Law firm panel management: Best practices and practical insights

Managing a panel of outside law firms is a critical function for any corporate legal or insurance claims department. A well-structured panel can be a strategic asset, driving efficiency, controlling costs, and ensuring access to premier legal expertise. Conversely, an outdated or poorly managed panel can become a significant liability, leading to inflated spending and inconsistent outcomes. The key is to find a strategic balance that aligns with your organization's goals while fostering strong, collaborative relationships with your firms.

My colleague Amy Choe, Head of Professional Services Practice Management at Wolters Kluwer, and I recently hosted a focus group with legal operations and claims professionals to explore this topic. The discussion provided a wealth of practical insights and highlighted both shared challenges and innovative solutions emerging across the industry.

Legal panels today

Our conversation confirmed that formal legal panels are a standard industry practice. A quick poll of the participants revealed that 83% have an established panel of firms, while the remaining 17% described their approach as more flexible or still in development. This high adoption rate underscores the value that legal departments place on having a curated list of trusted advisors. Common criteria for panel inclusion often revolve around expertise, historical performance, and overall value.

One interesting point of discussion was the evolving approach to diversity, equity, and inclusion (DEI). While still a significant focus for many, some federally regulated organizations are adjusting how they track DEI data from their firms. As Amy noted, some clients are moving away from mandating data submission. Instead, they continue to collect it voluntarily, valuing the visibility even if direct action based on the data is limited. For many, DEI remains a vital part of the dialogue, shifting from a strict data requirement to a more collaborative conversation with firms about fostering diversity.

Right-sizing panels

A primary challenge for many departments is determining the optimal size of their panel. Think of it like a sports team roster; you need enough players to cover all positions, but not so many that you can't give each one meaningful playing time. Among our focus group participants, panel sizes varied dramatically, from eight to 400 firms. A list of 400 firms, as Amy pointed out, functions more like a preferred provider program than a true strategic panel. The goal should be to cultivate a manageable number of firms to allow for deep, meaningful engagement.

To make informed decisions about which firms belong on your panel, robust metrics are essential. The most useful metrics to guide these decisions include spend and billing rates, matter outcomes and success rates, staffing mix and efficiency, and billing guideline compliance.

One participant shared their process of conducting annual reviews with every firm that exceeds a certain spend threshold. This practice fosters a relational, rather than purely transactional, dynamic by creating a dedicated forum for mutual feedback. Another organization is centralizing performance data through internal questionnaires, which are then used in periodic reviews. These structured feedback mechanisms are invaluable for maintaining panel quality and ensuring alignment.

Managing panel exceptions

Even with a well-curated panel, situations will arise that require engaging a non-panel firm. Among our participants, most indicated they have a formal exception process. No one reported a "no exceptions" policy, highlighting the need for operational flexibility.

Common reasons for going off-panel include specific expertise or jurisdictional requirements, conflicts of interest, and urgent matters where panel firms lack capacity. A clear and efficient approval process for these exceptions is crucial. One participant described implementing a tiered approval system for blanket and one-off exceptions, bringing structure to what was previously an unpredictable practice, and ensuring that panel deviations are justified.

Maintaining a strong, collaborative panel

Clear and frequent communication is the cornerstone of a positive panel relationship. These interactions should extend beyond periodic formal reviews. I recently heard an example of a company that hosts multi-day workshops for its panel firms. These sessions educate firms on the business and involve them in collaborative problem-solving exercises, fostering a deeper understanding and a true partnership spirit.

Ultimately, your own data is your most powerful asset. As Amy concluded in our session, if you analyze your legal spend, you will likely find that a "natural panel" of frequently used firms already exists. By identifying this core group, you can enter negotiations from a position of strength, leveraging your consistent business to secure better rates and deeper discounts.

For more on how you can ensure the most effective law firm engagement, read my blog post from earlier this year, Engage, enforce, and examine: Insights on vendor management.