© SEP TEMBER 2013, ASSOCIATION OF CORPORATE COUNSEL 15
Over the past seven years, the Marsh & McLennan Companies Global Legal Department has embarked on a strategic plan to reduce legal costs, particularly outside counsel
fees, while improving the overall quality of legal services to
the company. Since 2008, the MMC legal department has
reduced outside legal fees by 56 percent. The plan has three
major elements: implementing new technology, reducing
the number of outside law firms and pursuing innovative
value-based fee arrangements.
Leveraging new technology in pursuit of innovation and
improved metrics, the department recently completed a global
implementation of Datacert’s Passport system for e-billing and
matter management, migrating from a legacy system that was
over 20 years old; it has transferred over 85 percent of its outside
legal spend to the system. MMC Legal was Datacert’s first global customer to implement Passport.
“With new technology and improved reporting, we’re now
more focused than ever on metrics that give us the ability to
measure performance and operational efficiencies,” says Michael
Caplan, MMC Legal’s chief operating officer. These metrics
include global spend by operating company, line of business,
region, law firm and matter, cost savings, and cost avoidance.
MMC Legal also launched an initiative to streamline the
number of outside law firms used by the department, selecting
about 50 from more than 400. A Request for Information was
sent to these 50 firms with questions ranging from capabilities
and rates to appetite for value-based fee arrangements.
A significant output from the exercise was the development
of a new standard-form engagement letter for each preferred
provider, setting forth billing guidelines. It requires law firms
to provide a business case, key dates and deliverables, suggested
staffing models, and blended rates for partners and paralegals
for non–fixed-fee work. Caplan estimates that the move to a
preferred provider list and consistent billing guidelines has saved
MMC at least $10 million annually since July 2011.
This approach had the approval of Peter Beshar, executive
vice president & general counsel. “In terms of getting our in-
house lawyers on board, I had to have support from the top,”
says Caplan. “Peter signed on to the idea that we had to look at
the outside firms at the same time that we were implementing
MMC Legal began using value-based fee arrangements about
three years ago on M&A transactions. The company moved to
an alternative-fee model in 2012 through competitive bidding,
but expects to increase its utilization of these types of arrange-
ments in 2013, especially in the areas of litigation, M&A,
subpoenas, contracts and intellectual property.
“We have really moved toward fixed fees, feeling that they’re
really the only kind of alternative fee arrangement we can stick
to, because they’re tied to scope,” says Caplan. “We’ve gone
from 0 percent of matters under fixed fees to 40 percent.
“We care greatly about predictability. It is more important to
us than price. We have notified all of our preferred partners that
we are moving all work for key matter areas to fixed-fee pricing;
the responses have been very positive,” he says.
How has the MMC Global Legal Department been affected?
“Our view is that in-house lawyers can add more value over
time than outside firms. By reducing our overall legal spend, we
are able to strategically add more internal resources to support
growth,” Caplan says. In addition, MMC Legal is looking to
move to a shared service model, where in-house lawyers will
support multiple operating companies.
“A primary goal of the Marsh & McLennan Companies Legal
Department is to create value: for our business colleagues, our
company’s clients and our shareholders. We believe we can accomplish this by using sound judgment to focus on the things that
matter and striving to be efficient in all that we do,” says Beshar.
“We expect the same of our outside counsel partners and look to
them to help us design value-based fee arrangements that make
sense for the matters we work on together. Above all, we look to
create lasting relationships with all our constituents, as a way of
maximizing the value we add to all the matters that we touch.” vc
Marsh & McLennan Companies
A Multi-Faceted Approach to Creating Value: Technology, Convergence and Value-Based Fee Arrangements
FROM THE JUDGES
“Focused improvement on using value-based fee
arrangements, which shows how much progress can
be made over a relatively short period.”
“This nomination really jumped out; they attacked
issues on a broad range of fronts. I was impressed
by the sheer variety of simultaneous initiatives
being undertaken to make a more client-focused
From left to right: Paula McGlarry, Lucy Fato, Michael Caplan,
Peter Beshar, Kate Brennan, Jennifer Feldheim, and James McNasby