Using metrics to measure law department performance
Measuring the right metrics can provide in-house counsel with compelling evidence that law departments add demonstrable value to their companies. This article discusses key metrics law departments may use to objectively quantify, analyze, and report on changes in their performance over time.
Law department metrics typically measure quality, workload, and spending.
Because every law department is different, the metrics a law department uses to measure its performance may differ depending on the company's industry, the law department's annual budget, and the law department's size and business goals.
Track law department staff success and productivity
Using metrics to measure law department employee performance can assist the general counsel role in:
- Identifying which employees are meeting or failing to meet performance goals
- Recognizing and rewarding high-performing employees
- Improving the performance of under-performing employees
- Equitably allocating the law department's workload
- Identifying practice areas that may require greater or fewer resources
Measure attorney performance
Metrics to measure attorney job performance may include:
- The number of litigation matters opened and closed
- Litigation results compared against anticipated outcomes
- The number of contracts reviewed and executed
- The average cycle time per matter (the time it takes to handle a legal matter from beginning to end)
- The amount spent on outside legal services per matter
- The number of matters handled in-house
- The actual amount spent by the attorney for the year compared to that attorney's annual budget
Measure legal assistant performance
Metrics to measure legal assistant job performance may include the number of invoices approved and paid, board meeting minutes drafted, stock certificates prepared, legal issues researched, subpoena responses prepared, and e-discovery projects handled.
Implement staff productivity metrics
Before using metrics to measure staff productivity, general counsel should:
- Clearly define the metrics to be measured
- Ensure that all employees understand the metrics
- Confirm that the productivity evaluation process complies with applicable law
- Consult with the company's human resources department
- Decide whether, when, and how to share any data collected with employees
Measure law department spend as a percentage of company revenue
Many law departments measure as a percentage of company revenue internal spend, external spend, and combined internal and external spend on legal matters to show how changes in the department's management can increase efficiency.
This can include:
- Increasing or decreasing the number of law department employees
- Changing or converging outside counsel
- Insourcing or outsourcing legal work
- Implementing an affirmative recovery program
- Using legal project management principles to streamline matter management
- Investing in new technology
- Creating one or more law department operations positions
Track actual spend to budget
Tracking actual spend to the law department's budget, as well as actual spend to budget per matter, can assist in determining how the law department came under, met, or exceeded the budget. It’s also beneficial for forecasting future law department budgets, as well as budgets for certain matter types, as well as holding outside law firms and other legal services providers accountable for their inefficiencies.
Evaluate outside counsel performance
Periodically measuring outside counsel performance can assist law departments in deciding whether to retain a law firm's services or seek new outside counsel for future matters.
Law departments should evaluate law firm performance using metrics including:
- The timeliness of work product delivery
- An analysis of actual spend to budget
- Measuring actual matter outcomes against estimated recoveries for litigation matters
- Tracking the number of client training sessions conducted
- Tracking matter cycle time
- Tracking counsel fee arrangements
Other metrics to measure how the law department uses outside counsel include:
- Number of law firms used
- Type and number of legal matters handled by each law firm
- Annual fees paid to each law firm
- Number of law firms offering alternative fee arrangements
- Number of law firm evaluations conducted
Measure source of legal spend by business unit
In companies with several business units, measuring the source of legal spend by business unit can assist the law department greatly. Tracking this information will help identify which business units require the most legal resources and why. It’s also helpful in deciding whether to hire additional staff to address the increased legal needs of a particular business unit and identifying areas in which employees may require training.
Track the Effects of Employee Training Programs
In addition to measuring which business units may benefit from increased training, law departments also should track the effects of employee training programs in reducing the number of ethics violations, sanctions, fines, and government and other internal investigations. Complaints filed with the company’s human resources department, government agencies, and the courts should also be tracked.
Analyze the data and report law department performance results
Law departments should periodically analyze the data collected and prepare customized reports or dashboards for their constituents to show how the law department adds value to the company. Depending on the report recipient's needs and personal preferences, the law department may decide to:
- Insert charts or graphs in the reports to visually present compelling information
- Run the reports weekly, monthly, quarterly, or annually
- Send the reports to the company's senior management and board of directors
An electronic matter management system can simplify this process by compiling the data, analyzing trends, and preparing reports.
However, metrics by themselves cannot improve a law department's performance if they are not acted upon; the information is only as valuable as its use.
Analyze metrics using the right framework
An analysis of the law department’s raw data does not necessarily consider the many intangible elements of a law department's success. For example, skill set, work ethic, and attitude of all law department employees — including the general counsel's management style — are beyond mere “data.”
Subjective information such as a strong partnership between the law department and outside counsel, company culture and values, and management's support of the law department are harder to define but still valuable data.
Accordingly, because raw metrics data can be misleading, law departments and company management should consider these and other qualifying factors when analyzing metrics to measure the law department's overall performance.