An external-lawyer review – three years on…

In 2002, Carillion reviewed its external lawyer network, targeting cost reductions and a marked improvement in service (described in the October 2003 issue of Managing Partner). Three years on, we review progress and identify the next steps.
By Richard Tapp, Carillion

Carillion carried out a root-and-branch review of its legal work in early 2002, identifying that we used nearly 50 different law firms in the UK. Our legal work is complex and, in many cases, novel, and our legal spend represents a significant cost. We identified that our use of lawyers needed to change, and that it was difficult to manage both the cost and logistics of such a diverse panel. We also had concerns over service levels, and the ability of the external resource to allow us to respond to a competitive and dynamic market.

We wanted to use our lawyers to translate our business objectives into reality; to speed, refine and enhance our processes so that we could do so as quickly and efficiently as possible; to resolve disputes quickly and effectively; and to gain competitive advantage.

The review
Following a detailed review and tender exercise, we invited our chosen firms to join us to form the Carillion Legal Network. Some of the firms have undergone merger activity since we began and the network now comprises:

Ashurst – private finance;
CMS Cameron McKenna – private finance;
Clarks – employment, environment;
Dickinson Dees – initially working for our mechanical and electrical engineering company, since sold;
DLA Piper Rudnick Gray Cary – insurance, health and safety, property development;
fbc – minor litigation, property;
Kilpatrick Stockton – FM;
Linklaters – private finance;
Pinsent Masons – construction;
MacRoberts – Scotland;
Reynolds Porter Chamberlain – construction, FM;
Sacker and Partners – pensions (acting for the trustees);
Slaughter and May – public company, corporate, competition, pensions (acting for the Carillion Group).

Managing the network
We set out to manage the network actively, transparently and openly. Our own customers demand very high standards of us, and in turn we have expected much of the network firms. We are a demanding client, but in return have sought to offer loyalty, support, communication of Carillion’s aims, objectives and business strategy, and a continuing and growing work flow.

Our management strategy has a number of key strands:

Management. We started by setting out our requirements clearly and unambiguously. A formal protocol sets out the key arrangements with each firm, dealing with instructions, review and reporting, contact arrangements, dispute management, fees, and communications. A member of Carillion Legal, or a subject specialist within Carillion’s management, acts as liaison with the contact partner in each firm. We require written monthly reports from each network firm, and carry out detailed reviews with each firm twice yearly. Actions arising from each review are documented and followed through, targeting continuous improvement of the relationship to mutual benefit. We use a formal matter-management system to track the progress of matters, fee authorisation and reporting, and as an internal management tool;
Communication. From the start, we wanted to ensure that network firms understood Carillion’s business. We reasoned that it was unfair for us to expect them to be commercial, to add value to our business and to be an equal and effective member of our team unless they fully related to what we do. We launched the network with a day-long network conference, at which a number of lawyers from each firm met our in-house lawyers, management and key contacts from the business. Our chief executive, John McDonough, gave a key-note speech and other directors briefed on their parts of the business. The conference has become an annual event and, in addition to briefings, has included workshop sessions on core legal and commercial issues, updates on the performance of the network, and an opportunity for networking between the business and members of the network firms. Feedback suggests that it is a very successful way of communicating – and, as far as we know, it remains a unique event in the UK. To build on its success, we use a bi-monthly newsletter to brief firms on developments in the business;
Relationship. We have also set out to improve understanding and build the relationship between Carillion and the network firms on an individual level. As such, we have a rolling programme of taking trainees from a number of the firms, generally for one of their six-month seats, and have taken qualified secondees from several firms. We also use shadowing arrangements, where network-firm lawyers can follow our business people to gain a better understanding of the business, and our lawyers can work with members of the network, as well as a programme of briefings by Carillion people to network firms;
Knowledge transfer. Knowledge management is an important strand within the business, with our Better, Smarter, Faster programme stressing the need to work more effectively, using knowledge from previous projects while all the time streamlining our processes effectively. Within Carillion Legal, we have built on this need, appointing a solicitor – professional development – Jennifer Charlson, one of whose responsibilities is to work with the network firms to co-ordinate the use of training, briefing, know-how, standard documentation and procedures, and knowledge management between us. We also use joint working groups with the firms on issues of joint interest;
Measurement. We have put in place a suite of key performance indicators (KPIs), which set out to measure and monitor the performance both of the network and of Carillion Legal. These include financial, customer service, business process and partnering metrics, which we report half-yearly to the business. As part of the process, we have an online client survey that operates through Carillion’s intranet and allows all users of legal services to respond. It asks more than 25 questions across the categories of:
Service quality;
Programme and delivery;
Co-operation and teamwork;
Communication;
Commerciality;
External lawyer management.

From the survey, we generate a half-yearly performance table of the firms, which allows us to monitor trends. We also produce a feedback form for each firm, which shows their performance against the average in each category. Finally, we also use the process to measure Carillion Legal’s own performance against that of the external firms.

Has it worked?
From the start, we targeted a significant reduction in cost and a marked improvement in service levels. We set out to monitor both, using the measures outlined above and a series of regular reviews with each of our business groups.

So have we achieved our objectives? In short – yes, and the process has also enabled us to identify what further improvements are possible and embark on a programme of continuous improvement. We have more than achieved our cost-reduction targets – which themselves were set out to be very challenging, and all our feedback and monitoring suggests that the improvement in service levels has been significant. We have improved the integration of lawyers, and brought about significant change in the perception of the role and value of lawyers within the business.

The three-year review
We felt it important that we did not become complacent. Our business is fast moving, competitive, challenging and very low margin. Our competitors are of high quality, and our own customers sophisticated and demanding. As such, in our legal strategy, which sets out the basis on which we provide legal services across the business, we established that we would review the operation of the network in its third year.

We started by carrying out an internal review within Carillion Legal, identifying a number of areas that we felt would benefit from refinement and improvement, but also firmly establishing that, in our view, the network should be renewed largely in its existing form.

Building on this process, we carried out a broad process of consultation and review in two parts – first, within the business and second, with the network Firms themselves were project managed by one of our solicitors, Jane Mackreth. We asked for responses to a series of questions – seeking views on:

The operation, size, scope and use of the network;
How it might be improved;
Whether we should re-tender the network, or change its constituent firms;
How costs might be reduced and processes improved;
Whether certain work should be brought in-house or, alternatively, outsourced;
The operation of our protocol;
Performance monitoring;
Communication and review.

We received an excellent response from within the business, which was overwhelmingly in favour of retaining the present arrangements, continuing our policy of incremental improvement, and using the opportunity of the review to build relationships and enhance performance. The process also brought forth unsolicited praise, which was most welcome, as well as constructive suggestion and criticism, which we could use to define how best to take the process forwards. From the network firms, we received detailed responses with positive and helpful suggestions designed to take us to the next stage.

Building on the review
Armed with our feedback, we brought the contact partners of each of our firms together with members of Carillion Legal for a day-long workshop, externally facilitated for us by Sally Woodward of Sherwood PSF Consulting, which shared the detailed results of the consultation with the network firms, looked in detail at four key areas highlighted by the consultation responses, and set out to determine discrete work streams to take the position forwards. The four key areas were:

Improving Carillion’s bottom line – working smarter, better, faster;
Making the legal network even more effective;
Making more and better use of technology;
Improving pricing and financial management.

As a result, we have established a number of work streams on subjects as diverse as risk management, fees, process planning, the protocol, key performance indicators and project management, each led by a member of Carillion Legal. We have undertaken to produce a short handbook for lawyers within the network firms, introducing them to Carillion, to our processes, and setting out what we require of them. We have set up a number of arrangements for the network firms to work together on areas of interest within and across their respective specialisms. These are already beginning to bear fruit, and to show further enhancement for the coming months.

The next step is to finalise the format of our protocol, and to formally re-appoint the network firms for a three-year period from 1 October 2005.

And the future?
We are very conscious that the next phase of the Carillion Legal Network’s development is crucial. In the past three years, Carillion has continued its process of transformation into a forward-looking, customer-focused business providing integrated solutions to our clients. We have continued to win industry, customer, and City awards, and have doubled our share price. We have carried out a programme of non-core disposals, and refocused the business on sustainable, profitable growth.

In the legal sphere, we have set out to reflect our business success and to bring the use of lawyers within our business to reflect best practice in all areas. We believe that we now have an efficient, cost-effective model, tailored to our business which brings with it real competitive advantage.

As in all aspects of our business, we must continue to improve it, both in an evolutionary fashion, and where appropriate by transformational arrangements too. We, and our network firms, understand that Carillion’s business model requires and demands effective and challenging management of cost and resource, coupled with an understanding and careful control of risk. The relationships that we have built have shown real advantages for both Carillion and members of the network, and we look forward to the next phase of growth and consolidation, both of Carillion and of the Carillion legal network.

Richard Tapp is company secretary and director of legal services at Carillion plc. He can be contacted at rtapp@carillionplc.com.