Learn why legal departments create law firm panels and how they work

Law firm panel management, implementing and managing a convergence/consolidation program, is a commonly discussed cost savings and efficiency strategy for in-house legal teams. However, achieving it can be an extremely time-consuming process. 

There is no question as to why legal departments are interested in law firm panel management. Legal departments in the largest companies (those in the top 25% of companies with more than $20 billion in revenue) have an outside spend of $130.3 million every year according to the ACC 2023 Law Department Management Benchmarking Report.

Looking at these numbers, you can see why 78% of legal departments say that controlling outside counsel costs is a high priority, and 65% consider law firm convergence a priority for their teams (Thomson Reuters 2023 Legal Department Operations Index). At the same time, according to the ACC report, the vast majority of companies are either increasing the number of law firms they engage (30%) or that number is staying the same (57%). 

Making progress with a panel management project is a feat of change management and relationship building. While it’s something many legal departments have difficulty with, for obvious reasons such as the project’s scope or balancing the interests of many stakeholders, it can be achieved through a focus on process and communication, skills that legal operations professionals excel at. 

In advance of our upcoming webinar on the topic featuring legal operations leaders from Salesforce, PNC and Luna Legal Ops (formerly PG&E), we wanted to share some insight into law firm panels and panel management.

What Is a Law Firm Panel? 

Law firm panels (often referred to simply as “panels,” or other terms such as preferred law firm panel, preferred provider panel, etc.) are groups of designated law firms and sometimes alternative legal services providers used by legal departments for matters not handled in-house. Creating a panel usually involves picking a group of law firms based on factors such as practice area, expertise, geography, expense level or size. 

When starting a panel program from scratch, legal departments often begin by looking at the firms they already work with and analyzing them to build a smaller list of preferred firms that are then given panel membership. Once the list has been narrowed and the panels created, the legal department sends the preponderance of their work to those firms, giving the company more negotiating power with the chosen firms and strengthening the relationship between the department and the firm due to the volume of work being sent their way. 

What Are the Elements of a Law Firm Panel Program?

While every company is different and will approach its law firm panels differently, there are some common elements that many legal departments use to help manage their panel programs successfully. 

Categorization of Firms

As noted above, each panel is usually composed of firms that fall into the same category, whether that’s a particular practice area, region of the globe or firm size. These can also be further divided into tiers based on expense. For example, you might have “top-tier” firms that charge higher rates but also offer a greater level of service reserved for high complexity, high-risk projects and have “lower-tier firms” within the same panel that can take on less critical matters. 

Defined Renewal Periods 

One common panel management strategy is to create cycles for refreshing panels. Rather than having panels open to be joined or consolidated at any time, legal departments will create a time period (e.g., two or three years) during which panels are essentially locked, and no new firms will join. Then, when that time comes up, the department will analyze the firms’ performance, open the panel membership up to new firms and make changes based on conclusions from the information examined.

Data Analysis 

Certainly not unique to panel management, data plays an important role in the process. After all, the end goal of a panel program and law firm convergence is to provide more value to the company. Without measuring and reporting on firms at regular intervals, you’re defeating that purpose. Some legal departments use proprietary internal tools, others use off-the-shelf legal technology platforms and some use simpler options such as spreadsheets. 

Structured Communication

Both internal and external communication are incredibly important for panel management. Internally, legal operations professionals should be talking to their attorneys to learn about their relationships with outside counsel and what is working and what isn’t. Even better if this qualitative data is collected and reviewed alongside the data analysis mentioned above. 

Externally, communicating to your trusted law firm partners about the purpose of your panel, how their performance compares to other firms and the value of their relationship is the bedrock of a successful panel program. Many companies achieve this through regular calls and meetings, often sharing firm reviews or data dashboards with the firm to provide context behind the conversation.

What Are Panel Management Best Practices?

We’re only scratching the surface of panel management in this blog post.