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CCCA62_034-38.qxd:CCCA_V1No1_DriversSeat-FIN.qxd 09/14/2007 03:18 PM Page 35 Feature Making partnerships work More than a decade ago, E.I. du Pont de Nemours and Co. decided that having almost 400 outside law firms made it not only impossible to control costs, but also, difficult to get an accurate reading of what those costs actually were. By drastically reducing the number of its outside law firms — in a procedure now called“convergence,”— DuPont led the way in altering the relationship between inside counsel and outside firms. With around 80% of all major corporations in Europe and North America having now undergone some form of convergence, how is it going? Has convergence lived up to what were very high expectations? What lessons have we learned? By Richard Skinulis t the Royal Bank of Canada (RBC), “convergence was Partners, not suppliers successful beyond our best expectations,” says senior Donna Miller, director of finance and accounting law for U.S.- Acounsel Murray Aust, an early convert to the potential based Marriott International, believes a shift in mindset — think- advantages of convergence. “Notwithstanding the unprecedented ing of outside law firms as “partners,” rather than mere suppliers business activity and revenue growth at the bank in the past six — is the key to implementing a successful convergence program. quarters, our external legal expense has decreased each quarter.” In 1994, Marriott outsourced legal work to around 200 law Still, for Aust, the challenge lies in getting down to the right firms. Today,seven or eight firms handle close to 80% of its work. number of outside law firms. He cautions that in a country like Trying to learn from companies that tried too hard to lower the Canada, regional imperatives and specialization issues such as bottom line — by using tactics such as online auctions that gave immigration,can preclude paring down too far. RBC went from business to the lowest bidder while ignoring everything else — nearly 1,000 outside law firms (Aust jokes that some people ques- Marriott chose to focus on the intangibles. tioned if there actually were that many law firms in Canada) to “We take the position that we are not leveraging the relation- around 125, with 75% of the spend going to the top ten firms. ships just to drive down fees or to be able to have our own way The chosen firms reflect the Canadian reality of geography,but with law firms,” the Washington-based Miller explains. “To us, also the idea of reciprocity. “You want to make sure your business quality is the top concern.And you can’t achieve that when you SASHIMI, THREE IN A BOX on the narrow focus, cut your legal spend. But you are also going are only willing to pay X amount.” units are happy,” says Aust. “If you cut too many firms, you may, are forcing the law firm to use low-level associates because you Marriott’s strategy has resulted in ongoing, and mutually satis- to cut the bottom line of the bank, because those firms are going fying relationships, she says.“We have had almost no turnover in to pull their businesses and the referrals they do for the bank. In other words, you should never lose sight of the big picture.” what we call our ‘partner firms’ since turning to convergence 12 AUTOMNE 2007 CCCA Canadian Corporate Counsel Association 35