Change is Imminent
Barclays has been in the midst of a two-year programme of change, focused on introducing transparency to the legal function regarding its costs and commercial performance for the business. GC caught up with general counsel Bob Hoyt’s chief of staff, Alison Gaskins, at the bank’s headquarters in London to learn how this process has played out and where to from here.
legal commercial optimisation
Alison Gaskins’ remit on joining Barclays’ legal department was formidable. Group general counsel Bob Hoyt told her in no uncertain terms, ‘I want to be able to have a conversation with my CEO which clearly states what the legal department is doing for its internal customers, including what it costs and why it costs what it does.’ A former management consultant with over ten years’ experience in COO and change management roles at Barclays, even Gaskins was initially daunted by the scope of this request. But it became clear to her that by understanding the underlying economics of the Barclays legal department and how they can be influenced, it would be possible to revolutionise how legal services were delivered to the business. The process has to date covered five interlinked aspects: matter management, e-billing, the law firm panel, lawyer time recording and management information (MI).
Figuring out the menu
Going back to the genesis of the idea, Gaskins explains that Hoyt analogised the issues in legal by comparing them to an all-you-can-eat buffet. ‘It is really like people coming up to a buffet and picking what they want, but having very little sense of what things cost or how much they are consuming,’ she says. ‘When the bill for what you eat comes in, it goes to someone else. In the same way with legal services, when the bill comes in for services rendered, it’s often sent to someone other than the person who received the work. In the context of that, we have spent the last 18 months trying to figure out how to price what’s on the menu, how to help the diner understand the pricing, then ensuring the final bill is fair, accurate and sent to the right person.’
The second challenge for the team looking at this was a lack of control regarding demand for legal services. The business as a whole might set a budget for legal spend. But what if a new litigation case rears its head, or a new location or business is required, perhaps even closing one down. For legal, this can translate to a raft of new costs which can emerge and blow that budget out of the water. ‘We can be missing each other in terms of expectation,’ says Gaskins.
‘What it came down to ultimately was figuring out how to codify work in relation to the costs of each matter – essentially a service catalogue for internal legal services. That’s often anathema to lawyers but is a concept the business can understand. This can be uncomfortable for lawyers because the idea that all work can be unitised and priced can’t easily be applied to work which is essentially “advisory” in nature. But in fact, it can be applied more widely than you think, where you can show that work has a beginning, a middle and an end.’
What we need to know
Gaskins explains that her team spent the past year figuring out ‘what we need to know’.
Initially, that entailed establishing a taxonomy of legal services against which lawyers can record their time – even though many in-house lawyers will throw up their hands in horror and tell you a major factor in leaving private practice was to get away from time recording. But Gaskins clarifies what they are focusing on is very different. ‘We are not concerned with productivity or how much time is taken on something, what matters is being able to ensure the work is accurately aligned to the business area receiving it and paying for it.’
At the same time, the team focused on introducing a new matter management system for the largest and most complex matters, as well as an e-billing system to standardise and codify billing rules. These internal processes were developed hand-in-hand with a fresh law firm panel, coupled with a new approach to law firm relationship management. These developments are underpinned by new reporting metrics and a new management tool to ensure the teams can measure and demonstrate value for the business.
The business as a whole was not heavily involved in the design of the new processes outside of an overarching mandate steering the project, which was a clear expectation for how legal costs are managed. ‘We have got to be sufficiently compelling and convincing enough in the solutions that we give them to this problem. So the involvement of the business is really around the ultimate outcome,’ says Gaskins, explaining the line of thinking her team has used to approach the project.
At present, Barclays has lawyers embedded across different business units, and there will inevitably be legal services which are shared functions across units, such as litigation or employment law. ‘The business units want to be very clear that they are only paying for the amount of shared legal service they actually use, hence greater transparency around the whole delivery, management and billing process,’ says Gaskins.
Time is ticking
The dreaded time recording portion of the project was introduced in the second half of 2015 to a mixed reception. For the lawyers within the investment bank, it was more of the same, as their previous general counsel had asked them to time record and the new system represented a marked improvement. Other areas, however, were less keen. But it came at a time when there was a greater drive from the business for increased transparency, which in turn put pressure on individual general counsel across the bank. This caused a strong sense of leadership from the top as to the practical and strategic imperatives for time management as part of a greater need for project management. This tone from the top helped smooth the wider implementation.
The time management tool was built with a series of reporting functions within it, which general counsel can look through with their business managers to see where their teams are spending their time and help ensure the data is accurate as a basis for cost allocations.
While this was built in-house, the matter management and e-billing function were sourced from an external vendor. The time management, matter management and e-billing systems all sit together as part of a custom built management information system. This aspect is really where the big picture functionality comes from – it allows general counsel to get a birds eye view of work allocation, costs and a direct insight into how their department is running. Gaskins explains that it provides a much more informed view for legal decision makers, while ensuring a lot less time is wasted in meetings getting updates, as the individual general counsels have the ability to enter a meeting with the data already prepared.
Both the matter management and e-billing systems have an obvious application to how external work is handled. Symbiotic with revolutionising this use of external counsel was the revamped Barclays panel. Gaskins explains that a key question in designing this was:
‘How can we help lawyers think differently when instructing law firms?’ Gaskins emphasised that they always want the decision to sit with the lawyers, but to embed the new ideas around project management and transparency within this process.
The business as a whole was not heavily involved in the design of the new processes.
The process was launched at the beginning of 2016 and the new panel went live in July. ‘An initial aim,’ Gaskins says, was ‘ensuring work is allocated to the right firm at the right price.’
Under the new panel arrangements, the selected firms are categorised into three groups:
- Panel firms – these are multi-service firms used across the function, in multiple areas and multiple jurisdictions.
- Core specialist firms – these are of equal status and standing with panel firms and can be used in more than one place but are more specialist in their remit.
- Specialist firms – are firms that have a particular technical specialism or geographical focus.
In regards to the panel, the defining rationale was that of partnership with Barclays. That was defined very clearly in terms of innovation, creativity and alternative pricing.
Computer says no…
A big change for Barclays legal function was the universal adoption of the new e-billing system. Gaskins explains that this system works via a built-in rules engine which ensures that engagements are set up correctly for invoicing at the start, with the resulting invoices either meeting the rules or being rejected and returned to the law firm for correction. She explains that prior to this, ‘law firms would often send in woefully high level invoices with too little itemisation and it can take our lawyers ages to get to the bottom of what it’s for. Either that, or it’s 50 pages long with too much detail.’
‘As in any organisation there are clear sets of rules for invoicing; all law firms will have had terms of engagement agreed. When an invoice is set up by our system it has those terms of engagement expectations built in. The system will flip it back if what comes in from the law firms does not meet these expectations.’
It’s literally a case of ‘computer says no’. In September the first set of invoices for August came in under the new system. Forty invoices came in and forty were rejected! Although that number seems shocking, Gaskins explains that once fully embedded and routine, the system will remove a lot of administration and remediation work, as well as mitigate some of the personal angst out of quibbling over costs: ‘Since the start of the change, the law firms have been very engaged and supportive – many of them already use e-billing with other clients and know the benefits it can have. So, despite the high initial rejection rate from the system the panel firms are on board with it.’
Delivering the changes
The delivery of the new management process overall is the responsibility of Gaskins and her team, which includes a head of change management who is responsible for the programme delivery and a head of commercial management, who is responsible for the law firm piece. ‘We came up with the idea of a new commercial management role last year, and we specifically wanted to hire someone from a law firm with client relationship experience to bring in that insight and have the credibility with our own teams and the law firms,’ explains Gaskins. But, perhaps most interestingly, nobody on Gaskins’ team driving this project is a lawyer.
The head of change management has performed that sort of role somewhere else in the bank and therefore is used to having a portfolio of change under him.
The head of change management and head of commercial management are joined by a COO responsible for strategy and the financial performance of the function, plus a head of risk control whose remit is to ensure the function meets the bank’s policies and controls.
‘We have made a lot of new hires into this world and changed roles as we realised what we need,’ says Gaskins. She holds a view that it is often more effective to use experienced change management resources on these initiatives while involving lawyers as subject matter, as a way of ensuring everyone can play to their strengths. Management and process are fundamental areas for legal teams, whatever their size. Increasingly project management is becoming a significant aspect of all legal work and most major law firms will now have non-lawyer project managers on big matters that are likely to run for an extended period – generally a number of years.
That means that Gaskins’ role is not unique – particularly in large financial institutions. ‘All bank legal teams have teams like mine.’ She feels that the use of people like her and her team allows lawyers to focus more on their legal work, although ‘It’s often a struggle’ she adds wryly. ‘While bankers are much happier to defer problems back to the centre and out of their remit, lawyers are very proactive and super bright so they often want to move in and start doing something themselves.’
Barclays’ expectations of law firms
Gaskins comments that panel firms are now expected to engage at a different level than before:
‘These are the performance metrics that firms will be judged by. A very clear visual tool is the scattergram charts where firms are plotted according to these metrics in relation to competitors.’ The different value metrics can be seen by internal lawyers at Barclays to inform their judgement and choice of external counsel. A different version of this is available to the law firms themselves so they can plot their value offering in regards to the team’s expectations and how competitors are matching these.Gaskins shares some of Barclays’ expectations below:
- Excellent technical expertise in relevant legal areas, including from other firms as appropriate.
- Provide lawyers who are commercial, and understand our position as a regulated institution.
- Ensure effective quality control across all matters.
- Advice incorporates the firm’s collective experience in the industry or area of law.
- Bring a strategic approach to all legal matters.
- Always deliver the collective experience of the firm.
- Look beyond the particular matter to consider policy consequences and long-term trends.
- Provide advice and guidance on innovation in the profession.
COLLABORATION AND TEAMWORK
- Operate as an extension of our own in-house team.
- Work collaboratively with other Barclays firms.
- Develop understanding of Barclays’ businesses and objectives.
- Harness the value of lawyers working across multiple areas by sharing insight from their experiences with Barclays.
VALUE FOR MONEY
- Understand the commercial drivers of legal costs.
- Offer ideas for increasing cost-effectiveness of legal services.
- Provide accurate cost estimates and timely notice if changes are to be considered.
- Avoid a ‘win at all costs’ mentality by talking to us about cost-value trade offs.
- Provide professionals who are trained in industry standards.
One of the central motivations for this project was demonstrating the value which the in-house legal department provides to the wider business. It’s fundamental to how the in-house function operates, but Gaskins avoids getting too philosophical about it. ‘What’s different about what we’re doing is essentially about helping demonstrate how we do what we do. We spend a lot of money on behalf of the business, so it’s about transparency and accountability. One of the problems about the value debate is you can only really get to the crux of that by taking the function away to see what happens without them and no one is going to do that!’
‘I think [group general counsel] Bob Hoyt and I are thinking quite differently from the norm in terms of articulating it, by not bringing in this notion of value of legal work. But the starting point was very much, “how can he have the right conversation with the CEO and provide the transparency he needs”. We’ve just been focused on how we can help make that happen.’
The road ahead
The change process will take roughly two years to complete, all going to plan, with current progress sitting at about the halfway mark. In fact, the new systems have been tested and the rollout has taken place with some teams already. Now the challenge is to get everything in place across the whole function globally. It’s a gradual process, says Gaskins, explaining ‘litigation have everything up and running globally now; we started with them as they are the most complicated in terms of their need. But by the end of the year the rest of the legal function will have all the systems as well.’
As a whole, the Barclays legal function feels they are really grappling with some of the same fundamental challenges facing all legal teams – regardless of their location, size or sector. ‘It’s really a case of starting and making central to the process what you are trying to achieve – for us, that’s transparency and accountability with the chief executive. That same question applies no matter how big or small the company and no matter what the industry.’
If you would like to hear more about the Barclays Commercial Optimisation Programme, Gaskins and members of the Barclays legal team will be sharing their thoughts and experiences about the design and implementation of the programme at the next Enterprise GC conference on 13-14 March 2017 at Syon Park, London.