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CCCA_V6No3_Dept-Performance-FIN_CCCA_V5No3_Dept-Performance 9/18/12 11:48 AM Page 8 Performance in the Law Department Actively “ managing relationships with law firms Only the legal department can maintain lasting relationships with preferred firms. By Richard G. Stock t does not happen very often that enough about processes to review legal Pfizer has innovated by applying a fixed Ithe general counsel of a corporate service delivery, about legal project man- fee for dynamic portfolios of legal work or institutional legal department will agement, and about alternative fee to 19 firms. want to replace a preferred law firm. arrangements and so are more inclined to Its alliance steering committee is Typically, fewer than five firms deliver initiate changes. In most circumstances, designed to keep the portfolios balanced at least 80 per cent of the legal work the savings will range from 15 to 25 per and the annual fee paid to each firm fair. for companies with a national reach. cent on projected legal spend. The econ- The legal department uses tracking tools Over the last 10 years, many compa- omy has not been kind to most compa- and data analysis to monitor activity levels nies have consolidated the number of nies or to all levels of government. So, as work goes out and bills are received. firms to create their preferred lists, but more recently, savings are featured as a Pfizer realized that it was not enough to only a few have done this using a doc- higher priority and a key performance rely only on law firm feedback as a way to umented and formal process. indicator for legal departments. adjust the allocation for a firm. Because of There are a handful of reasons or cir- this, the steering committee oversees and cumstances that stimulate a review. First, a The Pfizer experience works to adjust the allocation of files new general counsel arrives on the scene Pfizer Inc. launched its “Legal Alliance streams essential to the success of the and uses the opportunity to shake things Program” in 2009. The objectives were to arrangement with each law firm. up with the established firms. Second, the “foster trust and collaboration, promote Meetings are held with firms to address law firm relationship partner retires or proactive solutions-based lawyering, and specific or systemic issues that crop up moves to another firm and the replace- reconfigure the value paradigm.” Ellen with the arrangements. Interestingly, ment has not been groomed by the law Rosenthal is Pfizer’s Chief Counsel for Pfizer does not want to receive shadow firm to transition into the relationship. the program. She has written and spoken hourly bills — it believes that these do The chemistry is just not there. about it frequently. The alliance covers at not reflect the real value received from Third, although it may be a rare occur- least 75 per cent of legal spend and applies law firms. The steering committee repre- rence, the law firm drops the ball on a to Pfizer in the US and internationally. sents different parts of the legal depart- few important files. In these cases, the I have seen other arrangements in ment, and in turn those parts support dif- legal department will shift work to the Canada (HIROC) and in Australia ferent business units. It makes sense for remaining preferred firms. Fourth, the (Telstra) where firms receive an annual the committee to serve as the deterrent to company wants the legal department to fixed fee to cover all matters for broad referring legal work to other than alliance contribute its fair share of cost savings to baskets of work. But these agreements are firms. Sometimes, it makes sense to refer the company by moving beyond the usual often restricted to just one firm. Covering work to other than alliance firms, but the discount arrangements with its firms. a number of jurisdictions and various committee must approve it. This type of VEER.COM Many general counsel have read or heard legal specialties is quite another challenge. mechanism and vigilance are important 8 CCCA Canadian Corporate Counsel Association FALL 2012