David Stark, Executive Vice President, Chief Legal Officer, Teva Pharmaceutical Industries, Trevor Faure, CEO, Smarter Law Solutions, Lee Udelsman, Partner, Major, Lindsey & Africa
In 2017, Teva Parmaceuticals’ new CEO took the reins and developed a restructuring plan to address financial concerns throughout the organization. In 2019, CLO David Stark enlisted the help of MLA Transform Advisory Services and partner Smarter Law Solutions to assess Teva’s legal team and help them do their part in the overall organizational restructuring.
Before working with Transform Advisory Services and Smarter Law Solutions, what was the state of Teva’s legal department?
David: Teva had a long history of acquisitions and had just completed an intense period of growth. As a result, we found ourselves with hundreds of legacy law firms that we were using globally. You can’t get any synergy that way. You can’t get any governance that way. And you can’t control the situation that way. We knew there was a better way to look in-depth at our relationships and spending.
How did decide to turn to Transform for an assessment?
David: We have a long-standing relationship with MLA and Lee Udelsman, in particular. Lee was aware of the fact that we were being challenged by our new CEO to completely rethink the expense base. He recognized through several conversations that there was an opportunity available to us through Transform to meet the challenge posed by our CEO. Lee made an introduction to Trevor and the Transform team, which was very timely because this was something that I had been thinking about before but the company was not ready for it at that time. Now was the time.
Lee: David and I would generally have conversations from time to time about the legal function and the state of the business. Teva was contemplating relocating its U.S. headquarters from Pennsylvania to New Jersey, which would have been impacted some of the people working in the legal department. It was a confluence of things and it just seemed like an opportune time to explore the overall efficiencies of the legal team a little bit more closely.
What was your impression of Teva’s initial state?
Trevor: My initial impression wasn’t an impression; it’s just an application of data. You do an analysis and you stare at the outputs to create as objective a picture as possible. You try not to bring preconceptions or your opinions initially; you just analyze the data and present findings: “This is what it says.”
What’s powerful is how David responded. He was very magnanimous about the data. Oftentimes, when you’re a senior lawyer and somebody brings you data, the instinctive reaction is to be defensive. But not David. He was open to embracing solutions and how the structure could be transformed.
What was the most surprising and most valuable information you learned from the assessment process?
David: I thought it was all pretty straightforward and while I personally wasn’t surprised by just about anything, it was important to get an outside perspective and to be fully committed to the process upfront because there is always resistance when you are implementing big but important changes. I expected a very difficult process, but I also expected it to get there in the end because I was fully committed.
Trevor: Teva had a classic “false economy” model that is demonstrably the most common amongst legal departments; this is where the company intends to save money by not having many internal resources but ends up spending a lot more money on external resources as a result. The interesting part was they were also spending about the same amount on commodity, core and cream work—there was no differentiation based on the value of work being performed.
How did you begin addressing the results and making changes?
David: Bringing in a consultant was important because not only has Trevor done this before but he also has an objective stance and an understanding of the pain points. He was able to help us build the internal capabilities so that we could take over the management of the business model we have developed that will work for us.
But to get to that stage, we had to objectively look at all of the law firms we were working with and evaluate them based on our values and what mattered to the legal department as a whole. For example, diversity was front and center in this process. My team was particularly proud of how serious we took looking at the diversity efforts of our firms and building that into our decision-making process. One was doing implicit bias training, which we loved and we took throughout our company.
Trevor: It’s a series of iterations and every journey is different. If you are going to converge something like 600 law firms to 60, you have got to look at the volume and type of work coming in. So, we subdivided the work in the department—Commodity is high-volume, low-risk work; Cream is the low-volume, highly important work; and Core work is the tier in between. You can’t have a one-size-fits-all approach. You have to look at what is best and manageable for each tier within your legal department. Ultimately, the general counsel carries the responsibility of setting the tone at the top and the strategic imperative. David empowered his people and outlined a vision for the future that, while it was scary because of the uncharted territory they were entering, would take them on a positive trajectory.
Where are you now? What does the future look like?
David: We finished this project at the start of the pandemic and while COVID-19 made it a lot harder, we’re happy with the progress we’ve made and the new structure. We are excited about where we’re going. This is a high-touch thing and, yes, we have work to do in order to transition and optimize this and we remain committed to the process.