Mark Smolik, General Counsel and Chief Compliance Officer of DHL Supply Chain Americas, assesses the ongoing expansion of in-house legal departments, including how they fit into a business’s overall structure, today and in the future.
CCBJ: Supply-chain management is a sprawling industry. How is your team at DHL organized – who are the key players and what are their roles?
Mark Smolik: I have the privilege of leading a team of high performing professionals in multiple countries. The dynamics of the team have changed considerably since I joined DHL in 2009. At that time, we were a team of five. Today, we are a team of fifty-eight servicing the legal, compliance and commercial contracting needs of our various businesses. Seven team members report to me. They include our general counsel in South America and Mexico as well as senior leaders of our commercial, real estate, litigation and employment practice groups. Also reporting to me is our Vice President of commercial contracts management who is also instrumental in the management of our compliance function.
We’ve seen a growing number of in-house legal department leaders saying they aren’t “just lawyers” – they’re there to help further the goals of the business and the success of the business. With that in mind, how do you and your colleagues collaborate with the other key departments at DHL?
If you walk around our department, in any of the countries where we have offices, you won’t find many law degrees hanging on the walls. We are business people who have the benefit of having law degrees. It’s an approach that resonates with our business partners. We operate our department on three key principles: Align, Enable, Simplify. We go to great lengths to make sure the objectives and goals we set as a team are aligned closely with those of the businesses we serve. We work closely with colleagues at every level of the company to find ways to enable their business, while assuring we are strong stewards identifying and mitigating risks. We seek to do all of this by delivering simplified solutions to oftentimes complex and challenging issues and matters. I meet one on one with business leaders to gain the benefit of their insight to assure we are servicing their needs and delivering value they feel is benefitting their organizations.
What’s your assessment of the regulatory landscape in the United States at the moment, and what does it mean for your business?
In my opinion, it is a bit unpredictable. Businesses desire and need some degree of consistency in laws and rules that govern their operations and the economy overall. When governments fail to act or fail to provide a relatively stable regulatory environment in which to operate, it can be challenging for many businesses to plan or commit to certain investments. A recent survey by KPMG highlighted that almost two-thirds of general counsel surveyed said the U.S. regulatory landscape is among their top concerns. It’s surely a top concern of mine. It is increasingly challenging to advise our business on a number of key matters/initiatives when the regulatory landscape that directly impacts the giving of such advice is so unpredictable.
What do you see as the greatest challenges and opportunities in 2019?
Some of the most significant challenges facing the legal industry today are also some of its greatest opportunities. Law departments remain under pressure to do more with less. It’s a challenge general counsel have been facing with increasing regularity particularly since the great recession hit our industry in 2008. In response, more and more innovative department leaders are turning to alternative legal service providers to help reduce or lower overall costs and enhance the value they deliver to their organizations. This innovative, new way of thinking is fueling a wave of new entrants to the legal industry ecosystem. It’s also propelling the growing influence of others such as Elevate, Clarilegal and dozens more who show no signs of slowing down. In many respects, the traditional law department, law firm buy-sell relationship continues to change. The growing influence of procurement professionals in that relationship remains a bit of an unknown as law firms struggle with new challenges to their traditional hourly fee pricing model. I have openly stated in a number of forums that I cannot continue to pay hourly fees that escalate year over year and exceed, in a growing number of instances, $700 per hour on average. It’s why I am constantly evaluating the cost and benefits of in-sourcing legal work. One innovative approach we adopted at DHL is referred to as our CCM (commercial contract management) model. We’ve built our own ALSP within our legal department. Among the legal department team are more than 20 commercial contract managers who are intimately familiar with our business and are responsible for drafting and negotiating all of our customer contracts. Our CCMs serve as project managers coordinating every aspect of getting a customer contract related deal closed. It’s a model that has been working with tremendous success over the 10 years I have been with DHL. In addition to significantly increasing the value we deliver to our business, our CCM ALSP model permits us to deliver work-product at a significantly lower cost when comparing having that same work handled by attorneys, who support our CCMs in furtherance of our one team approach.
It’s not all about costs in law departments. Talent management of both internal and external team members and service excellence are critical to the delivery of sustainable value. In every organization where I have worked as a professional I’ve had the opportunity to learn and grow my career through the feedback I’ve received during the annual performance review process. While it’s great to hear about strengths, I’m always more interested in learning about my gaps in performance or leadership. The highest performing members of my team, with the greatest senior leadership potential, are those who have embraced their discussions with me and their supervisors during this process and have acted on the feedback. Years ago I developed, and then rolled out when I joined DHL, a similar review process with external law firms (who I consider to be extended members of our team). At first firms were surprised we were going to review their performance against objective performance criteria. But we did and the results have been remarkable. The performance of our external team has increased considerably and our overall costs remain at a level we feel is balanced and fair. Our highest performing firms continue to grow their business with us and they are enjoying the opportunity to be intimately involved with our team and our business. All of this came about because we were innovative and perhaps bold enough to have the conversation with our external partners. Admittedly, we were ahead of our time when we kicked off this initiative. But, this way of thinking is gaining notice among law firms and law departments seeking an innovative way to enhance value proposition between them and help manage and structure a much needed performance discussion/evaluation.