Clifford Barr is assistant general counsel, litigation and human resources, for Marathon Petroleum Corporation. In October 2018, the company merged with Andeavor, an integrated marketing, logistics and petroleum refining company where Barr has worked for 13 years. His job there changed dramatically about two years ago, when the company hired Kim Rucker as its new general counsel. Rucker had previously been general counsel at Kraft, where there was an established legal operations group. She saw that Barr, whose work in procurement had led him to develop processes and to standardize and streamline procedures, had an aptitude for this sort of thing. (His years as an Air Force JAG officer also came in handy.) So she asked him to create and lead a legal operations team to help transform the legal department from a cost center to a strategic value-added business partner. The interview has been edited for length and style.
Youʼve been involved in a fair amount of M&A activity recently. Can you talk about some of the value that a law department and an ops department can bring to the company?
Clifford Barr: An ops department can stretch into many different areas, but I think the biggest value can come from having increased visibility into your budget so you can understand what your best targets for cost reduction and value creation might be.
One of your biggest targets for reduction is likely to be your outside counsel costs. There are two main strategies for lowering them: hire more experienced in-house counsel to offset the use of higher-cost outside counsel, or negotiate better fees for outside counsel use. His company has focused on both strategies.
First, it has increased in-house counsel usage through hiring more experienced in-house counsel and training current counsel so that they can provide support for business initiatives. Highly experienced in-house counsel have been brought into the department for areas such as M&A, real estate, litigation, compliance and procurement contracting. We have also established an excellent commercial contracting group that minimizes the use of outside counsel for commercial contract review.
The other strategy for lowering your outside counsel costs is through negotiating better fee arrangements for outside counsel use. Many legal operations teams look for simple standard rate discounts when they want to achieve savings. My team has discovered that the fee arrangements that you never asked for are the ones that often have significant value, such as fixed fees, collared fees and phased fee arrangements. For example, we have set up phased fee arrangements for M&A projects where we phase our legal costs so that if a deal does not advance all the way to completion, the firms that we work with will not charge us a fee. If the deal does move forward, then as we advance through the various phases, the percentage of outside counsel fees we pay will increase. If we complete the deal, then the outside counsel fees are paid in full and there is an additional bonus for the outside counsel for the successful close of the deal. Fixed fees help not only with cost reduction but also with budget stability. If you are paying a set amount for legal work, you may not be getting a heavy rate discount, but you take away the uncertainty of having high, unplanned outside counsel spend in one quarter and low outside counsel spend in another quarter. Having predictability for budget and planning is a tremendous advantage created by fixed fee billing.
What else helps you control costs?
Barr: Budget monitoring is a must. I have a member of my team, Monica Moton, who is extremely good at budget monitoring and running analytics on a regular basis, both for outside counsel spend and for internal spend as well as for travel expenses and education. Diligent budget monitoring shows you the areas where you may be able to cut costs. For instance, instead of spending $100,000 or more a year on having attorneys travel to various spots for CLE, we offer them an online suite of CLE programs that we have set up for a flat fee. They can go online at any time and take classes to satisfy their CLE requirements, which has reduced our overall travel and training expenses. These types of savings can’t really come about until you have good budget tracking and analytics reporting. Budget monitoring and related analytics also help you report your success in creating savings and efficiencies.
If someone was to try to home in on your teamʼs performance or the companyʼs performance, what would you point to for key performance indicators (KPIs)?
Barr: There are several KPIs that my team tracks. First, we track our reductions in spend – both internal and external. Your internal spend consists mainly of travel, employee expenses, education costs, etc. External spend is generally on outside counsel and other consultants. A KPI that my team uses for this is the spending distribution between internal and external spend. This KPI will generally indicate how much more in-house coverage may be added to offset outside counsel costs. The more you can shift the percentage of spend distribution to internal costs, the more your overall spend should decrease because a higher percentage distribution to external costs is generally indicative of a higher total spend on outside counsel, and thus a higher total spend.
Second, my team tracks staff productivity based on head count and process efficiency. Since we have done analytics around how much reduction there is in outside counsel spend by adding head count, we track head count and productivity very carefully to make sure we are not just hiring people, but hiring them for strategic purposes and placing them within legal for areas that need the most coverage. Tracking process efficiency along with staff productivity allows you to see how much time is spent on administrative tasks and to ensure that these tasks are necessary. Tracking staff productivity will also ensure that your legal staff is fully engaged and utilized correctly at all levels.
Third, my team tracks outside counsel usage data such as the percentage of fee arrangements for outside counsel billing, what type of fees make up these billing arrangements (blended rates, hourly billing, collared or fixed fees), overall satisfaction with outside counsel and outside counsel compliance with our billing guidelines.
Fortunately I have two members of my team, Michelle Straus and Monica Moton, who are very advanced at using our matter management and SAP systems to track much of the above KPIs. Michelle and Monica are both excellent at tracking matter details and related analytics. It is critical to get a matter tracking system in place as soon as possible and start to track outside counsel metrics and understand your budget details.
Another thing that has been key to driving compliance with billing guidelines and engagement letters is to centralize the review of your outside counsel billing and creation of new matters. Attorneys and paralegals are doing other activities, so when bills come in through your legal tracking system or when a new matter needs to be created, they do not always have time to review and capture details in the legal tracking system. What my team has done differently than a lot of other legal operations teams is to task one person, Kristin Partida, with creating all the matters for our legal department, which allows us to get the most accurate information into our Legal Tracker system. My team also reviews all outside counsel bills to ensure adherence to our billing guidelines and engagement letters.
Additionally, my team has taken a very different approach to the legal support function. Instead of paralegals and administrative assistants reporting to individual attorneys, we have brought all of the administrative assistants and paralegals under a single legal operations support manager, Joanna Mason. This setup centralizes all billing for the legal department under the legal operations team. Since all expenses ultimately run through my team, we get a really good feel for the legal department’s spending and overall operational pulse. This also allows my team to ensure that administrative support is distributed evenly and applied timely to critical needs.
What gave you the idea for this organizational setup?
Barr: The organizational structure for our paralegals and administrative assistants was a takeaway from military organizations. When I was a JAG officer, military legal departments were set up with the paralegals and administrative staff reporting to one senior noncommissioned officer. That sergeant focused on both the proper placement and professional development of the paralegals and administrative staff. This structure has distinct advantages because you have a lot more centralization, control and flexibility of support. It also helps to break down group silos and foster working as a team, which is critical in the military and highly stressed in our legal department. Also, more focus can be placed on the professional development of the support staff, which aligns with our values.
Going back to tracking against peers in the industry, what are your sources for doing that? Is there a database or some resource that allows you to look at similar-size companies, whether itʼs based on revenue or number of employees, where your colleagues can see the decisions of other ops departments or law departments to compare?
Barr: We use some of the Association of Corporate Counsel (ACC) materials, but the biggest source my team is utilizing right now is CLOC [Corporate Legal Operations Consortium]. Its website has a variety of reference materials, documents and survey results. The surveys are an excellent resource because you can look at surveys across the entire industry and see what other operations groups are doing. CLOC involvement lets you truly understand the world of legal operations and how much activity there is right now.
We have also implemented a tool called Sky Analytics through Legal Tracker. Sky Analytics works by using the matter and billing information from your legal tracker system to identify how accurate firms are with overall billing and how compliant they are with your billing guidelines. It also analyzes what your outside counsel are charging you and compares those rates across your industry peer group or location. This gives you an excellent indicator of whether you are paying too much for a firm or getting a deal on par with the rest of your industry peers.
Do the surveys tend to be very narrow, like one or two question runoffs, or are they full-blown ACC-type surveys?
Barr: The CLOC surveys tend to be very narrow. For instance, there may be a question about implementing an artificial intelligence system for contract review that might ask what types of systems others have used and what the results have been. The questions are developed by individual CLOC members and distributed to the CLOC membership for response. Once the questions are distributed, you will see active discussion via email over what everybody else has done. Many times, there will be demonstrations set up with certain vendors based on the survey discussions. If somebody says, “I’ve had a good experience with this service or software,” then the CLOC members coordinate a demo with that vendor to show everybody else what they have done. This is helpful because you can fully understand the capabilities or limitations of a software or service right from the start.
For people looking to take advantage of the opportunity to develop an ops team, now that itʼs more sellable internally, what would you caution folks about, and what challenges have you seen as youʼve taken this on?
Barr: To get started, you want to show what the potential savings from the establishment of a legal operations organization will be. You want to give your best approximation and make sure everybody understands you are giving them some of your early guesswork, which is likely to change. Knowing where you are and what current processes are in place will help you know where you want to focus your early efforts. I would highly recommend using some basic Lean Six Sigma concepts to determine the best targets of improvement or savings.
Once you begin, if you bring true value and process efficiency, you will be called on to do all kinds of things, many that are outside the traditional operations role. The problem is that if you get stretched too thin, you could lose sight of your core operations functions, such as controlling spend, creating efficiencies, enabling the sharing of knowledge across your group and making sure that you are aiding in departmental administration and career development. So be sure to stay focused and don’t get lost in the woods by following the smaller trails.
Starting out, you will also want to make sure you have a mission and a vision laid out. Many new operations teams begin immediately exploring different options to create efficiencies. These teams want to implement programs, software and hire people right away. My advice is to slow down and ask, “What is your team’s vision and mission? What is your first goal to achieve? What are your current processes?” If the answer is that you are not really sure, then you need to stop and take time to form answers to these questions. The biggest mistake you can make is to jump forward, implement a bunch of technology, bring in consultants and not understand how best to employ them. Software and consultants can be extremely helpful, but again, you must first understand where you need to begin. You need to determine where it is that you lack knowledge or analytics. After using the Lean Six approach to determine your starting point, you will want to attend workshops to gain insight into those areas of potential improvement and begin tracking things so that you can use analytics to aid you.
You also want to know your audience. If you’re speaking to your in-house counsel and you say, “Everything you have been doing is wrong, and I’m here to change it,” you are not going to get a very warm reception. Instead, show your team how you are trying to help them, how you are going to work as a team to build value and how you can help them demonstrate their success within the organization. I have spent a lot of time working with my peers, and that has brought me success because I make sure I have their buy-in and partnership. All your efforts will fail if you do not approach this as a team effort, and my success is due to the help and cooperation I receive from the entire legal team.
Remember that the operations role is not just set up to satisfy a one-time cost savings goal. A lot of people think operations is just about sending an RFP out once a year to slash outside counsel rates. That is not at all what legal operations is about. Legal operations is a continuous effort. You have to plan for the long term and how you’re going to support keeping your overall goals moving forward. If you’re just going for short-term wins, these may run counter to your long-term goals. Rather than just trying to slash prices and cut costs, you want to form long-term goals. You don’t want to create an adversarial relationship with your law firms. Rather, you want to create a partnership to make sure that the firm is going to keep their doors open and can recruit good attorneys to represent your interests.
Is there anything else you have found interesting as you have started in legal operations?
Barr: Yes, I have discovered that legal operations is now gaining so much traction within the legal industry that many outside law firms have their own operations person or group. As I recently negotiated with several law firms, I noticed that my initial conversation was with the main partner or relationship manager, much like many conversations of the past. However, when I let them know that my team and I were in an operations function and that we wanted to discuss alternative fee arrangements, the partner or relationship manager would want to reconvene the call at a later time. When the call would reconvene, the law firm would introduce their operations person and we would begin negotiations in earnest. So many law firms have basically “opped up.” I think itʼs a funny term, because you always hear about people “lawyering up,” but now you have many outside counsel firms “opping up.” Firms and companies are beginning to understand the value that a legal operations department brings, and they realize that it is very important to have somebody who understands operations on their team.