Reviewing your legal panel, especially if it has grown organically over a period of years, can be a daunting task. Here are our recommendations to best structure your approach.
Some of the most common issues we find are as follows;
1. You cannot confidently identify every single legal firm you use.
2. Which means you aren’t completely sure how much you spend either by firm or overall legal spend.
3. Most often you will have some details regarding rates and term of engagement but not all.
Step One – Identify your spend
There will be financial data within your organisation detailing the payee and amount. This is your start point.
Then ask your teams who typically utilise legal firms to identify which firms they have appointed over a pre-defined period (usually the past calendar or financial year). Cross reference the firm names with the payees from the finance data
Finally approach the legal firms identified above and ask them to provide invoice data for the same period of time.
By combining these three data points you should have now got a good understanding of which firms you have been using and what amounts you have been spending on each.
WORTH NOTING: Getting your spend data to 100% accuracy is a very tall order and often not worth the effort. Get to within 80% plus then move on to the next.
Step Two – Understanding who you use and why
Now you have a good idea of what your legal spend IS, you need to establish what your legal spend SHOULD BE.
Some good questions to ask;
Are legal firms being appointed unnecessarily?
Do your deployment rules need revising?
Are the right firms being appointed for the right type of matter?
The last question is key and it greatly helps to map out which firms are receiving which type of matter. If you are sharing four new instructions a year with 4 firms who all offer the same expertise, it is safe to say that you have too many on the panel. Likewise if you have hundreds of matters going to only one or two firms its likely you have too few.
Try to capture the reasons behind a legal panel member being go-to firm, and if possible quantify what impact this has on your business. It could be that you have a defence counsel that wins unwinnable cases, you might have an industry recognised expert at another firm or even that yet another firm always sticks to the matter budget so financially there are no surprises.
Finally it is not uncommon, especially in specialist areas, that the loyalty rests with a particular partner rather that the firm itself. Should this be the case, it is important to note for a later step.
Step Three – Agree your strategy moving forward
Agree which matters you will look to outsource and which you will keep with your internal teams. Set defined and clear rules which are unambiguous and provide internal referral points for any grey areas.
Having mapped out instructions to firms agree an ideal target number of firms required to give you enough coverage but without reducing your buying power too much.
If you already have billing protocols with your firms, review and revise them. If you do not have any, draw some up. These are essentially a set of guidelines outlining what you consider to be a billable activity and what should be included within the agreed hourly rates.
Finally if you haven’t already done so map out all hourly rates you are paying, by firm.
WORTH NOTING: with several hourly rates per seniority (senor partner down to intern) comparisons between firms can get complicated. If you can, apply a weighted single rate depending on what % each seniority contributes to the total hours billed. It makes comparisons much simpler.
Step Four – Start a formal review process
You can make this as big and formal as you see fit, with a full blown tender process or a light review that covers the important points to get the best results.
As a minimum, we would suggest the following in included:
1. Acceptance of your billing protocols.
2. Agreement to your terms and conditions of engagement.
3. The firms best proposed rate card.
4. Overview of expertise within the firm.
5. Added extras (staff training etc) on offer.
6. How the firm intends to align with your requirements.
Traditionally this exercise is completed via the written word but there is no reason why it cannot be conducted via interviews with the senior partners.
Ensure that all current panel members are invited, as well as non panel firms to enable a better comparison.
Step Five – Complete the review and set up your new panel
Compare the responses and map out the proposed rates from each firm by class of instruction. There will be outliers where the proposed hourly rate is far higher than the average – remove these firms unless there is a compelling reason not to.
If you need to verify the range of rates proposed against a wider data set, try this free benchmarking resource.
WORTH NOTING; Firms who you have worked with for many years will claim that the rate they charged you prior to the review were old and now you are undertaking the review the rates will have to increase. This is the reason for bringing in different firms for comparison purposes as others will most likely be more cost effective.
Make sure that you have competition by class of business in your panel and that the firms know this – set up an instruction structure which rewards good performance.
Finally, if you are choosing a particular firm because of a partners expertise, make sure that any contract you have stipulates that you will follow that partner to their new firm in the event that they move on.
