How does a three person IP legal department go from using 200 outside law firms to just 30 in six months, while saving the company nearly $100K annually in legal costs? No, it’s not magic. Rather, it is the result of embracing innovation and finding new ways to add value to the company. That’s exactly what Pennsylvania-based Kennametal’s legal team did, and others are taking notice.
So who is Kennametal? Kennametal Inc. is a global industrial technology company with 13,000 employees which conducts business in more than 60 countries. Despite its large size, the company has a surprisingly small IP legal department led by Chief Counsel of Intellectual Property (IP) Larry R. Meenan and just two other patent attorneys.
Time for a Change
A few years ago the company adopted “innovation” as a core value. The company’s goal: Secure 40 percent of sales from new product offerings. The boom in product development was great for the company, but Mr. Meenan and his legal team found themselves overwhelmed by the increased workload.
Rather settling for business as usual, the Kennametal legal department took a page out of the company’s innovation mantra and looked for better ways to manage the department. The end result was nothing short of a success, but it didn’t come without a major overhaul. So how did they do it?
3 Steps to a Legal Department Makeover
1. Embrace Technology. Kennametal’s first step was to “follow the money” or, in other words, find out where the biggest amount of legal spending was going. They quickly realized their paper-intensive billing and invoicing process was the culprit and they needed technology to help them better manage the process. They decided to enlist the LexisNexis CounseLink software, a cloud-based legal spend and matter management system to help them streamline their billing and invoicing process.
2. Develop Billing Guidelines. Working collaboratively with outside firms, the IP team established new rules for billing terms and arrangements, for things like: How to compensate for meals or travel in different cases, or when hourly rates would apply versus alternative billing methods. They did this to gain better insight in terms of how things should be categorized and how they should be billed.
3. Clarify Fixed Fee Work. To gain more cost predictability and to make easier matter comparisons the team asked for standardized rates on IP legal work in commodity-type service categories—for example: When filing a patent application in a specific country, or when conducting a trademark inquiry in these locations. This insight proved to be invaluable for forecasting future expenses.
The Big Picture
With a more holistic view of the legal department Mr. Meenan and his team are beginning to see how their investment is paying off in more ways than one. Here’s a quick snapshot of their progress thus far:
- A savings estimated at $93K annually largely due to capturing billing guideline violations.
- A consolidation of 200 law firms to 30 leading to retention of only the highest value relationships not to mention a more manageable number of firms to work with.
- A savings of 4 ½ days of administrative work each month by going paperless.
- A new docketing system which provides a unique matter file and corresponding bill with built in security features enabling only designated counsel to review them, as needed.
- Invoices are now automatically reviewed for compliance with billing guidelines and if any red flags are noted they are either highlighted or deducted.
- An automatic monthly report is sent to accounts payable which can be uploaded for vendor payment.
- An additional report shows matter costs and value based on legal spending.
A Shining Example
Mr. Meenan says their intent wasn’t to streamline outside law firms, but it happened organically as a result of the technology change, new billing guidelines and natural attrition. Today, the IP department is more streamlined and easier to manage. On top of that, the group has become a model for the company.
After seeing the IP team’s success, the company’s general legal department, comprised of seven attorneys in the U.S and abroad, decided to follow suit. As a result of the change, in just six months, they generated just over 15 percent of the invoices, and less than four percent of outside firm costs. Two key metrics for that same timeframe indicate the overall legal department processed 2,426 invoices, and automatically captured $32.3 thousand in invoice reductions.
However, the biggest marker of success according to Mr. Meenan, is the recognition the group is getting from upper management. By approaching their business in an innovative way, they have shown their ability to do more with less while maintaining high quality on a flat budget. Sometimes change can be difficult admits Meenan, but without risk there isn’t the opportunity for reward. When looking back at the company’s mission the IP team proved the meaning of innovation comes in all shapes and sizes.
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