Heath Monesmith

Eaton Corp. general counsel Heath Monesmith started revamping his outside counsel strategy about two years ago, when the legal department was trying to deal with a sprawling inventory of 185 law firms.

Monesmith wanted to build deeper, more trusting relationships with outside counsel. “And you can only do that with a few firms,” he says. “It's not practical to try and do it with a large number.” Eaton is a power management corporation registered in Ireland, but with operations based in Cleveland. It has over 96,000 employees doing business in more than 175 countries.

Monesmith says a strategic committee initiated the outside counsel selection process and “ran point,” but the entire team of 51 lawyers worldwide took part in the choices. “We took a hard look at how we retain outside counsel, and sought to hire and retain counsel who embrace Eaton's values,” Monesmith says. “We want to think of our outside counsel as an extension of the internal team and hold them to the same standards—exceptional lawyers who are efficient, cost conscious, strategic, innovative and practical.”

While the project looked at all outside counsel, the strategy focused on 108 U.S. litigation firms. “Litigation happens to be one of our cost drivers,” Monesmith explains. “If you have a select group of litigation counsel, you can leverage that relationship into other areas.” The GC says the in-house team “purposely didn't set objective targets of reducing to a certain number of law firms. The result was simply a natural byproduct of our selection process.” Eaton went from 108 outside litigation law firms to 25, and reduced its legal costs by 11 percent year over year.

Monesmith declined to identify any firms in this pared down group that stood out above the rest. “I trust all 25 of them to handle our litigation matters,” he says. “On any day, any one of them could be in the top three. It just depends on the region, the issue and the expertise required that day.”

On billing, the GC says Eaton uses “a full suite of options” for outside counsel, including alternative fee arrangements. “But there are times when billable hour makes more sense, if internal and external lawyers are on [the] same page regarding budgets and expectations,” he adds. The legal department will sometimes use fixed fees for some work and for appeals, while insisting on volume discounts when using billable hours.

“We also use our technology to track for annual budgets and life-of-matter budgets,” he says. “And we use specialized tracking forms for bigger matters.”

To form deeper relationships, Monesmith says Eaton brings in each strategic counsel at a law firm for regular structured feedback conferences. “These are not meetings about the legal matter of the day,” he explains. “These are broader meetings about evaluating performance.”

“We talk with them much like a leader would with an employee,” he says. “We discuss the level of the service they have provided, where things went well, where things didn't go as well.” And it's a two-way street, as Eaton's legal department seeks to hear from firms in return. Monesmith says, “Our own teams report where we think we could have done better in our relationships with outside counsel, and ask for their feedback on that.”

He says his team also examines the law firm's business model, and asks how the firm is innovating, how it is training associates, and what its latest diversity and inclusion initiatives are. The bottom line: “Those meetings are really about building trust with a key strategic supplier. That feedback loop in turn drives higher levels of performance,” Monesmith says.

For its part, Eaton has launched a “backstage pass program” that allows diverse lawyers at its outside firms to visit the company several times a year and to meet with company leaders to better understand Eaton's business imperatives.

The legal team's hard work hasn't gone unrecognized. Its outside counsel strategy revamp earned it an Association of Corporate Counsel Value Champions Award for 2018.