May 25, 2017
Michael Tucker on Steering Avis Budget’s Legal Department Toward Value Prominence
Michael Tucker has served since 2010 as Executive Vice President, General Counsel and Chief Compliance Officer at Avis Budget Group (ABG), which owns the Avis, Budget, Zipcar, Payless, Maggiore, France Cars and Apex brands, and has just been named a 2017 ACC Value Champion. As the company, which did approximately $8.7 billion in revenue last year and employs over 30,000 people worldwide, has successfully worked to transform itself from a vehicle rental company to a global mobility business, the legal department has worked equally hard to transform itself into a true business partner of its internal clients, one that measures its true impact on the company's successes.
Tucker heads up a legal department of 52 globally, including four compliance professionals and 16 paralegals. The department is organized by regions and subject matter expertise, inclusive of three regional leads based in the United States and England, and other country leads in France, Spain, Portugal, Italy, Germany and Brazil. In 2014, ABG adopted a zero-budget policy going into 2015, in which every department's budget was reduced to zero. In order to build the legal budget back up, Tucker had to justify everything in it, including salaries, professional services expenses, T&E, and every other budgeted line item. That exercise accelerated the change Tucker had been trying to bring to the department since he arrived. The way he did it, and works with his colleagues on the business side of the company, is illustrative of the way the role of general counsel has changed over the course of Tucker's 34-year career, 22 years spent in-house.
"In my early days, legal departments were viewed by the business as lower-cost (compared to outside counsel) legal advisors for non-complicated legal matters. Today, in-house lawyers are expected to take the lead on most matters, whether complex or routine; must be prepared to talk strategically about legal risks and the business of the company-client; and must justify their costs in terms of return on investment in the legal function. The question comes down to how the legal department drives revenue, EBITDA and margin growth; launches new products and services; develops better business practices; protects against cyberattacks; ensures legal compliance with laws; and defends the company in lawsuits," he explains.
Starting with a clean slate, Tucker began to build a budget that would support the in-house legal department he envisioned: for example, one that included a global compliance function that hadn't existed before. The company had just been lucky, Tucker says, but he realized ABG needed to lower its risk profile and be better prepared. But he had to convince the business to invest money and personnel. Rather than just talking about prevention, he needed to talk about how the function could help to make the company more profitable. He got the green light, and as a result was able to obtain a decrease in ABG's general liability insurance premium by almost $200,000.
Although it sounds draconian, the zero-based budgeting process is something every company should do once in a while, says Tucker, who notes that it also helped him get his arms around his company's global in-house and outside counsel spend. Whereas there had been "little appetite" within the business to invest the time and money to do the analysis necessary to get things under control before, the zero-based budgeting process revealed many unrecognized factors about the company's legal spend, including, most significantly, that 71 percent of the outside counsel time ABG was billed for work done on its largest and most significant litigation and transaction matters was partner time. It also revealed "that a large percentage of the work was being sent outside because of a lack of bandwidth in the legal function, not for the expertise of the outside counsel," Tucker said.
Tucker hired six new attorneys and began insourcing more work, which helped to reduce outside counsel spend by 33 percent (inclusive of the costs also of the legal ops manager and switching to a new e-billing and matter tracking system). He also hired a legal operations executive. The multifaceted transformation is described in detail in the ABG Value Champion profile.
Tucker believes that outside counsel should also deliver value above and beyond resolving legal matters. "Obviously bringing value means getting the best results on a matter-by-matter basis," he said. "However, in our case, it also means being able to articulate an expected ROI on the investment in outside legal services at the commencement of a matter and being able to compare it to the end results; enhancing the legal and/or business acumen of the in-house legal team (providing CLE, mentoring, and providing legal/business trend analysis); and, of special importance to the ABG legal department, contributing to the advancement of our use of technology and actionable metrics to deliver better service quality matter-over-matter."
The most challenging issues facing ABG today are increasing its operating margins and compliance with ever changing global data privacy laws. This last concern is particularly pressing, says Tucker, who notes that ABG converted one of his legal generalists into a certified data privacy officer three years ago and is "spending millions" to meet the new requirements.
Looking forward, Tucker plans to continue refining ABG's engagement model with panel firms, which have been reduced from 672 firms to just seven. He wants even more metrics and reports to change how the businesses view the legal department. "The legal function is no more a cost center than business development or sales and marketing. Legal simply has not had the metrics to discuss its contributions in terms that tell and highlight its true role and business impact. We are attempting to create and develop the metrics, algorithms and management procedures to prove out and articulate the value we add to business success," Tucker says.
Early results indicate that he is succeeding on much more than just reducing outside legal spend. An innovative new matter intake and assessment process allows the ABG legal department to better identify and communicate to clients the key legal and business considerations anticipated, reducing surprises and helping clients and outside counsel better plan the strategic legal approach and business investments in a matter.
Tucker and his team are also working on developing additional metrics that are customized methodologies for certain key client service areas, valuing legal spend to the business in such specific areas as licensing and franchising, fleet optimization, business risk profile reduction, intellectual property, employment law, data privacy and insurance.
Besides his seven years in the role of EVP, GC & CCO at Avis Budget Group, Tucker has 12 years of private practice, and 15 years in various legal leadership roles at GE and Tyco in his professional history. Tucker said he overwhelmingly prefers being in-house counsel, stating that "the need to be conversant in multiple areas of law, to work closely with business colleagues, and the opportunity to work with people to develop and mentor legal and business careers are without equal in the private practice of law."
"Being a strategic partner is almost a cliché today," Tucker says. "I want the business to see legal department spend as investment spend."