The Smarter Legal Model
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1 The Smarter Legal Model Trevor Faure, Partner Global Leader, Legal Services EY Global / Linkedin: uk.linkedin.com/pub/trevor-faure/88/725/110/ Executive Lawyers Thought Forum Macau, 2014
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4 What s On Your Mind, Asia Pacific? Who are the ultimate clients? How to measure the performance and value of the Legal Department? Should Contract Management and/or Compliance be within Legal? Centralised vs. Decentralised Legal Teams? How to resolve conflicting objectives and KPIs Should I link Legal Department performance to company performance and if so, how? How to measure problems and costs avoided How do I assess and predict resourcing needs? How to measure and improve Internal Headcount Quantity How to measure and improve Internal Headcount Quality What talent training should Law Firms provide? What are the key strategic points in managing External Counsel? Page 4
5 Modern In-House Counsel. The Day Job... Leader of people Wise and trusted counsel Statesperson Salesperson Psychologist Business analyst Surrogate judge CLO - Cheap Legal Officer Project manager Keep-Out-Of-Jail-er Coach Conscience Executioner and Best friend. To all people. At all times. And increasingly across an equallydisparate range of cultures, languages and time zones. Infallibility is essential. Only the omniscient and omnipotent need apply. No pressure then. Page 5
6 Working Smarter Legal Coverage essentials and enablers Compliance Client Satisfaction Headcount Net Cost including legal fees, fines & business losses MORE LESS Page 6
7 Working Smarter Coverage Compliance Client Satisfaction Head Count Net Cost (incl. legal fees, fines & business losses) Page 7
8 As defined by stakeholders (C-suite, shareholders, internal clients, regulators, legal staff, customers, etc.). The Essentials - substantive legal work product: contracts, transactions, litigation, licences, policies, corporate governance, subject-matter specialisation, advice, negotiation, drafting, etc. The Enablers - execution of legal operations: business involvement, management of external counsel, training of clients, FAQs, processes, knowledge management, legal research & education, administration. budget management. Adherence to all applicable laws, regulations, third-party rights, codes of professional practice, contracts, licences and perf ormance of all related obligations. Coverage Compliance Client Satisfaction As assessed by clients. Key Performance Indicators such as: contract turnaround times, meeting project deadlines, successful litigation / dispute outcomes, responsiveness, expertise, clarity & precision of drafting & advice, proactive support & training, client empowerment, alignment with business objectives, user-friendly work product (templates & processes, etc.). Full-time equivalent legal staf f employed including non-qualif ied support staff and contractors. Internal Head Count Net Cost (incl. legal fees, fines & business losses) The cost of Internal Head Count and external legal services, law firms, expert witnesses, outsourcing, knowledge/matter management systems. The cost of f ailure: e.g. contract liability claims, unfair dismissal compensation, regulatory fines, civil / criminal compensation, legal cost awards. Page 8
9 Measuring, Managing and Improving Anything: common sense applied to objective data Page 9
10 Coverage: does the Legal function actually have a list of the essential legal work and responsibilities agreed with the stakeholders? [250 leading legal departments, May 2013] 43% 34% 57% 66% No Yes No Yes Essentials - substantive legal work product: contracts, transactions, litigation, licences, policies, corporate governance, subject-matter specialisation, advice, negotiation, drafting, etc. Enablers - execution of legal operations: business involvement, management of external counsel, training of clients, FAQs, processes, knowledge management, legal research & education, administration. budget management. Page 10
11 Coverage: to what extent does the internal & external Legal function cover the legal essentials and enablers for all stakeholders in all jurisdictions? [250 leading legal departments, May 2013] Above 80% 11% Coverage 50% - 65% 25% - 50% 20% 27% Under 25% 22% % of Legal Departments Page 11
12 Compliance & Net Cost: how many serious compliance incidents have occurred during the last six months (i.e. those resulting in significant penalties/legal fees)? [250 leading legal departments, May 2013] Number of Compliance Incidents Over None 5% 7% 34% 54% % of Legal Departments Page 12
13 What is the level of Client Satisfaction with the Legal function (selfestimated or surveyed)? [250 leading legal departments, May 2013] % Satisfaction Rating out of % 8% 18% 54% % of Legal Departments Page 13
14 Head Count: does the Legal function have an adequate level of staffing? [250 leading legal departments, May 2013] No 73% Yes 27% % of Legal Departments Page 14
15 Net Cost: the level of external legal spend is... [250 leading legal departments, May 2013] unknown, to be honest 13% too High 44% just right, Goldilocks! 25% too Low 18% % of Legal Departments Page 15
16 Average Performance of 250 leading legal departments Measured & Analysed: the False Economy Model Coverage: 50% Compliance: Several incidents Client Satisfaction: 7/10 Head Count < X Page 16 Net Cost (incl. legal fees, fines & business losses) > $Y M
17 Improvements achieved under The Smarter Legal Model Coverage 25% to 80% Compliance: 500% GMI improvement Client Satisfaction: 3/10 to 9/10 Head Count X Net Cost (incl. legal fees, fines & business losses) $Y M 30% Page 17
18 Like Malcolm Gladwell s Tipping Point and Jim Collins Good to Great, Faure s The Smarter Legal Model is the rare book that will be read with equal interest and appreciation by both practitioners and academics. It is destined to become an important part of any conversation about the role of law and lawyers in the global economy. Professsor David B. Wilkins, Harvard Law School He shows...the holy grail of business productivity... Bursting with ideas, his book is a "must read" for business people and the lawyers who work with them. Ben W. Heineman, Jr., Former GE Senior Vice President for Law Faure offers a set of tools to help reduce costs, increase legal coverage, improve compliance, and increase client satisfaction. More ambitiously, he casts aside the traditional, often fraught, commercial relationship between law firms and their clients and replaces this with a species of partnership arrangement, under which the business interests of the in-house lawyers and their external advisers are much better aligned. Professor Richard Susskind from The End of Lawyers? Video: see Bloomberg TV: Modernising legal services & Law Firm Business Development or The American Lawyer The Smarter Legal Model Page 18
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