Smarter Legal Model overview & data update T Faure (Jan 2014)

Smarter Legal Model overview & data update T Faure (Jan 2014)

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  The Smarter LegalModel – overview & data update from client engagements January 2014 Trevor Faure, Partner, Global Leader Legal Services, Ernst & Young Global [email protected] / +44 7802 595053
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  Page 2 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. Coverage Compliance Client Satisfaction Internal Head Count Net Cost (incl. legal fees, fines & business losses) 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 performance of all related obligations. 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 staff employed including non-qualified support staff and contractors. • The cost of Internal Head Count and external legal services, law firms, expert witnesses, outsourcing, knowledge/matter management systems. • The cost of failure: e.g. contract liability claims, unfair dismissal compensation, regulatory fines, civil / criminal compensation, legal cost awards.
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  Page 3 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. Coverage: 50% Compliance: Several incidents Client Satisfaction: 7/10 Head Count < X Net Cost (incl. legal fees, fines & business losses) > $Y M Average Performance of 250 leading legal departments Measured & Analysed: the False Economy Model
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  Page 4 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. 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% Typical improvements achieved under The Smarter Legal Model
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  Page 5 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. Measuring 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] 57% 43% No Yes 66% 34% 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.
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  Page 6 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. Measuring 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] Under 25% 25% - 50% 50% - 65% Above 80% 22% 20% 27% 11% Coverage % of Legal Departments
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  Page 7 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. Measuring 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 departments, May 2013] None 1 - 5 5 - 7 Over 10 34% 54% 7% 5% NumberofComplianceIncidents % of Legal Departments
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  Page 8 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. Measuring Client Satisfaction: What is the level of Client Satisfaction with the Legal function (self-estimated or surveyed)? [250 leading legal departments, May 2013] 1 - 2 3 - 4 5 - 6 6 - 8 9 - 10 1% 8% 18% 54% 19% SatisfactionRatingoutof10 % of Legal Departments
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  Page 9 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. Measuring Head Count: does the Legal function have an adequate level of staffing? [250 leading legal departments, May 2013] Yes No 27% 73% % of Legal Departments
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  Page 10 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. Measuring Net Cost: the level of external legal spend is.... [250 leading legal departments, May 2013] too Low just right, Goldilocks! too High unknown, to be honest 18% 25% 44% 13% % of Legal Departments
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  Page 11 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. Previous State Coverage: 52% of Legal Essentials & Enablers Compliance: Several costly incidents Client Satisfaction: 6.5/10 Head Count: 2.4 Lawyers per $Billion ABC Revenue: Half the Industry Median. Net Cost: 0.38% ABC Revenue: 15% above the Industry Median PLUS $20-150M Compliance Fines. Real world example: ABC was overspending due to lack of controls and inadequate legal coverage. Rationalizing law firms, systematising processes and improving internal talent saves up to One Third of the true total ABC legal spend and minimises Compliance losses. AnonBusinessCorp Future State Coverage: 80-85% of Legal Essentials & Enablers Compliance: Few incidents Client Satisfaction: 8/10 Head Count: 4 Lawyers per $Billion ABC Revenue: Responsive, Proactive & Strategic. Net Cost: 0.26% Revenue 20% below Industry Median PLUS ABC revenue upside from contract management and leverage.
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  Page 12 TheSmarter Legal Model: more for less. ©Trevor Faure 2010. All rights reserved. “Drawing heavily on management theory, economics, and organizational psychology, and rooted also in his extensive practical experience as an in-house lawyer, Faure offers a set of tools to help reduce costs, increase legal coverage, improve compliance, and increase client satisfaction. [H]e 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?” www.uk.practicallaw.com/about/morefromless “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 See Bloomberg TV: Modernising legal services & Law Firm Business Development OR YouTube: “Trevor Faure Bloomberg”