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October 8, 2012 Insights

Contract Management – A New Collaborative Legal Services Delivery Model

Overview

Contract Management – A New Collaborative Legal Services Delivery Model

In this post Mark Ross, Integreon’s Vice President of LPO, and Carla Goldstein, Chief Strategic Innovations Officer at AmLaw 100 firm Seyfarth Shaw, provide an account of how an initial meeting between their organisations led to the birth of a collaborative law firm/LPO contract management legal services delivery model.

Republished with permission from The Global Legal Post’s LPO Handbook 2012/2013.

A Great First Date

Earlier this year, on a blustery Chicago morning, an executive team from global legal process outsourcer Integreon arrived at the offices of AmLaw 100 firm Seyfarth Shaw. Integreon had recently made the strategic decision to sponsor the Financial Times Innovative Lawyers awards to show their support for those firms who listened to the issues and challenges of their clients and decided to break the mould and change the way they work.  Seyfarth, long acknowledged as a poster child of law firm innovation for creating SeyfarthLean, an adaptation of Lean Six Sigma for the legal industry and embracing it across their practice groups, had been recognized by the FT as one of the top 10 most innovative law firms in the U.S. The Integreon team had been eagerly anticipating this meeting in the hope that the FT’s endorsement rang true.

From both sides of the table there was an immediate meeting of minds around the notion that the legal profession was changing and would never return to the old status quo.  The LPO executives listened intently to Lisa Damon, National Chair of Seyfarth’s 350 Attorney, Labor & Employment Practice Group and member of the firm’s executive committee, while she described what the firm’s leadership defined as a perfect storm galvanising change in the legal profession.

“Unrelenting cost pressure, disaggregation, commoditization, globalization, and technological advances are forcing firms to reevaluate their business models and implement innovative solutions in order to deliver cost-effective, high-quality legal services to their clients. We believe that first-movers who embrace change will be better able to meet the demands of their clients, and gain a competitive advantage,” said Damon.

This article, co-authored by Mark Ross, Integreon’s Vice President of LPO and Carla Goldstein, Seyfarth’s Chief Strategic Innovations Officer, is an account of just one output from that initial meeting – the birth of a collaborative law firm/LPO contract management legal services delivery model.

The Contracts Problem – As is.

At the core of today’s business-to-business landscape, contracts effectively define the rules of the road.  The typical Fortune 500 or FTSE 100 Corporation maintains tens of thousands of active contracts while operating under the domain of burgeoning regulatory compliance. Concurrently, the in-house legal department budgets are under ever-increasing scrutiny with the mandate to General Counsel being simply to do “more with less.”

General Counsels are hesitant to spend already constrained Outside Counsel budgets on the high volume, and what is perceived as lower risk, contracting process. The internal organisations demanding contracts support (sales, procurement, and supply chain) are less interested in the reliability of the outcome, in terms of compliance and risk tolerance, than the speed of getting a deal done. However, despite the apparent disconnect between the legal department’s priority outcome of minimising risk and those of the internal business units, in today’s market outside counsel is typically only used on the largest, most valuable contracts. On the occasions when outside counsel is engaged to support high volume contracts, the legal review process is far from efficient with outside counsel allocating inappropriate resources, given the complexity of the task at hand.

The current staffing model for contract generation, negotiation and management for many corporations is still predicated on a method that is both labour-intensive and cost prohibitive through utilisation of expensive in-house legally trained resources. In the last 20 years, internal departments have also started hiring their own lawyers and paralegals to supplement the support or perceived lack thereof from the legal department. Whether sitting within a legal department team or in an internal department’s quasi-legal team, many lawyers are simply over-priced to be performing the review and ongoing management of the company’s high volume, lower complexity contracts.

As far as workflow and technology are concerned, the situation is little better.  The usual modus operandi involves a contract requester sending an email or perhaps completing a template and emailing it to those individuals he or she believes are appropriate to do the work. Without a formalised process, relationships can come into play, with email requests for legal review sent to the individual whom the requester “likes dealing with.” Often these emails may be missing necessary information or may fail to contain relevant attachments. In-house lawyers then red-line and negotiate the terms via email. These lawyers are responsible for handling the entire document workflow through email, with little or no capability to track the status of each transaction. Contracts are finally signed in hard copy, then scanned and attached to shared drives, although frequently the legal department has a lack of visibility into whether or not a contract has been formally executed and if so, where it is stored.

Often there are no formalised processes, standard templates and accepted language or back-up provisions for routine contracts or guidelines for turnaround times involving these contracts.  Even companies with defined service-level agreements (SLAs) in place frequently don’t have the mechanisms to enforce them nor the incentives in place to make them work. Over-allocated in-house lawyers are unable to meet the expected SLAs, and this creates a conflict between the business client and the legal department. While the work product is up to the business client’s expectations, the client remains dissatisfied with the timeframe for delivery.  At best this approach can be described as an antiquated model of resource allocation that leverages technology not designed for the task at hand. At worst, it reflects an inappropriate allocation of resources and no formalised processes or management of the ongoing rights and obligations under the applicable contract. The outcome is a costly and inefficient use of internal resources, with the company’s risk tolerances failing to be adequately captured in the final contractual documentation.

Two Heads are Better than One – the Joint Solution

Owing directly to the processes presently in place within most in-house legal departments contracts generate overwhelming amounts of administrative burden on the in-house lawyers and their support staff. Because law firms have not historically focused on efficiency, appropriate resource allocation and continuous improvement, they are often not suited to handle the review and effective management of a large portfolio of the more standardised contracts with cost efficacy. Fortunately this is not the case with Seyfarth.  The firm has long recognised that the disconnect between a legal department and the internal business units, coupled with inefficiencies in processes, left substantial ‘white space’ for innovative law firms.  It was the SeyfarthLean way of thinking that facilitated the firm’s exploration of whether it could provide a corporate legal department with an end-to-end lifecycle of contract review and management services.  Seyfarth’s approach and over-arching culture demonstrated to Integreon that here was a law firm that not only talked the talk of innovation but also walked the walk.

However, the inescapable fact remained that a significant proportion of the work involved in contract lifecycle management still ranged from administrative to routine in nature. In order for a law firm to capture some of this white space, its offering would need to be coupled with that of an appropriate legal provider partner.  For routine contract administration, creation, review and negotiations, that perfect partner is an LPO. The law firm’s expertise, coupled with the LPO’s engine room as a joint solution, becomes affordable and desirable for contracts from the least complex and low risk to the most complex and high risk. Both Seyfarth and Integreon were convinced that a combined solution would empower GCs to outsource a greater volume of contracts, and this would facilitate in-house lawyers to be better able to focus their time on more value-added work.

Shortly after this first meeting, Integreon and Seyfarth began scoping out the broad parameters of the joint solution. The 30,000 foot premise would be the deployment of law firm lawyers for high level review and negotiations, teamed with LPO lawyers and paralegals for mid to lower level negotiation, review and administration. The combination of the legal expertise of a leading AmLaw 100 firm and a state-of-the-art contracts workflow tool, together with expertise in global legal services delivery, process-based development and transition from a leading LPO provider, would offer the corporate legal department a service that was far greater than the sum of its parts. 

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