In-house ACCess : In-house ACCess: Association of Corporate Counsel : ACC : The In-house Counsel Bar Association

 Part IV. Follow along in this four-part blog series featuring a timely and provocative look inside Hewlett-Packard Company’s innovative new legal talent development program. This blog takes a look at the training program from the perspective of a participant, HP new hire, Gail Su. Gail is a graduate of Harvard Law School and is currently Counsel on the Intellectual Property Transactions Team. Prior to joining HP, Gail attended Harvard Law where she served as the President of the Harvard Asia Law Society, as Conference Chair for both the Asia and Pacific American Law Students Association and the Journal of Law & Technology. The voice, views and stories expressed by the authors below are their own and not ACC’s. To read the first installment of this series, click here.

Part IV: Who Says Attorneys Can’t Be Trained In-house?

When I first started at HP, I was excited but nervous. I wasn’t sure what to expect, but much to my relief, HP had it all sorted out.

My training has come primarily from two sources: a set curriculum that all new attorneys are asked to complete and my on-the-job experiences. The set curriculum is composed of classes (that I attend both online and in person) and practical experiences. The training was designed to give me broad exposure to the workings of a large company and to help me develop certain skills. It has given me the opportunity to attend classes on core legal topics such as antitrust and contract law; I have had the chance to present a legal recommendation to a company executive; and later this year, I will spend a week at a legal outsourcing site negotiating sales agreements. In addition, I’ve attended a customer meeting with an HP executive as well as a negotiation workshop, and participated in a business simulation where I helped a fictitious company evaluate business options.          

In my day-to-day training, I am fortunate to be under the instruction of managers who are committed to my development as an attorney. I am also fortunate that the entire IP Transactions team has joined together to mentor me. I have been exposed to a wide range of matters and have learned from lawyers with different styles of practice. Sometimes I work on projects by myself. Other times, I work on projects with other attorneys. In all cases, I am encouraged to take on as much responsibility as I believe I am ready for. There are no rules as to what I am capable of, and there are no rules as to which projects are too complicated for me. 

Additionally, my manager encourages me to take ownership of my career, including choosing experiences that will benefit me professionally. One of my professional aspirations is to work on cross-border transactions, especially in Asia. Upon hearing that I would be interested in spending time in HP’s Shanghai office, my manager’s words to me were, “Let’s try to make that happen.” I am pleased that it worked out and I will leave for Shanghai in October.  

Finally, I am encouraged to participate in pro bono activities. In fact, each HP attorney is asked to complete 20 hours of pro bono service a year. In the short time that I have been at HP, I have worked on a VAWA immigration self-petition, advised non-English speaking clients at a legal clinic for small businesses, and instructed middle school students on the law.  

Ten months ago, I couldn’t have imagined that my career would be off to such a fast-paced and exciting start. Thank you, HP, and I look forward to experiencing all that you have to offer.

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Throughout 2010, ACC continued to take the pulse of the legal industry through its annual surveys. From the changing role of the CLO, to the evolving relationship with outside counsel, including the increased use of alternative billing arrangements, our surveys provided data to our members so they could have reliable benchmarks for their own law department management practices and insights into new legal and business trends.  Our surveys shared some themes in terms of takeaways for 2011 – a desire for an increase in value and efficiency in legal work predominated and practical methods for achieving such efficiencies emerged.

With fickle consumer confidence and a sluggish economic recovery this past year, CLOs actually showed signs of optimism indicating increased job satisfaction and plans to hire internally, according to the 10th Annual Chief Legal Officers Survey released in March. Results showed a sharper focus on reducing costs, increasing value and responding to regulatory scrutiny. Specifically:

·91% of CLOs reported that despite expanding duties, they were still satisfied with their chosen career. This is a positive data point indicating that external economic conditions did not heavily impact job satisfaction. One could surmise that internal structures, processes and rapport with management strengthened relationships and solidified job satisfaction and will play a key role in continued career fulfillment in the year ahead.

·29% (more than a quarter) of the respondents planned to hire staff for their in-house legal departments in 2010.  Despite the recession, this was up from the 23% with hiring plans in the previous year’s survey. The uptick in staffing and augmented workload will require an increased focus on efficiency in the coming year as CLOs manage their law departments, budgets and C-suite relations.

·79% of CLO respondents want to increase the percentage of outside counsel spending based on alternative fee arrangements. As CLOs face a myriad of intricate and new challenges, they are turning to business-oriented solutions. Initiatives such as the ACC Value Challenge will play an integral role in 2011 as in-house counsel seek more creative, value-based billing arrangements with outside counsel.

Another important set of benchmarks emerged in October with the release of the 10^th Annual ACC/Serengeti Managing Outside Counsel Survey. For a decade, this survey has assessed key elements of the in-house counsel/outside counsel relationship. This year’s results revealed that in-house counsel are seeking more business-oriented management techniques and more value-based fees from their firms to drive efficiency in legal costs and reduce overall legal spend.

·65% of respondents now require project budgets; 60% require risks/potential resolution strategies. Compared to a decade ago, in-house counsel now require measurable data, metrics, targets, project management tools and rigorous cost-controls to implement getting maximum value from their outside firms. This will continue to be a priority in the year ahead.

·Company resistance to alternative fees has declined by 16%; firms’ resistance to alternative fees has declined 69%. Over the past ten years, results show that law firms are “getting it,” as they are offering alternative fees more often (up 6%). In light of these results – and those from other surveys – we believe the move to alternative billing will continue to increase in 2011, even if the economy strengthens.

·28% sought input from their law firms when evaluating technologies for collaboration. The most common technologies for which law firms provided input were matter management and e-billing systems. Law firms should heed these results and offer clients useful business solutions in 2011.

A third survey in November, the ACC/The American Lawyer Alternative Billing Survey, also showed an increase in the use of alternative fee arrangements in 2010. While still a small percentage of total outside counsel spend, the increase in the number of “value-based” fees demonstrated the determination of law department managers to continue to increase the use of alternative pricing and valuation methods, even as the economy recovers.

·29% of in-house counsel reported an increase in the use of alternative fees in 2010 and 53% of General Counsel said they used flat fee billing for an entire matter. We were interested to see if in-house counsel would continue to experiment with new fee structures once the markets began to rebound and budgets were not under the same level of stress in 2010.  The fact that billing practices did not revert back demonstrated that in-house counsel were continuing the march to drive costs and value away from measuring hours alone. The needle will likely continue to lean toward alternative fees in 2011. 

·52% of GCs indicated that their value-based or alternative fee arrangements were initiated primarily by the law department, not by law firms. With increased pressure to demonstrate value and stand out from competitors, law firms will need to be more proactive, become trusted business advisors to their clients and focus on value in their relationships with outside counsel in 2011. 

·24% of survey respondents not using alternative fee arrangements in 2010, plan to try to implement them in 2011. These results show that the push for value-based fee arrangements is not a fad that will go away. These practices are now not only more acceptable, but becoming more firmly ingrained as an offering at major firms. As value-based billing options become institutionalized, we predict they will increase steadily not just this year, but year over year.

For both law departments and law firms, there is a lot to chew on in these trends and benchmarks as we ready ourselves for a new year with new challenges and we hope, new solutions. We will continue to tap into ACC’s in-house counsel community for feedback and insight to help us prepare for what is yet to come. As Albert Einstein proffered, “Learn from yesterday, live for today, hope for tomorrow. The important thing is not to stop questioning.”

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Post 13

Compensation, Conversation and Collaboration

Week 13. Each week via the In-House ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. ACC Value Challenge steering committee member Ken Grady, General Counsel and Secretary of Wolverine World Wide, offered to profile his selection and start-up process of launching a trademark portfolio management engagement with law firm Seyfarth Shaw. Ken's co-blogger is Lisa Damon, a member of Seyfarth's Executive Committee and leader of the firm's efforts to incorporate Lean Six Sigma into its business. The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client side

From Ken:

We structured the value fee for 2011 by borrowing from a common executive compensation arrangement. First, we established the base fee for 2011 (think base salary). Seyfarth used raw data that Wolverine supplied (hours, number and type of matters) to calculate estimates assuming the work was done by (1) a traditional large firm (higher rates), (2) the current firm, and (3) Seyfarth. I also calculated an estimate. My calculation and Seyfarth’s calculation of the Seyfarth fee agreed within about 7%, and we decided to use my number (I had the edge given my insider knowledge).

Next, we set up a bonus structure. The bonus recognizes savings based on systemic changes. This is a key point. We want repeatable changes that reduce the time to do portfolio work. That means we need process improvements, not one time cost avoidance. Reducing the time it takes to process a trademark application is a process improvement, whereas deciding to file a trademark application in fewer countries is a one-time savings. Process improvements give Wolverine savings each time we do an application.

The bonus builds on two opportunities: (1) reducing Seyfarth’s work, and (2) reducing foreign agent work. Between Wolverine and Seyfarth, Seyfarth has almost total control over the foreign agent work. So, for each $1 of systemic foreign agent savings, Seyfarth will be paid a $1 bonus. Seyfarth’s work is more closely tied to Wolverine. Since we must work together to reduce Seyfarth’s costs, we split each $1 of systemic Seyfarth savings $.75 to Seyfarth and $.25 to Wolverine. Put differently, for each $1 systemic savings on Seyfarth’s work, Wolverine will pay Seyfarth a $.75 bonus.

To measure Seyfarth’s systemic improvements, we will use two metrics: time to process an application, and time to receive a useable specimen (we have to file specimens in certain countries to show we are still using the mark). We need one score across both metrics to determine Seyfarth’s bonus, so we will combine the results on the two metrics by weighting them 80% on trademark applications and 20% of specimen gathering. We calculate the trademark application improvement metric, multiply it by .8, calculate the process improvement on specimens metric, multiply it by .2, and add the results. For every X% of weighted process improvement, Seyfarth will earn $.75.

Let’s compare this to a common executive compensation bonus system. I earn a base salary (base fee). My long-term bonus depends on the company’s performance on two metrics, earnings per share (think trademark applications) and value added (think specimen gathering). EPS counts for 65% of the final score, and value added counts for 35%. We get the final score by taking the weighted score (.65 times EPS score plus .35 times value added score), and apply that weighted score to the sliding bonus scale. For each X% improvement in the EPS/Value Added score I get a bonus of $Y.

I’m going to emphasize one point – this structure depends on process improvements not one-time savings. That means we need a system (we are using, of course, SeyfarthLean) to document existing processes, improve those processes (reduce work), and ensure that they are repeatable. Since many have successfully used lean process improvement for services where you could claim there is great variability (for example, medical treatment in hospitals), using it for legal services does not present any unique challenges.

Next: Explaining the power of this approach in driving shareholder value for Wolverine, and margin improvement for Seyfarth.

The firm view

From Lisa:

As the provider, we were delighted by Ken’s approach. We believe that it is fair, aligns us with Wolverine and properly reflects our joint expectations for the further development of the trademark service platform. 

More than that, it provides a compelling strategy for recognizing both the “industrial” and “artisanal” components of our work that Ken has described in the past. We receive a fair base fee and the opportunity to do better if we can help to build out the service platform.  We are absolutely committed to working with Ken’s team to identify process efficiencies and other systemic changes, believe we can do it by harnessing the capabilities of SeyfarthLean and agree with Ken that his approach fairly reflects that commitment.

So, what did we need to do from our end to get comfortable with the approach from a business perspective? We clearly wanted an approach that worked off a different calculus than seeking to compare the projected results of Ken’s pricing strategy against a traditional hours times rates model. That approach might have been ok but was clearly inconsistent with the core theme of the Wolverine trademark relationship 

Like Ken, we worked first to develop a scoping model that projected fees under several different scenarios. Working with Ken, we determined that his numbers and our numbers on scope were close and elected to work with Ken’s numbers (that company knowledge thing). From there, we looked at our costs to deliver the scope, ran through a scenario analysis that Ken developed and looked at margins. With that analysis, we concluded that Ken’s strategy should bring us together with Wolverine in a joint mission to handle the daily core services and further develop the trademark platform.

This exercise was similar to our more traditional pricing analysis only in the goal of seeking to understand the financial results of various scenarios. The economic incentives associated with rewarding strategic value (as the client understands it), however, was very different from the more traditional approach to pricing trademark portfolio services and very cool from our perspective.

Next: Working as partners; next steps.

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 Process Mapping Primer 

Week 12. Each week via the In-House ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. ACC Value Challenge steering committee member Ken Grady, General Counsel and Secretary of Wolverine World Wide, offered to profile his selection and start-up process of launching a trademark portfolio management engagement with law firm Seyfarth Shaw. Ken's co-blogger is Lisa Damon, a member of Seyfarth's Executive Committee and leader of the firm's efforts to incorporate Lean Six Sigma into its business. The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

The client side

From Ken:

Lawyers are idiosyncratic workers. We do things differently when you compare one lawyer to another, and we do things differently when you compare how we do the same thing from time to time, such as preparing contracts. We justify much of this idiosyncratic behavior by claiming we do bespoke work – each time we do a case, contract or other matter, it is unique. Our idiosyncrasies, however, make us very inefficient.

We have designed the Wolverine/Seyfarth partnership to reduce process variability, using the SeyfarthLean techniques, so that we each become more efficient in providing legal services to our client. To know what Wolverine does today, we will make process maps. A group of two to eight individuals, drawn from both entities, will brainstorm and capture each step in a current process. In the old days, we did this by taping a long piece of butcher paper on the wall and noting each step in the process sequentially along the length of the paper. With all the mistakes, corrections and additions, it was busy when we finished. Today, Seyfarth does the same thing using computer tools that make the result much cleaner. Using the process map, we then (1) simplify steps, (2) weed out unnecessary steps, (3) re-sequence steps, (4) standardize steps and (5) create tools for steps. Each time we change the process, we update the map. We pull from a variety of metrics to measure our improvement – e.g., overall time to complete the process or number of steps in the process.

An obvious place to start with a trademark portfolio is the application process. The client sends an e-mail asking about the availability of MARK for use with a product. The in-house paralegal does a quick screening search and e-mails back saying that it looks like it is available, and asks whether she should do a full search and how the client will use the MARK. The client emails back saying yes to the full search, and gives a partial answer on use. The paralegal e-mails the outside paralegal requesting a full search. The outside paralegal requests the search and sends the outside IP attorney the results. The outside IP attorney has some follow up questions and sends them to the in-house paralegal, who in turn sends them to the client, who in turn responds to the in-house paralegal, who in turn responds to the attorney. Draw a line on your yellow pad and put each of these steps in sequence. Congratulations, you drew your first process map and already see several ways to improve the process. After each iteration, we want to achieve a steady state. That is, we want a defined process that we will repeat each time we do an application keeping variability to a minimum. One benefit of this technique is that you can apply it endlessly to any given process, always finding room for improvement,

We still can be brilliant lawyers. We just exercise our brilliance at the right time in a defined process that eliminates the unnecessary steps that cost our clients more, but don’t add value.

Next: So what is the status of those fee discussions?

The firm view

From Lisa: 

Ken has delved into the world of process mapping in his post this week. Okay, we love process mapping. We use this Lean tool often at Seyfarth -- we use it in very complex matters and those that are more repetitive. We may do it electronically, on a white board or even in our heads -- the trick is that it is a way to think about a problem.

When we first started working on process mapping, there was some resistance among our lawyers (and from me, as well). "Every matter is different," I kept saying. "This is complex litigation. How can we know what will happen?" We also heard: "My M&A work is highly specialized; a process map won't work." However, as we began to refine what we thought what a map could be and how we put it together, our lawyers began to see the magic of the tool. We think of our maps as "guides." We know that every legal matter is different, but we use maps to think through strategy, to organize our resources, to spot inefficiencies and to refine our strategy. They have become for many of our lawyers a true strategic tool as they think through complex issues for our clients. A quick plug: If you want to see how this works in real life, Ken and I will be doing a session at the ACC Conference, where we will have the audience on its feet, using a number of Lean tools, process mapping included. If you are coming to San Antonio, join us for some fun.

Another tool that we love to use to think through an issue is a "root cause analysis" tool. This can really force you to think beyond immediate problem-solving by requiring you to stop, think and ask tough questions. One of the tools, in fact, is called the "5 Whys" because it essentially demands that you probe for the root cause, using a series of "why" questions.

We also use other tools to guide our thinking. We find that other tools -- fishbone diagrams, for instance -- can be useful in working through client and internal issues to help identify the right solutions. I used one in a complex internal investigation last week, and it enabled me to get to an efficient solution that worked at the heart of the matter, not the periphery.

As we have said before, Lean gives us a way to think, a different approach to the practice of law. The tools support the thinking; they allow us to analyze and solve problems more efficiently and effectively. We would love to hear what kinds of tools and disciplines you are using. Let us know.

Next: A fee update and Ken teaches Seyfarth

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 The grocery-strategy connection

 Week 11. Each week, via the In-house ACCess blog, follow the promise and pitfalls of forming a new value-based client-firm relationship. ACC Value Challenge steering committee member Ken Grady, General Counsel and Secretary of Wolverine World Wide, offered to profile his selection and start-up process of launching a trademark portfolio management engagement with law firm Seyfarth Shaw. Ken's co-blogger is Lisa Damon, a member of Seyfarth's Executive Committee and leader of the firm's efforts to incorporate Lean Six Sigma into its business. The voice, views and stories expressed by the authors below are their own and not ACC’s. To catch up on the story so far, click here.

 The client side

 From Ken:

Nutritionists have told us for years that we should develop a strategy before we go grocery shopping. We should plan our meals for the week, deciding what we will have at each meal, and how to do things like sequence the meals to use leftovers. From that plan, we should develop our grocery-shopping list. If you are efficient, you group items on your grocery list according to where the store places those items. When you go shopping, you move efficiently through the store, without backtracking, and you buy only what you need. You don't go shopping when you are hungry, and you don't give in to the temptation to buy those goodies in the checkout aisle.

Lawyers love tasks and checking things off lists, but as much as we advertise our strategy skills to our clients, we often neglect that step ourselves. We don't develop our strategy before we dive into the tasks. Of course, we do use strategies from time-to-time, usually for lawsuits, acquisitions and other transaction events. However, typically, we don't develop strategies for routine work.

For the Wolverine trademark portfolio, Wolverine and Seyfarth are working to develop many strategy tools. These tools will guide our decisions on issues relating to each mark, streamlining pieces of the decision process that today are ad hoc.

We want to make decisions up front about what to do in various situations and know where marks fit into our portfolio before we are confronted with the question. For example, we want to know the relative importance of a mark, and which countries are more important for that mark -- based on factors such as sales levels, related marks and counterfeiting risk. We want to have a strategy for customs surveillance, and a strategy that ties the mark to our domain name strategy. Using these and other strategy tools, we can make decisions quickly. If something pops up on a watch list, we know whether that country is important for that mark, and that guides the decision about what effort to put into a response. We avoid ad hoc decisions that result in our buying things we don't need.

Doesn't it take time to develop these strategy tools? Yes, but not a lot. Once we have the template, the time is in filling out the templates with the assistance of our client. The savings potential is enormous. It can cost thousands of dollars to oppose a proposed registration of a competing mark in one country. If we decided that our mark in that country is not strategically important and we avoid spending the thousands of dollars, then we probably covered the cost of the strategy process for the mark. We avoided the temptation to buy something in the checkout aisle and stuck to our original strategic shopping plan.

Next: Developing a map to the future.

The firm view

 From Lisa:

Ken's entry this week talks about developing a strategy before you act. For us, Lean Six Sigma helps provide the discipline for that step.

When I look at how Lean has changed my life as a lawyer, one of the keys for me has been to develop the discipline to stop and think before returning to business as usual. Ken talks about this step in the trademark area; for us, it is a step we try to use in every matter across the spectrum.

A key feature of Lean is DMAIC, a structured way to look at a matter and plan an approach, a strategy. This discipline asks you to:

·       Define the problem first -- what are you trying to accomplish? What problem are you solving? It mandates talking to your client, standing in his/her shoes and understanding the issue.

·       Next, you Measure. Look at the information/data that you have available (not relying on your "gut" or on the way you have always done something).

·       You then Analyze and Improve -- or implement -- the strategy or the solution.

·       The “C” stands for Control, which is the discipline of not going back to the way you have always done something, not returning to "business as usual."

Using DMAIC as a framework for the way you think about a legal problem can be no more than a quick mental ‘stop and check’ before you begin a project or a longer more involved discussion. The important thing for me is the pause to think, to consider and to plan -- the strategy that Ken talks about.

Lean provides other tools that I find useful in the world of lawyers -- for instance, the concept of looking at the root cause of problems and the tools designed to help you get there are ones that I use frequently -- not just in law, but in my like life as a manager of people. Too often, instead of stopping and analyzing, we jump to a solution -- lawyers are trained to solve problems. Again, Lean gives us the discipline to stop and consider: Are we really solving the root cause, or are we simply putting a bandage on something that won't last or won’t truly solve the issue?

Like effective project management and process design tools, taking time to plan strategy on the front end almost always saves time on the back end. I believe that strategic planning is not a luxury or an option to use only when time permits, but instead, it is a step that should always be integrated in my thinking -- whether I'm planning the trip to the grocery store or planning a much more complex project for one of my clients. I guess that all of those law school professors were right in the first place: Keep your pencil down in an exam until you have planned the answer!

Next: Working with Ken to map out strategy

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The situation:

•    The economy is in recession
•    Businesses of every size are being impacted
•    Internal staff is being asked to do more with less
•    Layoffs are a matter of fact.

It should be no surprise that this slump is impacting the legal industry. Many blog sites, including the Wall Street Journal and Above the Law, have daily posts on staff cuts and other changes in the marketplace. Numerous surveys indicate a gap between in-house counsel and outside counsel. Where is value and how does it relate to annual spend?

On April 13, 2009, I had an opportunity to attend my second ACC Value Challenge event. Unlike nearly everyone else in the room, I’m not an attorney. My background in the legal industry and understanding of law firms gives me an interesting perspective of the two somewhat differing worlds. In attendance were a number of law firm partners and in-house counsel, including a number of general counsel from local corporations.

My twitter stream (@time2simplify) had a few gems:

One attendee recognized that the ACC Value Challenge event is being held at the Ritz-Carlton... many lols. "best place at best price"

Both law firms and in-house departments share a similar problem: Desire to impact the bottom line is shared by both managing partners & CFOs

Take-away items from the event include:

• One definition of value: Good work – and perhaps value - is not over-lawyering (defined as anything that is not needed and appropriate)
• How are attorneys using technology? Extranets, e-billing, and knowledge management were a few examples.
• If the golden gate bridge can be built on a contract, couldn’t a large legal matter?

So legal community, what’s your point of view?

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