Why do firms seek to innovate and how do they go about implementing change?
A roundtable event organised by BLP in conjunction with The Lawyer at the General Counsel Strategy Summit in Portugal, investigated these questions. A panel of counsel was asked how their firms overcome inertia or obstacles that might exist either within the department or in the wider business environment, and how they went about measuring the success of their innovation programmes and the key performance indicators of their progress.
Neville Eisenberg, senior partner, BLP: Let’s start off by hearing where you’re coming from.
Mollie Stoker, general counsel, Lucozade Ribena Suntory: We’re a new company, about two and a half years’ old, which came about when Suntory bought Ribena and Lucozade from GSK. We’ve had to build every bit of business process and structure from scratch so I’m interested in hearing other people’s experiences.
“I know everyone is very down on procurement teams but they’re helpful in finding good suppliers, running a proper process, and getting the right tests done”
Emma Park, general counsel, GC Aesthetics: I joined our company a year ago. It’s growing fast, having bought two established manufacturers. It’s an enthusiastic company trying to do a lot very quickly but the processes were not in place so I’ve spent the past year trying to build them.
Lauren Ekon, general counsel, Investec Bank: The biggest challenge for me is the senior manager regime. I’m accountable for the entire legal team and I have 50 to 60 people reporting to me. However, I would still like to work on transactions, so I’m looking at partnering with law firms and other third parties to help me work out how to carry out my responsibilities without
micro-managing 50-odd people.
Kathryn Higgs, senior counsel, ethics and compliance, Tesco: I’ve been at Tesco for three months. I’m responsible for the roll-out of a
preventative risk and ethics function. I’m looking at ways to incorporate technology.
Chris Fowler, general counsel, UK commercial and legal services, BT: I’m always interested in understanding how to do things differently and to understand what works and what doesn’t work. But most of all it’s about learning not to be frightened of failing.
“Procurement wanted to analyse my legal spend but I said there was no way they were going anywhere near that”
Neville Eisenberg, BLP: Where does the pressure to change come from – the business or the legal department?
Jagjit Singh Nazran, head of legal and company secretary, Santander Asset Management UK: In our view there was no choice but to innovate against the cost structure we confronted. We’re not going to increase headcount. The major M&A transaction I worked on lasted longer than we thought so we were forced to be creative, thinking up ways of being efficient and building up templates from a variety of sources.
Lauren Ekon, Investec Bank: The pressure has largely come from the regulatory environment, so we haven’t had a choice. Whether it’s competition laws or the Bribery Act, the onus is on the institution. So we’re working with KPMG and BLP to adapt to that regulatory environment. It’s basically about asking how to keep out of jail. You still have to mitigate risk and spend a lot more money on having the systems in place, such as contract management tools, procurement and so on, which we didn’t have.
Kathryn Higgs, Tesco: The rise of the regulators is driving this. They’re focused on data and evidence. Audit findings are a very helpful motivator because you can see how well programmes are being implemented around the world. And there’s pressure from the business as well. Of course, businesses have finite resources, so you have to look for data ideas and technical solutions.
Neville Eisenberg, BLP: With all the pressure that exists in the business for change and improvement in your area, how do you go about selecting the products that you might deploy? Do you go direct to suppliers or talk to other in-house legal departments?
Kathryn Higgs, Tesco: I’m looking into launching a due diligence platform globally across the business covering all reputational issues – not just bribery and corruption, but modern slavery issues as well. How do I do it? I ask around and find out who people use. We’ve met potential suppliers and we’re getting demonstrations of systems. The next stage is a lot of engagement with the stakeholders to make sure that the solution we’re going with is going to work.
The due diligence you have to get done if you want to buy goods is very different from what you would look at if you want them to interact with a minister, and figuring out how to integrate it with the business involves talking to support functions in all the overseas operations that constitute the business.
“We had a review by KPMG on our contracts to investigate [our compliance] process so now we do have some structure and process”
Neville Eisenberg, BLP: Does anyone else have experiences along this line?
Mollie Stoker, Lucozade Ribena Suntory: I’d probably use my procurement team. I know everyone is very down on procurement teams but they’re helpful in finding good suppliers, running a proper process, and getting the right tests done. We’re also instituting a due diligence platform.
Neville Eisenberg, BLP: Law firms have a lot to learn about what role procurement has in modern companies and could do with some help from in-house departments in order to navigate a world in which procurement is important.
Lauren Ekon, Investec Bank: Procurement wanted to analyse my legal spend but I said there was no way they were going anywhere near that because they don’t necessarily understand what’s involved. Say, for example, it was a massive bill from Linklaters, they might recommend using such and such a firm in the Midlands instead, which might not be the most appropriate solution. We’ve got a repository where our own lawyers fill in details about firms and any problems they might have, so that I can see what is going on.
Iain MacDonald, general counsel, GE Grid Solutions: On the subject of innovation in legal departments, taking a macro view depends on the culture of the business.
I’ve just gone from a French environment to an American one and it’s like going from one extreme to the other. Everything I’d been trying to do for the past 13 years with regard to training, broadening and innovating with colleagues in the management team now comes as second nature to the new management team. At GE you’re given authority to make changes.
Emma Park, GC Aesthetics: When I joined GC Aesthetics, I brought processes over into a smaller environment, and scaled it down. I had to think about driving value and controlling costs. It doesn’t matter what size the model is. There was no contract database in existence so I undertook an immediate due diligence exercise on our distribution contacts.
The next step is to introduce technology to drive efficiency. We now have legal purchase orders. Instead of having engagement letters for every matter, there’s a page template. You have to fill in the details, ask firms to scope the matter and give fixed or capped quotes – that’s mandatory. There’s scope for agreeing assumptions but it’s about driving some rigour. I’ve now got a record of all my spread of legal work and quotes. Non-disclosure agreements were first on the hit list. I don’t want my desk full of them. I refreshed all the templates and they are going on a shared server with guidance notes. It’s like insourcing commoditised work.
We work in 75 countries, often with two distributors or more in each jurisdiction. All that needs a contract management programme. It’s being able to have quick visibility over legal matters, taking things off desks and allowing me to work on strategic stuff. It’s about redefining the role of the legal function.
Neville Eisenberg, BLP: One of the biggest challenges these days is reducing costs while adding value. However, adding value has become a much more sophisticated and complex topic than it used to be when it was pretty much limited to secondments and discounts. These days it could be a whole range of propositions of collaborating and developing ways to become more efficient.
Risk management is increasingly important and is now more about trying to implement preventative measures. There’s an insight piece too – this used to be limited to training programmes but increasingly our clients are looking for a range of different offerings. Data analytics are increasingly important because of the volumes of activity, and firms can develop insights that can be helpful to clients. There are opportunities to collaborate with external lawyers rather than the traditional outsourcing and supply relationships.
In terms of innovation, legal knowledge and advice, it’s about trying to find more effective ways of delivering advice. So, for example, a few years ago we tried to get our lawyers to present advice visually as well as in words, and that means using pictures, graphs and design so that legal advice could be far more intelligible to business people.
Chris Fowler, BT: The target we have year on year, as with all corporates, is to drive down costs by 5 per cent. So we’re always looking at how to do things differently and how we challenge established ways of working. What’s worked for us is doing it from the bottom up, and giving people in the team the incentive to come up with ways of getting things done better. One guy on our team suggested we put all the governance approvals on Sharepoint. Previously we had done everything by exchange of emails. It was a really simple change. It was complicated and labour intensive in terms of the workflow, but now we can authorise actions much more quickly. The teams are happier because this was slowing them down and now our decision-making is quicker.
So innovation can come from the ground up. They have got great ideas because they’re living it. Any programme of change is like an election. You get your believers, your non-believers and the middle ground, and it’s the middle ground you have to spend time with. The biggest change we have had to make is managing the function rather than managing work, and that takes a lot of doing. You need top-down approval for that, otherwise the natural tendency is not to want to let go.
Lauren Ekon, Investec Bank: When you put in Sharepoint how did you deal with all the legacy stuff?
Chris Fowler, BT: We had to mandate certain things. We agreed on what we would use from a reporting perspective. We used to have a Heath Robinson system where everyone did it their own way, and everyone had their own Word template. We said, here are three or four things which from a systems perspective we are reporting and focusing on. We introduced time recording, not to log hours but to log what the team were working on. We were all a bit wary of it but when we pared it back we got a lot of feedback from the team saying, actually we quite like it because we use it as a tool to see who was overstretching themselves and who we maybe need to have a conversation with.
So I personally think the best stuff comes from people in the team if they feel encouraged to do it and if they have incentive to do it, because they often understand the business far better than someone managing them.
We’re more focused now on performance management. It used to be one of those things that everyone talked about but nobody actually did it. But we genuinely spend a lot of time now rewarding our top performers in terms of better annual bonuses and better annual pay. That, conversely, also means being tougher on our lower performers. It’s a horrible phrase but I do believe in healthy churn, bringing people in with fresh ideas, and moving people up and moving people out. That’s not easy because performance management for lawyers is like trench warfare.
Neville Eisenberg, BLP: Do law firms play any part in the processes you are running?
Lauren Ekon, Investec Bank: We do a lot with BLP regarding our policies and procedures. I’m not advertising, I’m just saying how it works in practice. They helped us on a competition programme that got a lot of traction and was rolled out into a great training programme. To be honest I could not have done that on my own.
Jagjit Singh Nazran, Santander Asset Management UK: When it comes to working and partnering with external lawyers, we don’t have much room for choice as our private equity [owners] dictate which law firms we must pick as preferred suppliers and we pick up the cost. Our job is to go back and renegotiate that fee.
Igor Tot, general counsel, Central and Eastern Europe and Russia, Dell: For us innovation should be about simplicity, which may sound contradictory because one might think that innovation is complex. However, we try to simplify as much as we can because business is already so complicated.
Nuno Bastos, general counsel and chief compliance officer, Zurich Insurance, Portugal: It’s easy to follow one standard procedure but there should also be an exception to each procedural process so that things can get customised locally. On the whole, I am in favour of a centralised perspective, which provides assurance and stability. However, local perspective and local insight are also important.
Vivienne Vuckovic, head of regulatory control, AXA Travel: I joined Axa Travel a year ago and I’ve had to restructure. I’ve been given the task of setting up a legal, compliance and risk team, so I’ve had to put in new processes. In a small team the big IT solutions aren’t going to work but it’s good to have certain processes in place in terms of the way things are done. KPMG reviewed our contracts to investigate that process, so now we do have some structure and process. I’ve also been looking at legal firms and more global reach and considering who I can use in different jurisdictions.
Mollie Stoker, Lucozade Ribena Suntory: My team’s personal objectives for the year are about improving workflows and they’re measured and given bonuses on this basis. Working with the sales team, we had some basic but very efficient solutions, such as frequently asked questions, using Sharepoint, and trying to deliver training in a more engaging way.
We are also looking at apps, particularly on
incident management and compliance training. We’ve created material that we want to develop as an app by the end of the year, so holding those documents but sharing them. One of our law firms is helping us with that. They’re doing it
gratis because we give them so much work.
Compliance training is also being developed on an app. We started by asking where we were going to keep all this information. What if it was in a paper folder and the office blew up, or what if it was on a laptop that got lost or stolen? Then we realised that what people carry around with them all the time is their phones. It’s about thinking through everything we do.
We’re looking at automatic templates and the best way for the team to access information. So instead of handouts from a training session that all end up in the bin, information such as competition dos and don’ts would be on the phone. We have a PSL on our team who reshapes everything we do so that it can be used more efficiently. Our sales team is on the road all the time rather than in the office so they need to access it.
But innovation is not all about technology. For me it is a way of thinking and doing things, and gaining visibility in the business. It’s also about how to give people the incentive to think that way and not be bound by the old ways. That’s the question we all need to ask.