This article is a shorter form of a piece published in Legal Evolution titled The Four Fatal Flaws of Law Firm Panels.
For corporate clients, law firm preferred provider panels hold out the promise of improving quality and responsiveness while reducing cost. The potential benefits are attractive: a short list of law firms will bring proactive service, consistent client-facing teams, multi-year rate fixes, and big volume discounts. Law firm panels have become ubiquitous.
But as too many general counsel and heads of legal operations have discovered, panels are really hard to do well. Many never launch; others launch but never really succeed. Why is making a list of preferred providers so hard? Partly because “making a list” is a lot harder than it sounds, but mostly because it’s just a small part of a much bigger process.
At AdvanceLaw we have a box seat view of panel arrangements; we see them succeed and we see them fail. Below we outline three of the most common mistakes in panel arrangements, and we suggest solutions.
Mistake #1: Clients don’t put enough value on the table. Many RFIs receive a tepid (or no) response from law firms. GCs are often surprised when this happens, but it’s often because they haven’t put enough work on the table. This happens even when the company has plenty of legal spend; the team has chosen to craft an RFI that involves too few practice areas, or isn’t clear about the duration of the proposed arrangement.
Successful firms are busy and profitable, while law firm growth is difficult and risky. As a result, firm leaders need to see long-term growth potential if we want them to respond energetically to an RFI.
Solution: Be more ambitious. Clients should gather their legal needs across as many practice areas as practicable, for a defined period of 2-3 years, and put all that work on the table at once. This maximizes the value firms can see and motivates them not only to respond to the RFI, but to follow through and ensure that the client is being served well over the life of the arrangement.
Mistake #2: Clients create the panel – and then don’t use it. A panel’s success mainly depends on the energy and quality of follow-through after the panel has been selected. But since creating the panel is exhausting work, the project tends to lose steam after the panel is announced – which is to say, it loses steam right when the changes it promises are supposed to begin. As a result, engagement with new firms is limited, agreed management practices aren’t carried through, and the client never benefits from all the work of creating the panel.
For law firms, those who worked so hard to get on the panel see little to no increase in work. In fact, we know a firm in Chicago that stopped serving an existing client in order to clear conflicts to get onto a preferred provider panel. They got on the panel – and two years later the “new client” still hadn’t called.
Solution: Plan for a marathon – and then run it. In-house teams need to plan for the whole project – which includes marketing the panel internally after it’s created, implementing financial and process controls to effectuate the panel, and reporting regularly on panel successes and areas of opportunity. Panel arrangements need to be consistently and clearly championed at the GC level, with regular messages from the top articulating how everyone – including law firms – benefits from the change.
Mistake #3: The RFI is a “Request for Inundation.” This is actually the most common mistake, and the most lethal. RFIs frequently solicit so much information that the entire process drowns in law firm responses. Unless the RFI is carefully constructed to prevent this, each firm’s response will be 20-30 pages or more of dense text. Once five or ten law firms have responded, the client team is looking at hundreds of pages of reading just to begin to figure out who to hire. Many panel selection projects hobble along for a few months before they are abandoned in deference to other in-house priorities.
Solution: Limit responses to what you can read (five or ten times). Clients need to ask focused questions and think critically about how many words pages will come back in response. If there is any doubt about the team’s ability to digest all the information, responses should be forced into a shorter format. Law firms are always happy to provide more detail on request.
Implementing a law firm panel can be a transformative change management project if it is designed well and carried out with consistent energy across a period of two to three years. That kind of sustained effort requires a clear GC-level commitment, of course. It also requires a practice of measuring and reporting panel benefits in order to motivate every stakeholder to push the change and fulfill the panel’s promise.