This article begins with a column from Deutsche Bank’s Jason Williams. To jump to the second and third columns, please use the following links:
Gary Nelson
Senior vice president of risk management and legal operations, Medtronic
Eleanor Whitfield
Head of legal services, Invensys plc
Jason Williams
CHIEF OF STAFF, DEUTSCHE BANK
I moved to my current role in Deutsche Bank’s legal department six years ago. My background is in business psychology and I have held a number of change management roles in the organisation previously, predominantly in the finance and risk management divisions. As a non-lawyer, my current role is to help oversee the day-to-day running of the legal department and to lead change management projects; in particular, new technology initiatives or new ways of working.
In the past three years, there has been added focus on project management within in-house legal departments and an emphasis on more business-process-driven ways of working. The use of technology – for example, document management or contract drafting tools – has become key. Technology has to support business processes. It’s all about doing more with less.
A new outlook
Change is necessary. Already, in the past two to three years, there has been a mini-revolution in the legal profession. The greater use of technology and the launch of legal process outsourcing – also known as legal services outsourcing (LSO) – are just two examples of this.
In my previous roles at Deutsche Bank, the emphasis was either on minimising risk or cost. But, in my current role, I’m able to bring those two activities together. It’s a matter of keeping costs down, while ensuring that the department is able to deliver legal services appropriately.
Traditionally, many in-house teams would simply turn to their preferred external counsel when they needed legal support. Now, it’s about applying the right resource to the work and risk involved – or ‘smart-sourcing’, as we call it.
We have two types of smart-sourcing solutions. We have our own captive off-shore department that manages our document negotiation functions, but we also use LSO vendors, such as CPA Global, in India or other jurisdictions when it is simply not cost-effective or necessary to manage the work in-house.
However, it would be a mistake to suggest that you can simply pass over the work to a vendor. You need to work in partnership with your suppliers, to make sure that they understand your strategy and the direction of your business. The same applies to external law firms – and to your internal team.
Only by understanding the way that people work can you truly drive change in the culture of a department or a business. The psychologist, Kurt Lewin, proposed a theory for introducing change: you need to unfreeze the way that you work, adapt it and then freeze it again. But, for this to work effectively, you also need to involve your staff in the process. It’s important not to leave people behind; they need to adapt to new working methods, otherwise it’s only natural that they will slide back into old habits.
The approach also has to be consistent across the organisation as a whole. I work in the Europe, Middle East and Africa regions, which include a total of 200 staff, but senior members of the legal department in other locations in which Deutsche Bank operates are also introducing these changes.
It’s a worldwide effort driven by the Global COO of the Legal Department, Rose Battaglia. She felt that the organisation needed to rethink the way that it structured its legal solutions, so we all sat down together – Rose, myself and others – to review the way that the legal department worked. We looked first at document drafting, broke the process down into its constituent parts and applied solutions, including LSO, to improve efficiencies. It’s not only a matter of making short-term cost savings, but also ensuring that the legal department is geared up for the future and the way that the business is going to change. You can’t just have a short-term strategy.
New processes
As a back-drop to all of this, of course, is the environment in which the banking sector is currently operating. Regulatory requirements aren’t going to go away; in fact, they’re going to grow in the next two, five and 10 years. Deutsche Bank needs to get the appropriate resources and processes in place now if we are to meet the regulatory demands of the future.
At the same time, the legal department needs different skills than perhaps were necessary in the past. Today, you can’t just give legal advice; in-house lawyers also need to be managers – both of their internal teams, and also of external resources, such as LSO vendors. Part of my role is to work with others in the department to ensure that lawyers’ soft skills evolve in order for them to take on these new responsibilities.
In a way, Deutsche Bank has benefited from being an earlier mover in this area. We recognised the changes to the industry and understood that by reviewing our legal services and introducing LSO early on, then we’d be able to achieve much more and move forward much quicker. For example, by working in partnership with LSO vendors, we’ve been able to create processes that meet our specific needs.
It’s important to remember that introducing new ways of working isn’t simply about changing the process. You’ve also got to bring people with you. Your department has to be comfortable with the solutions that you’re proposing, as, if not, they won’t adopt them. However, at the same time, you need to make them understand that, one way or another, change is going to happen. As an organisation, you can either choose to lead that change or to follow others. We don’t intend to be followers.
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Gary Nelson
SENIOR VICE PRESIDENT OF RISK MANAGEMENT AND LEGAL OPERATIONS, MEDTRONIC
Much of the rationale for giving overall responsibility for Medtronic’s in-house legal function to a non-lawyer was driven by common sense. Looking at legal risk from a risk management perspective, for example, is very similar to the way in which we would look at it from a legal perspective. It’s only natural that we should seek to centralise our practices and to build common databases and assets.
A similar story applies when you look at financial management. The risk management function at Medtronic has always involved a fair amount of finance-based work, budgeting and so on. Out of necessity – because both the legal costs and risks are fairly high in medical technology – there has been an increasing focus on spend management and cost in the legal department in recent years. In general, the department needed to find better ways to control and oversee budgets, and so it made sense to call upon those skills already developed by the risk management team.
At the base of both examples, of course, is the need to incorporate project management skills into the legal organisation as a whole. If a practice or a piece of technology works in one area, then you should also think about using it in broader terms or to deal with bigger challenges. That’s why, for instance, Medtronic pools all its financial reporting together in one spot, applies common technology where it makes sense to do so across the entire organisation, and coordinates all of its annual planning through one centralised function. We’re now applying that same approach to the legal department too.
However, it would be a mistake to suggest that it is a relatively new practice for a corporate legal department to be run by a non-legal head. I’ve been working at Medtronic for 17 years, previously in a finance and risk management capacity, and my joint role to oversee both risk management and legal operations was formalised nearly a decade ago. Since that time, I’ve overseen a global legal team of some 275 staff, including risk management and compliance staff as well as around 125 lawyers, spanning 250 facilities across the Americas, Europe and East Asia.
Free to manage
It’s natural to suppose that there may be a reluctance on the part of lawyers to work with a non-legally qualified senior executive, but I’ve not found this to be the case. In fact, they are very open to it. Frankly, much of the work managed by the legal operations department at Medtronic is really not work that lawyers are trained to do in the first place. In any case, part of your role as manager is to build trust and good relationships over the course of time – this work can’t be done without that environment of trust.
By remaining separate from the day-to-day legal work, we’re also able to concentrate on big-picture management issues. Returning to the issue of budget, for example, we have a number of spend management initiatives under way. This includes sitting down with all our key outside counsel partners to look at budgets and work plans. We are also having detailed discussions regarding all the high-dollar volume matters so that we really tune in to the work that is being done and the costs of doing it.
My department is very actively involved in looking at the spectrum of work done by law firms and assessing routine work processes. In e-discovery, for example, there’s a lot of routine work that we think could be managed more effectively. We’re currently analysing ways of pulling certain types of work out of the equation and looking at lower-cost options for delivering that work without sacrificing quality. This includes looking at outsourcing opportunities in the US for legal work in general (legal services outsourcing or LSO).
We are also implementing greater discipline around our e-billing systems so that we have more automated ways of pulling out exceptions or instances of legal fees that we feel to be unacceptable in the current market
Collaboration is key
I understand the suggestion that non-lawyer heads of legal departments are more astute at dealing with spend management and cost-cutting than lawyers, who perhaps may be too close to the work. However, I don’t believe that it’s as simple as that. The process at Medtronic is a collaborative effort and it is done in full partnership and transparency with the internal team and our external partners.
For example, another initiative that we are working on very closely at the moment is determining which firms we are going to partner with going forward. Currently, Medtronic deals with hundreds of law firms, and we want to reduce that number to less than 50 so that we can increase our leverage. Those selected firms will then also have a better working knowledge of who we are, what we do and what is important to us.
As part of this process, we’ve sent out requests for information to all of the leading law firms globally and we are looking at a range of issues, including who leads the charge on their side and their diversity statistics. We have various markers that are very important to us. We are currently cataloguing the responses from more than 100 firms, and the process from beginning to end will take about five months.
However, the decision on which firms to cut and which to keep can’t be managed by a non-legal head alone - it can’t just come down to budget. Instead, it’s about working alongside the internal legal team to measure, for example, the quality of a firm’s work or the fit between its working practices and ours.
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Eleanor Whitfield
HEAD OF LEGAL SERVICES, INVENSYS PLC
I am a lawyer by training, but my current role as head of legal services for Invensys plc is focused on service delivery rather than legal practice. However, my legal background – previously group general counsel working day-to-day with Invensys Rail’s business units – has armed me with important insights into the way that legal services have traditionally been delivered in the organisation, the fast-moving nature of our lawyers’ workload and areas where we could perhaps better assist them and our business units.
In particular, this has meant plugging potential ‘holes’ in the provision of services. Invensys is a global company and it’s impossible for us to have lawyers on the ground in every jurisdiction. We operate in ı80 countries worldwide, but with only a small team of lawyers. With this breadth of cover, we need to be agile and able to respond to the changing needs of the business as well as flex our legal services in areas to cope with sudden increases in demand.
When a sudden burst of work arrives, the temptation is always to roll up your sleeves, stay late and deal with it yourself. But that can only ever be a short-term solution. My focus is on finding long-term, more sustainable ways of coping with such situations. I aim to sort out processes that will work in the future, rather than just burying the problem by stretching internal resources, expecting them to cope with it themselves or turning to external law firms for support. At one point, Invensys was using more than 600 law firms and it became clear that we would need to be more creative in our solutions than this. It was this type of scenario that led me to legal services outsourcing (LSO) and CPA Global.
Why outsourcing?
LSO doesn’t just support our internal team by taking work off their desks, it also helps to deepen the legal department’s strategic and commercial knowledge. It allows them to concentrate on the big picture. It’s not an issue of taking away work; it’s about introducing processes to make your lawyers more effective. In other words, using the right people for the right skills. The internal team no longer has to spend their time looking at the small print, as that can be prepared on their behalf by the CPA Global team in India. Their role is to analyse that output strategically, making them more effective lawyers.
Of course, the relationship needs to be set up well. For a start, internal lawyers need to learn to delegate. Delegation is a real art, but, if it is done well, you can get better quality results. Work also needs to be able to flow smoothly from the internal team to the LSO provider and the process needs to be resilient, especially in cases of sudden demand.
But I would also say that LSO suppliers need to understand their client’s business as a whole. For example, when it comes to reviewing a contract, it’s often the least obvious but most important details that you’re looking for - that clause you may not notice at the time, but which you might end up paying for later. You won’t necessarily know that if you don’t know the business. I’m hoping that the relationship that we have with the CPA Global team will develop in this way. Just as with an internal legal team, it’s not just about giving them ‘routine’ work to do, it’s about challenging them – that’s how you develop talented lawyers. Already the standard of lawyers in India is exceptionally high. Most have Masters degrees or PhDs. The one element that they won’t always have is business acumen. You can get that only from experience. That’s the exciting part of this process.
In turn, your internal lawyers will develop skills and experience by overseeing the flow of that work. It’s not a matter of replacing like-for-like – we don’t intend to replace any of our team with staff in India – it’s about supporting them so that they can work more effectively. How many lawyers do you know who don’t wish for a better work-life balance?
Management skills
It’s often asked whether lawyers can be effective managers, but I don’t think that is something we’ll even be considering in ı0 years from now. It’s a skill that all lawyers will need to develop. But you can’t expect them to do that alone – you need to give them both guidance and support.
Knowledge management is also key. When a business is global and its lawyers are scattered across the world, there’s always the danger that different regions are reinventing the wheel each time. You need to be able to capture the knowledge and experiences of your team in each region so that others can learn from it too.
LSO is also able to help in this area; for example, by helping a company to build a global contracts database that can be accessed by all. The more sophisticated you are, the more you can harvest that data; for example, not just looking at the number of contracts, but also trends and potential issues. That’s great for measuring and building efficiencies – for instance, by looking at which contracts are the strongest or weakest by region or business area. You can then target your training, deploy your staff or prioritise your work appropriately. It’s a question of being agile and being able to respond quickly as and when your business units need legal support.
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These columns first appeared in Legal Strategy Review, issue 7
