Why law firm panels fail…

Law firm panels are a key tool for controlling legal spend for clients. Done well, they should also help stimulate innovation in the way work gets done. Innovation matters because panels wouldn’t be worth the effort if they didn’t deliver better outcomes for the client. Having been in and around in- house legal teams for over two decades I can say that there are many forces resisting innovation in legal services. Those forces can only be overcome by a shift in mindset and behaviours by both law firms and clients. But critically, neither firms nor clients will commit to this effort if their relationship is temporary or poorly defined.

I’ve learned through bitter experience that law firm panels are really hard to do well. Many fail to launch at all and the vast majority fail to achieve their potential. So, what are the key reasons law firm panels fail to live up to expectations?

Reason 1: Client short termism

Panel terms are typically unattractive for law firms. They impose demands and constraints on them in return for no commitment of regular work in the long term. Clients run panel processes on the assumption that law firms will be hungry for the work. But firms typically have a profitable status quo, so they have learned to be fussy about which approaches to respond to. Equally, every firm has had the experience of putting hundreds of hours into winning a place on a law firm panel, only to get no work out of it – may I take this opportunity to say sorry!

Clients and law firms both know that in-house lawyers don’t shift work away from incumbent providers without a sustained change management effort. Making that kind of shift takes time.

Additionally, in-house teams too often do not recognise that a law firm panel actually requires a continuous management workstream. To succeed, the panel must be marketed internally, overseen, subjected to process controls, measured, and reported upwards and outwards on a regular basis. A primary measure of success should be the percentage of total legal spend that goes to on-panel vs. off-panel law firms. That number needs to be going up at every interval until it is diminishingly small. If there are law firms on the panel still not seeing any material flow of work, it suggests one of two things. The panel is too big, or the distribution of work is uneven – which in most respects means...the panel is too big.

Yet sustained long-term focus and effort rarely happens. As a result, law firms see a limited return on their efforts and the client sees no transformation in the cost or quality of legal service.

Reason 2: Lack of value on the table

Clients sometimes want to divide a panel arrangement by practice area. This at once diminishes a law firm’s motivation to take part. In practice, it means that the partner who really wants to get their practice group on the panel is unable to sell the deal to the pricing committee. With cross-selling opportunities off the table, the value of the relationship to the firm may be too little.

A balanced approach will put as much value as possible on the table at the outset. This maximizes the value firms can see, it motivates the firm’s leadership to take the client seriously, who will then mobilise the necessary resources to ensure great client service. Importantly, it is also the precondition for clients to get what they need: innovation, added value services such as training and secondees, technology investments, and a willingness to embrace client-specific process and protocol that firms often struggle with. To do this requires intentional client leadership – which brings me to the third reason law firm panels fail.

Reason 3: Management is not the same as Leadership

Management is giving people what they want; leadership is convincing people to want something better. A transformative panel arrangement is a true leadership exercise because all the management oversight in the world won’t get lawyers to change how they do their job.

The panel strategy needs to be clear and consistently championed by the General Counsel. This tone from the top needs to explain how everyone benefits, including law firms.

This requires a leadership assertiveness that is surprisingly rare among in-house counsel. Too often, even where a General Counsel is convinced that a material change is needed, in an admirable attempt to be collegiate, they ask their team if they want to do it or not. This means that everyone has a voice, which is great. It can also mean that everyone has a veto, which is not great.

Leadership starts with a vision, continues with consistent communication over the long term, and is brought to life with rigorously applied financial and operational controls. Most critically, retaining an off-panel law firm should require prior written GC approval.

Reason 4: RFI responses nobody reads

Clients will often approach firms with an RFI seeking enough information to sink the titanic. One of the most common outcomes of an RFI process is...nothing at all. Law firm responses combined run to hundreds or thousands of pages. The client team begins to wade through them, loses steam (or interest), and never gets to the end. The RFI process dies of neglect and often the law firms who made submissions are never even told what’s happened to their response.

Law firms are guilty parties here, but only the client can prevent the problem from arising. Clients must ask focused questions and then constrain how many words a firm has for its responses. Client’s must figure out what they “have to know” – to ensure compliance with law and policy – and beyond that, what do they “really want to know” that will help decide whether to put the firm on the panel.

Conclusion

Panel arrangements can be transformative if they present a compelling opportunity to law firms, and they have leadership commitment at General Counsel level. The whole effort needs to be rooted in a clear strategy that incentivises all stakeholders to make it work.