As the legal sector continues to contract under pressure from stakeholders and clients to reduce legal spend, Leah Cooper, managing attorney of Anglo-Australian mining group Rio Tinto, thinks it's about time the industry developed more intelligent and cost-effective ways of providing legal services.
Dissatisfied with the "token" efforts of law firms to reduce rates, Cooper has entered instead into a groundbreaking legal process outsourcing (LPO) arrangement with partner CPA Global that is targeted to save Rio Tinto 20 percent of its yearly legal fees. She believes that LPO can not only provide corporate legal departments and law firms with a cost-efficient method of delivering routine and low-level legal services, but can and should also be developed to provide higher-value legal services.
"For a long time, we've been asking law firms to provide us with ways to better control and predict our costs, but at best they offered a discount or a cap in fees," Cooper says. "In the end we decided to take the initiative ourselves."
A Vision For Change
American-born Cooper enjoyed success in a variety of roles before joining Rio Tinto in May 2007. She cut her teeth in private practice at U.S. law firm Foley & Lardner LLP before moving in-house at BellSouth Telecommunications (now AT&T) and then on to energy services holding company AGL Resources, where she caught the eye of the legal department heads at Rio Tinto.
Brought in as vice president and general counsel of Rio Tinto's mineral division, Cooper was just 13 months into the Denver-based role when a change of leadership in the legal department led to the creation of a new global position of managing attorney, a post that she has quickly made her own.
Now based in London, Cooper's initial goal was to centralize the management of the legal function in order to support the individual Rio Tinto business units. "We have 100 lawyers spread across the world," Cooper explains, "so it can be technically challenging to manage the legal team as one business. By centralizing budgets, HR and responsibilities, we have a clearer picture of our internal abilities, our costs and our workloads."
Cooper's work to unite the company's legal division proved timely. Commodity prices crashed alongside the global economy in late 2008, leading Rio Tinto to announce sweeping changes to its business in December 2008 that involved a 14,500 reduction in headcount plus extensive and ongoing budget cuts to its operating expenditure.
While there are no plans for the legal team to lose any staff, for Cooper it is important that her department play a proactive role in capping and cutting its outgoing expenditure - and she sees LPO as a key solution for this.
"I'd outsourced legal services in a previous role and found that LPO worked well for repeat matters such as procurement templates," she explains. "I knew it would be an easy win when it came to cutting costs, but I wanted to push the boundaries much further at Rio Tinto."
However, it would be wrong to suggest that budget management was the only factor driving Rio Tinto's LPO strategy. "When I first started as managing attorney, I surveyed our legal teams to assess how they felt about our professional development, training and talent management," says Cooper. "We quickly discovered our lawyers were spending a lot of time doing low-level work - the sort of work that isn't important enough to send to an external law firm, but builds up on a day-to-day basis so that when the more strategic and rewarding work comes in, staff are too busy to take it on.
"We found we had really talented lawyers working on pretty basic tasks, and that's not cost effective or personally rewarding," Cooper adds. "LPO enables us to free the internal team up to work on higher-value projects."
Rio Tinto put together a request for proposal (RFP) that went to a number of legal outsourcing firms identified in The Black Book of Outsourcing . "We sent the RFP to eight firms originally, then narrowed it down to four and then two: CPA Global and our existing Business Process Outsourcing (BPO) partner."
After visiting CPA Global's offices in India, Cooper says she was struck by the maturity of its offering in comparison to other more process-orientated providers. "I wanted a partner that was able to look well beyond routine automation and I found that in CPA Global."
In fact, Cooper says it's easy to return with "stars in your eyes" after visiting CPA Global's set-up in India. "After our initial tour, my colleague leaned over and asked: 'Where do we sign?'" she recounts. "We could see that CPA Global could offer a solution that far exceeded mere replication of tasks. It enabled us to recognize opportunities for additional offshoring."
Mapping The Work
Rio Tinto used a tool that CPA Global has developed called the "legal heat map" to help it identify and filter legal work that would have been managed by internal lawyers or outside counsel, but could instead be sent to the Indian team. "The low-level work that our internal lawyers used to manage now goes to CPA Global," says Cooper, "This frees up our lawyers and keeps our internal clients happy as their work is no longer 'bogged down in legal'. It also reduces our risk as a business, as there was a lot of work that we just didn't get to in the past."
But Cooper adds that the real benefit of the legal heat map was in segmenting legal work that could be shifted from outside counsel. "We are starting to make tremendous financial gains," says Cooper. She estimates that Rio Tinto's cost savings equate to a 3:1 reduction for in-house legal work and a 7:1 reduction for work that would have been sent to external law firms: "it's a really powerful way of showing our internal clients just how much money we are saving them."
Nonetheless, there have been obstacles to overcome. "Just as with any new supplier, there is an element of training involved," Cooper says. However, she's keen to stress that the team provided by CPA Global's Indian office work as "Rio Tinto lawyers," and that they function as any other Rio Tinto office does. She also emphasizes that the outsourcing arrangement has not replaced a single lawyer on her internal team, nor was it meant to. "We don't have enough lawyers as it is," she says. "This is a way to add resources to the team."
So far the team in India has completed 40 projects, ranging from contract review and drafting, legal research and analysis, merger and acquisition due diligence work and more complicated drafting, such as joint venture agreements. CPA Global is also providing support in other jurisdictions.In particular, Cooper refers to a project underway on behalf of a U.S.-based Rio Tinto business to comply with an e-discovery document request from the Federal Trade Commission. "We're using an external law firm to run the project but while they are antitrust specialists, we didn't want to pay them to manage the document review as well," she explains. "Instead we asked them to work with CPA Global so that the right work could be delegated to the right provider. We've saved close to $1 million without even blinking."
The U.S. law firm was initially cautious about the idea of working with an LPO provider. "They had doubts about communicating with a team in India and the quality of the work that could result," she says. "But not all roads lead to India with CPA Global. That's the other differentiator between it and other LPO providers. We were able to say: 'If you don't want to work with a team in India, how about the team that is based just two blocks away from you in Washington DC?' The CPA Global team in the U.S. was able to ramp up 50 lawyers in 48 hours, and they had significant experience in document review and e-discovery to boot. The project demonstrates that with the combined efforts of in-house lawyers, external counsel and the LPO provider, you can build a really cost-efficient solution without compromising quality or expertise."
Cooper stresses that Rio Tinto would never stop using its external counsel. "We value their strategic expertise," she says. "But we don't want to pay exorbitant fees for low-level routine work.
"When we used to engage law firms, we would say: 'How much?' Now we ask: 'What does it take to get there?' If elements of the work can be completed by lower-cost resources, then we will send that portion of the work to CPA Global and we expect our law firms to support us in that. If they won't, we'll find firms that will."
Raising The Bar
However, it's not just law firms that Cooper is challenging. "We also want CPA Global to step up the services it is providing," she says. "The LPO industry is great at providing routine, repetitive and basic legal services and most providers can't go further than that. But I want our lawyers in India to take on more strategic work, to fill the void between flat LPO and the more strategic work provided by law firms. When we met the team during our visits to India and heard about the hiring and training process the lawyers went through, we were immediately comfortable that CPA Global was hiring the best," she says. "But then I thought: why are we limiting them to simple process work? I asked CPA Global to deliver more sophisticated legal services and it has responded."
Of course, it's still early days for the project and Cooper stresses that it is a learning process on both sides. "You have to invest in your team so that they become comfortable with this new way of working - and you have to constantly review the process, particularly if things go wrong," she says. "CPA Global oversees the quality of the work, but we also have to measure its effect on the business: are our lawyers and internal clients happy with the end product? The more closely aligned their satisfaction and the quality of the work, the better we will all be."
Cooper emphasizes the importance of pushing awareness of LPO throughout the business. "We continue to look at ways in which the team in India can help different business units," she says. "Of course, it's easier to plan for work that is in the pipeline, but a lot of deals happen overnight. It's understandable that the knee-jerk reaction is just to call in your usual external counsel, but we have to make sure the business units come through the legal department so that we can allocate work efficiently and effectively."
Would Cooper advise other companies to set up a similar arrangement? "Yes, without a doubt," she says. "But I would tell them to do their homework and pick a vendor that suits their business and their objectives." She also counsels that LPO is not a solution that can be entered into without planning. "You can't outsource a problem and just expect it to be miraculously resolved," she explains. "You have to own it; you have to be involved every step of the way. The majority of the work we are outsourcing is not volume-based; it's day-to-day work that requires constant communication. Yes, it's being completed by CPA Global lawyers based in India, but I want the internal team to think of it as simply dealing with any other colleagues."
Cooper says the arrangement has also brought considerable benefit to other areas of the legal department. "When we started looking into LPO, quality and cost savings were key drivers," she explains. "But what we hadn't envisioned was the sheer energy of the work coming out of India. The team there has so much enthusiasm for the work they're doing and they are incredibly productive. I'm not billed when they stop to have a chat or look at personal emails, because they just don't do that."
The outsourcing arrangement has also enabled Rio Tinto to centralize information and working techniques. "Our lawyers used to have their own bespoke systems, local to their offices," says Cooper. "But by briefing the work into CPA Global, we've naturally started to standardize the way in which we work and share knowledge, which drives other efficiencies across the business."
Cooper estimates that CPA Global's services will enable Rio Tinto to cut 20 percent from its legal spend - saving tens of millions of dollars per annum. "It's just a question of institutionalising the process," she says. She also expects the legal services that CPA Global supplies will be rolled out into other business areas, such as compliance, intellectual property (IP) and procurement. "There are lots of opportunities long term, but right now the priority is getting the system down pat," she adds.
This article first appeared in the summer 2009 issue of Legal Strategy Review.