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Legal tipsDecember 28, 2019

What are the Five Metrics Every Legal Department Should be Measuring?

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Data means insights, on all levels and in all business domains. We live in an era of statistically-backed decisions, Quantified Self movement, and data rooms. By no means, your legal department should be missing a data-enabled change. To navigate your way in data deluge and a seizable number of metrics, sit down with your team to decide where to start. In this article, we offer a few helpful suggestions on what metrics should be first to analyze.

We live in an era of statistically-backed decisions, by no means, your legal department should be missing a data-enabled change.

Economic Value Generated by the Legal Department

Legal departments are often perceived as a kind of a service add-on to the main business operations. Why would one expect to measure the revenue of a department which isn't supposed to generate any at all? Even more, you may often find budgetary restrictions imposed on legal departments to keep them under tighter control.

Executives forget that even though LDs do work hard to provide legal service support to any business activity, they save corporate funds, too. Think of well-crafted corporate and tax structures, as well as litigation resolved in a commercially effective way. All that may cost the business a fortune. Even though the economic value in figures depends on a particular business sphere, such legal activities bring a major indirect economic value:

  • Managing an intellectual property portfolio
  • Dealing with compliance programs
  • Providing alternative dispute resolution methods
  • Offering legal advice
  • Current and Anticipated Expenses

    For sure, each department should consider regular expenses payable around the same time each month. Use budgeting techniques, planning tools, and project plans to measure the monthly costs of running your department. Keep it on track for several months to determine the current and anticipated expenses.

    Even if you have all the anticipated expenses of your LD covered, leave some space for the metrics that make up extra costs for legal performance. For instance, your company may be planning to uncover new foreign markets. There might also be new deals on mergers or acquisitions. Or even unexpected public authorities’ audits - plans like that certainly need legal support and extra expenses.

    If you turn a blind eye to such matters, your department may lack budget funds in the most challenging moments. Keeping track of issues like that will help you be more cautious with further budgeting leaving “extra space.”

    Legal Talent Retention

    Successful LDs should always try to bring the most talented people on board and ensure their competence in various spheres of law. Frequent outsourcing of cases to external counsels is an expensive, difficult-to-measure activity. There should be strong reasons to prove that it’s really necessary if the internal staff is satisfied and performs well. But how can you measure that your employees are satisfied, competent, and not likely to leave their positions?

    Talent retention should be a top priority for any HR department. Even if no one seems to be planning to leave, employee retention should still be on your agenda. For starters, try to answer the following questions to see what data you have on your hands:

  • How many employees do I currently have in my legal department?
  • How often do employees change their position or role in my department?
  • How many employees have I lost in the last 6-12 months?
  • Has my department added new hires in the last 6-12 months?
  • If you are scratching your head, it means that you aren’t taking good care of your data. That should change so that you could measure the talent retention rate anytime you need it. Keep a record of educational background, experience, positive outcomes, and specialized training of your employees, too. On top of that, peer reviews should also be on your department’s to-do list.

    The Ratio of High-Value vs Low-Value Work

    With the adoption of technology, more and more tasks are easily automated without much involvement of legal personnel. And that’s good because specialists can focus on demanding, exciting tasks that only qualified legal pros can cope with. At the same time, a range of procedures, in particular, internal compliance, could be supplemented with legal playbooks and typical operational scenarios put into templates.

    To make your legal department more efficient, measure the time you spend on low-value work. Then sort things out and decide which of the low-value tasks can be automated and done by tailored software instead of your specialists. Make sure that employees in your legal department are busy with really high-volume, important tasks.

    Building custom automated templates for legal documents is what AXDRAFT does the best. We can help companies launch and automate document drafting and approval process customized to their particular needs. If you delegate a routine part of day-to-day work to our service, the ratio of this metric will change toward greater efficiency.

    If you delegate routine of day-to-day work to technology, the ratio of High-Value vs Low-Value work will change toward greater efficiency.

    Legal Workload

    You should always be wary of situations when other departments turn to you for legal help. First of all, try to find out whether it’s really needed. With carefully organized workflows, corporate departments should turn to legal staff only to review their final contractual activities. Legal departments are responsible for putting the finishing touches to stay on top of legal nuances and anything that might cause business problems in the future.

    If any department needs legal assistance more often, it usually means that there's a more serious issue at play and senior management must take care of it. When other business units need a greater-than-usual attention of your legal department, this asks for new blood to cover in-house legal spend or technology to safely delegate more to business units.

    Cost of Outside Legal Advice

    If you keep track of your legal team performance covering the above-mentioned metrics and some more, you’re doing really well. But it’s not enough. To succeed in the modern highly-competitive environment, you should be familiar with top developments in the legal market. Cross-practice insights might be useful to stay on top of current legal trends and best practices. As we’ve mentioned, there should be strong reasons to resort to external counsels, but there are cases when it’s simply unavoidable.

    Dealing with external counsel requires time and resources. You’ll need to find an appropriate company, analyze its expertise, and conduct interviews to finally agree on a specialist and expertise your department is lacking. Full-service firms will offer cross-practice involvement for a smaller price than niche boutiques. Another option is to ask for fee arrangements or discounts if you have a sufficient track record or good business relations.

    Measuring the time and expenses you spend on dealing with external advisors can give you meaningful insights to help you or your management decide on at least two things. First, considering how often you resort to external help and how much it costs, you’ll see if it is more rational to hire new specialists in-house. Second, if an internal lawyer still costs you more, you’ll have enough data at your disposal to prove that external legal assistance is really necessary.

    The Final Word

    From our point of view, these metrics are most valuable to manage a legal department and show its value to the company's management. The exact number of metrics is your personal choice. One thing that is true for both small and big LDs is the value behind data and the power of knowledge it will give you.

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