Corporate law departments often assume that they and their law firms have a clear understanding of each other’s goals.
Most would likely also agree that winning a litigated case would be a good example of a goal that the two parties share.
But the deceptively simple question of whether or not winning cases is a shared goal — or if it’s even one of the more important outcomes — becomes complicated when the culture of each of the parties is incorporated into the discussion.
To parse this critical question from a performance management perspective, LexisNexis held an industry webinar recently. Soliciting input from expert practitioners on both sides of the goal equation, we sought to identify goals that are important to both corporate law departments and the law firms they hire, arrive at a holistic definition of success, explore the behaviors that should be encouraged to generate success and, finally, discuss metrics and measurement related to success.
Webinar participants included Steve Popelsky, Assistant Vice President of Litigation Services at the Motorists Insurance Group based in Columbus, Ohio, Mike Ethridge, a partner with the law firm of Carlock, Copeland & Stair, LLP a practice that primarily represents insurance carriers and corporations, focusing on construction litigation, insurance coverage litigation, and personal injury claims, and Kris Satkunas, Director of Strategic Consulting, LexisNexis CounselLink. Dan Ruderman, also a member of the LexisNexis CounselLink Strategic Consulting group, served as the webinar’s moderator.
Following is a digest of the webinar’s key discussions.
Ruderman: Let’s begin by asking the question—What is success?
Popelsky: The thing about the question of success is that it’s different for every organization.
Ruderman: Obviously there are differences in the way companies view things — but they also have a lot in common when it comes to their law department’s goals. So why can’t we just measure wins and losses? Or why can’t we just measure costs? Isn’t that really all that matters at the end of the day?
Popelsky: Cost is really important for some companies and not for others. The same is true for law firms and any organization, really. Why isn’t the win a success? Well, it can be, but if you win at the expense of something else it’s not a success. Or maybe it’s a success for one party and not for another.
Ethridge: I agree. I think it’s important in this day and age of risk management and conflict management and all of the changes that are going on in the legal profession to not lose sight of the fact that the insurance company and the corporation might think of success differently.
Ruderman: That’s an interesting point. Let’s expand on that.
Popelsky: What I’ve learned during the course of my career with several good organizations, national and regional, is that each of these organizations was different. They had different goals and those goals changed as the organization’s overall objectives change. The objectives were always a function of the organization’s culture.
Ruderman: What are the consequences of ignoring the influence of culture?
Popelsky: The only times that my business unit’s activities or goals got us out of sync with upper management was when we didn’t have a firm grip on the culture of the organization we were working for. We got carried away with what we considered to be the traditional goal of attorneys or adjusters, and we tended to lose sight of the higher-level issue of why we were doing all this and who we were doing it for.
Ruderman: Would you say that reflects your experience as well, Mike?
Ethridge: Definitely. When we ask the question of how do you define success, what we’re asking is how do we best serve a client. How do we deliver the outcome that they need, the one that aligns with their goal for this specific situation, this particular lawsuit or claim, and how does it align with the broader aspects of their culture? And so, “How do we provide that service?” is the fundamental question. We and our clients and the law firms are going to have different cultures and different values. The answer to that question is going to look a lot different, depending on the people engaged in the conversation.
Ruderman: How do we tie the idea of culture back to the question of success? Is there a specific formula to follow?
Popelsky: You can’t just give people the answer. You have to give them a process that leads them to the answer that works for them.
Ruderman: That sounds like there’s extra effort involved.
Popelsky: While it may be a little unsatisfying to come into a discussion like this and learn that you have a lot of work ahead of you, I can tell you that the last time we conducted a full-scale analysis of the organization’s culture it yielded some incredible conversations about what we were trying to accomplish and for whom. In our organization, we identify ourselves primarily as a customer service organization. And our questions were along those lines. Our wins are along the lines of how well we serve our clients and are not necessarily related to what happens in the courtroom.
Ruderman: Do you have anything to add to that, Mike?
Ethridge: Sure. One of the things Steve just said is really important, which is we all want somebody to hand this to us wrapped up in a package with a bow on it and to tell us, “Here’s the definition of success, this is how you make it happen.” That’s just not possible. So I think it’s important to be open to the fact that a lot of what we’re asking and talking about isn’t going to have clearly defined answers, and that’s okay. The important thing is that we’re asking the question.
Ruderman: Framing the question is a critical part of the process, then?
Ethridge: I think again, picking back up on something Steve said, what we have to remember as lawyers is that we, too, like insurance companies, are in the business of service. When we ask the question of how do you define success, what we’re asking is, “How do we best serve the client?”
Ruderman: Thank you, Mike. What are your thoughts, Kris?
Satkunas: I absolutely support all of the comments that both Steve and Mike have made. From my perspective on this in talking with both our corporations and with law firms over the years, it always surprises me when I walk into a room with our clients and they ask me, “What should we measure?” And my answer to that is always, “Well, tell me what’s important to you, and then I can suggest some things that you should measure.”
Ruderman: And that gets the ball rolling then?
Satkunas: I’m generally met with a blank expression because they haven’t thought about what’s important to them. When the four of us started talking about this broader topic, probably over a year ago now, I think all of us shared some similar experiences and we wondered why is it so hard for people to figure out what’s important to them when it’s so critical in terms of knowing whether they’ve been successful and to be able to build the relationships between in-house and outside counsel.
That being said, to Steve’s point, it takes time. It’s not something that you can just answer within an hour’s conversation. You need to really understand the culture to be able to assess what is important to your organization.
Ruderman: Thanks, Kris. Anything else?
Satkunas: Just a couple of thoughts. I think that oftentimes people assume. Whether in the claims department or the law department, they assume that firms know what’s important to them. They make that assumption, or vice versa: that law firms think that they know what success looks like for the client, or they think that the experience they’ve had with other clients is relevant to the particular client that they’re talking to. Well, the fact is, their client base is going to have various objectives and define success in many different ways.
Ruderman: You said that you had a couple of thoughts. What’s the other one?
Satkunas: Yes, just one other comment on this subject. I mentioned that I often get asked the question about what to measure, and when I ask what’s important, the angle that a lot of people take when they don’t have an answer is, “Well, just tell us what everybody else is measuring and we’ll measure that.” But that’s the wrong way to solve the problem of defining success. So I encourage them to figure out what’s important to them.
Ruderman: There are skeptics out there that are going to say, “Look, success is if you win the case and success is if you drive your costs down.” Let’s talk about that. Why is it such a challenge to find out and why is it that asking what everybody else is doing is the go-to methodology?
Ethridge: I agree that it’s highly important that we begin to ask ourselves this question of what are the things that matter to us? What’s important to us? What are our values? If we don’t have real clarity on that and we don’t operate from the place of clarity around what matters to us, then it’s never going to be in sync with anybody else. That part of the process is essential and I think it’s very difficult for lawyers because lawyers really struggle with abstract things. We like the concrete. We like structure. We like clear definition. To deal with concepts that are more abstract, more amorphous, are real struggles for firms.
Ruderman: So that’s the main obstacle, then?
Ethridge: The other thing that I think is probably true for all organizations is it’s a lot easier when you’re just three or four or five people that come together with a shared mission and shared culture and have real clarity around what that culture is. But, as you begin to achieve some success, and as you grow, that becomes more and more difficult. I think as firms grow beyond five, six, eight, nine, ten, then you have a lot of equity partners that are in the leadership roles and they have different values. And the more these firms grow, the further down that path they continue, the more obscure what matters to them becomes and the more difficult it is to have conversations with clients about how you get in sync with measuring success.
Ruderman: That’s a revealing observation, Mike. Do you have anything to add, Steve?
Popelsky: Well, I think there were some pretty good comments there. Looking at this from the point of view of the law firm — which I have not been associated directly with for many years, but work with every day — it’s part of the question of after you figure out what your culture is, what’s important to you, then figuring out who your key stakeholders are. This is a very involved process. There could be literally hundreds of stakeholders, but not all of them are key stakeholders.
Ruderman: Explain what you mean by “key stakeholder.”
Popelsky: For the law firm, for instance, you would say that a key stakeholder would probably be the partners—and the families that depend on the partners for their income and for their living. And the defendant policyholders who rely on the attorneys to provide that defense that secures their own interest. And also the insurance carriers that provide the business that supports the whole thing.
This is a very involved discussion. What it really comes down to is sitting down with the people in your organization who are in contact with your stakeholders, and figuring out which relationships are the most important. Once you figure out which relationships matter to your culture, you can figure out what the needs, wants, and desires of those relationships are, and then you can have a really strong idea of where you want to take those relationships.
Ruderman: That’s a lot of keep track of, Steve. I think you said that there’s definitely a business answer; it’s maximizing the business. And then you also said that this is all interconnected. You also brought up the policyholder and their entire business and the impact of a case on the policyholder, which I think would tie into your company’s business, right? I mean, you’re not in the business of losing policyholders.
Popelsky: We identify ourselves through our key stakeholder, which we consider to be the independent insurance agent. And while our efforts seem almost entirely devoted to the policyholder, it’s that relationship with the independent agent that defines our success as an organization. I think all this comes out on a practical basis in your strategy discussion with your defense counsel at the outset of a new litigation. It’s a discussion that should continue through the life of that file, and as the matters on the ground change and information becomes available, that strategy discussion should include it.
Ethridge: Let me ask you a question, Steve, before we turn it over to Kris. How important is it for you to have the conversation with your defense counsel about who your stakeholders are? Do you tell your defense counsel that the independent agent is one of the critical stakeholders in your operation because of where you are as a company and how you want to grow, or is that’s not a claim’s issue, not a litigation issue, so that just never enters into the conversation?
Popelsky: I will say that there’s a practical side to this and also a philosophical side. The more our key stakeholders and our defense understand about our business and how we go about doing things, the better. The more clarity we have, the better we’re going to deal with one another. The more honest, the more forthright, the more we’ll pull meaningful information out of the field.
Ruderman: Explain a little more about how the independent agent fits into the equation.
Popelsky: They’re the corner guy, the person the policyholder has dealt with all of their lives. They already have that level of trust with the agent that they don’t have with us because they don’t know us. They learn about us through the course of their defense, but trust comes hard.
Ruderman: Is that the practical side you alluded to?
Popelsky: The practical side of this is that the independent agents often have information and contacts that are very useful to defense counsel. They’re often the people who know these policyholders the best. As an investigator, and as a defense attorney, oftentimes these independent agents and their various producers and CSRs (customer service representatives) are an untapped resource. And they like to be involved sometimes. Other times they don’t. It depends on the relationship. A lot of times I’ve found that you can sell something to a policyholder as far as a defense strategy—taking a risk that maybe they don’t really like—if you secure the assistance or the willing approval of the independent agent, because they trust them.
Ruderman: Anything else?
Popelsky: There’s the practical side to that and there’s also the side of knowing that every time one of our inside associates or one of our defense counsel steps into a situation in the field that they understand the crucial nature of our customer service relationship, and that they don’t antagonize or otherwise send people in the wrong directions. Because in the final analysis, when we come out at the far end of one of these defenses with the verdict, with the settlement, with whatever the win is, whatever the resolution is, the real thing for us is that we want to have our policyholder go back to the agent and say, “I was well served.”
Ruderman: Okay, we’ve added agents into the mix, and trust. It really is a multivariate relationship. Let’s say that we can come up with some definitions of what’s important to you and to your client and to the parties that are involved — the agents, the policyholders, the law firms, the carrier. You’re going to have to determine key performance metrics. My question would be, what metrics have you used? Let’s start with you, Kris, since your experience has brought you into contact with numerous law departments over the years.
Satkunas: Sure. But before I start talking about the metrics I’ve seen, let’s talk about the process for determining metrics once you’ve established what your objectives are. I’ve worked with a lot of different departments going through this process, and there really are several things that have to occur and several players that have to be involved in these discussions to make sure that you get to the right metrics once you know what the right objectives are.
Ruderman: Tell us about that process, Kris.
Satkunas: It usually starts with a brainstorming exercise. Take cost, for example. It’s a very simplistic example, but if keeping costs low is an objective of your business, you could look at lots of different metrics. You could look at the total cost of the claim both in terms of outside counsel fees and settlement costs. You could look at hourly rates. You could look at weighted hourly rates. You could look at how consistent what you pay for light claims is.
Ruderman: That sounds like a lot of metrics to track.
Satkunas: There are lots of different things that you could measure, but you certainly don’t want to measure everything. You do want to go through the process of figuring out what all the options are so then you can choose the best metric. Something that I tell a lot of our customers is that they really need to limit the number of metrics they end up reporting on. Otherwise, they’re just buried in data and can’t make any decisions from it. Typically, there are always going to be some metrics around outcome. I’ve also seen measurements around compliance — how well did the firm comply with the department’s guidelines or with the processes that they have in place. If cost is
important to you, measure cost. If cost is really important to you, maybe pick two metrics related to cost, but don’t get carried away beyond that.
Ethridge: I just want to point out that when it comes to metrics, lawyers and law firms are not even in the same league as insurance companies and groups like CounselLink. There’s no way that we as law firms have the ability to measure things the way that insurance
companies do. What we measure and how we measure is always going to be really limited, and that’s why I think it’s important that there’s collaboration between carriers and law firms about these performance metrics and what’s being measured and how the law firms are stacking up compared to other law firms out there.
Satkunas: It’s critical when you go through these exercises to make sure that you have somebody who’s quantitative that can help you through that brainstorming process. There probably aren’t too many lawyers that are going to fall into that category, although I’ve certainly worked with many who are very interested in this subject. You may need to bring in a finance person. You may need to bring in a consultant. It’s the reason that we get involved in these discussions, because we have a lot of experience here.
Ruderman: The value of quantitative expertise is definitely something to keep in mind. Before we move on, do you have anything else to add on metrics?
Satkunas: Just a couple more thoughts. The first is about how you go through that process. As you’re brainstorming, you don’t want to let yourself be limited in terms of what data you think you have. You may decide that something is important to you and start talking about all the ways you could measure it, and then you might throw those things out because you can’t measure it. On the other hand, you might decide to start capturing data going forward that lets you measure that. So keep all of the ideas on the table in that brainstorming session.
The second thing is to keep in mind that subjective reviews can be quantitative, as well. If you decide that one of the most important things to you or your organization is that your law firms communicate with you and give you a status update on a weekly basis, you could have your counsel enter some sort of an assessment of “Does the law firm communicate with me as well as it should?” and then have them rate that on a scale of one to four or something like that, and then it becomes quantitative. And one last thought — law departments might want to consider representing the metrics they decide to measure in a graphic scorecard. A scorecard enables them to compare law firms side by side to see how they rate across the spectrum of key metrics. We’ve helped many of our CounselLink users create scorecards and the consensus is that they’re a valuable management tool.
Ruderman: That’s a good review of metrics from the law department side. What about from the law firm’s perspective, Mike? Of the things that you measure, what would you say is the most important to you?
Ethridge: I do try to measure the cycle time of my cases. Over the last few years, I’ve created a variety of spreadsheets where I’ll track details on certain categories of cases, like a residential construction case, for example. I track the average cycle time for a commercial construction case or a coverage case. And then we can also look at jurisdictions and see how that affects it.
Ruderman: Do you track any other metrics?
Ethridge: Costs in litigation and budget compared to actual costs. Those are other things that are fairly easy for us to measure. And one of my personal most important things to measure is my initial prediction of how the case is going to come out. You know, how early was I able to make a prediction as to how the case would get resolved and how that compares to the ultimate resolution of the case I’ve been practicing now for I guess 28 years, plus or minus, and doing what I do for a living, you lose a lot of cases. We defend cases, we defend folks who get sued when they make mistakes and cause other people damage. When that’s what you do, you don’t have a total win column and zero in your lost column.
Ruderman: So the ability to predict outcomes is critical for you, regardless of whether it’s a win or a loss?
Ethridge: Exactly. Over time, what’s become important for me is my ability to accurately determine as early as possible for my client or my carrier where this thing is going to end up. And I think that’s a metric that really transcends a lot of others. If we can done this as long as we’ve done it, we become more accurate with that. Those kinds of predictions probably make people in the world of metrics and actuarial science cringe because they get a little scared whenever you want to measure predictions.
Ruderman: Steve, would you like to comment on how you handle metrics on your side of the table?
Popelsky: This is a huge field. We have developed measures around cycle time, compliance and forecasting evaluation. We’ve benchmarked with the larger community.
We’ve also created a subjective scorecard with a lot of the things about the relationships that we care about, and we quantify that to use with the metrics we developed. And we’re willing to share this with our defense partners. We think that’s important. It’s a two-way street. We’re not just delivering this news to counsel, we’re discussing it in a non-pejorative way. We want feedback. We want to know what we
could be doing better, to know where we figure in these relationships.
Ruderman: How does the data you capture and analyze and the information in your scorecard relate to actual outcomes?
Popelski: It’s just data. It doesn’t mean anything by itself, it’s only meaningful if we put it to use on the ground for practical wins. For us, the data tells about the relationships. We think that good behaviors based on good relationships generate good outcomes. We’re not
terribly concerned about what happens in a particular case if it’s a product of what we consider to be good behaviors. And we have a lot of discussion about that. When we meet with our counsel, we’re not talking about, “Hey, we gotcha on this.” We’re saying, “Hey, we’ve noticed that this has occurred, we’d like to talk about how it came about and what generated it.” If we have clarity around the kind of relationship we have, everything else turns out good. And our results have turned around on these concepts.
Ruderman: That’s a valuable real-world lesson that should resonate with all of us. Thank you, Steve, Mike and Kris, for sharing your insights.
As the preceding discussion has explored, the way a company defines and measures success is clearly influenced by many variables, including its culture and its specific corporate objectives. Key performance indicators (KPIs) used by legal departments should align with strategic business objectives. LexisNexis has conducted multiple surveys of legal and claims department operations specifically focusing on metrics and KPIs tracked to measure performance. To learn more about this important subject download the “LexisNexis Pulse Check Survey of Legal Department Operations” or the “LexisNexis Property & Casualty ALAE Cost Containment Survey” fora wealth of insights into the spectrum of success metrics that P&C insurers and legal departments in general track.