"From small beginnings come great things." According to a recent legal industry survey, more than half (56%) of the legal departments reported having a formal metrics program in place.1 But many would look at that statistic and dismiss it as a trend applicable exclusively to larger legal departments. A lean department must think that a robust program of this nature is a luxury that few small departments - generally comprised of 3-5 attorneys (according to the ACC's last census) - could support. At first glance, for a smaller legal department, data would be a "nice to have" but based on limited time, costs and resources, it does not rise to the "need to have" category. Those small legal departments who adopt this assumption would be wrong: a "right-sized" metrics program can benefit any legal department, large or small.
So, how can a lean legal department "right-size" its metrics program? The key is to carefully tailor these metrics programs with clear, articulated goals and an easy-to-follow, replicable process to collect and process data. Accordingly, if your small legal department is going to commit limited time and resources to building a metrics program, it is imperative to demonstrate that the investment will result in growth, momentum and value for you and your team. The following top ten considerations will help you build a "right-sized" metrics program for your small and lean legal department.
1. What story do you want to tell?
Lawyers are skilled storytellers, especially when it comes to advocating on behalf of their internal client stakeholders in the courtroom or from across the negotiating table. But how can in-house attorneys take that same skill and use it to advocate for their professional careers and the needs of the legal department? The same process in story telling for clients applies in data collection and begins with identifying goals and honing objectives. Often the data story begins with a fork in the road, one road labeled: "Legal Spend and Outside Counsel" and the other "Everything Else Efficiency-Related." Immediately following the financial crisis in response to the mandate to reduce outside counsel spend, more legal departments went down that first road, collecting data points about how the department was improving the management of its law firms and external spend. This might be the road you want to explore initially, because you rely heavily on outside counsel or your external budget is so large that data-informed process changes can make a measurable difference.
The "Legal Spend" metrics story is a straight-forward story to tell, but if you aren't relying heavily on outside counsel or have a large external budget, is there another story you might consider telling? In the new normal, we have heard the repeated mantra of departments: "we are doing more with less"; this is probably truer for smaller, lean departments. Accordingly, perhaps the story you want to tell is not about managing law firms, but better managing the internal resources available to you in-house. Consider the power of telling a story about the efficiency of your internal staff and department, where doing "more for less" is a quantifiable and measurable. Consider developing where the in-house attorney, who is entrenched in the business, is measurably smarter and more responsive than her outside counterpart. Or, perhaps, the story is about a piece of technology that provides a better starting point for drafting or contracting work, thus unleashing additional time to focus on more strategic work. The story you want to tell - whether about external legal spend or the effectiveness of your in-house team - will help you develop the data and metrics to fuel that story and achieve the desired outcomes.
2. Outside of the legal department, who else should have input on the legal department's metrics program?
In addition to formulating the story, as discussed above, consider the audience to whom you will be sharing this story. Are there key data points that will be meaningful to them? What data points will be important to your stakeholders? For instance, if you are a GC, has your CEO or CFO articulated particular goals for you and the department? Or, maybe you support a business division that is unaware of how they consume legal services or the costs (time and financial) of such services. Are the goals demonstrable in data and metrics that will be embedded in your metrics program? Do you need to reprioritize data collection to meet the needs articulated by these stakeholders? In shaping your metrics program, be sure that stakeholders outside of the department have the opportunity to provide input; their guidance will help prioritize resources and pinpoint the data that you will want to collect.
3. Where do I start?
The next considerations for a lean department's metrics program has to do with the types of data points you'll want to collect and the KPIs you'll want to measure. Much of this is a prioritization exercise because all of these data points will be "nice to have"; the key is to focus on the data points that tell your story and to take baby steps to build that data driven story. Where to start? Data to understand your overall legal matter portfolio is an example of starting small and building towards a larger framework. Too often, when legal departments first initiate a metrics program, they immediately are drawn to these granular data points that are hallmarks of robust metrics programs. Before diving deep, it will be important to have a solid foundation, which includes knowing the overall legal inventory or portfolio. For instance, do you know the raw number count of legal matters the company has open and is providing legal services on? Once you know the full count, then consider getting a little more granular by tagging those matters and gathering data regarding whether the matter is:
- Handled internally with in-house resources or handled externally with outside counsel?
- Transactional vs. dispute resolution/litigation?
- Associated with a particular region or business unit?
4. Are there specific data points about transactional and contract work that should be collected?
- Number of agreements/contracts handled each year by each attorney; is there seasonality (i.e., more demand for legal services at the end of the quarter? End of the month?);
- The underlying revenue generated by such contracts and transactions;
- The percentage of agreements that were created using the company's standard agreements;
- The average turnaround time for these contracts or agreements? How long did it take to negotiate the transaction (and more importantly, how was that time spent: drafting? negotiating? waiting for the other side to respond?)
- Identify the specific clauses that require more time negotiating or those that have been the subject of disputes.
Again, choose a handful that fit your story and objectives to demonstrate your contributions on the contract/transaction front.
5. What data points should I collect about outside legal spend?
Many legal departments focus on data related to outside legal spend as their starting point for their metrics program. This is a good starting point, as many general counsel don't even know what their total external legal spend is within a financial year! Consider some of these data points in connection with outside counsel spend:
- Have I managed to the external budget given to me by finance?
- How many law firms are providing service to us?
- What business units or geographies are consuming the most outside counsel spend?
- On what types of matters do we generally seek outside counsel assistance? This question is particularly interesting when thinking of developing an RFP for a portfolio of similar matters or an alternative fee arrangement for a specific or portfolio of matters.
- Do we turn to outside counsel because of: too much volume? Jurisdictional necessity? Expertise outside of our legal department? These questions are particularly interesting when thinking of hiring for an expansion of the lean in-house team.
As with the transaction data points, be selective about the data you collect on outside legal spend; there will be opportunity to build on a solid foundation.
6. What data points should be collected about outside counsel performance?
In addition to looking at the big buckets of dollars being spent with outside counsel, consider collecting data and KPIs about your law firms. For your small legal department, careful about its limited legal spend, are there particular qualities that define superior performance? Consider collecting data on a scale of 1-5:
- Legal expertise: did the lawyer demonstrate the requisite knowledge in the subject matter?
- Responsiveness and communication
- Budget and predictive accuracy
Based on these evaluations, consider driving more work and spend to those law firms that are quantifiably delivering better service and outcomes. This is especially important for small legal departments with limited resources; partnering with the right outside counsel is paramount.
7. Is it worthwhile to deploy an internal client satisfaction survey?
The heady French novelist, Gustave Flaubert, stated that "There is no truth; there is only perception." If this quote rings true to you, consider collecting data about how the delivery of legal services by the legal department is perceived by your internal clients. Are you perceived as the "Department of No" because of slow turnaround times for agreements and contracts? Is your legal department perceived as one that adds value and is aligned with the business or is the in-house lawyer synonymous with 'deal-killer'? What qualities would you expect from outside counsel in terms of legal expertise, know-how, responsiveness and budget and predictive accuracy? Is your department delivering the same/better/worse quality of legal service than outside counsel based on a similar score card? Are you curious to know more about client satisfaction surveys?
8. Outside of tracking legal matters and spend, what other data might be helpful to collect?
You have an idea of the data you want to collect about legal spend. You have an idea of the data you want to collect about the inventory of legal matters, including the contractual matters your team handles. These tend to be the two biggest buckets of data legal departments, both large and small, concentrate their collection efforts on. Outside of this scope, many departments also consider collecting data to demonstrate contributions to the overall organization and to the legal industry including:
- Number of legal and compliance trainings provided;
- Pro bono hours or hours dedicated to the company's social responsibility programs;
- Diversity of the in-house team and outside counsel.
9. I know what to collect, but where do I find and store this information?
Small legal departments must not underestimate the multiple pools of data that are available to mine. Lean legal departments should consider searching for data in matter management or e-billing tools, which are rich with data. If the small department doesn't have these more sophisticated tools, it can look to its AP system, shared drives, homegrown databases or SharePoint sites. And, it doesn't hurt to ask your outside counsel for data! Finally, if the small department must look to several disparate systems, it should consider identifying a central system to collect such data.
10. We've collected the data for a period of time. Now what?
For the small legal department embarking on the use of metrics and data, it's important to remember the collection of data is just the initial step. Start small and identify areas where you think the data collection has given you the most return for your investment of time. Spend the time analyzing and ask yourself: How can you make the data actionable or create a change in behavior? Does the data support the story you wanted to tell? If not, what must you do to set the department on a new path? The data will clearly spark new questions and new conversations. For the small legal department, continue to refine processes to collect the data. And if it makes sense, continue to grow the data collection program. For guidance on how to do this, consider these performance metrics from more robust metrics programs
. And finally, remember: from small beginnings come great things.