Barclays is intent on pushing dozens of major law firms to adopt a radical overhaul in working arrangements in time for its long-planned move away from a formal panel by 2021.
The global banking giant confirmed on Monday (2 July) that it had completed its final global panel review, further reducing its advisers from 140 to just under 100 before it phases out a conventional legal panel altogether in three years.
The bank, which before a 2016 shake-up had as many as 400 firms on its global roster, refused to name the firms appointed. But it has again revised its category system, removing a third ‘core specialist’ category to only have ‘primary’ and ‘specialist’ firms, of which the majority are in the latter. A three-card rate system which asked firms to price mandates according to strategic, medium and flow has also been removed.
A team led by Barclays’ head of external engagement Stéphanie Hamon worked over the past two years to develop a new framework for more active, ongoing management of its external counsel. This established defined expectations against which advisers were assessed and pushed the use of ‘effective fee arrangements’ (EFAs) ahead of hourly rates.
These concepts were piloted with the bank’s top 30 law firms over that time, but will now be progressively rolled out panel-wide.
Hamon told Legal Business three camps emerged in the pilot: those firms which embraced the change; those which understood the need to change and were trying to do so; and those which did not want to change. Those which had embraced it were a ‘small number, just a handful of firms’.
‘It’s fair to say there was a certain level of scepticism as to what we were trying to achieve. The firms which have done better realised it was as much in their interest as ours.’ Hamon said the bank expected the number of law firms fully engaged with its new framework would have substantially increased from that ‘small number’ in three years when the current contractual panel expires.
Hamon added, however, that the shake-up was implemented quicker than initially expected and more firms were engaging on what the bank sought. The immediate focus in the new panel is innovation, diversity and inclusion and EFAs.
EFAs are being pushed to support accurate budgeting and forecasting while also pressing law firms to become more efficient by moving from hourly billing. The previous three-card rate system was the first step in making firms price matters according to whether they were strategic or not.
Hamon added: ‘They’re going to think long and hard about how they are going to deliver to that price point. It’s really hard to justify efficiency when the pricing mechanism is based on hourly rates.’
Major Barclays advisers believed to have been retained on the panel include Allen & Overy, Clifford Chance, Linklaters, Dentons, Simmons & Simmons, Baker McKenzie and Ashurst.
The bank’s value account system, where firms are required to pay a rebate if they fail to hit their value targets, whether in the form of secondees, volume discount or bespoke training, remains in place, as does the £1m threshold for the relationship account system, which gives firms an annual value of free legal services they must provide in return for volume of work – primarily through legal advice and secondments.
Innovation included but was not limited to technology, with the broad concept being any changes to the way a law firm worked which provided efficiency for Barclays. Technology was still at an early stage, Hamon said, but initiatives like its law-tech Eagle Lab incubator were aimed at using collaboration to find solutions more quickly.
Firms would be required to demonstrate diversity and inclusivity in every engagement it had with the bank. Barclays was also launching a specific consortium for its panel firms to discuss and action diversity initiatives. Barclays head of relationship management Christopher Grant said: ‘They are able to demonstrate that that is core to what they’re doing and understand it is core to us. Matter by matter, throughout the year, each one of those metrics are looked at.’
Grant was confident the bank had made its overall expectations clear: ‘Those firms that position themselves well, understand what the expectations are and are able to deliver against it, will naturally find themselves starting to bloom. Those that fail to do so will put themselves in a more difficult situation in terms of maintaining panel status.’