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Shell Legal – Strategic Selection

L aw firms and lawyers appear fungible from a certain distance. While it is relatively simple to narrow a selection process to a subset of qualified firms, differentiating those firms from each other is a challenge for the firms and for the client.

Former ACC Chairman Michael Roster, who is also the former managing partner at Morrison & Foerster, estimates that for 85 percent of a company’s legal spend, “there are typically 10, 20, or more law firms and practice groups who can handle the work superbly, not just okay, but superbly.” Winnowing the options to a few panel firms requires either a willingness to throw darts blindly at a board or a structured process for understanding which firms are the most compatible given the client’s priorities, profile, and culture. Opting for the latter, strategic sourcing then becomes not about getting the cheapest service by beating up suppliers, but about obtaining the best service at the best value. This requires abandoning ad hoc selections based in unjustified preference or complacency. Strategic sourcing demands a rigorous and collaborative approach that addresses all levers for savings through objective analysis and market intelligence.

For Shell’s global panel review, the threshold question was quality (i.e., identifying the firms that could handle the legal work superbly). New firms were identified on the basis of experience, diversity, and business opinion. The incumbent herd was thinned based on a number of metrics, including results, performance versus budget, diversity, and business opinion. 

Opinions, including “business opinion,” are not normally treated as a quantifiable metric. At the scale of Shell, however, quantification is essential. Using a scorecard survey, it is fairly straightforward to turn subjective attitudes into a measurement. Importantly, however, a simple Likert scale (i.e., rate 1-5) will often yield a bimodal distribution — most reviewers awarding almost all 3’s or all 5’s — that is not sufficiently granular for purposes of differentiation. A more useful survey requires respondents to rank firms or allocate a finite number of points among them. This weighting often proves revealing. It is astounding how many incumbent firms can be eliminated from a convergence initiative simply because the consensus of internal lawyers indicates a lack of interest in continuing the relationship.

After Shell pre-screened for quality, firms were asked to respond to a Request for Information (RFI). The RFI, which will be covered in a separate article, was focused on what the law firm would bring to the relationship beyond technical legal expertise. Shell expects its firms to invest in the relationship. The return on that investment is multiple years of steady revenue on Shell work and the attendant opportunity to realize additional margin on investments in process and technology. The RFI covered areas such budgeting, pricing, billing, diversity, project management, knowledge management, and value services. 

Some firms chose not to participate in the RFI. Many more firms were jettisoned from the selection process based on their RFI responses. Other firms were no longer a fit from a geographic perspective with Shell’s changing business footprint globally. The remaining firms were then subject to an inquiry about their information security, data privacy protocols, organization, and governance. More firms were disqualified. The remaining firms then participated in a reverse online auction for billing rates (also a subject of a stand-alone article). With the auction complete, management proceeded to final selection based on a comprehensive scoring matrix built from each of the preceding stages.

Shell considered hundreds of firms and ultimately settled on a global panel of six law firms in addition to several local panels across the globe. The process was completed relatively quickly, eight months, and relatively orderly given the scale and scope of the task. 

There is no one way to screen panel firms. Indeed, relying on a single filter introduces a single point of failure. Multiple layers — a.k.a., as the cumulative act effect — improve the likelihood of yielding superior results. This is true for both selection and post-selection management (e.g., framework agreements, after action audits, quarterly business reviews, and other topics for future articles).

Moreover, Shell’s stages were more than funnels. Not only did each stage surface more information about potential law firm partners, but negotiation was also embedded in the process. Instead of selecting firms and then trying to negotiate with them, the negotiations were made fundamental to the selection criteria. If they were not great lawyers, Shell would not be talking to them. The question therefore became whether they were the right fit. How much the firms were willing to invest in the relationship was paramount in determining fit. Again, these are multi-year and, in many cases, multi-million dollar supplier contracts. If Shell is committed to its law-firm suppliers, the law-firm suppliers had better be committed to Shell.

About the Authors

Vincent Cordo serves as the legal team's Global Sourcing Officer for Shell. He is a member of the ACC Legal Operations section.

Casey Flaherty, a former in-house counsel, is the founder of Procertas. Casey consults with law departments and law firms on legal operations, service delivery, and technology. He is the author of Unless You Ask: A Guide For Law Departments To Get More From External Relationships, written and published in partnership with the ACC Legal Operations Section.

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