Susskind: Rio Tinto deal heralds huge changes

I just read Richard Susskind's take on Rio Tinto's legal process outsourcing (LPO) deal, which he describes as "ground-breaking."

Why is the arrangement with CPA [Rio's LPO partner] so significant? Primarily because it is evidence of a profound change in the legal world. In-house lawyers are under great pressure to reduce their head count and to spend less on external law firms, but, at the same time, their workload is increasing.

Clients, in short, need their advisers to provide more-for-less.

As we have noted previously, "more-for-less" cannot be achieved by focusing purely on hourly rates. Susskind agrees and posits that offshoring will provide one of many alternative approaches, another being "computerisation, using tools such as automatic document drafting and workflow technology."

The takeaway

Rio Tinto has made it clear that it really does want change. Whether you're in-house or in a law firm, you've got to decide whether this is a one-off or the start of a trend.

If it's the latter, you better work out what it means for you and how you're going to respond.

Rio Tinto to slash legal costs by 20%

In an effort to reduce it's annual legal bill by 20% (or around US$20M), Rio Tinto is outsourcing legal work to India. According to The Times, the work will include "tasks such as reviewing documents and drafting contracts."

Targeting expensive lawyers

Rio estimates that its Indian operation "will be seven times cheaper than comparable lawyers in London." Rio's legal process outsourcing partner, CPA Global, "provided us with fresh thinking about how to unlock real savings on our legal costs without altering the level of service we offered our internal clients," said Leah Cooper, Rio’s managing attorney.

The test will be whether Rio can actually maintain current service levels after transferring their processes to India.

Other benefits

"As more of our standard legal work is filtered though to CPA Global, we will have more time to lift our heads up from the day-to-day reactive delivery of legal services and focus on being more proactive," said Cooper.

Where to next?

If the offshoring really enables Rio's lawyers to focus on being more proactive, it could open up other opportunities. For example, it may just give Rio's lawyers the bandwidth they need to look at improving service delivery, rather than simply maintaining it.

Now, as we've previously noted, the only way to do that without increasing costs is through innovation. And increasing productivity by transforming and automating your business processes is not easy. It takes a big commitment of time and effort from subject matter experts and other skilled employees.

However, the good news is that success results in valuable competitive advantage that's difficult to replicate. Which means that, at the very least, you owe it to your clients and shareholders to investigate the business case for taking service delivery to the next level.

So, what are you waiting for?

The 10 Most Innovative Legal Departments

Is your department innovative? This is the question being asked by Inside Counsel, a magazine for in-house legal departments.

Why is innovation important?

The answer, in a nutshell, is that innovation is what enables organisations to remain competitive. It's transformational in nature, enabling step changes in productivity (as opposed to incremental improvements). It's what drives progress. And in corporations, innovation is just as important in the legal function as in sales, procurement or HR.

What is not innovation?

Many in-house lawyers are under the misconception that beating their external law firms over the head about hourly rates constitutes innovation. (Funnily enough, one of last year's submissions was a "patent-pending method for forcing law firms to lower their rates.") Another common approach is to shift work from top tier providers to chepear firms or regional offices.

Focusing on billing rates and cost cutting isn't innovation. All it does is lead to bill padding, poor service or both.

So what is innovation?

Real innovation involves finding new ways of doing things. And sustainable innovation can only be achieved by revamping and automating key business processes. What are the major activities and processes in your legal department? Is contract drafting/review/negotiation up there? If so, how effective is your current process? Have you ever analysed it? Could it be made cheaper, faster or less risky?

If your contracting process is world's best practice, nominate for the Inside Counsel 10 now. If not, test drive Exari to see what's possible.

Drafting contracts to be understood

Everyone who deals with legal documents can point to unintelligible agreements. Many would argue that this is the aim of the drafter.

That may sometimes be the case. But, more often, the drafter(s) in question simply know no better. Most lawyers are NEVER taught how (or why) to draft in Plain English.

If you're interested in removing ambiguity and communicating more clearly, there are a couple of sites you should check out.

• Adams Drafting assesses all manner of contract language and advises on best practices for clear and concise usage.

• Typography for Lawyers focuses, not on the words per-se, but on their visual presentation. This site explains how poor text layout impedes readability and comprehension and tips for better typography.

And for an interesting take on the proliferation of legal gobbledygook in contracts, see Why Our Agreements Look Like Crap.

Automated document assembly software can help keep your contracts consistent and compliant, but the document author still must use clear, understandable language.

How to Fix Turnaround Times

The previous post ended by asking how banks could better handle unanticipated spikes in lending applications. Or more generically, how can a service provider respond effectively to an increase in client requests?

Scalability
And that doesn't mean hiring more people. It means automating processes to capture quality data up-front and remove bottlenecks to downstream fulfillment. The real issue is how to do that properly. Tactical solutions focussed on an individual function or channel cause as many problems as they solve, while strategic solutions are out-of-date before they're implemented.

Quick wins
The key is to start with a quick win. Rapid deployment to handle a targeted problem. Then, after solving that problem (and celebrating the "win"), iterate.

The right tool for the job
But to do this effectively you need the right platform. From the start, the system needs to be:

Robust - to mimize expensive down-time.

Scalable - to reliably handle increased volumes.

Flexible - able to handle new business situations.

Usable - to be embraced by the business.

It's all about the user
It's the last requirement - usability - that is most often overlooked. And, it's the most important. If a system is not designed for business users - as opposed to by IT - it will fail. For a system to be owned by business users, it needs to be easy to use so the business can maintain it without needing to continually go back to IT.

The result
By automating their document intensive processes with document assembly software, Exari's clients have been able to cut cycle times and costs by 70%. Think about how much more productive you could be. You'd be amazed how much you can achieve when the business "owns" the solution to its problems. Contact us to learn the ROI for your project.

Australia's Big 4 Banks' Big Mortgage Problem

Though they may not realize it yet, the mortgage sector market share of ANZ, CBA, NAB and Westpac (at over 82%) is starting to cause them problems.

All four banks have been reported as taking up to a month to process mortgage applications. So far it hasn't mattered, as borrowers haven't had any viable alternative funding options.

But it looks like that's changing. Mortgage Choice for one is encouraging its brokers to steer clear of the major banks. CEO Michael Russell has said that they are going to be running workshops focussed on lenders with "clean pipes who are best equipped to handle an increase in volumes."

Broker sour grapes because of lower commissions? Maybe. But all bankers would agree that application turnaround times are of key importance to borrowers and brokers, and hence to a bank's ability to take customers out of the market.

So what should the major banks do? (Find out in an upcoming post.)