I first met Dan Fitz when he was being interviewed by Harvard Law School as part of their case studies for the Leadership in Corporate Counsel programme. His approach to organising UK telecommunications company BT’s legal services stood out as truly innovative, in the face of all-too-familiar financial restraint. Afterwards, Dan very kindly agreed to be interviewed for my research on different approaches to organising large-scale in-house legal services. This in turn led to a further request to be a keynote speaker at this year’s successful ILANZ Conference in Rotorua, Ka Mua Ka Muri.
Despite presenting via video-conference, Dan’s presentation held the attention of a large auditorium of in-house counsel not just because the pressures he faced resonated with all of us but because of his response to those pressures. He challenged our collective assumptions of how to deal with the ultimate in-house counsel conundrum, to deliver more value to our businesses for less cost. According to Dan, it has never been a better time to be an in-house counsel.
Dan Fitz was appointed Group General Counsel and Company Secretary at BT in 2010. When he arrived, he was told his budget would be cut by 5% each year. The sector was characterised by falling revenues and dividends were at an all-time low. The message at BT was everyone had to get leaner.
Identifying the problem
At that time Dan inherited 450 lawyers, split into 26 different teams. Everyone was over-worked and under-resourced. There was no career development but there were tight controls on both spending money on external legal advice and increasing internal legal resources.
In order to deal with these issues and the pressure of a diminishing budget, Dan and his team first identified their in-house legal objective: “to enable and protect value for BT”. They then analysed how they worked. This involved dissecting the legal functions (both internal and external) right down to a granular level (drafting, negotiation, research, meeting internal and external clients). The analysis found that only 10% of time was spent with clients, only 20% of tasks were location dependent and there was no link between the complexity and value of the work being done with the qualification or experience of the lawyer.
The result? BT Legal looked at changing both their internal structure and their external legal spend.
In 2010 the BT legal team was departmentalised and scattered over four continents. The focus was on who they worked for rather than what they did. There was duplication in the work across the teams. Dan decided to adopt a shared services model.
This meant that many of the core delivery functions were centralised (such as commercial, litigation and employment) and funded from a common legal budget. Only those senior lawyers and teams performing specialist functions were retained within the BT divisions.
Dan recognised the value in having an in-house team. In-house counsel know the client better than anyone else. The goal for Dan was to retain staff – by moving them up the value-chain – and to manage a diminishing budget. To do that, attention turned to the external spend. In effect, Dan retained the complex and interesting legal work for staff and exported the low complexity, repeat work.
Alternative Legal Providers
BT Legal uses external legal providers in several different ways, relying on a mix of alternative legal providers as well as the more traditional law firms.
Dan’s first foray into the world of alternative legal providers (ALPs) failed but BT now uses Axiom, which triages all of BT’s legal work – low complexity/high volume drafting tasks are allocated to Axiom (and other legal providers) and the complex work goes to BT Legal. This means that essentially all of BT’s standard work (anything under £3 million contracts) is outsourced. The use of a fixed price contract allows Dan to manage the external legal spend.
BT Law Limited
Dan didn’t stop there. He also embraced the changes to the regulation of legal services that took place in the United Kingdom at about the same time as New Zealand and became one of the first in-house legal departments to obtain an alternative business structure licence and launch its own legal process outsourcing venture.
BT Law Ltd handles small tort claims. It originally arose out of dealing with insurance recovery claims from visits by BT engineers (bumps, scrapes and breakages) but has since expanded and is offering its services to other businesses, such as courier companies. The extra revenue feeds into Dan’s budget.
Seven years on, BT’s legal team is smaller but more cohesive. Today there are 275 lawyers across BT. The legal spend has significantly decreased: the BT legal team’s commercial spend is 75% lower than it was in 2010. Senior legal team members have developed as business managers and there is a strong sense of where BT Legal is heading and comfort with that direction. Work is now assessed by looking at how to get the best quality within the price boundary: ALP or in-house or external counsel.
BT Legal handles 3000 requests for legal services and the ALPs now do 70% of the work. In-house BT Legal staff are moving up the value chain, delegating the low-value work to the ALPs.
In the next three years, BT Legal wants to set “zero- touch” boundaries, removing the need for legal input on most individual contracts.
For New Zealand in-house legal teams, BT Legal’s innovations give us more options to consider than the usual go-to solution: briefing out the top/high end work to cope with increased demand. We need to look at building our in-house legal capacity to ensure job satisfaction and rethink the ways we outsource and manage our external legal spend.
As a starting point, we need to thoroughly understand what work we currently provide to our businesses and question whether what we are doing is the best use of our value-add as in-house counsel. Knowing the answer to that question, will help us determine what the next steps should be. As Dan concluded at his ILANZ seminar: “Never be a slave to the model – the model is there to serve your purpose.”
Tania Warburton was awarded the 2015 ILANZ Scholarship. Her research topic was the government legal in-house model: international case studies – responding to change. The full report is available on the ILANZ website, ilanz.org.