Critical Issues in Relationship between Lawyers and Clients – Live from Bloomberg Big Law Summit
This is a live post from the Bloomberg Big Law Summit. Please excuse any typos or errors in how I capture proceedings.
9:10 am Keynote Address: Ann R. Klee, VP Global Operations – Environment, Health & Safety, General Electric Company
A maven of the corporate law business, Brackett Denniston III, Senior Vice President and General Counsel of GE [called away – Ann is his substitute], has steered the legal department of his $150 billion conglomerate through growth, turbulence and restructuring, ranging from major acquisitions, to the company’s selling most of its finance arm, GE Capital. In a keynote address, Denniston will lay out his views on what it takes to be a strong lawyer in today’s changing business landscape, and what he perceives to be the most critical issues driving the relationship between in-house lawyers and outside counsel.
Ann has a team of 1800 people in her organization. Will explain how GE has changed and continues to change. Then discuss how the legal organization changes how it works. And finally guiding principles for success.
The one thing constant at GE is change. The company has sold off many units, bought others, and invested heavily to become the software company of the future. (RF: There have been many articles about GE investment in the Internet of Things.)
As in-house lawyers, we face several challenges. The operating environment is complex, for example, 170 countries. Regulatory structures have become more complex globally. Cyberthreats grow by the day. Lawyering in this environment is simply more expensive.
Our outside counsel cost is increasing at faster than the rate of inflation. GE drives a very hard bargain with firms. Demands competitive bidding, shifting work to smaller and regional firms. Former profit centers for some law firms – specifically eDiscovery – are gone; GE has pulled that work in-house. To address the challenge of delivering legal advice, the company is transforming its culture and leveraging technology.
In 2012, GE launched “simplification initiative” to drive down SG&A costs. It was not just about cost reduction but also to drive support organizations to become more focused on serving customers, internally and externally. One example from recent past: required over 100 legal approvals for lease in Africa. Another example: completely different contract terms across divisions.
The law department has simplified contracts and streamlined compliance procedures around KYC. It has done other process improvements. Integrated legal teams around investigations, L&E, government relations, M&A, environmental – across business units. For example, investigations unit was able to hire very high quality investigators who know local markets around the world. Saving millions of dollars by insourcing and getting much higher quality.
Consolidating legal work across fewer firms. Had worked with >2000 firms. Now down to 40 firms in US. Over 600 in Europe to about 70. Reduced outside spend by about $60M from this convergence.
Being asked to do less with less. We must focus on what’s really important.
The big tech disruptor for GE is the industrial Internet. We collect huge volumes of data to optimize performance of our industrial equipment. This creates new legal issues. Team has to think about privacy, security, and IP.
Law department must keep things simple. Focus on what’s most important and doing that. Stop doing lower value work. That has been really hard for many of the company’s lawyers.
The need to focus is an increasingly important lawyer skill. This includes project management skills and knowing what to focus on. Most of our work is not bet the company. We must look at process analysis, IT, systematization to manage most of our legal work to be more efficient. Using Spotfire to get real-time data on all legal matters. Helps evaluate efficiency of outside counsel.
GE lawyers integrate with the business, working closely with business teams.
Unyielding integrity is a key principle. Speed and efficiency are important but not at expense of integrity. Moral case is strong but so is business case. Every dollar on a bribe is one dollar less available for innovation.
In closing… navigate a world that looks very different than most lawyers are used to. Business of law today is more challenging than in the past. But this means for lawyers willing to embrace uncertainty and ambiguity, there are many opportunities. It’s a great time for lawyers who want to be business partners.
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