Lawcadia have produced a 5-week series on buying legal services in Australasia, written specifically for PASA. This fifth instalment is the conclusion of the series…
In this final article for PASA on legal procurement, we are going to explore the soft side of working with legal teams and what is required for success in legal procurement.
“The relationship between in-house legal and procurement has too often been far from productive,”1 reports a journalist for GC Magazine, a publication for prestigious legal industry entity The Legal 500. The same article shares that some legal departments refuse to engage with procurement, or have simply kicked them out of meetings.1
“Procurement may still be a four-letter word in the legal industry, but the legal landscape is clearly changing,” comments Tom Sager, former General Counsel at DuPont in the USA.2
Although popular opinion is that procurement and legal are not a combination that works well together, there is evidence to the contrary, as according to a Buying Legal Council study, many procurement and in-house legal departments work very well together.3
“Find someone to champion the work, someone who will support the implementation of change in areas unaccustomed to change,” advises Aaron Katzel, global head of the legal operations centre at AIG in the UK. It seems that perseverance and support from the top pays off as US insurance giant AIG has, according to Katzel, managed to save around $1bn in costs by implementing procurement practices that were commonplace in many other of their business functions outside of legal.4
At AIG in particular, one of the executives took the lead and challenged the business to take a fresh look at how it consumed and managed legal services, to become more data-driven and leverage their buying power and internal expertise. According to Katzel, “this top-down challenge led to the legal department partnering with procurement to find ways to get the most advanced and technologically-driven techniques to managing procuring for AIG’s legal counsel”.4
It is important to point out that getting buy-in at the senior level is not sufficient for success – the entire legal team need to be on board and aligned with new legal procurement processes and initiatives. As Justin Ergler, Director, Alternative Fee Intelligence and Analytics at GSK cautions, “to win over legal, you will need a ‘two-pronged’ approach: sponsorship from the top is important, but you also need well-thought out approaches to get buy-in from the bottom up.”5
Listening and learning
Steph Hogg, legal procurement expert and legal pricing consultant in the UK advises procurement professionals who are looking to get involved in the legal category that the most effective thing they can do is to the listen to the General Counsel and the legal team. According to Hogg, “It is a personality-driven relationship; you have to get to know the GC, understand what is important and what isn’t, and what role they need you to take.” She goes on to reinforce the importance of being sensitive and mindful of how you relate and interact with the legal team: “You have to know when to stay quiet and let legal take the lead. You need emotional intelligence; these are highly intelligent people, good negotiators in their own right, and if you don’t get them onside, it is difficult to get their trust and deliver what they need.”1
To be effective in legal, procurement managers need to have specialised knowledge of legal services as a category – although they don’t need to know the exact specifics of legal matters. If an individual does not already possess some prior knowledge of the legal market, then it is important that they quickly learn to understand the language of the law and the legal marketpace.6
Establishing and building credibility can present a very steep learning curve for those new to legal procurement, which can be challenging when also balancing short-term saving expectations. As legal procurement consultant Jason Winmill observes, “Taking shortcuts (such as not understanding key legal concepts or proceeding without robust benchmarking data) is a common mistake – one that often jeopardizes legal sourcing initiatives.”7
Playing good cop / bad cop
2016 research by the Buying Legal Council highlights that negotiating price is one of procurement’s responsibilities,8 and this makes a lot of sense as procurement professionals are often highly skilled in tough negotiations and data analytics. Having procurement fill this role of tough negotiator, or “bad cop”, allows in-house counsel to assume the role of “good cop”, and Dr. Silvia Hodges Silverstein says that this works very well. “As in-house counsel, if you have to deal with your counterparts every day, it is much better to have procurement people be the tough negotiators/bad cops. It doesn’t destroy your working relationship with your outside counsel.”3
According to legal procurement expert, Steph Hogg, “There is an incorrect perception that procurement is there just to batter down the price… sophisticated procurement is not all about price, rather about careful selection and getting the right value for money.”1
If procurement overly focus on price, they can get in-house counsel off-side, as at the end of the day their neck is on the line when it comes to successful completion of key legal matters. Depending on the type of matter, risk assessment and business critical nature of the matter, quality may be more important than price, and both procurement and legal need to collaborate on setting objectives in this area.
One approach that is effective when working with legal departments is providing them with viable options, rather than pushing for a single resolution. In-house counsel will be more comfortable if they stay in control.7
Procurement is becoming a valued partner of the legal team as they work together in collaboration. Procurement can support legal in managing law firm selection and ensuring their organisation gets best value for their legal spend. According to the Buying Legal Council, “while it may be uncomfortable for legal departments to give up some of their independence, many of the tasks procurement takes on are outside the typical skillset and training of a lawyer, such as complex data analysis. What’s more, procurement’s involvement relieves in-house counsel from a range of unpleasant tasks, such as negotiating rates with the outside counsel, conducting billing audits, and issuing RFPs.”8
Legal and procurement can be friends, partners and collaborators, and the more they can be aligned and see the benefits that each can bring to the table, the greater the rewards to their organisations and the legal industry as a whole.
This concludes our 5-weeks series on legal procurement. We hope you have found this to be of interest. If you would like to provide feedback or get in touch about anything that we have raised please email us at [email protected].
1 Jodi Bartle. (2016). Procurement and Legal – A Perfect Storm. GC Magazine, Summer 2016. Retrieved 7 December 2016.
2 Sager, T. (2015). Foreword. In Hodges Silverstein, S. (Ed), Legal Procurement Handbook (p. 12-13). USA: Buying Legal Council.
3 Hodges Silverstein, S. (2012). You better know their names and understand their metrics: Corporate procurement influences the law firm selection. Strategies: The Journal of Legal Marketing, V14.
4 Wood, J. & Novarese, A. (2016). Working smarter. The In-House Lawyer. Retrieved 9 December 2016.
5 Winmill, J. & Parsons, C. (2014). Legal sourcing steps in to the spotlight. Inside Supply Management.
6 Hogg, S. (2016). Procurement and law firms – ‘never the twain shall meet?’. Retrieved 8 December 2016.
7 Winmill, J. (2015). Successful legal sourcing. In Silverstein, S.H. (Ed), Legal Procurement Handbook (p. 187-192). USA: Buying Legal Council.
8 Buying Legal Council. (2016). 2016 Legal Procurement Survey.