1. Commit to Looking at the Legal Process Outsourcing ("LPO") Option with an Open Mind
Industry leaders seize opportunities and discover better practices ahead of the pack. They are voracious readers and smart listeners. They are tuned into their clients' needs and remain ahead of the competition through industry innovation. Most of all, industry leaders conduct their evaluations objectively. In the case of LPO,you may ultimately decide it's not for you, but you should at least evaluate it like an industry leader and objectively explore whether it could benefit your company. Go into the process understanding that many companies that have gotten tremendous value from LPO -“ in terms of financial savings, time savings, increased capacity, better quality, and more -“ would have originally bet the farm that LPO wasn't for them. You don't have enough volume? You would never send work to Indian lawyers? Your work is too specialized? Change those statements by prefacing them with "I think" and then commit to getting some facts. With an open mind, have a conversation with an LPO expert or colleague who has worked with one in the past. Explore the matter objectively. Play devil's advocate. Accept as truth that some of the world's most respected and successful companies outsource legal work, and they wouldn't continue to do it if they didn't receive real value. Recognize that if you don't make an objective evaluation, your competitors will. Be open to the possibility that there might be previously unseen opportunity in LPO for your company.
2. If You Appoint a Lieutenant, Choose Wisely
Many department leaders and GCs recognize that they need to look at LPO but, driven by time constraints or perhaps feeling that they lack the expertise, turn to a "lieutenant." This can backfire if you don't choose wisely. Here are essentially three ways to source a lieutenant: in-house, consultant, or outside counsel. From my experience, someone in-house will always be the most reliable. An in-house lieutenant understands your legal department structure and politics, they know the work, and they have insight into your spending and budget. It's okay that they don't have a background in LPO â€“ what's important is that they can represent the needs, practices, and culture of your company when talking to providers. As long as you can assure them that LPO will be used to reduce work load or to give them time to work on higher value projects rather than to replace staff, an in-house lieutenant is likely to bea competent evaluator. Selecting a consultant can be a bit trickier.Although consultants may bill themselves as having deep expertise, the truth is that LPO is a fairly new industry and as such,many do not. If you retain a consultant, be sure to ask about their legal process outsourcing experience, and not just their general outsourcing experience. Question them about which providers they have vetted in the past and find out how many times they guided a client through an actual legal project with a provider. Remember that the experience of their company does not necessarily impute to the individual consultant. A consultant may be getting a first time LPO education as they run your diligence, which means that the real consultative benefit will inure to the company that hires them after you. The third type of lieutenant you could turn to, outside counsel, can yield highly subjective findings without the right direction. If the firm is viewing the LPO provider as competition, they have strong motivation to persuade you not to try it. This can be a healthy part of a 360 degree look at LPO, but it can also lead to the decision maker only hearing a one-sided story. A way around this is by structuring outside counsel's inquiry into LPO as a mandate. Ask for creative pricing options and tell them that you'd like to see one option that incorporates LPO. If a firm has to work with an LPO, and if they are being evaluated by the advantages and feasibility of the solution they develop, they are more likely to give providers a fair vetting. If they discover real problems, they will tell you.
3. Decide Upon an Approach to Your Evaluation
You can take an informal approach or adhere to strict methodology when evaluating LPO providers. An informal route can be as simple as contacting a single provider, having a few conversations, and then either deciding to keep talking and maybe identify a potential project or to close your file with a note that LPO isn't for you right now. A more structured route can include a set questionnaire (i.e. a "request for information" or "RFI") or a request for a custom process and solution in response to your specific legal needs (i.e. a "request for proposal" or "RFP"). An RFI or RFP can be more time consuming than engaging providers on a few calls or in person, but it will enable you to match and compare answers and see how one provider stacks up against another. If you choose to go with an RFI/RFP, an insider tip is that many LPO companies can provide you with lists of industry relevant questions that you can customize and distribute to top providers. Few, if any, LPO companies will charge for this service.
4, 5, and 6: Comply with the ABA's Suggested Guidelines for LPO Due Diligence
In Ethics Opinion 08-451, the ABA suggests a framework for conducting proper diligence when selecting an LPO. If you are looking at India-based providers, the recommendations can be simplified as follows: a.) Are the LPO's professionals qualified to do the work? Ask about the education of the attorneys who would be supporting your company. Find out how many years of experience they have and what types of matters they have worked on in the past. Ask to see resumes. Have calls or, better yet, video conferences, with the attorneys who would actually be assigned to a project and ensure that you speak even to junior team members. Perhaps most important to your investigation is ascertaining whether the attorneys have relevant experience or the right skill set to do the actual work you need. It may be necessary to look at an LPO provider's qualifications more than once: the first time to decide upon a provider generally and the second time to ensure that the resources within that LPO are a good fit for a selected project. If you don't have confidence in their qualifications, talk to another provider. b.) Will the project receive adequate supervision from an appropriate mentor? Find out how many attorneys with US law licenses are on site and ask about the reporting hierarchy. Ask what makes the project managers qualified to manage other attorneys. Find out about channels of escalation, how training is done and about who conducts it, and ask how work is supervised and how quality is guaranteed. You should also understand how much of your company's time is required up front so that you can,knowingly and fully, commit to providing that level of supervision. c.) Will the LPO uphold the same standard of confidentiality to which you are bound and will your data be secure? A simple way to get a lead on whether data protection is sufficient is by asking if the provider has current international security certifications and whether the certification is for all facilities, some facilities, or only designated areas within facilities. Additional topics which merit discussion are:
- How the provider ensures data safety and monitors physical security; Whether it has had past breaches in security and what policies are in place in the event of breach; What type of background checks it performs on hires; How it avoids conflicts of interest, what type of conflict check database is used, and if you can obtain a copy of their conflict check operating procedure; and What type of confidentiality training the professionals receive. Finally, if you get serious about outsourcing, think about a trip to India.
A great way to get over (or validate) concerns is to see operations first hand and to meet, in person, those who you will entrust with your work.To improve the cost-benefit equation of such a trip, consider visiting several competing LPO providers' facilities.Great companies understand your interest in looking under the hood and will gladly host you.
7. Select the Right Pilot
Some companies have a particular legal challenge or project that provides an obviously good first foray into outsourcing, such as a document review or a large batch of old contracts that need to be entered into a management system. For other companies, such a project may not exist and it may be harder to isolate appropriate tasks that can be delegated to a provider. In the latter case, an easy starting point is to look at where your legal team spends its time and, separately, where it spends its money. Any tasks that regularly take up large chunks of time either individually or collectively by the department and/or outside counsel are prime places to start (with the exception of document review, which is perfect for outsourcing but hopefully not regular). High legal expenses for anything other than high level legal work could also watermark projects potentially suited for LPO. Bear in mind that patterns of time and expenses aren't always apparent. A good LPO can help you analyze where your team spends time and can find patterns in your legal spend and billable hours. From there, you can isolate where LPO might offer benefits.
8. Check Client References and Ask Around
The best assurances are from your peers. Don't be shy about calling a provider's client references or asking colleagues at your local bar association why they do or don't outsource. When speaking with attorneys who use an LPO, ask them why they continue to use their provider and what they know now that they would have liked to have known before outsourcing. Many top companies and law firms outsource on a regular basis; take advantage of their experience.
9.Focus on the Big Picture
Too often, companies get bogged down evaluating estimated times broken into precise tasks and then crunching and re-crunching numbers. Discussing this type of data, especially among large groups, can drag an LPO evaluation on for weeks and even months. While you certainly have a responsibility to get the best deal for your company and to understand the basis of any pricing, it's also important to look at the big picture with this simple question: "Is it a good deal for us to get X for this price?" If you were paying outside counsel $500 per contract and an LPO offers to do it for $200, the bottom line is that if it's quality work, it's a good deal. For every month you debate, you are potentially hemorrhaging money that you could be saving.Beyond price, the same goes for time and efficiencies. If your internal people can complete a task in one hour and an LPO tells you that it will take them an hour and half, look at the big picture. The hour and a half of LPO time is going to be far cheaper than the hour of internal time, even before you factor in the hour per task that your department recaptures to use on more valuable endeavors. Understand details on processes and pricing, for sure, but also know when it's time to let go and see that a win is a win. Help your colleagues to do the same.
10. Document and Share Your Findings
Even in the world's best run in-house groups,the right hand can't always know what the left hand is doing. Pangea3 receives a surprising number of inquiries from individuals in legal groups who don't realize that a colleague, perhaps in another city or perhaps just down the hall, has already engaged us in discussion or even solicited a proposal for a specific project. There are also times when someone swears up and down that their company will never, under any circumstances outsource legal work and we are left in the awkward position of telling them that they already work with us. Although you might not typically share your cases or projects with everyone in your department, a look at LPO is a little different. It's off the beaten path.There is a lot of curiosity around LPO and many attorneys have surprisingly emotional reactions for or against it.Documenting and sharing your findings at a department luncheon, in a newsletter, or at a formal presentation can carry multiple benefits in addition to simply making for an interesting conversation. You can save your colleagues time if they were considering looking into LPO themselves, or shield them from potentially embarrassing ignorance when the topic arises and they are asked their company's position. Finally, from a selfish point of view, people can't recognize what they don't know about. You took initiative on this and thought outside the box;it's right for you to get peer recognition for that. The foregoing top ten list provides high level guidance for evaluating an LPO provider. For more tips on launching an LPO investigation or to discuss how LPO might better your legal department, you may contact the author at Marilyn@pangea3.com.
The information in this Top Ten should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or the ACC. This Top Ten is not intended as a definitive statement on the subject addressed. Rather, it is intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.