Pearson PLC has used global law firm panels and an alternative services provider to cut nearly 25% of its legal spend over three years, according to the education company’s chief legal officer Cinthia Nespoli.
The company mandated the budget cut in 2017 as part of a broader effort to increase efficiency. The law department partnered with Morae Global, an ALSP, to streamline transactional work while also culling its list of outside counsel to three panels and a preferred providers list.
Bloomberg Law is conducting a Q&A series highlighting some of the legal industry’s most important relationships: the often fruitful but sometimes complicated connections between general counsel and their outside law firms. We’re talking with general counsel across industries about how they select outside lawyers and handle issues like billing, fees, and tracking performance.
Sao Paulo-based Nespoli joined Pearson in 2012 and became CLO in July. She previously worked as a lawyer for a Mexican home appliances company and as an internal auditor at Mann+Hummel in Brazil.
Nespoli recently spoke to Bloomberg Law about Pearson’s two-pronged strategy and the internal legal operations team that she says makes it all possible.
This conversation has been edited for clarity and length.
Bloomberg Law: How did your team and Morae create the Transactional Service Center?
Cinthia Nespoli: We are actually looking at Morae as an extension of our legal department in how we work together to better use technology, better use data, and become more efficient on how we deliver legal services. The Transaction Services Center provides end-to-end legal services for revenue and expenditure contracts to Pearson business units located in our U.S., U.K., and international markets. Initially, when we envisioned the TSC in 2018, what Morae started to do for us were transactions. Now, we are also looking into having not only transactional work, but also a different level of work from the Morae team as well.
We have, of course, legal trackers and then we have e-billing that works with firms. We have sharing technology with firms in which we share reports and they can use our technology as well, and we can pull out reports and information on cases. We are also looking at other technological tools from an AI perspective that we can use in contract clauses, databases and that sort of thing.
BL: How do you see Pearson’s use of tech evolving in the future?
CN: We have been truly vested into implementing technology and having it in our legal department. It’s a journey, and the beauty of tech is that tech evolves. You are never quite there. There is always something new and better and different that can get you to the next step. So I think we certainly have a team that is invested in, you know, following up technological trends, understanding what is there in the legal market so that we can then evaluate whether those are going to be good choices and good matches for us. The legal ops team is something that has helped us in terms of how we are looking at the more digital legal future.
Our current technology landscape is comprised of a number of software applications that are used for demand management, matter and spend management, contract management, legal hold, electronic discovery and data analytics, IP management, corporate governance, entity management, compliance, data privacy, knowledge management, and reporting and analytics. [Enterprise software company] Onit is what we are using as our base platform for technology, and we have a license with Onit that is customizable.
BL: How have you balanced operating your legal team of more than 100 employees with integrating these new technologies and processes?
CN: There is a lot of legal technology available, but it is important to think about the fact that these things require execution, and having a legal ops team can really help you get there. Fairly recently, my predecessor created a legal ops team for Pearson. So within the legal department, we have an embedded department that is in charge of technology, service-level agreements, efficiency in how we do things in different ways, implementing self service and different technological tools to get us through that journey.
A legal ops team requires different sorts of expertise that you wouldn’t usually find within a legal function. For example, data analysts, software engineers, depending on whether you own the technology or whether you were outsourcing it. Therefore, you would have to go to market and source it.
BL: You have created panels of go-to firms for everyday legal matters, a strategy that Honeywell’s law department and others have also used. How many panels do you have, and how did you decide on the firms that would comprise them?
CN: We have panels and we have preferred firms. The idea behind that is, again, that we’re matching the right firms to the right service, that we got to the right mix. We have one U.S. panel, one U.K. panel, and we have an international one that is basically covering India and Brazil. We have four firms for the U.S., three for the U.K., two for Brazil, two for India. On top of that, we have a list of around 10 preferred firms we occasionally use for particular subject matter or geographic needs. We have major global firms like Morgan Lewis, we have Quarles and Brady doing patent work and trademark work for us. We have Freshfields and Herbert and Smith for the U.K.
The first criteria was who were the firms that already knew us, and with whom we’d already had trusting relationships and long-term standing relationships. The other thing was the massive idea underneath the creation of these panels: to match the right work to the right partner. You don’t want to spend a massive amount of money on a matter if you are engaging the wrong firm for that level of work.
So, of course, we have the panels, we have the preferred firms. But if I have an out-of-the ordinary matter, like a major piece of litigation, or a massive M&A operation, then we would go and we would do a bid.
BL: Were your fee arrangements renegotiated as part of these panels?
CN: We have negotiated different rates so that we have the best deals we possibly can for the company with the right mix of outside counsel. The legal profession is evolving, and so are the outside firms that we use. We’re moving to alternative fee arrangements in which what we’re trying to negotiate is fixed fees for matters, caps, and different formats for how outside counsel is provided.
The idea is that the panels would last for three years, so we don’t have to be revisiting those arrangements on a fairly constant basis. That was the spirit of the panels, and we believe we have fair deals in place with the firms that we have on the panels. We have very good partnerships with these law firms, they’re well respected, they’ve known us very well for some time, so we really feel we are in a good place.