Eversheds’ unusual alliance with security multinational Tyco has attracted a flurry of headlines. The deal – which sees Eversheds and its allies handle all Tyco’s day-today legal work in over 30 jurisdictions, much of it for a fixed fee – is central to Eversheds’ bid to position itself as the first choice for international clients for day-to-day commercial matters. But meeting Tyco’s unique requirements meant a trying year of adjustment for Eversheds – and an even more wrenching change for its partner firms.
The basic parameters of the deal – designed by Tyco regional general counsel Trevor Faure, and his deputy David Symonds – were simple. For a fixed fee, Eversheds would provide all Tyco’s day-to-day commercial legal needs, from contract review to employment disputes, in all of Europe, the Middle East and Africa. For more complex matters, Tyco required detailed cost estimates before any work could be undertaken. Eversheds was to provide monthly invoices detailing all the work of it and its partner firms in one database. This would allow Tyco to analyse its spend by area and look for savings.
The contract was Tyco’s attempt to address its out-of-control legal spend. “It’s impossible to monitor your spending when you’re dealing with 270 law firms,” points out Tyco’s David Symonds. “We wanted to cut costs, but also to better inform our businesses what their legal costs would be upfront, so they could plan ahead.”
But the task was harder than expected. First, Eversheds had to carry out a gargantuan task of culture change. Diana Newcombe is the Eversheds senior associate who has overseen the firm’s Tyco relationship full-time since its inception in early 2007. She remembers when she first appreciated the scale of the task Eversheds had in front of it. It was early on in the contract, and Eversheds had just implemented Tyco’s demand to see detailed cost estimates before starting work. “Tyco received one cost estimate totalling 250 euros for recovery of a 96-euro debt,” recalls Newcombe. “The client unsurprisingly was pretty unhappy with this proposition, but the lawyer in question couldn’t understand why.”
Eversheds was discovering what the magic circle realised when it spread across Europe several years ago: that the US-UK model of legal service is a very different beast from that which still prevails in many jurisdictions. “Whatever world you are trained in as a lawyer is the one you believe to be the correct way to approach a matter,” says Newcombe. “In some jurisdictions it’s assumed that if a client instructs a lawyer to litigate a case, the client has already decided it’s commercially wise to do so and it’s not up to the lawyer to challenge this view.” Some areas had more re-learning to do than others. “One approach that we have observed in some jurisdictions is to charge fees in proportion to the overall value of the matter to the client. That might be a good way to work on a major project, but it’s often not appropriate for day-to-day cases.”
When Tyco received bills from Eversheds’ partner firms, these cultural differences struck them simply as good, old-fashioned overlawyering. “We had a number of issues early on when as far as we were concerned, things were being overstaffed,” recalls Tyco’s David Symonds. “There was a lack of appreciation that, even if this was standard practice for them, even if their clients were used to having two or three lawyers involved, Tyco’s arrangement with Eversheds as a whole was different.”
At the same time, Eversheds had to grapple with the arrival, in dribs and drabs over the first few weeks of the contract, of 732 files of ongoing matters from Tyco’s former firms. All had to be processed, conflict-checked and assigned to the relevant office. At the same time, Eversheds faced the huge task of collecting and collating detailed information on all the work being done for Tyco across the network in line with Tyco’s stringent requirements.
“We had to put together an Excel spreadsheet including thousands of different entries from 50-60 different countries, broken down by practice area, country and business unit – within one month of the fees being incurred,” explains Eversheds’ international clients tsar, Stephen Hopkins. “We weren’t able to get every single piece of information together and be confident we had a 100% complete picture. No law firm in the world can do that straight away.” And no matter how on top of things Eversheds’ London HQ was, its partners around the world struggled to meet the new requirements. Sven Laurencik, a young lawyer working full-time on Tyco work in South Africa for Eversheds’ ally Routledge Modise, recalls one particularly frustrating problem. “In April all the invoices we’d submitted between January and April had to be redone and resubmitted in about three days. We had to speak to the company that made the accounting software, get the program changed, and recapture all the information. It wasn’t just me doing 20-hour days, but the secretaries as well.”
Few clients place such emphasis on reporting. But detailed information, comparable across jurisdictions, was crucial to the model Tyco had designed. As well as full cost estimates before matters began, they wanted monthly invoices that could be quickly analysed and passed onto the businesses for payment. Consistency was vital so that Tyco could analyse where it was spending most and identify possible savings. When Eversheds was unable to provide full information, correctly presented, in the first couple of months Tyco wondered if Eversheds were going to be able to cope. “There were times when we wondered if they would manage it,” admits David Symonds. “We’ve always been convinced that the structure’s right, that to work with one external adviser in this way was the right strategy. The question was: could any firm do it?”
The turning point came in May, when Stephen Hopkins began working full-time on managing the firm’s relationships with international clients. Dealing with the Tyco situation was the first priority. Hopkins could see the firm had badly underestimated the scale of its task in making the Tyco contract work. “It had not been possible to anticipate the level of investment we’d need – not so much on the actual legal work but on project-managing, administration and reporting on all the work,” he recalls.
He and Diana Newcombe launched a two-pronged attack on the problem. First, in a series of meetings and training sessions across the region, the partner firms were brought up to speed on what was required of them in terms of working practices and reporting. “There were a lot of one-to-one meetings with the various offices to help them understand what we needed and why we needed it; a huge number of teleconferences; a great deal of communication about where we were at and what was still required,” recalls Hopkins. “And we needed to convince our colleagues that this was the right way to go, that there was a huge market for this kind of product. We could see, and we still believe, that Tyco is a great opportunity to demonstrate to global clients how we are a very client-focused firm, possessing a mindset and using processes that put the client firmly in control of things.”
A clear commercial argument, rather than arm-twisting, seems to have been the approach. “We’ve taken partners to pitches to hear clients saying that this is the approach they’re looking for,” recalls Diana Newcombe. “We tell them that this is getting us through doors. It’s a convincing argument.”
At the same time, a new software system – the Global Account Management System, universally known as GAMS – was developed to manage all Tyco’s work. Eversheds had already employed case and deal-management software systems, called Rapid Resolution and DealTrack, to help clients keep track of progress. The new system added mechanisms for the provision and approval of cost estimates, and tools to prepare Tyco’s detailed reports automatically. It’s easy to overestimate the significance of software in defining working practices. But people at all levels of the contract describe the introduction of GAMS as a vital boost. “It was obvious that this was required,” said a partner in one of Eversheds’ Eastern European allies. “It took some time to train everyone to use it, but there was never any question it was needed.” One young assistant in Eversheds’ Manchester office who has project-managed several matters for Tyco said, “It’s always easy for fees to get out of hand, but GAMS really focuses people’s minds. It helps them see what’s important and what isn’t.”
By October, when GAMS was fully launched, costs had begun to come under control. “Once they came to terms with the fact that there were certain things we wanted and they had to deliver them – financial information, communication – and focused on that, and resourced it, that’s when things started to improve,” recalls David Symonds. “April and May were the low points, but a lot of work was put in through the summer and by September and October, we were having to reject cost estimates and invoices far less often.”
Eversheds and its partner firms had succeeded in imposing order on the chaos. But was it enough to win a renewal of the contract? The arrangement with Tyco was due for renewal in early 2008. If it wasn’t renewed, Eversheds would have poured time and money into pleasing Tyco – and put its international allies through a wrenching period of change – for nothing. In early 2008, the call came. Tyco were ready to start negotiating a new contract.
In the end, says Tyco’s David Symonds, it was Eversheds’ willingness to adapt that won Tyco over. “Had we changed to another firm, could they have done it any better? Eversheds were prepared to listen to what we had to say, to take it on board and to put in what from my perspective seems to have been an awful lot of effort in going round to each office to explain the deal, explain the protocol, the practice, the procedures; to not just say ‘do it’ but to make sure people understand why it has to be followed. That’s why we’re getting the service levels we demanded.”
“There were days when we wondered whether we could convince Tyco quickly enough that we could deliver,” admits Stephen Hopkins. “But we were always very committed and never thought, not even for one moment, ‘No, we don’t want to do this.’”
* * * *
It’s tempting to simply see Tyco as a clever client wringing every last bit of value out of its lawyers. But its willingness to give Eversheds time to get things right suggests that the firm’s talk of “partnership” is more than just spin. Other adjustments have been needed to the way the contract is billed. In South Africa, for example, Sven Laurencik quickly found himself swamped by employment disputes, but was able to negotiate for his firm’s employment department to bill such matters hourly instead of within the fixed fee (see boxout). “Tyco, as much as Eversheds, recognised that this was a relationship – there had to be give and take,” recalls Laurencik. “It was reasonable to expect it to be profitable for us too. They could have held us to the initial arrangement, but then we could have walked away at the end of the contract.”
This idea is central to the “DuPont model” that the Tyco relationship is based on. Once a law firm and a client are deeply embedded with each other, it’s in both’s interest to meet the needs of the other, the reversal of the usual client-law firm relationship. The new contract between Eversheds and Tyco, which went into effect in May this year, takes this approach further. Eversheds has a chance of receiving a six-figure bonus at the end of the year based on its performance in client satisfaction surveys, its success with diversity targets, and a reduction in the number of new pieces of litigation initiated against Tyco over the year.
While the diversity target has attracted the most press attention, it’s clear Eversheds’ focus is on the client satisfaction element. “One of the things we’ve talked about a lot with Tyco is: how do we encourage the right sort of behaviour in our lawyers?” says Hopkins. “If you’re paying by the hour, the incentive normally is to do more hours, which, if it’s a rocket-science job, can be just the right approach. But on many, many other jobs – even M&A – clients want a detailed estimate of what it’s going to cost. Having a fixed fee can be a fantastic way to do that, but this tends to encourage a law firm to delegate things down to the lowest level. Combining a fixed fee with a client satisfaction rating, tied to a bonus, you get the control and predictability of costs along with a reward which focuses on quality.”
The litigation prevention bonus is designed to encourage Eversheds to invest in training and education work with Tyco staff across the region to reduce risks. “The main concern that came through from my clients after the first year was that they wanted me to be more proactive about training,” recalls Sven Laurencik. The new contract also ties payment for litigation to outcomes. For each piece of litigation, Eversheds and Tyco agree what a satisfactory outcome would be. If the result is less than hoped for, Eversheds settle for 90% of their fees. If the result is significantly better, they pocket an extra 25%. “It incentivises both our lawyers and the Tyco businesses to think about what litigation really means for their business, and keeps everyone focused on a commercial outcome,” says Newcombe.
Nevertheless, for all the talk of partnership, the level of investment Eversheds and its allies have put into the contract has left many observers wondering if the game is worth the prize. But Hopkins says that the Tyco contract has brought Eversheds a flurry of attention from significant international clients. Healthcare company Brady Corporation has already agreed a similar deal with them. And Eversheds’ investment in its day-to- day work with Tyco has led to plenty of the more remunerative billable work. “Currently 70% of our Tyco work in the UK is premium work. We’re doing major M&A, high-profile employment work, antitrust work,” says Hopkins. “This contract has required investment, as do many significant client relationships. But it’s very fruitful in the long term.”
Tony Williams, the legal consultant and former managing partner at Clifford Chance, believes Eversheds’ efforts to be worthwhile. “Eversheds is seeking to increase their credibility with major international clients,” he points out. “Their willingness to try new models, their preparedness to adapt, gives them a real differentiator from other firms that will attract real interest from some of those clients.” The merits of the single-adviser approach certainly aren’t lost on rivals Lovells and DLA Piper, both of whom have signed similar agreements recently with Honeywell International and Linde Group respectively. * * * * Eversheds’ efforts to get its partners working to Tyco’s satisfaction are ongoing. When Client Report sat down with Hopkins and Newcombe, the latter had just returned from delivering some training to a lawyer at a partner firm in Eastern Europe. In fact, in some ways, Tyco has provided Eversheds with a useful way to incentivise its partners to adopt the modern client service ethic. “Some offices, and this has included the UK, say: we’re professionals, we give legal advice and that’s what we do.When we talk to lawyers about components of client satisfaction, such as spending time with clients at their office, it’s a surprise,” says Newcombe. “It’s good to have a contract with specific targets and to be scored on performance.”
So as Eversheds press on with the second year of their relationship with Tyco, they can look back on a significant achievement in getting on top of it – but they must also look forward to further training, tweaking and cajoling to get it 100% right. “The administration was out of control for a while,” admits Hopkins. “And to be frank, we’re still smoothing out some issues. They’re continuously evolving.”
The young lawyers who have to make it work
It isn’t just Eversheds themselves who have had to adapt to meet Tyco’s requirements. For the young lawyers carrying out much of their work in several jurisdictions around the world, the contract has meant being thrown in at the deep end.
Sven Laurencik was just a few months qualified when he was interviewed by Tyco regional general counsel Trevor Faure for the role of full-time Tyco legal operative for South Africa. Effectively a sort of semi-secondee, Laurencik remained based at his firm Routledge Modise in Johannesburg, but was selected by Tyco to see to all its day-to-day legal needs.
In the security industry in notoriously crime-riven South Africa, this involves more than just reviewing contracts. Laurencik’s duties have included bailing an arrested security guard employed by ADT Security, Tyco’s business in South Africa, after a firefight; and dealing with a robbery from a local mint guarded by the company.
“It was a 24- hour-a-day job,” he says. “An incident happens, we need a lawyer, I put on my suit and go. I get a call at 6am that a guard has been arrested, I’m up and on the way with the bail application.” A far stretch from the work of most newly qualified assistants.
But more challenging was winning over his clients. When Eversheds and its allies took over Tyco’s work they replaced over 200 law firms across the region. In South Africa alone, Laurencik replaced 17 different law firms and inherited over fifty ongoing pieces of litigation, as well as a host of commercial matters. Unsurprisingly, the regional managers of ADT were unhappy to see their long-standing advisers replaced, at a stroke, with a barely-qualified youngster.
“People did say ‘Who the hell are you? Where’s the guy I play golf with?’ Laurencik recalls. “The first few weeks were basically a self-marketing exercise, flying around, trying to explain how it would work.”
To win over his sceptical clients, Laurencik set about to, as he puts it, “make myself indispensable.” He knew that only improved service would impress his hardbitten clients, and promised to respond to most queries within 24 hours.
Young and inexperienced, Laurencik was reliant on the rest of his firm for expertise in specialist areas. “If I had a question I couldn’t answer I could take it behind the magic curtain, get the answer, and come back. All the client saw was me, but there was a 350-lawyer firm behind the curtain.”
After a few months, Laurencik had begun to win over the local Tyco businesses. But winning their trust meant dealing with an avalanche of new instructions. Seeing their new young counsel could deliver, ADT’s managers began submitting more and more matters to the legal team. The result was a frantic period for Laurencik. “Things started to get hairy around April,” he recalls. “I do look back at that time and think, ‘When did I sleep?’”
The Tyco arrangement saw most day-to-day legal work, from contractual matters to simple disputes, paid by a fixed fee. The intention was that Laurencik would handle most such matters with minimal reliance on the rest of the firm. But as the workload ballooned, the model wasn’t working.
A particular problem, it quickly became clear, was employment claims. The security industry in South Africa is prone to disputes following dismissals, and by April Laurencik – not an employment lawyer – was dealing with 120 outstanding disputes. “It was obvious to all concerned that I couldn’t be in several employment tribunals across the country at once,” says Laurencik. “We had most of the firm’s employment team working on them.”
But employment tribunals came under Tyco’s fixed-fee arrangement with Eversheds. If the firm found itself devoting several staff to such matters, it would be losing money – a lot of it – on the deal. Laurencik knew that the level of employment work being done by the firm, effectively for free, couldn’t be sustained. The firm’s arrangement with Tyco would have to be modified.
“I rang [Tyco’s regional general counsel] Trevor Faure and said, look, if I do all this work myself, I won’t be able to do anything else,” Laurencik recalls. He asked that employment matters be moved out of the “basic scope”, meaning that the firm could bill hourly for them over and above the fixed fee. Laurencik also suggested Tyco look into adding additional capacity in-house in South Africa specifically to deal with employment disputes.
To Laurencik’s relief, Faure agreed. Laurencik sees it as evidence that the firm’s talk of ‘partnership’ is more than just flannel. “Reason prevailed,” He recalls. “Trevor is a very demanding client, but if you can back up your arguments he’ll come to your aid.”
The problem addressed, Laurencik continued beavering away while his colleagues took care of the employment disputes. He barely had time to dwell on whether he’d succeeded in winning over the clients who’d been so suspicious at the start. Then, one day in the summer, he saw some of the reports on him regional managers had completed for their superiors. “Several of them said I was doing a superb job,” he recalls. “That’s when I realised it was actually going very well.”
In April this year, Routledge Modise became a full member of Eversheds’ international alliance. Laurencik still spends most of his time working on matters for Tyco. He says that, while he struggles to keep up sometimes, the system seems to be working. “You always feel it’s only a matter of time before something goes wrong. But that hasn’t happened, because the systems are there to ensure things don’t fall through the cracks. I don’t think ADT has ever lost a case or a contract for a substantial amount of money because of a mistake on our part.”