This is the second of a two-part interview with Stephanie Corey, Director of Legal Operations and Legal Chief of Staff at Flex, the global electronics manufacturing company. She is also co-founder of the Corporate Legal Operations Consortium, which is holding its inaugural institute in May.
In part one, Corey explained how operations experts are integrating traditionally siloed departments and changing the dynamic between in-house legal and law firms. Below she shares tips for building relationships with outside counsel and bringing more stability to traditionally unpredictable costs.
Logikcull: You’ve talked a lot about how legal operations is about tightening cost controls and a business efficiency process. But it also seems to be about improving the quality of law practice. To that end, what areas are you measuring to show improvement in quality of law practice?
Stephanie Corey: That’s a good question. Legal operations is about cost controls for sure. My goal is to pay for myself every year, and if I can do that a couple times over, I’m feeling really good. But you can’t just cut budget and expect everything to run smoothly, because it won’t. What I’ve found through practice and experience is if you proactively look for ways to save money — like you do an outside counsel RFP, or you unbundle services from your law firms and give some of those services to low cost providers — there’s a lot of low-hanging fruit where you can save a ton of money.
And then what you do is you take that money and reinvest it into the department — to get your systems up to date, implement e-billing and contracts management, hire a knowledge management person to improve self-service tools and the information on your legal portal. Use the money to do the things that you need to do to improve your department and then you give some of it back to corporate.
Before corporate comes to you and says “Cut 10 percent,” if you proactively use 8 percent to reinvest in the department and give 2 percent back to corporate, finance ends up looking at you like a total hero. If the cost pressures aren’t on you yet, be proactive. Do it now and reinvest.
L: It seems like part of the legal operations movement is an effort by in-house counsel to essentially turn the tables on outside counsel — to take back some of the power law firms have traditionally wielded. What’s your assessment of how well corporate clients have been able to exert pressure on firms to provide better value?
SC: The answer is two-fold. On the one hand, we are pulling a lot of that work in-house because we’ve determined that, to run as efficiently as possible, there are core competencies that we need to keep in-house. A long time ago, you’d have somebody (in-house) just sitting over outside counsel and outside counsel would be managing everything. Now, you're seeing corporate law departments taking more of that control in-house because that’s really how you run more efficiently.
We’ve taken more control, though, by really working in a partnership with outside counsel to influence them. Before, outside counsel had — “power” is the wrong word — more control to do whatever they felt necessary to run the cases. As corporate legal departments were forced to become more responsible because they had to report out to the CFO or CEO, we in turn put more pressure on outside counsel. So it’s more of a cultural change than us all of a sudden picking up the phone and saying, “Hey, we’re taking over.”
"You're seeing corporate law departments taking more (work) in-house because that's really how you run more efficiently."
I think you’ve seen a cultural shift over the last 10 years. So you see more of a partnership between in-house and outside counsel than you did before.
L: So corporate legal is bringing some work in-house that has traditionally been done by law firms. Do you think that’s going to equate to more hiring in-house? Because it seems like, even today, one of the staples of corporate law departments is that they are very lean and do a lot with a little. Do you think that’s going to change?
SC: I don’t. I really don’t. I had a great boss that use to say, “One model fixes one problem, but it creates another problem,” which is always true. It just depends which model (outsourcing versus insourcing) you want to go with. What we’ve seen at Flex over the last couple of years from tracking in-house and outside spend is that, even though we’ve pulled more work in-house and have hired more people in-house, our spend has stayed exactly the same. And we’ve increased our level of service dramatically over the last four years. Just from that anecdotal situation, I’ve seen that some work, when you pull it in-house, you can save a lot of money and it does make a sense to hire internally.
"What we've seen at Flex over the last couple of years from tracking in-house and outside spend is that, even though we've pulled more work in-house and have hired more people, our spend has stayed exactly the same."
It doesn't make sense to bring some types of expertise in house. We’ve looked at different pieces of our spend to see what we should pull in-house, what we want to own and what belongs outside. Every GC and his or her team has to make that decision. And then that’s the model for your department. But yes, I do think there are ways to pull work in-house and save money. I do think you may see some growth in corporate legal departments. But it’s not like, at any point, the CFO or CEO is going to say, “Here’s $20 million. Do what you need to do.” So we just have to continue to be more efficient.
L: Going back to what you were saying about working with outside counsel, what tips that you’ve gained from personal experience do you have for establishing a relationship with outside counsel that creates more value for both sides?
SC: The partnership piece is really important. One thing we did with CLOC is started meeting with the CIOs and COOs of law (firm) departments — the people who are essentially our counterparts working inside the law firm. We’ve tried to partner up and come up with better ways to communicate, get the financial reporting we need, and just come up with some common language so that we can break down these silos.
From an operations perspective, there are things we can better do to partner with law firms. It’s funny, I think good relationships have always existed between in-house lawyer and outside lawyer. The barrier — maybe “barrier” is too strong of a word… But the thing to really work on now is the relationship between the operations team and the law firm. Rather than just lawyers producing work, how do we work together to get the spend and the budgets and the tools running more smoothly? And how do we communicate better back and forth from that operations perspective? I think that’s where we’re really starting to gain ground. I know the law firms are more willing to speak with operations managers — they see the general counsel values us. So I see a lot more communication happening then I did in the past.
L: Where do you see corporate law departments encountering the greatest cost variability, and how do you bring more predictability to those areas?
SC: The two areas where I see the most variability — and I doubt anyone would dispute this — are litigation and M&A, because those are the things we have no real control over unless we’re actively going out and suing people. But when somebody sues us, we just don’t usually know when it’s going to happen. It varies from year to year.
We don’t really have control over M&A either, but typically from a budgeting perspective, those costs are built out to the deal. Once the deal takes on a life of it’s own, it’s billed out and usually treated as a separate function.
Litigation usually isn’t that way, so the expenses are difficult to budget for. However, what I’ve noticed is that, year over year, you see the law of large numbers emerge. As cases settle new cases come on. I’ve found that, from a management perspective, the best predictor is the past, and so if you budget based on the run rate, typically you’re going to be pretty close. And if some whammy hits, you just kind of have to ask for forgiveness and figure out how to deal with that separately. But there are ways that allow you to get pretty close.
"From a management perspective, the best predictor of the future is the past."
At HP, we came very close to our budget every quarter. We rarely blew it unless something major came in.
L: How granular do you get when looking back at past litigation and trying to forecast for the future? For instance, are you going back and measuring how much certain types of litigation tend cost, what custodians were involved, and the discovery expenses? Are you looking at all that stuff as well?
S: Yes, we do, and we’re starting to get even more granular. Recently we just hired an outside counsel analyst in Austin and implemented e-billing. So we’re able to look at line-item expenses closely and evaluate trends year over year. When I was at HP, for instance, one of the major trends we saw revolved around intellectual property litigation, which was a big driver for spend and we could see ramping up over time. Here at Flex, our litigation portfolio isn’t anywhere near as big as HP’s. But we do look at spend analysis with all kinds of different metrics. We look at our preferred provider spend versus non-preferred — and if there was a non-preferred spend, why we hired outside counsel that wasn’t on our list. We look at low-cost versus high-cost firms and try to push as much work as we can to the low cost. And like I said, we look at in-house spend versus outside spend.
We look at all of this data quarterly in great detail. We spend a lot of time in the (general counsel’s) staff meetings going through it so that people can really understand what they’re really spending their money on.
L: To end, tell us what you’re biggest persistent challenges are and how you think the legal operations function can overcome them moving forward.
SC: One of the biggest challenges is technology implementation. Technology out there is still very siloed. So if I want financial metrics, that’s one system. If you want contracts metrics, that’s another system. Knowledge management is multiple systems. E-discovery is a different system. So I’m looking forward to the day where there’s more continuity — where instead of spending hundreds of thousands of dollars on contracts management or e-billing, that there is something for legal that allows you to manage the entire department all in one. These systems are very expensive to implement. They’re complicated. They’re not customized to our processes, and the implementations often fail to a certain degree — or take years to get them to where you want them to be. If we can find more simplified tools, that will be a great day for legal operations.
"One of my biggest challenges is technology implementation because the technology out there is still very siloed."
I think it’s going to happen. When I started in this field, there were very very few tools. Now we’re seeing all kinds of new tools coming out, and venture capitalists are starting to invest in legal technology because they see there’s a return on it.
As told to Robert Hilson, a director at Logikcull. He can be reached at email@example.com.