Revolution or Evolution?

Does it Matter?

Jeffrey W. Carr

Eversheds “The Client’s Revolution Conference”

September 2010

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Welcome to my world . . . .

• Safety Moment

• Quality Moment

• Thanks to Eversheds

• Let’s talk philosophy

• How we got here

• Where we might go

• Where this company has gone

• The Value Challenge

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Safety Moment

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THE 5 ABSOLUTES OF QUALITY

•THE DEFINITION OF QUALITY IS …

CONFORMANCE TO REQUIREMENTS, NOT “GOODNESS.”

•THE SYSTEM FOR CAUSING QUALITY IS …

PREVENTION, NOT APPRAISAL.

•THE PERFORMANCE STANDARD MUST BE …

ZERO DEFECTS, NOT “THAT‟S CLOSE ENOUGH.”

•THE MEASUREMENT OF QUALITY IS …

THE PRICE OF NONCONFORMANCE, NOT INDEXES.

•THE PURPOSE OF QUALITY IS …

TO CREATE CUSTOMER SUCCESS, NOT JUST SATISFACTION.

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The Hot Wash Process

• Say it

• See it

• Share it

• Decide it

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Question 1

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Question 2

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My shameless book jacket plug

• “Whether lawyer, teacher, law student, judge, arbitrator, mediator, client or entrepreneur;

• Whether you’ve already or not yet read and considered The End of Lawyers?;

• Whether you are convinced that the future laid out is left for some distant horizon,

• Disregard of this . . . exposition is fraught with peril. The . . . analytical framework and tools provide those with the courage to embrace change with both incentive and fortitude to so and to act quickly.”

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Commoditised

The End of

Lawyers?

Hourly billing Fixed feesCommodity

pricing, tending

towards zero

Marginal costs of delivery reduced

Source: R Susskind – “The End of Lawyers?”

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Weak competition

Routine

work

Complex

work

Strong competition

advisory service,

conventional firm

standardized or

computerized,

innovative firm

standardized or

computerized,

streamlined legal

business

advisory service,

streamlined legal

business

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Weak competition

Routine

work

Complex

work

Strong competition

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Susskind‟s Tools & Strategies

• Tools/Trends

– Commoditize

– Decompose

– Differential pricing

– Multisourcing

– Leverage

– Data/Benchmarking

• Strategies

– Efficiency -- Cost cutting

– Collaboration

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Question 3

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So, where are we?

• Revolution?

• Evolution?

• (R)evolution?

• Everlution?

• Foreverution?

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Are Clients Really Driving Change?

• “The Clock is Ticking on the Billable Hour”

• “They called for a Revolution but No One Came”

• “The Demand Side of the Market is Not Demanding”

• “Unfortunately Change Comes Slowly”

• “Who’s the Boss in the Value World? Shareholders!”

• “Talkin’ Evolution”

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An Industry in CrisisA Conspiracy of Failure

• Courts

• Law Firms

• ADR

• Law Schools

• LPO/LSO

• Press

• Work Life Balance

• In-House

• Management

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What will drive systemic change?

• CEO/CFO demand

• CLO leadership

• Peer pressure

• Fellowship

• Money

• Tools

• Baby steps

• Daring to fail

• Open architecture/Viral growth

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Change the perspective

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Sometimes, „winning‟ means something else

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Complexity is not helpful

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Change the business model

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The book of value

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Our Vision

• We are not lawyers.

• We are business people with legal training forged into a cohesive legal team committed to the success of FMC Technologies through focused effectiveness, relentless efficiency, constant improvement, creative disruption and unyielding integrity.

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Our 1º Law™ Tool Box

• Integrated matter management – Serengeti

• Performance based pay – ACES

• Early case assessment – Decision Pro

• Streamlining process – P-Card, Serengeti & Sharepoint

• Driving Performance – Meaningful Metrics & Snapshot

• Delivery/Execution – Project & Monthly MPR

• Leveraging internal knowledge – Sharepoint

• Leveraging external team/knowledge – Legal On Ramp

• Leveraging resources – “Cook Book” & Guidelines

• Leveraging time/space – Webex & Video Conferenceing

• Continuous Improvement –L2A2 & Hot Wash

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The Cloud

Customer/Client

Lawfirm 1

Lawfirm 2

Legal Content/

Research Provider

Fact Holders

Professional Service

Providers

Experts

In-house

counsel

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The Pyramid and the Funnel

vs.

Document Processors

Associates

Partners

$

Volume Centric Focus on Hours

or $/page

Value Centric

Focus on leverage or key info

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The Circle

Avoid

Manage/ResolveEfficiently

Lessons Learned

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Question 4

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Act like a business

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It‟s not rocket science – you‟ve got the data

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• Variable (aka Non-Transformational)

• Discounts

• Blended Rates

• Freezing Rates

• Budgets That Don’t Matter

• Value (aka Transformational)

• Fixed Fees

• Risk Sharing

• Efficiency Expectations

• Budgets That Matter

Pretenders & True AFA’s

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Future

Fixed Fees

Budgets with

Implications

Risked

Hourly Rates/ Efficiency

Expectations

Recent

Fixed Fees

Budgets with Implications

Risked

Hourly Rates

No Budget Implications

The Pyramid – Stacked AFA’s

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Aces LT

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Question 5

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Quality is the price of admission

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The FMC Litigation Value Challenge

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1° Law Litigation Value Challenge

Forum Objective Format Decision

Ph

ase

II

Ju

ne

20

09

Ph

ase

III

Au

g –

Se

p

20

09

Ph

ase

I

Ma

y 2

00

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Legal OnRamp

This is about

cultural fit,

innovation and

capability

2 Page Yes/No

Questionnaire

1 Page Excel Table

Plus 140 character

“Tweet”

Indicative ACES

Budgets: This is

not an auction. It

is about value.

Private online

Selection based

on interactive

chemistry and

impact

Discretion of Firm

– 10 topics

suggested

In person

meetings @ FMC

6 firms

selected

Qualification

Economics

Wow Not Woo

Meetings

16 Firms

selected

52 Firms

responded

32 selected

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46

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Question 6

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49

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Question 7

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Question 8

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All Legal Services Fall in a Box

I

ADVOCACY

II

COUNSELLING

III

PROCESS

IV

CONTENT

(Low) Knowledge/Judgment (High)

(Low

)Im

port

ance

(Hig

h)

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Total Legal Expenses Relatively Flat to Down

But Decline as % of Sales

Legal Expenses

0.000%

0.100%

0.200%

0.300%

0.400%

0.500%

0.600%

2002 2003 2004 2005 2006 2007 2008 2009

Year

Percen

tag

e o

f S

ales

Ext$/Sales

Int$/Sales

Legal Expenses

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

2002 2003 2004 2005 2006 2007 2008 2009

Year

Ext-Gen

Ext-Lit

Ext-IP

Internal Expenses

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Performance Benchmarking

Category FMC Technologies Mean Median

Exp/$Rev 0.210% 0.865% 0.497%

Int/$Rev 0.061% 0.215% 0.131%

Ext/$Rev 0.222% 0.609% 0.302%

Lit/$Rev 0.08% 0.297% 0.214%

IP/$Rev 0.083% 0.095% 0.11%

Total Legal/$Rev 0.330% 1.174% 0.809

Avg In-House $/Hr $167 $212 $197

Avg Ext Cnsl $/Hr $250 $400 $385

Attny/$B 2.86 6.78 6.85

Legal Heads/$B 3.96 8.92 6.66

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We have the power … We can drive change…

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What‟s in our way?

• Talking and debating is no substitute for execution

• Yeah, but I’m different

• Size matters

• Wrong v. inconvenient

• Company risk v. career risk

• Quality is more important than value

• Risk avoidance at any and all costs

• It’s just not my job

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Elevate your performance . . .

Elect Execute Evaluate Evolve

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Or ...

Or ...

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So, I ask you again -- where are we?

• Revolution?

• Evolution?

• (R)evolution?

• Everlution?

• Foreverution?

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“If you dislike Change, you‟re going to dislike Irrelevance even More.”

US Army Chief of Staff, Gen. Eric Shinseki

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Hot Wash on this Session

What Went Well (“W3”) Take A Look At (“TALA”)

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