Managing professional services spend is always a challenge – often vendors have deep relationships with key stakeholders within a company that can lead to suboptimal engagement of the right external capabilities and diminished value. To be successful strategic sourcing must use data and a fact-based approach in close collaboration with key internal stakeholders to deliver the optimal results – here is an example of F500 company Legal Sourcing exercise that delivered significant savings for the organization.
The Corporate Legal department had over 200 law+ firms servicing their various corporate needs. Numerous firms were one-time use only, many were engaged for one case only, and others were routinely given new cases due to an existing relationship with the firm or one of its lawyers, and not based on their core capabilities or the best value provided. The company did not have formalized guidelines or procedures in places to manage legal spend – each law firm was managed individually, or even worse, each case was managed differently. There were no negotiated rates in place for external counsel. An e-billing system was in place, but was used poorly and often not at all.
A new General Counsel joined the Company with one of key goals of applying cost management practices to law firms and external services as part of Company’s overall profitability drive. He was supported by the Category Lead, Jo Ellen Hatfield, a member of the OnDemand Professional Network.
First, to gain an understanding of how firms are selected and assigned a case, Jo Ellen met with Legal team leaders of each practice area to understand their key requirements, and their process for selecting, engagement and managing day-to-day activities and billings of their select law firms. Second, she analyzed billing/rate data across the company and presented finding to the new GC including average rates per location, by practice area and attorney level. The GC, the rest of legal team and the Category Lead developed a cost optimization strategy they wanted to pursue. Leveraging various analysis and requirements, the team agreed to pursue a competitive RFP strategy to identify a core panel of firms for day-to-day work and a small group of niche firms for key practice areas. Goal was set to reduce all external firm fees by 20% and to reduce the total number of firms engaged from current 200+ to 25.
1. The Legal department identified 3 core panel firms and entered into master engagement letters, committing the firms to their fee proposals for 2 years and to Company’s External Counsel Guidelines which mandated e-billing system invoicing and other operational efficiencies; all 3 firms were new to the Company providing fresh perspectives.
2. Total of 15 firms were selected for the niche areas of labor & employment, intellectual property, environmental, and government affairs. These niche firms also locked in their rates for 2 years and agreed to the Guidelines.
3. External fees were tracked through the e-billing system and savings reported monthly; total annual savings exceeded $5MM.
CRITICAL SUCCESS FACTORS
1. Improve efficiency by implementing the rate sheet element within the e-billing tool and educate users on correctly using billing codes;
2. Decrease the total number of firms to 25 or less and reduce fees overall by 20%;
3. Conduct an RFP to identify a panel of preferred firms, and identify niche firms for key practice areas.
Meet Jo Ellen Hatfield – Network Member Since 2021
Jo Ellen’s career includes progressive procurement leadership roles at Fortune 500 companies, across the food manufacturing and energy industries. Each role was focused on indirect spend categories, legal, consulting, financial and professional services. In addition, her various roles included change management, policy development, and procurement systems implementations. Jo Ellen relocated to Houston in 2009 where she was responsible for the category of Legal Services at BP Plc. Within that role, she developed Indirect Procurement’s partnership with BP Legal, delivering solid value to the Company. Jo Ellen joined Bunge Ltd in 2015 relocating to her home town of St. Louis, where she led the Indirect Procurement team which was responsible for Professional Services on a global basis. In this role, Jo Ellen worked closely with the Global Risk Management team as well as the Legal Department to drive value for each categories. Jo Ellen attended Webster University where she earned a Master’s Degree in Management. Previously she earned her Bachelor’s Degree from Fontbonne University.