Costs and profitability: Gone are the days of invoices from external law firms with only the cryptic explanation « For services rendered ». (Or, if not, they should be.) When managing legal expenses, it is important to track expenses. The availability of sophisticated invoicing software makes it easier than ever to collect and evaluate detailed reports tailored to your needs. How do you define KPIs for the legal department? How do you track them and what are the right indicators? Let`s take a look at how to build a data-driven legal team. Corporate lawyers are often some of the coolest and brightest minds in the industry – and it`s important that their wisdom and business judgment come into play in needle-moving projects, initiatives, and processes. The company wants the legal to add value – we know that because we asked for it. This includes the total cost of legal services provided; Cost per legal case, lawyer`s fees in charge of that case, legal fees in relation to income and, most importantly, estimated external costs in relation to an in-house legal department. Once you have a good understanding of what will affect your legal department`s KPIs, it`s important that you create KPIs that are achievable, measurable, and linked to desired outcomes. The best way to do this is to ask yourself the following questions: Compliance teams often use metrics and KPIs as risk assessment tools and measures of compliance success. Compliance KPIs can be implemented as an early warning system to identify potential compliance issues and help the company quickly implement controls or other measures to prevent regulatory action, bad publicity, and/or employee dissatisfaction.
Some compliance measures may also be referred to as key risk indicators, or KRIs. 3. Budget vs. Actual Spending. This is a fairly central KPI as it shows where the legal department stands in terms of spending targets, i.e. where actual spending is compared to budgeted spending. This should be tracked in two dimensions – year-to-date (year-to-year total expenditures greater than the previous year`s year-to-date budget) and for the last month, such as actual spending in June versus budget or forecast for June. Ideally, you will also follow by type of subject, for example: Litigation, contracts, corporate secretary, intellectual property, etc. The average hourly rate of outside law firms (especially if your goal is to reduce that number) and how the ministry tracks other savings initiatives you have are also interesting. With that in mind, this issue of Ten Things presents the ten KPIs I think all legal departments should follow. I`ll keep them at a high level and I can define one or two sub-KPIs to show how you can create or optimize KPIs to measure what you think is most important.
But these ten KPIs are a great start: 2. Contract quality. This measure is more complex than Measure No. 1, but it also tells you a lot more. For example, in a decision with a General Counsel, we implemented a contract assessment process in which we (together with the Company) developed a set of acceptable risk criteria for contracts. Our contracts were then evaluated for compliance with certain criteria. The best contracts received an « A » and the worst received a « D » (and low-scoring contracts had to be approved separately). We then establish a KPI where one percent or less of the contracts signed by the legal department fall into category « C » or « D ». I wrote about this process in a previous article titled « Minimizing Risk in Commercial Contracts. » You can also track things like how often you use company forms and templates, how often you use « customer paper, » and the level of « red lines » required to get to a store, such as: Low-medium-high, with the understanding that the more effort is devoted to customer paper or the deep red lines of the company`s standard contracts, For example, the lower the quality of the contract in general. While it`s mostly due to sales to keep up with these numbers, it`s always helpful for legal departments to know the level at which the legal department is engaged. As with many legal operations projects, the most important thing when it comes to legal KPIs is to just get started.
Start somewhere! Once you have numbers in front of you, it becomes much easier to determine which ones you want to move and which ones don`t. Some will say that the best answer to « when » is yesterday, if not before. However, KPIs aren`t something you can initiate or implement without carefully considering the ultimate goal you want, what activities or metrics are best to monitor, and how the data collection and analysis process alone can impact performance (sometimes, tasks that are not accurately measured may be downgraded or ignored). Also, it can be almost obvious – but let`s mention it just to be sure – that the right KPIs for your in-house legal department are probably not the same as those that are best suited to measure the performance of your external consultant. I know of a GC that has introduced KPIs for contract quantity and quality and for customer satisfaction (sales representative). He is obsessed with data, as he describes himself. The presentation of KPI measurement results absorbed 3/4 of each legal team meeting. However, I`m not sure his team of legal advisors appreciated this as a motivational tool. However, I suspect that the folks at C-follow were satisfied with the knowledge of the data. The tenant of the internal legal teams is the business unit, including the leaders and employees of other departments who interact with them. This can be done through surveys and the number of issues/times resolved.