Value, like beauty, is largely in the eye of the beholder. This can create quite a challenge within the legal community, though, for several reasons. First, law firms have not traditionally done a great job of asking their clients how they define value or how well the firm is delivering said value for the client. Second, clients themselves often do not know exactly how to define, in real terms, what they value.
It was precisely this issue that lawyers at 3M confronted when they began developing their outside counsel evaluation criteria. Joseph Otterstetter, associate general counsel for International Operations and former managing counsel, describes it as trying to develop an evaluation system similar to the annual assessment each lawyer at 3M undergoes. “It’s really just a basic communication practice that we formalized,” says Otterstetter. And through formalizing that basic communication, 3M has sought to quantify their largely qualitative impressions of their outside counsel, thereby creating a benchmark for evaluation.
“The impetus really began out of a frustration that we seemed to be episodic in our giving of communication back to our firms,” explains Otterstetter. “Lawyers tend to be somewhat passive-aggressive – if they’re unhappy with a firm, they just tend to not call them anymore. That didn’t seem consistent with the kind of trust we were trying to build with our outside counsel.” Otterstetter says 3M felt they owed their outside counsel more consistent feedback, and because all the players involved were such busy people, the process for providing that feedback needed to be more formalized.
The result was the rubric shown here. Leadership at 3M collaborated to settle on five key criteria for evaluation:
- Legal Expertise and Judgment
- Delivers Results
- Delivers Value
- Communication and Collaboration
- Alignment with 3M Values
There was a recognition that the actual expectations with regard to each of these criteria may vary based on the particular practice area or business unit within 3M, so the in-house lawyers within each of these areas were given some latitude to tailor the bullet points within each heading to meet their own needs. But the five core criteria do not change.
“To make this a holistic process, we aligned these key performance indicators with our selection criteria,” Otterstetter notes. “When we do an RFP, we base them around these five categories, and then annually we do a review meeting with our outside counsel.” In some cases, 3M is even hosting these evaluation conversations on an ongoing basis.
Each criterion is scored on a 5-point scale with a score of 3 meaning the law firm is meeting expectations, a 1 demonstrating a consistent failure to meet expectations, and a 5 showing results that consistently far exceed expectations. (Otterstetter adds that 3M’s legal team rarely gives out many 1s or 5s.) But lawyers, many of whom are used to being at the top of their classes, needed some coaching to realize that a 3 is actually a good result.
In addition to the numeric scores, each 3M lawyer with whom a given law firm worked during the year is solicited for their comments regarding the firm. These comments provide additional context for the scores. Law firms are also shown how they rank relative to other law firms within the portfolio, which has served to ignite the competitive drive among the lawyers to better their standings, increasing the efficacy of the program for 3M.
The feedback is also reciprocal. Not only does 3M invite their outside firms to visit their Minnesota headquarters, members of the 3M legal team also travel to the firms’ locations as a way of showing how valued the firms are as partners. As 3M is evaluating their outside counsel, the team asks that the law firms provide feedback to 3M. Although law firms are often loath to discuss with 3M how the firm perceives the company as a client, Otterstetter explains 3M had to make it clear that it wants that feedback to ensure the company is moving towards the best possible relationships with their outside counsel. Understanding what practices or habits may stand in the way of that goal is central to achieving it, he adds.
For example, one law firm pointed out that the scores 3M shared with them did not seem to align with how business was being allocated, Otterstetter remembers. Specifically, the firm could see that they were outperforming a competitor in terms of their evaluations, but the competitor was getting a larger share of work. The fact that the law firm pointed this out caused 3M to take a look at how their work was being allocated and ultimately resulted in the higher scoring law firm getting a larger share of the portfolio.
On Board with the Program
While implementing this program within the company did not see a high degree of resistance, 3M did notice that the feedback gathered from their own lawyers through the first round of evaluations was not as robust as desired. But as the value of this feedback program became clearer, 3M has found it needs to do less prodding of its own people to provide solid feedback.
“My advice to anyone looking to start this kind of program is that the first time is almost a trial run,” says Otterstetter, adding that what energized colleagues was the energy they saw around the feedback. “The firms really embraced it.”
Otterstetter describes how 3M invited the individual lawyers and paralegals who had worked with the outside law firms to join in the feedback sessions too. “I think having seen the appetite for the constructive as well as the positive feedback, they’re now willing to invest more time in giving meaningful, detailed feedback.”
There is an important lesson here for all stakeholders, whether on the buy-side or the sell-side. For in-house counsel looking to start such a program, getting the individuals who work directly with the law firms involved in actually providing feedback is key to showing them firsthand the impact that their insights have on these important relationships.
For law firms, an open and receptive attitude toward offered feedback will help strengthen the relationship between law firm and client; and it will give the law firm a stronger understanding of what the client truly values. And while it may be tempting to view constructive criticism negatively, law firms should remember that it’s better to have a client who is willing to be honest about shortcomings and work with the firm to overcome them than a client who simply stops calling.
Of course, none of this is to suggest that it is incumbent upon the client to be the ones to introduce an evaluation program. Law firms looking to deepen their client relationships would do well to consider approaching their clients with an offer to help create such a program. The bigger problem appears to be a lack of law firms taking such initiative. “I can tell you that in five years as managing counsel, I had three meetings with law firms in which they actually sought our input,” says Otterstetter. Clearly, developing a robust feedback program as a law firm cannot only help the firm deliver better results for the client but also can serve as a key differentiator in a crowded marketplace.
What a client values in their outside law firms will remain a fluid concept. But for both in-house legal departments and the law firms that serve them, a robust and ongoing conversation about the client’s priorities and needs will be one of the best ways to ensure healthy and productive relationships, even as the definition of value evolves.