Evaluation, Performance & Continuous Improvement Susan Hackett, CEO, Legal Executive Leadership ACC Value Challenge – Western PA Leaders Covestro Law Department March 16, 2017 Thank you – We’re going to talk about the need to critically and objectively assess how we’re doing – internally in the legal department and externally with our firms and other service providers. And then we’re going to talk about how to act on what we learn. Copyright © 2017, Legal Executive Leadership, LLC

Many of us don’t like being evaluated or criticized.

My topic today Knowledge workers are “critical thinkers” … … meaning they’re good at criticizing others, but not so good at accepting criticism. But if we don’t engage in critical evaluation of what we do, we risk doing only what’s comfortable for us, which is not the same as what’s important to clients.

What do we evaluate? Do our evaluation techniques drive value in performance?

Cost is always the default metric – the default evaluation technique Cost is always the default metric – the default evaluation technique. Did we make budget? Did we do more for less? But critical evaluation has to include considering performance beyond “making budget.” That’s actually a pretty low bar. Lowering costs is good, Increasing return for dollars spent is good. But cost is only one metric and frankly, it’s a blunt instrument with limited uses.

What are you evaluating What are you evaluating? “Lots of lawyers working really hard” is no longer a leading measure of value or the quality of service. Neither is “how long it took a laywer to do it” a good metric to define success or value Get away from activity and start thinking about outcome, and especially client/business outcomes. Clients don’t hire lawyers because they love the law, they hire them to help them advance their business goals

What outcomes do you want your lawyers to deliver What outcomes do you want your lawyers to deliver? What competencies do they need to succeed? What data supports the process and allows you to report results? Inside and outside – operational and substantive practitioners What do you think? Allow participatns to asnwer. What would be a great result for your lawyers to be able to deliver? (legal and business) So how do you get them to do those things raher than just engaging in lots of important legal activities?

People do what they’re paid to do People do what they’re paid to do. Performance is dictated by evaluation. Internal Team Evaluation Annual, quarterly, matter reviews Setting goals in advance; defining metrics that will measure success No one is exempt The needs of the business set the agenda External Team Evaluation Annual, quarterly, matter reviews Setting goals in advance; defining metrics that will measure success No one is exempt The needs of the business set the agenda people find out what they’re supposed to do when they’re evaluated on it We’ll start by showing how the evals for internal and external are/should be the same. But of course they will differ For external evals, you’re the boss / the client. For internal evals, you’re the service provider.

Outside Counsel Performance Evaluating Outside Counsel Performance Start here since it’s easier for us to talk about and then we’ll apply back to us. And remember that if we can’t adopt interanlly what we’re asking our external providers to do, they won’t likely do it either.

Charts cited: 2016 Altman Weil Annual “Law Firms in Transition” Report The world of outside counseling is potentially being set on its ear. Or maybe not. They will revert if we don’t demand change. Charts cited: 2016 Altman Weil Annual “Law Firms in Transition” Report

Change is really hard, it’s threatening, and it’s not fun Change is really hard, it’s threatening, and it’s not fun. But the real issue here is that they don’t feel a need to bite the bullet and do it because no one (namely their clients ) is demanding it. They’d do it if they were going to go out of business if they didn’t or if their profits went so far down that they had to lose the summer home in the Hamptons. It is true that firms and clients are still ill-equipped to force this change. But we shouldn’t be clients who complain, but keep on buying bad firm services anyway.

Okay, so given all of this, what is it that firms are doing to change, or to pivot, or to somehow adapt their practices ? Take a look at this and you’ll see that a few firms at each end of the chart are not at all serious about making changes or are dead serious about the, but the vast majority are in the middle saying we’re sorta interested or as one of my best friends would say, “Meh!”

So what are firms doing to better serve clients if not transformative change? How are they finding out what clients want to buy so that they can sell that (rather than continuing to produce what they want to sell but that clients seem less and less likely to buy?) Note at the bottom that only 30% are willing to do a post matter review or institute a formal client survey program since GOD FORBID we ever ask clients whether they liked what they got, what could be improved, how are we doing, etc. For gosh sake, they might tell us! And then what would our excuse be? We’d have created an expectation that we would actually do something about it. It’s easier to just have a conversation about the cost of the matter in front of you, without having to change the way you price your work or change the cost of producing the product. It seems lawyers in firms (and if we’re honest, lawyers everywhere) are great at being critical thinkers, but don’t like critical analysis of their own efforts.

Screen shot from my computer -

CLOC working group on law firm performance model scorecard: http://cloc.ldcsurveys.com/s3/Law-Firm-Performance

What In-House Clients Want • Partners who advance the business • Certainty / Predictability • Risk identification/management/amelioration • Measurable Results • Better management and lean efficiency • Costs that equate with value • A commitment to continuous improvement So let’s shift back to the client side again and away from how firms perceive the market …. Let’s return to our focus on what it is that clients want – and that through their in-house counsel, are more and more likely to demand. Discuss the AVC and how it began and how we collected this data – if the movement was to be one based on what client’s value, no one had a clue how to define those values in the marketplace since they are different from client to client and lawyer to laywer and industry to industry. But lo and behold , we found that for all their differences there was actually a striking consensus about what both in-house and outside leaders were looking to as the definition of value-based services. Even if they aren’t expert or moving quickly enough in delivering that agenda yet.

Law Department Performance Evaluating Law Department Performance

Alignment with Client Values So what do we do Alignment with Client Values So what do we do? How do we score ourselves? What helps you focus on continuous improvement and performance to goals?

Assess Core Competencies, results delivered Legal Skill Sets Practice management skills: financial, strategic Technology savvy/use • Supervisory skills Using Data to inform decisions Core values EQ – ability to get along, empathize, relate Communication (speaking, writing, listening) Engaged, innovating, leading …

Department Operation Scorecard “Legal impact on business” Scorecard Tactics Department Operation Scorecard “Legal impact on business” Scorecard Individual & Team performance/reviews Client Surveying • Metrics and reporting Hiring practices • Employee career path/plan After-actions • Key client interviews Defining competencies, connecting them to roles Establish key practices to drive value and measure results

Consider this law firm’s Core Competency Model: Model has five competency categories and each is correlated to 1 of 4 grade levels during reviews. What would be your dept equivalent? • Skills – Research & Analysis, Written Communication, Oral Communication, Advocacy/Negotiation, Professional Judgment • Client Service – Client Relations, Client Management, Business Development • Work Ethic – Work Management, Commitment & Initiative • Interpersonal Traits – Teamwork & Cooperation, Delegation & Supervision, Responsiveness & Initiative, Character • Firm Citizenship – Firm’s Policies & Plans, Cross Organizational Collaboration, Non-Billable Involvement

Key Practice: Tech and data practices: Not a substitute for practicing law … rather they allow lawyers to practice law in a business-like fashion and measure performance.

Key Practices Legal Project and Process Management: lean efficiency

Key Practices • Valuation techniques: measuring value or “worth” of work, not hours or activity

Key Practices Knowledge Practices: promoting proven & consistent behaviors; avoiding the daily re-invention of the wheel and allows measurement

Key Practices Customized staffing, talent development, and training: demonstrating core compe-tencies and productivity

Thank you for inviting me! Susan Hackett Legal Executive Leadership, LLC hackett@lawexecs.com +1.301.785.5534 @HackettInHouse | @LawExecs