not new, the length and tenor of the economic downturn may have pushed general counsels to more seriously consider the strategy.  Mark Ohringer, general counsel of global real estate developer Jones Lang LaSalle, recently noted that he spends 75% of his budget on non-law firm resources and considers his in-house team to be outside firms’ “biggest competitor.”  And GC Jeff Carr of FMC Technologies in Houston told Inside Counsel earlier this year, “At the end of the day, you really would rather not have to use outside counsel if you think it through.”

One major reason for investing in internal legal spending is the opportunity to use the legal function to prevent and anticipate problems, rather than to merely address them after the fact.  In-house counsel who work closely with the business units have the opportunity to be forward-looking in a way that outside firms do not.  For instance, when Google decided to cease business operations in China last year, the decision was driven in part by general counsel Kent Walker, who told the Financial Times that the in-house legal role is, in part, to “see around corners.”

As companies increasingly focus on what the in-house legal function has to offer, they may find they need to adjust their existing model to accommodate their needs.  IBM, which has spent the last several years overhauling their law department to better serve the company, has done just that with regards to their attorney recruitment.  IBM has begun to hire students directly from law schools, in an effort to ensure that in-house attorneys develop key company knowledge and specific skills.  According to an article on the company’s law school recruiting last month in Corporate Counsel:

The decision to hire students from law school came three years ago.  There was nothing wrong with the candidates they were hiring after five, six, or seven years at law firms.  But the skills they’d learned as associates didn’t match up very well with their responsibilities at IBM, [General Counsel Robert] Weber says.  The company still had to train them for six months before they were really ready to contribute.

And IBM is not alone.  As the in-house function grows in size and prominence, more companies may seek to control the training and recruitment of attorneys instead of outsourcing these activities to outside firms.

The in-house shift is thus not merely a reallocation of resources.  For at least some law departments, the shift has been an opportunity to gain greater control over the legal function and the long-term legal strategy of the company.

Posted by Emily Fisher

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Market Trends in Focus: An In-House Shift?

Posted on September 8, 2011 by | 1 Comment

Are corporate legal departments shifting more of their legal work in-house?  According to recent surveys in Australia and the US, the answer may be “yes.”

Australian law firm Mallesons Stephen Jaques surveyed 374 corporate counsel in Australia for the Compass 2011 Corporate Counsel Annual Survey.  The results indicate that even as law departments have sought to reduce overall legal costs in response to the economic downturn, companies are increasing the size of their in-house legal teams.  Respondents listed cost reduction as a primary reason for shifting some costs and responsibilities to in-house teams.  Fifty-four percent of respondents expect this shift to continue over the next three years with further increases to their in-house departments.

These results echo the findings of the 2010 Hildebrandt Baker Robbins Law Department Survey, which surveyed more than 200 law departments in 22 industries around the globe.  The survey found that even as median legal spending declined worldwide, law departments were making small investments in growing their in-house teams – respondents reported a median decline in total outside counsel spending of 6%, but a small (1%) increase in total inside legal spending.  Looking only at US respondents, the decline in outside legal spend was slightly smaller (5%), but otherwise tracks with the worldwide results.

There are a number of reasons why law departments may be looking to invest in their in-house departments even as they rein in overall legal spending.  Cost savings appears to be one.  Respondents to the Mallesons survey also reported an increased focus on business strategy and legal risk management as part of their corporate counsel role.  In troubled economic times, companies may be relying more than ever on their legal departments to help identify potential legal risks that could further impact the bottom line.

Posted by Emily Fisher

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