Think outsourcing and you inevitably think cost-cutting. But what other benefits can it bring to your business and how do you achieve these? Sophie Gould talks to Jeremy Barton, Partner and General Counsel at KPMG in the UK, about operational transformation, the importance of preparation, and how outsourcing can develop the skills of the legal team.
Tell us a little bit about your background and your team …
I’ve been General Counsel at KPMG for nearly two years, so I’m relatively new. I started off at Norton Rose then moved in-house at Andersen, where I was EMEA General Counsel. I stuck with Andersen through its Enron-triggered collapse and emerged as General Counsel of the Ernst & Young global organisation. I worked there for five years, driving the integration of a $30bn professional services organisation. I then became global General Counsel and Head of Risk at The Boston Consulting Group. I was there for eight years, building up a global team.
There are over 50 people in the KPMG team. It’s a combination of lawyers and non-lawyers. We have accountants in legal because historically the focus of legal risk management has been on the regulated audit side of the business.
Since I joined, we’ve started a transformation programme. The first part of the transformation was around the organisation of the team. It was relatively compartmentalised so we’ve broken that down and reinforced being one team across the specialities: corporate, commercial and practice protection & regulatory.
We also established our strategic priorities for the next 2 to 3 years. One of those priorities is operational excellence and operational transformation is key to that. The first phase of the operational transformation included outsourcing and offshoring. As a result, we use an outsource provider in India and my own team is now based both in London and in Gurgaon in India.
How is the outsourcing working?
We started with NDAs. It’s a ubiquitous type of document that highly qualified lawyers don’t really enjoy doing unless they want to take a break from much more complex contracts! The outsourcing has progressed from NDAs to assumption of responsibility letters, which deal with KPMG’s responsibilities vis-à-vis third parties. We’re also looking at some other basic contracts to be outsourced as well as initial response work on RFPs.
We could have gone for a Bristol-based team, it would have been more expensive and closer to home, but we made the decision to outsource to an Indian team. People worry about India for communication skills, but if you have the right team then there’s nothing to be concerned about.
Our model means the outsourcer is in direct email and telephone contact with our client, so they’re acting as they would if they were in my London team. Often people are used to outsourcing just as back office and never fronting negotiations, but the feedback from the business has been great.
I have two dedicated individuals in my team, one in commercial and the other in corporate, who allocate work to the appropriate team, individual or outsourcer to deal with it. In the next phase of our transformation, we are looking at how we automate some of that.
We have detailed management information and can tell quickly whether the team in India is raising the right issues and making the right judgements. If you have really good playbooks, then the quality of the output from the outsourcer is much higher. We took a long time to get the playbooks right but on balance that was absolutely the right thing to do. There is a front load in terms of investment, time and patience to get to that stage. The success of outsourcing is about the preparation.
What have you learned from the introduction of outsourcing?
One thing to manage carefully is the management information provided by the outsourcer, combined with monthly business review calls. My team do the calls – one of the great things about outsourcing is that it provides the team with management responsibilities that they might not otherwise have had. It’s a great development point for people in the team.
Something else to watch out for is changeovers in the outsourcer’s team. As with any in-house team, the more familiar somebody is with how you work, the better they become. The Indian employment market is fluid so you need to ensure that your provider is on top of that and that there’s fluidity of training, handovers and supervision.
It also comes down to having good channels of communication. You need to understand the responsibilities of the outsourcer and at what level. You need to be able to react quickly if you spot anything that looks like it’s below quality, and look for continuous improvement in everything.
To what extent did you have to sell outsourcing to the business?
People do worry about whether their client relationships are going to be okay. Is our brand going to suffer if we’re sending things to India to be done? You manage the concerns. You do pilots, you get people involved, and you develop people by giving them responsibility. The output overall is that people’s time is freed up, and they’re able to develop themselves more as a lawyer and move up.
I brought in a former General Counsel, who himself had built an in-house team in India, to talk to my team. They spent time with the team telling a story, showing them photos, and describing what offshoring is like. There are ways to bring people along on the journey with you: involvement and transparency are key.
People are concerned by the unknown and if something’s being done in a different way or a long way away, it is an unknown. You overcome those concerns by taking a leap of faith and giving it a go. If you have hiccups, you deal with them quickly.
What are the key points to think about when getting playbooks right?
Collaboration with the outsourcer is vital. We identified experienced contract lawyers in our team to work with the outsourcer to build the playbooks.
The playbook must be precise because it iterates different stages of negotiation, for example, provisions and fall-back positions. Collaborating with the outsourcer is invaluable as the outsourcer will have done it many, many times. It’s a joint effort: it helps develop your people, you get the confidence in the outsourcer, and you end up with a good product.
The drafts of the playbook were shared around the team so you had the benefit of people’s different experiences. Tapping into best practice creates a positive feedback loop and the work you’ve done becomes good training for the team.
Getting the playbooks right took a long time. I’m sure you could do it more quickly but it’s extra work at the beginning for an already stretched team. If you’re able to take somebody out of their day job and dedicate them to doing this, then you’d be able to move much more quickly.
What level of judgement do you delegate to your outsourcing provider?
You need to be clear in your mind as to whether and to what extent you give commercial judgement to an outsourcer. The answer depends on the different levels of service they offer. For example, at one level they will make no judgements whatsoever. If the playbook doesn’t answer the question, they’re won’t answer it and will escalate it back to you.
Some outsourcers are now introducing negotiators into their teams. The playbook needs to be explicit about what judgements can be made and will help avoid misunderstandings. Obviously, there are different risks for you and the outsourcer when it becomes to them making decisions rather than just following a process map.
What’s next for your business in terms of outsourcing?
Having bought into the outsourcing model, you continually ask yourself whether there is more you can outsource. Can we outsource document review, privilege review and e-discovery? You could outsource negotiations on segments or schedules, or technology schedules on big contracts.
For me, it’s all about continuous improvement. My job is to provide legal services to the business in a way that is effective and that means using the right people in the right way. Outsourcing is one of the tools we can use to do this.