The energy giant’s group GC discusses the overhaul of its legal function
When the in-house legal team of a large corporate announces a ‘review’, it’s often enough to instil a sense of foreboding in its external legal panel. For the law firm, it’s likely to mean months of painstaking paper pushing, parading in front of senior lawyers (and, these days, possibly their bosses) and making promises they hope they can keep, particularly when it comes to costs versus service levels.
But at National Grid, things are a little different, for now at least. There is a review planned, but group general counsel (GC) and company secretary Alison Kay is determined to analyse service levels closer to home, starting with her own 31-strong UK team.
‘I’m very much of a view that you have to start with the in-house team,’ says Kay, who took over from outgoing group GC Helen Mahy in January 2013, having joined in 1996, and worked her way up through the ranks, working as a commercial director in the UK transmission business between 2008 and 2012.
While Kay’s review is of her own doing, it comes in the wake of an eight-year pricing review by Ofgem. The UK’s energy companies are under more pressure than ever to prove they are providing consumers with value for money. In February, shares in British Gas owner Centrica fell after the energy secretary Ed Davey singled it out in a letter to Ofgem, pointing out that addressing high profit margins in gas suppliers may require regulatory action.
Unsurprisingly, the ‘more for less’ mantra has found its way to the top of Kay’s agenda and she says: ‘It’s a never-ending cycle, but now’s ripe for looking at our mix of work and whether there are some things we’ve done that we still need to do. Are we adding value or do we need to say the business can do some things itself but in other places we can add real value?’
The process began several months ago, when UK GC and company secretary Karen Clayton began pulling together preliminary information on the team, which undertakes core regulatory and contractual work, but also commoditised property, procurement and IT contractual work.
‘We really have got to sit down and analyse what our teams do, from the time they start their day to when they leave, to get a pattern,’ says Kay.
Once these patterns have been established, Kay plans to discuss the findings with the business to find out if the in-house team is operating at the right level and providing the most value. Things to look at include whether more investment is needed in IT in order to help the business undertake repeated contractual tasks, although this is unlikely to happen in the short term.
Only then does Kay plan to turn the same level of attention to National Grid’s external advisers. Coincidentally, the current panel expires this month and Clayton is in the final stages of an interim ‘light touch’ panel review, to be announced shortly.
The current UK panel, which was put together in 2011 when National Grid cut its roster of firms by 25% to 16, includes Allen & Overy, Linklaters, DLA Piper, Eversheds, CMS Cameron McKenna, Berwin Leighton Paisner and Field Fisher Waterhouse.
However, most significantly for advisers, the long-term aim is to not only look at the UK external legal function, but also its far larger US counterpart, which also reports to Kay, to see if there are areas where the two can be joined. There is currently no crossover and Kay says: ‘At the moment the US and UK are very separate with differing needs, stemming from different regulatory review and judicial systems. That might be how it stays, but there are so many international firms that there is merit in looking at whether some of our work could benefit from joint procurement.’
Kay is keen to stress the full-scale external adviser review won’t just be about turning the screw on National Grid’s legal advisers. ‘This is not just about external firms charging less, but about us having our processes and procedures in order so we can guarantee we’re giving great instructions and turning things around quickly – it’s two way,’ she says.
However, the need to involve National Grid’s procurement team in the process will no doubt introduce additional tensions and Kay is also considering bringing in an external consultant to advise on what the FTSE 100 company should expect in terms of value from its law firms.
While Kay is motivated to conduct the review by a desire to do the best for the energy giant, in many ways its external advisers have brought it upon themselves. Following the panel review in 2011, which was run by Mahy, one lawyer close to the process indicated that the results of a call for innovation had been disappointing and that the billable hour remained dominant.
For a FTSE 100 company with a combined US/UK legal spend of £35m, there is certainly not the innovation seen at the likes of telecoms giants Vodafone and BT, where firms often operate on a fixed-fee basis and offer services such as rolling secondments (where the lawyer is based at the law firm but is effectively on call). In that sense, it would certainly help cost savings if the US and UK work was pooled.
While the aim is to complete the in-house and external legal function review by March 2014, that deadline is likely to be missed as Kay adds: ‘We may not meet that and my main concern is to do it properly. I suspect we will retain a lot of familiar names, this is not a revolution, but we know areas that work well and the ones that don’t and we need to probe those areas.’
At a glance: Alison Kay
Career
1987-89: Articled clerk, Martineau Johnson (now SGH Martineau)
1989–96: Solicitor/associate in the corporate department, Martineau Johnson
2000–08: UK general counsel (GC) and company secretary, National Grid
2008-12: Commercial director, UK transmission, National Grid
2012-present: Group GC and company secretary, National Grid
National Grid – key facts
Size of legal team 31 lawyers in core UK team
Legal spend £14m in the UK; £21m in the US
Preferred firms Allen & Overy; Linklaters; DLA Piper; Eversheds; CMS Cameron McKenna; Berwin Leighton Paisner; and Field Fisher Waterhouse