Legal Dept. Key Performance Indicators - Why & What?

In this Blog, we'll provide a basic introduction to legal dept KPIs, share some thoughts on how to implement them and flag up what we see as being the key Day 1 legal dept. KPIs.

What are legal dept. key performance indicators? 

Legal KPIs help to monitor and evaluate in-house legal department performance, and provide leaders with actionable insights based on data. You can think of them as a great source of business intelligence.

It is helpful to think of legal dept. KPIs as the telemetry dashboard operated by the Pit Crew of a Formula 1 team - providing a real time view of the performance of the race car. 

The data feed presents actionable insights as to the performance of the car and allows for adjustments ahead of time to maintain peak performance.

Whilst the analogy might seem ego inflating as to the importance of the in-house team - it is basically true. In-house counsel, as an operating necessity, need to be operating at peak performance levels.

KPIs help in-house legal teams and legal operations teams to identify and maintain peak performance levels.

Why do you need legal KPIs?

There are many good reasons as to why a legal team should operate KPIs. However, we will stick to 3 of the most important:

Legal team decision making 

A hunch is good - but hard data which confirms performance level status is a much better basis for decision making.

Setting the right KPIs helps leaders to measure issues/performance and make decisions based on solid information.

The Business is more likely to get behind a request for a new CLMS system if you can show that its implementation will save [X] hours per year resulting in [Y] cost savings.

In time, deploying the right fundamental KPIs can support most of the key elements of in-house legal department decision making.

Performance Management

In-house teams must always improve to stay relevant by delivering better, faster, cheaper, and safer results consistently.

Legal KPIs are instrumental to the ability of an in-house leader to performance manage the legal function.

Access to up-to-date performance data allows them to assess the processes in a way that is objective and data driven, and which facilitates timely performance management of those processes.

Process efficiency KPIs are extremely helpful to the performance management of  processes such as contracting support, dispute management and overall legal dept responsiveness.

Value Recognition. 

If you have read our RPLV Transformation Decision Making framework - you will know that GLS is firmly of the view that the in-house team must actively demonstrate its value.

If the legal team is to obtain wider "value recognition", it must be able to articulate its value in numbers. It is no longer enough that "Jimmy in commercial thinks the team is awesome".

It is an absolute reality that legal teams must adopt the language of business - which is and has always been data driven.

For the "sceptics" out there that do not think that legal teams should operate by reference to KPIs - a reminder - almost every other business unit is already being judged by their numbers. 

How to set legal department KPIs?

There is no magic to setting legal dept. KPIs. You just need to observe the following principles.

1. Minimum: measure as few KPIs as possible. In-house teams should take a “crawl, walk and only then run” approach to introducing legal KPIs.
2. Quality: legal dept KPIs should focus on QUALITY not quantity. Pick the equivalent of BMI, i.e. pulse, blood pressure and cholesterol - which gives your Doctor a good read on your overall health.
3. Measurability: focus on KPIs that lend themselves to "easy measurement" - tracking KPIs cannot become a "job on top of the job".
4. Time, Cost & Satisfaction: choose KPIs that allow you to translate your findings into either a "time", "cost" or "satisfaction" score.
5. Bad KPIs are Good: embrace the notion that a "bad" KPI score is a good thing - and is not something to be avoided. Bad KPIs can quickly be improved on - and therefore become an easy basis to compare your initiatives against .

Which KPIs should you use?

In our Blog Legal Ops Essentials: What KPIs should your legal team implement? we covered this in detail, but below is a quick summary of what we think are the most important KPIs:

1.      Legal Spend: This metric measures the cost of using outside legal resources, including law firms and legal service providers. This vendor management spend figure should be regularly tracked against what was budgeted for the year. Burn rates should be noted and unbudgeted events should be flagged up as such in real time.

 2.      No of Matters: This metric looks at the number of specific matters that are briefed into your legal dept. To make this happen,  you need to implement a “legal service request protocol”. Requests taken in the hallway or via phone can easily be discounted from the workload that your legal team supports – so formal requests should be made and tracked.

3.     Contract Turnaround Time: This metric measures how long it takes for the legal team to review and approve contracts. This can affect the company's ability to close deals and progress business initiatives. It is an excellent indicator of the legal team's efficiency in support of your contracting function.

4.      Internal Client Satisfaction: This metric looks at your internal clients’ levels of satisfaction with the support given by the legal team. It is easily obtainable data through "one-to-one meetings" or non-invasive "desk top audits". It helps you establish how well aligned (and valued) your legal team is with the internal client. Few need to be convinced of the importance of effectively assessing "Customer Satisfaction" levels.

5.      Legal Team Satisfaction: This metric looks at the levels of satisfaction that exist within the legal team – and is obviously relevant for teams with multiple team members. Team morale is a vital indicator of team performance capabilities and should be tracked. Think of this as the “engine warning” indicator for your legal team.

6.      Hours Worked & On What: whilst controversial for most in-house lawyers – this is a vital metric that allows you to understand and re-shape cost and focus. If you are to shift your focus to more valuable support areas and deliver greater cost efficiency, you need to understand precisely what you are doing and how much it costs. A reminder – there is a big difference between "being busy" and doing things that are valuable.

7.     Legal Disputes: this metric can be many things but from Day 1 your team should simply be tracking the number of “actual” and “potential” disputes that you encounter. You should build up some historic baselines that hopefully (in time) you can significantly improve. This data is also important to justify improvements to your legal and risk infrastructure going forward.

We’ve worked with dozens of legal teams who were looking to be more data-driven, and the same metrics tend to crop up again and again. These are not “one size fits all” KPIs that would be right for every company, but they’re definitely commonly used by legal teams in high-growth businesses.

If you were to Google the topic of legal dept KPIs you will find lots of commentary about how legal dept KPIs should align with corporate goals and strategic planning, etc.

To this we would generally respond as follows "yes, but move cautiously ". The most immediate benefit of running a legal dept. is the ability to identify where efficiency improvements can be made. So, we encourage teams to embrace Day 1 KPIs that focus on tracking their operational performance. Once that is effectively implemented, you can worry about aligning with the "buzz words" of strategic goals and corporate objectives.

READY TO TRANSFORM YOUR LEGAL TEAM?

Please check out the GLS solutions and know-how resources listed on the right side of this page – they might assist your legal team with the issues explored in this Blog. 

Of course, if you would like discuss your transformation needs – please book a 30 minute FREE CONSULT WITH GLS