Law firm panels are a fact of life for most in-house lawyers, but a sizeable minority refuses to use them, and the law firm beauty parade is a largely unpopular concept across the board.
These are some of the findings that emerged from this month's Benchmarker survey in Legal Week's sister title Legal Director.
The survey, which was undertaken in association with Norton Rose, also revealed that law firms' lack of business knowledge is the key concern with clients, rated ahead of fees as the area where they would like to see improvement in the provision of legal services.
The survey, which was carried out by Opinion Research Business, looked at clients' attitudes to law firm panels and the purchasing of legal services.
Just over half (57%) of the 101 heads of legal interviewed said they employ a solicitors panel when it comes to parceling out work to external firms.
The larger the legal spend, the more likely a company is to have a panel in place. Of those companies with a legal spend of more than £1m, 65% have a panel as opposed to half (50%) among those with smaller budgets.
Advocates of the panel system believe it makes life easier, particularly where a large company may have been involved in a merger. One head of legal, who asked to remain anonymous, says: "When you have undergone a merger, other parts of the business may try to continue using external legal firms that you might not know.
"By centralising the operation with the introduction of a set panel of law firms which you know and have confidence in, quality control can be maintained."
This particular company only established its panel in the last year, but it is far from unique – many panels are relatively recent creations and the survey shows that they have grown in popularity in the last few years.
Almost half (43%) of those companies that have a panel set it up in the last two years with a further 17% saying that the panel was introduced in the last five years.
But it seems that the popularity of panels has peaked. Those that do not have a panel show no inclination to change their method of purchasing legal services. Of the 43 companies that do not have a panel, a massive 84% (36) claim that they have no intention of establishing one in the future.
For those without a legal panel most use a range of law firms, but a third claim that their legal advice is provided entirely in-house. Only 5% said they use just one law firm.
Claire Gilbert, head of legal at communications giant AOL Europe, advances a popular argument against panels.
She says: "I believe in always remaining open to new law firms. I do not believe in setting up a fixed panel when the personnel at a law firm can change so quickly."
This highlights the fact that, behind the glitter of a firm's corporate image, the reputation of the individual lawyer still remains vitally important.
Seventy-eight per cent of respondents said an individual's reputation is either important or very important. Gilbert says: "An individual is very important; if someone we work with left a firm, we would consider following them."
Whether heads of legal are in favour of panels or not, the beauty parade is commonly viewed as a tarnished process, which can lead to skewed results.
Just less than half of the respondents (47%) believe beauty parades do not work, with 37% remaining ambivalent on the matter. Only 17% of those questioned said they believe beauty parades are an effective method of selecting legal advisers.
Several of those interviewed attacked the idea.
Many claim it is a largely artificial situation, which involves being stuck for hours with a group of determined sales people telling you how great their firm is without being very enlightening.
Typical of those who hold this view is Sarah Bricknell, head of legal at telecommunications company Bowthorpe.
Bricknell says: "I know everyone expects to be sold something these days, but the beauty parade may not be the best process.
"You can end up making a decision about which firms to use based on how good or bad they were on the day [of the presentation], rather than on the experience or ability they bring to a transaction."
Many of those interviewed point out that the teams who arrive to give slick presentations are seldom the same people who your company will have to work with, should you decide to appoint them to your panel.
As Richard Francis, group company secretary at IT and communications company CMG, puts it: "They are an expensive waste of time."
Rather than making a binding decision based on a beauty parade presentation, several of those interviewed prefer to see how a law firm operates in practice.
Nigel Stanford, head of legal
at media services company CIA Medianetwork, says: "We are more likely to give a law firm a chance on a small job to see how good
it is."
Nevertheless, the survey reveals that younger heads of legal are far more likely to accept beauty parades.
Of those respondents with less than five years' experience, 22% said that beauty parades work, compared with none of the respondents with more than 15 years' experience.
Beyond panels and beauty parades, there are some qualities that are considered important whatever the process used to choose an external law firm.
Respondents identified a strong track record in a legal practice area (90%) and having a strong track record in the business sector (89%) as the two most important things that in-house lawyers look for when appointing law firms.
As might be expected, decisions are made on the basis of several factors. AOL's Gilbert maintains: "We tend to combine a demand for good sector coverage with a professional approach."
A factor that appears to be a very low priority is whether or not the chosen law firm is part of the magic circle, with only 3% saying this was very, or quite, important to them.
Furthermore, despite the on-going march by law firms to achieve global coverage, providing a global or cross-border service is not an important factor to the majority of clients, with only 38% rating this as very or quite important.
Typical is the approach of CMG, which uses three law firms most of the time, each chosen to handle particular aspects of its work:
Linklaters & Alliance for heavy corporate work; Radcliffes for property and trusts; and DLA for all IT-related matters.
CMG's Francis says: "I think these three firms between them should give us the representation and assistance we need."
When respondents were asked how law firms could improve the services they offer, at the top of the wish list was the desire to see the firms improve their knowledge of their clients' businesses.
More than half of the respondents (59%) identified this as the one way law firms could improve.
But the disciplines imposed by a panel system appear to work better in this respect. Only 52% of those with panels cited business knowledge as their top priority, compared with 70% of those who do not use them.
Other areas deemed worthy of improvement include the often thorny issue of fees, with more than 43% of the respondents calling
for greater transparency and 33% calling for a reduction in fees.
Nonetheless, the survey did reveal that, overall, in-house counsel were largely satisfied with the services they receive, with a mean rating of 7.6 (on a rising scale of 1 to 10). Even when they were asked to rate firms in terms of value for money, a mean rating of 6.7 showed that most companies are happy with their advisers.