Just as all supervisors should praise their staff, all in-house lawyers who are responsible for the delivery of external services should commend good work by a law firm.
If you think that simply giving a firm more work percolates as kudos down to the associates and paralegals in the pit, you are mistaken. At the least, an email note of thanks, copied to the partner in charge of the matter, goes a huge way toward building associate loyalty and extra effort. Flowers, chocolates, theater tickets and gift certificates, with a handwritten card for gratitude, helps hold the better associates and staff and creates loyalty. Even if the hats off is not instrumental, it is simply the right thing for a manager to do. Appreciate openly expressed works wonders.