BMO Financial Group has been recognized by the Association of Corporate Counsel for the way it challenged its legal and corporate compliance departments to come up with an awards program to find efficiencies and improve processes through its Innovative Team Challenge.
In its 2015 ACC Value Champions announcement today, the ACC highlighted the efforts of the 12 winners chosen from 80 nominations received. BMO was the only Canadian winner. It was in the company of AIG (New York), 3M (St, Paul, Minn), FedEx Ground Package System (Coraopolis, Pa), Fireman’s Fund Insurance Co. with Novus Law, Juniper Networks (Sunnyvale, Calif.), SSM Health (St. Louis), The Heico Co with Shook, Hardy & Bacon (Chicago and Kansas City), VMware (Palo Alto, Calif.), Xcel Energy (Minneapolis), Yazaki North America (Canton, Mich.).
Last year, through a town hall announcement, BMO’s legal and corporate compliance team was asked to create teams and come up with projects with an eye to process improvement, finding efficiencies and ideas around how they could work differently with outside counsel.
“We realized we needed to create a more formalized program to try and move this change and not do it on a one-off basis,” says Carla Goldstein, associate general counsel, director of strategic initiatives for BMO.
There were 40 projects focusing on mitigation of risk and how to differently price legal services put forward from different teams at the bank. The best ideas resulted in a standardized regulatory compliance review process that eliminated the need for 60 per cent of business reports and, through the use of value-based fees, the department reduced legal spend on employment litigation matters by 30 per cent.
“Before the challenge, the employment litigation was handled by a variety of law firms and all on the billable hour,” says Goldstein. “They went out to four or five law firms and asked for proposals based on fixed fees. What came back were proposals based on phases, so we were only paying for how far the litigation went, as well not being reliant on the number of hours the law firm was billing, which does not always correlate to the value of the matter at hand.”
The new process provides better predictability for BMO and made the law firms think differently about how they were handling matters.
BMO has also accelerated progress in its goal to eliminating hourly fees, moving to 40 per cent of legal work on value-based fees over two years.
The Innovation Team Challenge will continue based on the results it has produced so far.
“We will continue doing this because we are seeing that the change it is providing in the entire group has been monumental and exciting to watch and be a part of,” says Goldstein.
“It all comes down to communication,” says Goldstein. “It’s getting the in-house lawyers to really think about what they need, what’s the value to the company, what’s the objective and to communicate that to the supplier. “
So what is the takeaway for outside law firms? Embrace the “sea change” of the legal industry.
“Clients are looking at things differently and expecting our outside counsel to be in line with what the clients need,” says Goldstein. “That doesn’t mean just cheaper, it’s more efficient, off the billable hour, and starting to think about the needs of the client and not so much inwardly looking as to what they need to do to be profitable.
“I do think the billable hour will go away and will be based on a much tighter partnership between client and the law firm and coming up with fees that make sense for both sides. It’s not there yet but I think we’re moving in that direction.”