Webinar Series for Corporate Counsel: Tyco s Success Story - Integrating Procurement, Law Firms & KPI s. April 26, 2012

Transcription

1 Webinar Series for Corporate Counsel: Tyco s Success Story - Integrating Procurement, Law Firms & KPI s April 26, 2012

2 Host: Ron Lippitt Vice President of Global Services, Lumen Legal Ron is an expert in addressing issues affecting corporate performance, and helps ensure that Lumen Legal s relationships result in successful outcomes. He works with Lumen clients around the globe to create solutions that improve efficiencies and lower costs. Ron brings more than 20 years of experience in consulting and assisting organizations in finding the right balance between people, process and technology - using Lumen s thought leadership and array of strategic services. 2

3 Presenters Guest Speaker: John Jenkins VP, Corporate Secretary and Int l General Counsel, Tyco International Ltd. Topic Expert: Paul Smith Partner Eversheds Consulting 3

4 Guest Speaker: John Jenkins Vice President, Corporate Secretary and International General Counsel, Tyco International Ltd. As Corporate Secretary, John is responsible for corporate securities, public finance, corporate governance and Board of Directors matters. Internationally, he leads a global team of lawyers who provide day to day legal services to the company s operations in over sixty countries. Previously, John served as Tyco s Senior Litigation Counsel where he was responsible for corporate litigation with a focus on securities matters and governmental investigations. 4

5 Topic Expert: Paul Smith Partner, environmental lawyer and litigator, Eversheds Consulting Paul is a recognized expert on law firm partnering and convergence. He began developing this expertise as client partner for DuPont more than ten years ago. In recent years, Paul has focused on how the law firm and the global corporate law department can work together effectively across multiple jurisdictions. Paul consults with many global corporate law departments on their structures, processes and practices to derive greater value from outside counsel. In 2008, Legal Business magazine honored Paul Smith as 'Lawyer of the Year', one of the most prestigious awards in the UK. 5

6 Today s Book Giveaway The Power of Habit: Why We Do What We Do in Life and Business by Charles Duhigg (published February 28, 2012) In The Power of Habit, award-winning New York Times business reporter Charles Duhigg takes us to the thrilling edge of scientific discoveries that explain why habits exist and how they can be changed. With penetrating intelligence and an ability to distill vast amounts of information into engrossing narratives, Duhigg brings to life a whole new understanding of human nature and its potential for transformation. 6

7 Polling Question #1 What best describes the role of procurement in your legal delivery process? Don't plan to integrate in the future Fully integrated into the process currently Only involved in major contractual expenditures 20% 20% 26% Will be integrated in the future 33% 0% 10% 20% 30% 40% 7

8 Tyco s Success Story: Integrating Procurement, Law Firms & KPI s 8

9 Working Together The Procurement function The Legal function The good, the bad and the ugly Working in partnership 9

10 Understanding the Tyco Model The Tyco Legal Model In scope and out of scope work Fixed fee for all EMEA for in scope Year on year costs reductions Doing the deal 10

11 Polling Question #2 Describe the current status of your performance measurement program in your legal department. Have a program in place 21% Considering implementing a program in % Not considering a program in % 0% 10% 20% 30% 40% 50% 11

12 Tyco International Tyco International is a diversified, global company that provides vital products and services to customers in more than 60 countries. With 100,000 employees worldwide, Tyco is a leading provider of security products and services, fire protection and detection products and services, valves and controls, and other industrial products. 12

13 Describe the respective roles of the legal and procurement functions in determining legal services at Tyco. The procurement department (called the Strategic Sourcing organization at Tyco) assists the legal department by putting together a disciplined process for describing in an request for proposal (RFP) document the scope of services needed, the coverage expectations and the nature of the matter. The law department would judge each firm s ability to meet our expectations in the areas of cost, coverage and compliance. 13

14 What s been the biggest lesson you ve learned when the two departments work together in an RFP process? It s critical to give the firms rich, reliable data in the RFP so they can give you a reliable, accurate, well thought-out response. Data includes: The number of matters The jurisdictions where those matters arise Your historical cost to service the matters The amount of attorney hours spent on those matters 14

15 What KPI metrics did Tyco develop? Our metrics vary based on matter type (i.e. litigation vs. contract vs. M&A). But largely we look at: 1. Coverage the firm s ability to meet our needs in the right jurisdictions 2. Costs what is the price point that the services will be delivered 3. Compliance will we be able to execute the matter in compliance with the local requirements Within a given matter area (i.e. litigation), we look at performance metrics such as: Case cycle time Total cost to resolution, etc. 15

16 Before you embarked on these changes, what benchmarking did you do? We did benchmarking with other global multinationals that have engaged in convergence programs primarily DuPont, since they are a leader in the field We spent time with Tom Sager and hired one of his law practice managers to help us use a Panel Law Firm (PLF) model to guide the direction we were headed. We knew we were spending a lot of money with a lot of firms and it made sense to aggregate the work. 16

17 What were the goals set for the legal department, the individuals and the external law firms? Expand Coverage: Wanted to expand or increase our coverage in the right jurisdictions either through in-house or a partner firm on the ground Reduce Cost: We were spending a lot of money on outside firms and needed to impose cost discipline to reign in spending and right size the department. Our efforts included right-sizing in-house and right-sizing outside. Increase Compliance: Wanted to insure that the firm or in-house resource for that particular matter or practice portfolio had the ability to deliver the service in a way that was compliant with the local statutory regime 17

18 Please provide examples of KPIs for an external law firm and an individual? For an External Law Firm: We d focus on Cost and Hourly Utilization For example, in the Eversheds Memorandum of Understanding (MOU), Tyco was purchasing 20,000 hours for basic scope work in In 2012, that same work is down to 12,000 hours/year. Both Eversheds and Tyco are becoming more efficient in the service delivery model. For An Individual: We d focus on Budget Spend Each year, an individual would be given a certain amount of budget authority to deliver the work. He/she must deliver it within budget and for less the next year. 18

19 How did you roll out the program? What were the lessons learned? We rolled it all at once and it was painful. We should have staged it in phases once we took an inventory of litigation or commercial matters. All at once is not the most efficient way because you re giving a substantial amount of work to a firm and they can t digest it in a way that maintains the service level and controls cost. A year ago, we did it in stages in Canada over a three to six month period. It allowed the firm to absorb the work and staff the matters across the various jurisdictions without the disruption of bringing in hundreds or thousands of matters in all at the same time. Some companies will only transfer new matters and not historical matters. 19

20 How often do you re-visit the goals and objectives? At the regional level, the matter supervising attorney has quarterly reviews with the responsible engagement partner from the law firm At a higher level, we review the Memorandum of Understanding (MOU) annually to assess: What s the utilization? What are the cost trends? Are there areas where we re not seeing the efficiency we hoped to achieve? What are the causes? What can the company or firm do to address these areas? 20

21 Inside the legal function, do you tie compensation to the achievement of goals? Not directly. Indirectly, compensation is linked to goals in two ways: 1. Performance of the company on its earnings per share (EPS) line is tied to the compensation executives receive and by extension if we re missing our budget we will make less earnings and see that in the compensation paid. 2. There is a discretionary component to compensation that takes into account your adherence to or achievement of budget expectations. If you fail to achieve the budget expectation set at the beginning of the year, you will see it in your compensation paid at the end of the year. 21

22 What are the tangible and intangible savings associated with tracking KPI performance? Tangible Savings: You see it in the cost line. When you measure year-over-year, quarter-over-quarter, period-over-period spend, you can see if you re meeting the cost, coverage and compliance goals. You can also track the number of matters and types of matters. For example, if we re reducing the litigation inventory in a given practice area in a given jurisdiction, you see the tangible benefit of reducing controversy. Intangible Savings: We can see it in our relations with the P&L leaders because they have visibility into our efforts in delivering the service at the right cost point and in a manner which is predictable to the P&L. The volatility that many P&L leaders dislike in corporate law departments is controlled or eliminated by providing that cost predictability and that is something they can plan and manage around in the operations. 22

23 Given your success, what s next for Tyco? We will continue to deploy our convergence methodology in the areas where we re not converged. In those jurisdictions where non-native law firms are not allowed to practice law (i.e. China, India) we re focusing on how to converge regionally when one firm is unable to deliver services in all of those jurisdictions by virtue of the practice restrictions. 23

24 Questions from the audience? 24

25 Second Book Giveaway The Power of Habit: Why We Do What We Do in Life and Business by Charles Duhigg (published February 28, 2012) In The Power of Habit, award-winning New York Times business reporter Charles Duhigg takes us to the thrilling edge of scientific discoveries that explain why habits exist and how they can be changed. With penetrating intelligence and an ability to distill vast amounts of information into engrossing narratives, Duhigg brings to life a whole new understanding of human nature and its potential for transformation. 25

26 Next Webinar: May 17 May 17, 1:00 2:00 p.m. EDT 2012 Technology Advantage Webinar Series: Legal Spend Analytics Cost: Free Register at Data analytics is the next frontier of efficiency in legal services. Corporate legal departments continue to seek to get more work done with less resources and are asking law firms to perform legal services, better, faster and cheaper. Armed with a treasure trove of data collected over the years from e-billing and matter management systems, corporate legal departments are using data analytics to increase transparency into their own legal spend and perform real-time comparative benchmarking. Webinar speakers include: Topic Experts: Doug Ventola, President, Sky Analytics and David Galbenski, Founder & Chairman, Lumen Legal Webinar Host: Ron Lippitt, Vice President, Lumen Legal 26

27 Contacts Paul Smith Partner Eversheds Consulting Ron Lippitt Vice President Global Services Lumen Legal follow our blog! 27