Can you afford not to?

When Target comes to Canada this summer, the retailer’s legal department is bringing with it rigorous practices regarding fixed fee arrangements and use of billing and matter-management software.
Target’s desire to control spending came from external industry pressures followed by internal cues from the executive offices to cut costs and better manage spending. The recession has hit retail hard. A spike in litigation across the U.S. also turned up the heat to control legal spend, but Target didn’t want to deteriorate the legal work it was getting done externally.

In telling the company’s story to a recent Association of Corporate Counsel Ontario chapter meeting, Target Canada’s director and assistant general counsel, employee relations Eric Sjoding had the undivided attention of about 65 ACC members as he casually, but succinctly, laid out how things get done and measured at the retail powerhouse.

Law firms working for Target are held to a strict retainer agreement and measured annually on a variety of metrics. If they don’t measure up, there are consequences. The company also makes use of a billing and matter-management tool that illustrates how the budget is progressing on certain matters and where costs might be escalating. Sjoding admits that putting all of that in place did take time.

Towards the end of his presentation, an ACC member raised her hand to ask Sjoding about the time and resources required to roll out and maintain such a system, indicating she had a small in-house department compared to Target’s 100-member team in the U.S., and not much time to do anything but fight fires. Understandable, but more and more in-house departments won’t have the luxury of blindly OK’ing a bill, when costs are more than they expected.

When asked how many in the audience were getting budgets on their major legal projects, about 15 per cent of the audience raised their hands. When asked how many meet at least once a year with their primary firms to tell them how they’re doing, about one-third raised their hands. One would think those numbers would be higher.

I’ve heard several general counsel admit they just don’t have the time or desire to stop during a busy day, pick up the phone, and call their external partners to have that awkward conversation about what they’re being charged. But for how long can they afford not to?

For Sjoding it’s a regular part of the bill-review process. When he gets a new bill anything that comes across as a violation of Target’s retention guidelines with outside firms pops up in the software as an audit item. He must then go in and approve every exception to the guidelines. He can monitor everything from whether there is a constant spin of associates on one of his files to what he’s being charged for photocopies (10 cents, not 20 cents, and he keeps an eye on that).

“The fees and costs add up quickly and it truly brings great clarity to what those things are,” says Sjoding. “Those $500 or $2,000 charges add up. We are able to use those metrics and show we were able to save a ton of money for our legal spend.”

Why wouldn’t a legal department want to have a billing-tracking system in place?
One of the main outcomes for Target, says Sjoding, is “not only a reduction in fees but more so, predictability.” Wouldn’t that be nice?

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