26 June 2012

Pharma wins plaudits for slashing external fees

Global pharmaceutical giant GlaxoSmithKline leads a field of in-house legal departments in the Association of Corporate Counsel's latest round of 'value challenge' winners.

Right formula: GlaxoSmithKline leads in-house pack

The list -- announced at the end of last week -- was headed by the legal team at the London-based, £27.4 billion revenue multi-national drugs business for instructing its law firms to jettison hourly billing and for shifting large chunks of its work to alternative fee arrangements. The company was also praised for its increasing use of technology in the selection process for instructing outside counsel.

Cutting costs

Other in-house teams cited by the ACC were US DIY chain, the Home Depot, which is reported to have slashed its external legal expenditure by half in the last four years; Italian steel manufacture Lucchini for slashing legal expenditure by 65 per cent; US medical technology business Medtronic for cutting legal department spending by 40 per cent; and another US drugs company, Pfizer, for creating an innovative training programme for its law and MBA graduates.
The group also highlighted seven collaborations between corporate legal departments and external law firms:

  • Canadian financial services group RBC Capital Markets and Philadelphia-based law firm  Morgan Lewis & Bockius for tailoring fee structures and ultimately for cutting employment law spending by 35 per cent.
  • US technology company Rockwell Collins and Chicago-based law firm Seyfarth Shaw for re-engineering the way the legal department ‘selects, engages, manages and evaluates outside counsel’, while employing managerial concept Lean Six Sigma to drive efficiency.
  • Ohio-based building materials business Sherwin-Williams and Cleveland law firm Gallagher Sharp for a producing a system of using a single firm model that resulted in 15 per cent savings in legal expenditure.
  • Minnesota retailing company Target and Minneapolis law firm Nilan Johnson Lewis for generating a 20 per cent reduction in employment work costs.
  • Swiss-based manufacturing company Tyco International and Kansas City law firm Shook Hardy & Bacon for creating a model that has cut the business’s product liability cases in half, new case filings by 65 per cent, and case cycle time by 40 per cent since 2004.
  • US financial services business United Retirement Plan Consultants and Ohio-based law firm Porter Wright Morris & Arthur for a project that saw the chief legal officer work with the firm ‘to overcome two of most common barriers to fixed fees – lack of data and risk of variability in project scope’.
  • Michigan-based home appliance company Whirlpool Corporation and Denver law firm Wheeler Trigg O’Donnell for creating 40 per cent savings on its class action defence programme.

Bottom-line results

‘These law departments and law firms have developed and implemented initiatives to deliver bottom-line results for their clients,’ commented ACC president Veta Richardson. ‘By demonstrating creative lawyering and good old fashioned business sense, these ACC value champions not only controlled legal spend, but they also improved legal outcomes for their clients.’
Launched four years ago, the ACC’s value challenge programme maintains its aim is to retrain in-house legal departments and external counsel in more efficient working practices.

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