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Shell Sees Legal Team as Instrumental to its Future

This is the first in a series of articles that will provide an insider's view on the effort to incorporate professional sourcing methodologies into Shell's legal operations. It details Royal Dutch Shell’s global panel review process from the hiring of their first ever Global Sourcing Officer (a member of the ACC Legal Ops Section) to the mechanics of the panel review itself, on to the results, negotiations, KPI’s, stakeholder engagement, and more. Take a front-row seat for this story of continuous improvement in procurement of legal services.

D iversity and specialization are important elements of sustainability at scale. Pushing the known limits of scale, Royal Dutch Shell is the third largest company on the Fortune Global 500 with 94,000 employees working in more than 70 countries and territories. Shell not only extracts, refines, and transports about 3 million barrels of oil and gas per day but also has more branded retail outlets than McDonalds has restaurants. It is a massive operation that will need to scale even more to satisfy the growing global demand for energy, one of the biggest challenges of this century. Many people will contribute to Shell's continued success. Some of them are lawyers, not all of whom work at Shell.

Mirroring the corporation it serves, Shell's extended legal team also thrives because of diverse specialists around the globe, including over 1,000 internal professionals. Shell legal handles everything from M&A and IP issues, to resolving disputes and embedding ethics and compliance considerations at the heart of every business decision. Success demands closely aligning legal strategy with business strategy. Shell legal is therefore run as a business to ensure there is single point accountability for budget and results.

To run properly, the business requires strong working relationships with external counsel firms. While diversity and specialization drive superior performance, heterogeneity and distance create challenges for accountability and management. The fundamental task of managing outside lawyers does not differ from management in general: enable joint performance through common goals, common values, and the right structure. But autonomy-seeking lawyers working in independent organizations raise the difficulty setting.

Paradoxically, additional specialists can help address the problems associated with specialization. Donny Ching, Shell's global legal director, is charged with managing a multitude of external resources, along with his own department and other mission-critical responsibilities. Ching is supported by his own cadre of internal specialists. This support structure starts, but does not end, with Shell's internal domain experts who perform and oversee the substantive legal work. At the scale of a legal enterprise like Shell, there is also a demonstrable return on investment in integrating allied professionals into the value chain. Shell legal has specialists who bring expertise in strategic sourcing, project management, pricing, etc. to bear on the delivery of legal services. In a recent interview, Ching observed, "We're such a big group. We're capable of doing more."[i]

The title of that interview is "Donny Ching's first year as Shell's global legal chief and why private practice must watch out." Among other key strategic initiatives, the interview made clear that Shell's external lawyers should prepare for Shell's upcoming panel review in spring 2016. Ching acknowledged that some firms were reluctant to explore "appropriate fee arrangements" and that Shell would "have to lead them a bit….so we're developing quite a bit in terms of our own knowledge base, how to disaggregate and develop a commercial mindset." Towards that end, Ching hired one of this article's authors, Vincent Cordo, to serve as Shell's first global sourcing officer.

This is the first in a series of articles that will provide an insider's view on the effort to incorporate professional sourcing methodologies into Shell's legal operations. At the time of Vince's hiring, Ching spoke about the importance of panel review and suggested that firms who had been reluctant to heed Shell's previous calls for AFA proposals should have "a bit of a rethink."[ii] Richard Hill, Shell's general counsel for global litigation, concurred, adding that the panel review "creates a focus on working towards real value."

Vince's job is to assist Ching, Hill, and the other legal department decision makers. Vince is an MBA with a second masters in technology management and extensive experience in sourcing, pricing, project management, and key performance indicators (KPI's). Before Shell, Vince worked at three AmLaw 50 firms, most recently as Global Director of Client Value at Reed Smith. Vince's co-author, Casey Flaherty, is a lawyer turned consultant/writer who focuses on facilitating structured dialogue between law departments and their law firms. Casey previously worked as outside counsel for an AmLaw 50 firm and as in-house counsel for a major automotive distributor. The authors' formal mesh point is training in Lean Six Sigma and the attendant emphasis on continuous improvement.

This story will be one of continuous improvement. As Vince works with Shell's legal executives to plan, execute, and sustain the gains from Shell's panel review, we want to talk not only about successes but also about obstacles and missteps. Our topics will include the tendering process, firm selection, multi-sourcing, matter scoping, budgeting, fee structures, shadow billing, financial tracking, performance measurements, technology utilization, invoice analysis, etc. Though the lessons emanate from a specific environment, our aim is to discuss principles, practices, and projects that are widely applicable and accessible. While size matters—an in-house department of ten will operate differently than a department of a thousand—working within capacity constraints and making trade-offs remains central to implementing a sourcing strategy no matter the dimensions of the department or budget.

A thread that will run throughout the series: there is no versus. Every stakeholder involved in the delivery of legal services shares common goals: achieve the right outcome for the client by ensuring that the right people are doing the right work the right way at the right price. While there can be good faith disagreement on means (e.g., strategy, personnel, fee structure) there should be no discord about ends. The law department is not at war with itself — frontline lawyers versus management. Nor does the law department exist in opposition to other departments in the company (e.g., finance, procurement, business units). External law firms are not our adversaries. That collaboration is not always easy does not make it any less essential. Fostering cross-functional and cross-organizational collaboration is a crucial element of a successful sourcing strategy. While success is never guaranteed, these articles will cover principles and practices that make it more likely.

[i] Griffiths, Catrin. "Donny Ching's first year as Shell's global legal chief and why private practice must watch out." The Lawyer. 27 April 2015

[ii] Kinder, Tabby. "Exclusive: Shell Hires Pricing Analyst to Manage Fees Ahead of Panel Review." The Lawyer. 22 May 2015:

About the Authors

Vincent Cordo serves as the Legal team's Global Sourcing Officer for Shell. He is a member of the ACC Legal Operations Section.

Casey Flaherty
is a former in-house counsel who is now a legal tech consultant and the founder of Procertas.

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