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The overseers of the enterprise

|Written By Jennifer Brown
The overseers of the enterprise

For our 10th annual InHouse Annual General Counsel Roundtable we went to the great city of Montreal where five experienced corporate counsel, who clearly love their work and are passionate about the role they play in enabling business, discussed at length the issues that consume their days and what makes for strong external law firm relationships.

From cosmetics and toys, to trains, planes, and loyalty programs, these lawyers represent some of the biggest brands both in Canada and globally. Their legal departments play integral roles in their businesses and command respect from their internal clients. It was inspiring to hear Deborah Greenberg of Aimia — formerly Groupe Aeroplan — talk about how the business units have helped her make the case to add additional legal muscle when she, and in fact they, see what it can do to help the enterprise overall.

And as they bring more specialized work in-house and spend more time addressing the demands of their internal clients, deciding what gets sent to external firms is becoming an increasingly complex process and one they don’t take lightly. Greenberg and Bombardier general counsel Daniel Desjardins, along with Mark Girgis from Mega Brands Inc., and Nadia Petrolito from cosmetic giant L’Oréal, all described their collective disappointment in dealing with RFP responses from some law firms.

If firms are too busy to take legal RFPs seriously, Desjardins offers this advice: Instead of providing a poor response to an RFP or one that doesn’t specifically address the specific in-house request, don’t do it at all. He argues focusing on the clients they already have will net them a more profitable result. As Desjardins said: “One of my challenges to them is ‘guys, stop running after all those RFPs.’ Forget the next rabbit and concentrate on your existing client base. First go back to your existing top 20 customers. Are you serving them well? What are you doing for them? Who else is doing some work for them, how can you do more?”

Greenberg echoed that saying: “Don’t ask for the RFP if you have no chance of getting it or if it’s really out of your bailiwick. It’s just a waste of time.”

And in terms of alternative fee arrangements and finding other ways to get firms to deliver cost effective services, Petrolito perhaps summed it up best when she said the best cost savings is finding the right lawyer, period.

I think one of the great takeaways from the roundtable, which you will see in their answers to the questions about RFPs and alternative fee arrangements, is that these lawyers are testing their external firms to give them what they really need. If they don’t get it, they are looking elsewhere and they have a powerful vote.

As Fred Headon of Air Canada pointed out, the research he and the Canadian Bar Association’s Futures committee did certainly spoke about the need for predictability in legal services fees. “I think that reflects the fact that everywhere else that’s how things are unfolding and it creates a gap between our profession and everybody else.”

We hope you find the discussion informative and relatable to your own experience. Watch more from the roundtable in our video coverage of these five engaging in-house lawyers online at canadianlawyermag.com/inhouse.

This year’s participants were Nadia Petrolito, General counsel, chief communications officer L’Oréal Canada; Daniel Desjardins, Senior vice president, general counsel & corporate secretary Bombardier Inc.; Deborah Greenberg, Vice president, general counsel Aimia, Canada; Mark Girgis, Vice president, legal affairs, and corporate secretary MEGA Brands Inc. (now part of the Mattel family of companies); Fred Headon, Assistant general counsel labour and employment law, Air Canada. Also led the 30-person legal Futures initiative for the CBA. InHouse editor Jennifer Brown moderated the discussion.

INHOUSE: Is your legal team shrinking or growing?

Petrolito

It’s grown by one lawyer since I’ve been here and it was quite a feat to get somebody else on board. I also have an intern who is helping us and that is something completely new for us. He’s still a student in law school but he is part of our procurement team — he chose to go back to school to become a lawyer. I think we have no other choice but to be growing. We have a manufacturing client, we have a distribution centre, and we’re covering all of Canada — it’s a billion-dollar business and we keep acquiring brands — we’re up to 35 at this point, so there’s a lot to manage.

Desjardins

We’ve been growing at a fast pace over many years but now we’re growing at a slower pace. I think we’ve staffed all the key positions and we’ve in-sourced what we really want to in-source which is the core of the business about selling trains and planes and everything related to that. But what we’ve also been doing, instead of growing within the department is growing the department’s responsibility. So before, in Bombardier Aerospace for example, the contracting department was separate from the legal department. Now legal has taken over contracts to make it even more efficient. So we’ve grown also in the context of our responsibilities within the company, not only staff-wise, but also taking over other functions that have now become part of the legal team or under the responsibility of legal. We had added Bombardier Transportation, so it was time to do it in Bombardier Aerospace too. It makes it a lot more meaningful in the way of efficiency to manage both departments together.

Greenberg

We actually doubled in size a couple of years ago. There are now six  plus me makes seven. There are now two lawyers in Toronto because we’ve grown through acquisition in the last two years. We were just Aeroplan not that long ago and then we purchased a couple of companies that gave us a global footprint, but in Canada we also had different businesses that we operate other than Aeroplan. So I have lawyers handling those businesses as well. I don’t know that the team is necessarily going to continue to grow at the moment. I think we’re managing very well and we’re trying very hard to do things that enable us to not have our hands on everything anymore. We’re trying to teach everybody else in the company what they can be doing so that we don’t have to get as involved, and we manage more strategic things, which is where I think we should be.

Girgis

My team remains fairly consistent, post-acquisition, after being acquired by Mattel. But there was a re-focusing on certain aspects of what we do day-to-day. We remain in control of intellectual property, of course, because our design centre for our toys is here in Montreal. Manufacturing is also here in Montreal. We produce about 60 to 65 per cent of our products here in Montreal and, of course, labour and employment is associated with that. Some some aspects of legal have shifted where it makes absolute sense, such as international regulatory matters, and sales and distribution of our products is now handled by the parent company and the lawyers in that department.

Headon

We’ve had two postings out recently but I think it reflects the trend line that you’re hearing here with a variation. Considering the number of new designations that are popping up in-house, the more specialized kind of functions that we’re doing in-house, and certainly the numbers suggest that it’s a growing part of the bar. I think it’s going to continue that way as we take on compliance and corporate social responsibility that is very related to our work but not traditionally core to our function.

INHOUSE: When you are looking to add to the department are you making the business case first to management?

Headon

Whether you make the business case or not I think you should. I think this is an opportunity for the lawyers to show that we’re part of the team, that the things we do that are unique are very valuable. The fact we’re now part of the teams that are running the business, that’s how the decisions are going to be made and we need to find ways to demonstrate what the savings are or what the revenue opportunities are, what the benefit is to the company. Certainly, some of what we do is intangible, but I think those things that can be quantified, we need to quantify. It’s part of our relevance and it then shows the value of what we’re contributing to the business, so making that case is a very important part of the process. I think you can also add to it things like avoidance; there’s a real appreciation of the costs that were avoided by having a proper level of in-house counsel.

Greenberg

For sure I do a business case. You’re supposed to be essentially doing something to mitigate the fact that you’re bringing in a cost centre. I’ve actually had the business people help me make business cases that the initiatives and innovations they have are going to get to market faster and therefore there will be a benefit, which may not be as readily obvious when you’re making the business case, but down the road they know their work is going to get handled faster, more efficiently, and they prefer in-house dealing with a lot of it and I do too — we understand the business. I don’t see the need to use outside counsel for those things so I shift what I send outside. I’d rather send out things that are more problematic, more risky, where I need that extra advice and keep the real strategic day-to-day partnerships inside. That’s what we do the most, and the business people are more than happy to help me make my business case.

Desjardins

We have become extremely sophisticated in the way we make those decisions. Whether, we keep it in-house, and if we go outside, how we procure that, and which law firm we choose, because now the idea of one single law firm that does it all for you is gone the way of the dodo. We’re very strategic as to how we are going to procure it, through RFP or others, but also which law firm are we going out to. And, sometimes the big Wall Street firms or the big Bay Street firms are not the firms you want to go to. You want to go to that small shop that is good at what they do and at an efficient rate.

INHOUSE: When you’re sourcing someone new, have your law firms offered you someone who has worked on your files,

like a secondment but on a more permanent basis?

Petrolito

I had a seventh maternity leave in my department recently and decided to use an alternative firm here in Montreal. It just so happened a person I had worked with at Avon, who had worked there for seven years decided to come back to Montreal and join this firm. I was very lucky to be able to have him to replace the mat leave. I wanted to explore the secondment idea and actually asked the different law firms I work with if they had somebody they could lend out to me. Believe it not, most of them answered, “we can’t afford to give you someone full-time.”

I thought that was a very interesting situation, because you would think they would be craving this kind of relationship and yet they just couldn’t take the time, or at least couldn’t afford, to give me this person as many hours as I needed. I really needed someone practically full-time, so this was an actually amazing option because to boot I got this other person at an incredible hourly rate. He’s charging me less than a paralegal and I’m having him for a minimum 25 hours a week. He’s already doing more hours for me and he already knows the industry. He’s been in-house for 14 years. It’s an unbelievable coup in every sense.

INHOUSE: What issues are you focused on with respect to regulatory and risk management matters?

Petrolito

Cosmetics is a highly regulated industry here in Canada, and actually federal legislation in the U.S. is asking for it to be even more regulated. We have to protect the consumer and the consumer is much more savvy and sophisticated these days and they want more information.

Also the demographics at L’Oréal are very young and we need to ensure they’re all well trained and that they understand the processes. We put into place a comprehensive risk management program with all of our advertising, all of our marketing — nothing goes out unless both scientific affairs and legal have reviewed it, and they all know this and they all really follow it.

There are very strict policies and procedures that are put into place. I think it’s just a question of making sure that where you’ve got the bigger risk it is managed the most. There are risks with Canada’s anti-spam legislation, and risk with competition law to some extent. Of course, there are the business risks, not just the legal risks. You’ve got to know your business fairly well in order to understand the risks.

It’s harder to do in a smaller team and I think you have to do an internal audit and understand all the different factions of your business and then say, okay, well this is what I think is the weak point, and this is what I have to make sure is well looked after. I think you just have to see really where your risks are and concentrate on those.

Desjardins

I’m more of the philosophy that we need to push risk and compliance down to the lowest level possible. Our leadership in the legal function is making sure we are in the forefront on understanding our businesses to see what’s the impact, because it keeps changing. There are new laws coming all the time in Canada and around the world. We need to understand the impact of those laws and regulations in our business, making sure we train the right people and see that they’re trained so that they can put the processes in place so that we have complied. There’s no legal risk; it’s not for a legal department to manage. Just being at the forefront and making sure that we’re there and we can assist and train our people and make sure we put all the right processes together for me, it shows leadership in our department. I think compliance is a good example of that where we’ve taken a great role in compliance while making sure, we’re not responsible, but we are, at the same time making sure that we push it down to the right people at the right function, right department, right level.

Greenberg

There are many regulatory areas that affect us. CASL and privacy in general is one because we hold so much personal information in our company, across the world, and from our coalition programs and other things we do. We’re always very aware and vigilant when it comes to privacy matters and there was a recent case, a couple of weeks ago actually, from the privacy commissioner with respect to Bell and how they target market. That gave me a bit of pause, I will say, because as we try to be more relevant in the way that we market we have to be very mindful of those kinds of decisions that might get in our way.

I’m always thinking about things like that and there’s PCI (Payment Card Industry) compliance because we do take credit cards and process them for others, so we have to be careful about all those things. We actually think a lot about the regulatory framework that affects our main partners, the financial sector and the airlines, because if it’s going to be something that affects them, it will most likely directly or indirectly affect us and we try to be as aware of that as possible. When it comes to new innovations, like mobile technology, mobile payment systems, we know that’s going to be heavily regulated.

Girgis

About 60 per cent of our product is made here, but a lot of it is still sourced out of China and so the toy industry is highly regulated. Toy safety and the contents of our toys is a No. 1 priority and we do keep an eye on legislation and attempts to legislate. In 2008, due to some massive recalls that occurred in the United States and elsewhere, a lot of legislation changed for the better. What we’re seeing now, though, is even though there are very strict federal statutes, some states and even counties and municipalities are trying to pre-empt federal law and it’s going to be impossible to manage. It’s about making the people that are attempting to legislate in those areas understand that we take this very seriously and we’re on top of our game so the goods continue to flow where they need to flow and that it makes sense.

INHOUSE: What has been your experience with alternative fee arrangements and requests for proposals?

Greenberg

We have used them. We recently went out with an RFP for some litigation. I think certain files lend themselves more to a fixed-fee type of construct. With litigation, what they’ll end up doing is splitting it into phases and they’ll give you fixed fees for each phase. You’re going to get all the carve outs so in the end you still may have to spend more. So it may be efficient work, because they’re trying to get as much work done in a small amount of time, but they may put lawyers on the file who are not as qualified. So, there’s a balance there that has to be struck. I think you can get alternative fee arrangements in many different ways. We have the firms we work with most, who know our business best, and as a result we give them more and then we expect discounts, because we give them a chunk of our business. That works. I always wonder, though, whether they’re increasing the amount of hours.

In our RFP we ask for alternative fee structures. I put details in certain areas and I leave certain areas purposely vague — almost like an exam question to see how they’re going to approach it, then determine, based on what their way of thinking is, how creative they’re going to be. It’s not the firm I’m looking for in that particular case, it’s the individual that I’m going to be choosing in that firm. I’m not looking for someone to make a presentation on behalf of the firm. Part of it’s going to be fit — if it’s going to be a long-term trial, for example, and I’m going to be on the phone with this person on a weekly basis and I can’t stand their personality but they may be a good lawyer, there’s probably another good lawyer that I can work with better. It actually does matter.

Petrolito

I’ve done an RFP for a very specific time, because I was, in fact, losing a lawyer and the other one was about to go on mat leave and I needed contract work done. I went to an RFP and I was very specific about what I wanted to see. I wanted specific years of experience, their hourly rates. I also made it a little bit vague. I said, OK, you have about a week to get back to me with questions and then a week to get back to me with your proposal.

It made it very interesting because with the facts and with the questions that they would ask, I would see if they were already the right players. In the end, it has to be a question of costs but it was very interesting that one got completely eliminated because they didn’t even bother coming back with questions. I thought that was just ridiculous, because it was vague enough that you needed to ask questions and they didn’t even come back to me. So I thought OK, you are really not serious enough for me to be able to hire you. The responses from the law firms — some of them were actually going to their marketing teams and they were saying yes marketing helped me to put this RFP together. And, I thought that’s hilarious but they are really trying.

Desjardins

All of us have become more sophisticated in the way we procure, through RFPs and through all sorts of alternative billing and there’s no one solution that suits all. We’ll go case-by-case because for certain types of work it makes more sense to go this way or this way, but at the end of the day, I always come back to how much is it going to cost me? We all work with budgets and our customers do too. We go to tender and most of our customers, either in our airline business or in the train business, know we’re competing against the best in the world. At the end of the day, you’ve got a contract and it’s a firm, fixed contract. One law firm came to me and said, “Well it’s very complex to do a budget.” I tell them, let me talk to you about complexity. I don’t buy this. I mean, what we’ve got to price is way more complex than what they have to do.

In so many law firms you’ve got marketing departments answering RFPs after RFPs. One of my challenges to them is “guys, stop running after all those RFPs.” Forget the next rabbit and concentrate on your existing client base. First go back to your existing top 20 customers. Are you serving them well? What are you doing for them? Who else is doing some work for them, how can you do more?

Headon

I think our proximity to the client, our familiarity with how businesses work, and all the complexity that we have to manage is something where I think the in-house community can be giving back and helping the private bar, who don’t see that in their day-to-day. We can help them understand why these things are so important and how you get there, whatever the fee structure they ultimately come up with reflects the fact it’s how things are unfolding. The research we did on CBA Futures certainly spoke about the need for predictability and I think that reflects the fact that everywhere else that’s how things are unfolding and it creates a gap between our profession and everybody else.

Girgis

We do alternative billing as well. We have fixed-fee arrangements, which are sort of not-to-exceed budgets. They’re done by phase as well and sure, there are caveats, but you know in litigation there are caveats all the time. But it’s a dialogue. I don’t like surprises and now, as part of a bigger company, they certainly don’t like surprises and stuff has to show up on P&Ls. You can’t sell the business on the cost of something and go back later and say “Oops, I’m sorry, you know, it’s an extra couple of hundred thousand.” That just doesn’t work. Especially as we’re a manufacturer, if the manufacturing guys do a very good job of calculating labour rates, and calculating components, and calculating cycle times on injection mould machines, the least I can do is give them a ballpark about how much something’s going to cost and not make it exceed. So, I think it’s really about in-house counsel really communicating with the outside counsels and just being very open and letting them understand this is the way it needs to work.

We have, on occasion done RFPs — just recently we did three of them. They are specific and they’re phase-related so you know what the staffing is going to be and what the billing rates are going to be. What’s important is sometimes the law firms are concentrating so much on what they’re going to be doing, they forget about the experts and the expenses that come associated with that which can blow your budget. Getting them to get into those details is key. In the past couple of weeks I’ve gone back to the law firm to really get into that scale of details. The partner is promising me that it’s sitting right on top of his desk, but it’s been two weeks, because it’s hard, he has to figure out how many depositions am I going to do and do I really need four experts and how much are those experts? The devil is in the details and I think once I have that I’m better prepared, vis-à-vis the business people, to set them up for what the expectations are.

Headon

We’ve been saying this in the Futures discussion that the profession is going to have to work better with others to figure out how to produce things on an AFA basis that will still be profitable. There is real value that’s being delivered, but I’ve been suggesting there is a bigger role for procurement in it, and they need to work with the in-house team, like they work with anybody else, but there’s definitely a role they can play.


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