Build a successful panel with these tips from our recent webinar
According to a recent report by the Association of Corporate Counsel (ACC), large companies engage a median of 93 law firms in a given year and spend $130.3 million on outside legal providers. When you couple these statistics with the ongoing uncertain economic climate and directives from business leadership to cut costs, it’s clear why many legal departments want to make their spending more efficient.
Preferred law firm panels are one way that legal teams can cut costs, increase efficiency and strengthen relationships with their law firm business partners. However, as many legal operations professionals and in-house counsel know, building a preferred panel program requires a significant time investment from internal, as well as external, stakeholders.
We recently had the pleasure of speaking with three legal operations leaders about their experiences with panel programs and outside counsel management. Karen Helten, Outside Counsel Senior Manager, Salesforce, John Crawshaw, Legal Operations Manager, PNC, and Juanita Luna, Managing Director, Luna Legal Ops (formerly with PG&E), explained how they think about law firm convergence, the impact it’s had on their companies, implementation successes and challenges and much more.
In this article, we’re highlighting insights from that discussion about the panel creation process. To read the panelists’ thoughts on ongoing panel management, outside counsel data and measuring success, check out this companion piece on the Priori blog.
WHY DO LEGAL DEPARTMENTS CREATE LAW FIRM PANELS?
The idea of creating preferred panel programs is a natural one for legal departments that want to maximize efficiency. Managing dozens, if not hundreds, of law firms can be a dizzying task, so it only makes sense that narrowing down the number of law firms used will aid smoother operations.
In practice, there are several goals that law firm panels help legal departments achieve. These are some of the most important.
Cost Savings
This is probably the most obvious benefit of law firm panel programs, but that doesn’t make it any less compelling for legal departments. Consolidating the law firms a legal department uses inevitably means that the law firms you engage will end up with more work. This gives you more negotiating power and, in general, firms provide discounted rates (or alternative fee arrangements) for panel membership and the ability to win more business.
Increased Efficiency
By reducing the number of firms your legal department works with, you also reduce the administrative time it takes to manage and onboard firms. If you’re looking to bring more work in-house, this is a great way to do so—you’ll free up time for in-house counsel that was previously spent on administrative work. Data collection and analysis also become more manageable as defined processes for bringing firms onto the panel mean less information gets lost in siloed conversations.
Strengthened Law Firm Relationships
Beyond the additional negotiating power panel programs provide, they also help to build stronger relationships. With fewer total firms in your repertoire, not only will your team get to know your firms’ expertise in more detail, but the firms will also get to know your company’s business better. Successful panel programs usually involve regular check-ins between firms and in-house counsel and legal operations and that kind of regular, personal interaction and open conversation creates a strong foundation for valuable partnerships.
FACTORS TO CONSIDER BEFORE STARTING A PANEL PROGRAM
When legal departments look at creating preferred panels, they are often driven by the benefits listed above. Cost and efficiency are drivers of improvement for all types of legal operations initiatives, whether that means a panel program, legal tech implementation or internal work assessment, among many others. However, beyond these key factors, a lot of other considerations should go into the decision to stand up a law firm panel (or not).
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Quality – A panel can help you focus on those firms that give you the best outcomes and provide the most value. Tracking performance through standardized reviews and bringing that information to conversations with firms is a great first step (and is useful with or without a panel program).
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Diversity – It’s no secret that Big Law firms are generally less diverse than the overall legal market. Creating panels can help to prioritize working with large firms that have programs that value diversity and also give small and midsize firms (which tend to be more diverse) more access to your portfolio of business.
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Number of Firms – One panelist noted that feeling like the number of law firms your company works with is growing wildly or becoming unmanageable is a great indicator that a panel program will provide a lot of value.
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Competition – A common concern that comes with panel programs is that convergence could lessen firm competition—when there are fewer firms and they know they’re part of a smaller, approved group, they may be less likely to negotiate. Thinking about the balance of a panel can help avoid this. If you’re going from hundreds of firms to 50, for example, you can still retain competition while also receiving the benefits of convergence.
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Flexibility – Some companies have more rigorous programs than others, with few opportunities for panel step-outs (i.e., work going to firms without panel membership). It is a fine line to walk because the more you allow for exceptions to a panel program, the less effective the program will be. Legal departments should look closely at their business and how they expect it to grow. If your company is rapidly expanding into new regions, for example, you may want to carve out exceptions for that (or even put panel creation on hold until your legal needs are more consistent).
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Bandwidth – Creating a preferred law firm panel requires skillful change management, clear communication and buy-in from many stakeholders. It’s a large project and, like any change management project, without dedicated time investment, it can drag on and create skepticism. Whether you have the time and internal champions to plan and execute the project is an important question to think about.
WHERE TO START WITH A LAW FIRM PANEL PROGRAM
So you’ve decided to build a panel program for your legal department. Where should you start? The answer is to look inward. The best place to start when you’re creating panels is to look at the law firms you already work with and the work they’re doing for you.
Some of the questions you want to think about include:
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Where is most of your legal spend going? Are there particular practice areas, regions, etc., that are getting most of your business?
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Looking at the firms you work with within certain practice areas, are there crossovers (or potential crossovers) with other practice areas?
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How open to working with different firms are your in-house counsel in certain practice areas? Are some more open (or more hesitant) than others?
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Are your attorneys happy with the firms they’re working with, or are they working with them because that’s who they’ve always worked with?
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Which firms are performing well from an operational standpoint? Are there firms that make it easier for you regarding billing, invoicing and other administrative tasks?
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How well do the law firms you currently work with align with larger company goals (such as diversity or sustainability)?
Even if your company isn’t ready for a panel program, asking these questions can be useful for thinking about legal spend and the answers can help you receive benefits regardless of whether you have a panel or not. If you’re not already thinking about these things and collecting and analyzing data related to them, you’re missing out on key information that should inform your law firm hiring decisions as well as increase your negotiating power. If you can bring data to discussions with firms, it puts your company in a stronger position.
Another recommendation from the panelists is to consider bringing on an outside consultant. Asking these questions and managing the data that comes along with the answers sounds great on paper, but it is a huge project and can be too much to wade through for an already busy legal ops team. Two of the panelists explained that outside consultants helped guide them through the initial process, providing knowledge of the market and experience with other companies that proved extremely valuable. And then, once your program is set up and your team has the experience to know what works and what doesn’t, you can bring it in-house (although there’s no shame in continuing to use consultants as the program evolves).
Now that you’ve thought about what goes into creating a panel, you’re probably curious about what the program looks like in action. To find out how our panelists from Salesforce, PNC and Luna Legal Ops (formerly with PG&E) approached panel management, metrics analysis and more, read our follow-up article on the Priori blog.
Whether you have a law firm panel program and would like to enhance it or you are considering standing one up in your legal department, we hope this recap provided some useful tips. You can also learn more about cost-saving strategies beyond panel programs in our three-part series on the topic.
And if you’re interested in a tool that helps you structure outside counsel data, manage a panel program and make better hiring decisions, contact us for a demo of Priori Scout.
