A couple of weeks ago I learned that the legal department of Kraft Foods issued its “Adam Smith” award, for innovation in the delivery of legal services, to Clifford Chance, and Kraft intends it to be an annual award. I was curious to learn more.
The first thing I learned was that the award was not named for the publication you’re reading, but for the original Adam Smith himself. Hopes dashed, but that critical clarification behind us, I was nonetheless ready to find out more. What made me especially jealous was to learn that the winner receives a bust of Adam Smith from the Adam Smith Institute in the UK.
Officially, the award is the “Kraft Foods Free Market Award,” but internally it’s known as the Adam Smith Award, and that is the name by which it will henceforth be known here, and in all right-thinking circles. The award goes to “the firm that best demonstrates the principles of free market competition.”
Marc Firestone, Kraft Foods Executive Vice President, Corporate & Legal Affairs and General Counsel, said the genesis of the award was finding a way to lower costs for legal work and in the process they discovered that returning to basic economic principles was the key.
Kraft was kind enough to make Gerd Pleuhs, their Senior Vice President and Deputy General Counsel, available for an interview last week, and here’s what I learned.
Although the general thrust of the Adam Smith award may be to cut Kraft’s legal spending, Clifford Chance is, as Gerd frankly acknowledged, not a “low-cost provider.” So the challenge for Clifford Chance vis-a-vis Kraft-and all of Clifford Chance’s clients, frankly, which is one reason you’re reading about this here on Adam Smith, Esq.-is how to grow a high-cost business against cheaper firms who may be perceived as peers?
Did you know that Clifford Chance has worked on meeting Six Sigma standards internally? I did not; at least until this conversation with Gerd. He readily said they “don’t make a big deal out of it,” and instead take the view that “this is simply what we should be doing.” (I haven’t had the opportunity yet to talk to Clifford Chance about this, but I will.)
So what’s the background to the Clifford Chance/Kraft relationship?
Kraft, Gerd informed me, has about 120 lawyers around the globe but they lack robust electronic connections other than email. Clifford Chance, by contrast, has a robust internal communications system. “After three years of spinning our wheels,” Gerd reported, Clifford Chance was able to help Kraft’s legal department get truly connected globally in very short order. This makes great sense to me: Integrated global legal services are the core competence of Clifford Chance, but nowhere on the top 100 list for Kraft, nor should they be.
What firms does Kraft use, globally?
Clifford Chance, DLA, and Baker & McKenzie are their three key “strategic” firms that handle Kraft’s international business, Gerd replied. (Unfortunately, our time being limited, I didn’t have the chance to ask him if or how they used these firms differently, although I have my own suspicions.)
OK, so let’s get to the Adam Smith award.
The innovation was establishing internal blogs and discussion boards at Kraft addressing specific subject matter areas. The basic insight came from Clifford Chance but was adapted by Kraft for its own corporate culture, as I read it, and this could be an example of the most robust kind of innovation-sharing between firms and clients that we could imagine. The thinking must go as follows:
- Law firm has practice X (Knowledge Management as an expertise, in this case)
- Which client could use if it worked in their corporate environment (turning law firm KM theories into blogs and discussion boards)
- So that both client and law firm “win,” in the sense that the both learn something from each other.
What Kraft did, then, plain and simple, was to set up those blogs and discussion boards, even though they were something Clifford Chance had never looked at internally in terms of its own KM efforts.
What good were they?
Kraft, as you know, is a global consumer food services company (their press materials describe them as “a global snacks powerhouse,” and with annual revenues of $48 billion, that’s a lot of snacks), which means they generate their own specific variety of legal questions, such as “what food-like items are subject to VAT in various countries around the world?” Food is largely exempt from VAT, non-food subject to it. Kraft sells some products, such as chewing gum, which are on the border.
If you post that question on a discussion board, and get responses from around the world, you have the beginning of a knowledge base on VAT incidence on quasi-food items. And of course it’s also recorded for posterity, at least in theory never needing to be answered again.
And how about blogs?
Gerd readily admits that they weren’t “necessarily within people’s comfort zone,” but if they provide value he thinks their impact will grow and endure.
So who’s behind this project?, I asked.
“It comes from Marc Firestone,” EVP and General Counsel of Kraft, Gerd replied. “And as Marc sees it, the key is less about driving costs down per se than about creating value for both sides, in-house and outside counsel as well.”
That is devoutly to be wished, and exactly where I hope the entire dialogue about alternative fees leads.
We’ll see if the Kraft Adam Smith award is a step in that direction, but I believe it holds great promise.
And congratulations, of course, to my good friends at Clifford Chance.
Concluding sidebar:
About seven years ago I was approached by an AmLaw 25 firm which was looking for someone to bring additional robustness to its nascent KM efforts. Flattered, I thought I would propose something I thought would strike them as innovative at the time: To wit, using blogs and wikis (read: discussion boards) to encapsulate and spread knowledge internally, by expertise, within the firm.
I never heard another word from them. Still haven’t.
And no, the firm was not Clifford Chance.
But if that firm is reading this, sorry, folks, I’ve moved on.
