PILKINGTON PLC CASE STUDY

Pilkington Plc Case Study

Pilkington Plc Case Study

Outsourcing Of Pilkington

Toledo, Ohio-based Pilkington North America Inc., formerly Libbey-Owens-Ford Co., once handled the great bulk of its legal work in-house. The $1 billion-a-year subsidiary of Pilkington PLC, a U.K. company, manufactures glass and glazing products for building, automotive and technical markets. A year ago, Pilkington North America outsourced all its legal work to Pepper Hamilton LLP, which has 400 lawyers practicing in 10 U.S. offices and relations with cooperating law firms scattered around the world. (Amin, 2000, pp 93-116)

At the end of the first year of the outsourcing relationship, Pilkington had cut its legal costs by 40 percent. Beyond the significant cost savings, Graham says, the agreement provides three major advantages. "First, we are outsourcing under a fixed-fee arrangement, so we know what our costs are for each year and can plan accordingly. Secondly, we gained access to practitioners with breadth and experience, and we gained a scope of coverage that we could never have duplicated in-house. Finally, and perhaps most importantly, we built into the agreement a legal education program."

Pepper Hamilton is now responsible for educating Pilkington employees on a number of legal issues, including antitrust, employment and immigration. "This allows our employees to make more intelligent business decisions. Through this program, our employees come to understand not only the relevant legal constraints, but also the reasoning behind these constraints. Our legal costs will decline further as this program matures."

With the decision to outsource, Graham surrendered a significant portion of his span of control and drastically cut the number of employees reporting to him. "Spans of control should not be an issue in the outsourcing decision," he says. "Optimizing shareholder value is the goal. With outsourcing, we've been able to meet our performance goals at a lower cost." Graham reviews cases with the Pepper Hamilton lawyers biweekly. (Huber, 1993, pp. 121 - 129)

Pilkington was careful in choosing its legal provider. "We put together requests for proposals (RFPs) and asked half a dozen law firms to participate," Graham recalls. "We interviewed three or four. (Brusoni, 2001, pp 597-621)

Pepper Hamilton handles Pilkington's North American legal work with its own lawyers and with local law firms working under Pepper Hamilton. Some of the firm's own lawyers with work experience in Mexico recently completed an acquisition there for Pilkington. Pilkington North America has responsibility for its parent company's automotive divisions in South America and China, and Pepper Hamilton is on call for legal work arising in those areas.

The key to the success of the relationship, Graham says, "is that we get the firm's top lawyers. Although there is no formal agreement stating that Pepper Hamilton will always devote its top lawyers to Pilkington, Graham feels confident that the firm will continue to provide high-quality work. "The legal profession is so competitive that other law firms still call me for interviews," Graham says. "Pepper Hamilton knows that it must continue to provide its top people or lose out to another law firm that ...