For businesses these are unprecedented times. Major economic and international events have generated volatile market conditions. Added to this is the ever growing plethora of complex legal and regulatory requirements.

At the forefront of spearheading companies through these challenges are legal teams. However, for many of these teams, there remains a continued emphasis on delivering these legal services with improved efficiency and reduced legal spend. Nowhere has then been felt more than in their approach to external panels.

Such panels have undergone an evolution in recent years. General Counsel (GC) have demonstrated their willingness to reign in their panels, favouring slimmed-down rosters as part of an ongoing strategy to not only save on cost, but improve relationships with firms. At the same time, many GCs now look beyond established relationships and select firms based upon their approach to efficiency, innovation and pricing flexibility.

Below is an analysis of how this selection criteria has evolved further and the importance for firms to respond to this when looking to maintain or secure a position on a roster. Also examined is the approach that GCs could take to their panel arrangements in the future in terms of the number and type of occupants and the review process itself.

Panel selection – An expanding criteria

In addition to reducing roster size and moving away from the status quo, there are now two additional themes arising out of the GC selection criteria – diversity and collaboration. In regard to the former, the days of a firm arriving at a panel pitch with a team made up of solely white males are hopefully over. Those that do (and there is no doubt some that still do) are immediately demonstrating a clear disconnect and lack of understanding with the demands of a modern-day GC.

Diversity has become an embedded characteristic of many in-house teams. For those GCs whose teams are still lagging behind, ensuring diversity in terms of criteria such as gender, ethnicity, education and disability will nonetheless still be at the forefront of their current and future strategy. GCs are now expecting their counsel to follow suit. Those firms that fail to demonstrate greater diversity within their own teams or at least make some sort of progress, run the risk of losing out on work. For a more in-depth analysis on the importance of firms to meet the needs of diversity, including the latest data trends, see here.

When it comes to collaboration this can fall under two strands. The first is collaboration between the in-house team and the individual firm. This boils down to a GC desire for prospective firms to demonstrate a willingness to develop a greater understanding of the inner-workings of the business and strengthen the firm-client relationship. This is where technology can play a key role in helping to forge this collaboration. GCs currently possess little time and resource to dedicate to technological implementation. Here provides the perfect opportunity for prospective panel firms to step forward and bridge this gap by developing solutions of their own and offering to work directly with the in-house team to install and tailor this technology to meet in-house needs.

Technology aside, some GCs have attempted to bridge the relationship gap through the utilisation of law firm summits. Through these, panel firms collectively spend one-or two days at a particular client communicating face-to-face with leadership and in-house teams in a bid to gauge current and future concerns. Those GCs not currently utilising this capability should think about installing it within their selection criteria. Summits bring a human element to the firm-client relationship and install expectations and trust which can only benefit both parties in the long term.

Prospective firms should also be thinking about how they can use their own initiative to improve relations. This could involve offering to provide in-house teams with complimentary training programmes, secondees (both lawyers and project managers) and general technological support. Not only will GCs appreciate the initiative, but it also demonstrates a firm's willingness to provide their client with cost-effective and tailored legal solutions.

The second strand of collaboration is direct collaborative working between panel firms. This form of collaboration is one of the most interesting developments in the evolution of the modern-day panel, representing an important shift in the firm-client relationship towards a more coordinated and linked service offering. Such collaboration should also only be welcomed by GCs and firms alike. Bringing together expertise on a particular deal or in-house project, can not only aid the client which can benefit from the integrated service offering, but can also benefit the firms themselves which can use the opportunity to share knowledge and learn from each other.

Firms should now expect this form of collaboration to be a pre-requisite as part of securing any panel position. At the same time, firms need to be able to demonstrate a willingness to work with potential rivals. In showing the importance of this, a growing number of GCs are now beginning to rate firms in their end of matter evaluation, for their “decorum” and treatment of opposing counsel. Now is the time for firms to put hostilities aside.

So what do these additional requirements mean for firms? To either secure or maintain their position on rosters, it has become critical for firms to respond effectively to the varying and changing demands of GCs. Put simply, those firms that don't demonstrate a willingness to adapt, will find themselves missing out on panel places and with it, the accompanying and consistent work streams and revenue generators. Ultimately, firms should no longer see themselves as mere advisers but instead long-term partners to clients with an integral role to play in furthering their business-wide goals.

From the perspective of GCs, they should not forget their position of power in the firm-client relationship. If operated effectively, panels should be used to extract the maximum value and full potential out of a firm. If this is not the case, GCs should be asking the firm why. Furthermore, the GC community is a small one. Word can often spread quickly and those firms that fail to move with the times could find themselves the topic of conversation – and not in a good way.

The future approach to panel arrangements

Looking ahead to the approaches that GCs could take to their panel arrangements in the future, there are three trends that firms should potentially prepare for:

1) The first is the removal of the review process altogether. Back in March, Barclays began the last ever formal review of its global legal panel. From now on, the bank will review its panel firms through what it calls 'active relationship management'. Under this system firms are added or removed from the panel on an ad-hoc basis, while subject to an ongoing scoring system based on metrics including service delivery and alternative fee arrangements.

The rationale behind the change of approach is to afford firms greater clarity and transparency in terms of the bank's expectations of its advisers and create a benchmark for its in-house lawyers of what firms should be aiming for. The interesting thing for the market is whether such an approach will catch on. The advantage of active management is that it does away with lengthy and resource intensive procurement which will be particularly welcomed by those partners who dread the process. However, it also requires an experienced and embedded legal operations team in order to be effectively managed. This is not often a luxury afforded to many in-house departments.

Instead of scrapping the review process, the more likely option, at least in the short-to-medium term, is that pitching firms be required to utilise their ever-growing cross-firm expertise to demonstrate the linkage between different areas of the firm. This is most likely to encompass the level of collaboration between lawyers and technologists which requires the former spending as much time as possible with the latter. However, lawyers that can talk with confidence about technology and what it can entail for the client, not only make a firm's full-service capability more credible, but could ultimately be a differentiator over rival firms when it comes to the pitch.

2) A second trend is the shift by some GCs from a multi-firm panel to a single firm model. In the UK, notable examples include construction company Balfour Beatty which uses just one firm, Pinsent Masons, for its 'business-as-usual' work. Also adopting this approach are Turkish Airlines and Thames Water which both use Eversheds Sutherland as their respective sole provider.

Such partnerships are certainly innovative and enable a close strategic relationship. Furthermore, a common theme across supplier agreements is the innovative pricing on offer for GCs who are willing to take up the option. In the case of Balfour Beatty, under the terms of its new agreement with Pinsent's, the company can choose from a range of fixed-price agreements based on the type of legal work, while also seek advice from the firm on the design and implementation of legal process technology.

These are the perks that come with a close relationship. However, such an approach has yet to fully take off outside a limited few. Although consolidation of external advisers is one of the ongoing themes within the in-house market, GCs are likely to favour retaining at least a choice of firm to choose from and see the advantages of the differing knowledge and experience these firms can bring to the table.

This forms a considerable barrier to the growth of the single firm model. Nonetheless, the model will still form part of some GCs thinking as more straightforward methods to cut spend and secure maximum value from firms are sought. Managing just one firm also removes the added burden that comes with managing multiple firms. Therefore, although the supplier approach has yet to fully develop across the board, firms should still be prepared to demonstrate their ability to provide such an offering.

3) Lastly, firms need to be prepared to share their future panel places with alternative legal service providers (ALSPs). As of yet, ALSPs do not feature heavily on legal rosters but are known to be widely enlisted by a growing number of GCs on an ad-hoc basis. Expect this to change. Such providers are more-suited than firms to meet in-house demands around automation and flexible resourcing and as these relationships continue to develop, expect the innovative GC wanting to formalise these relationships through formal panel appointments.

This points towards a potential shift in the type of providers occupying panels away from the traditional law firm towards “NewLaw”. The danger for the former, is if this shift begins to gain momentum. Firms have traditionally failed to capitalise on GCs needs around automation and flexible lawyering, something which they may now be starting to regret. Firms either need to start upping their game in this sphere or else accept a future where panel positions are harder to come by.