26 June 2023

7 legal department metrics you didn’t know you needed

Author: Sacha Kirk Insights Resources

In an increasingly competitive and complex business landscape, legal departments continually seek new ways to improve efficiency, track progress, and demonstrate value.

Metrics are indispensable tools in achieving these objectives, allowing legal teams to measure their performance and identify areas for improvement. While traditional indicators like cost management and completed matters remain relevant, several other metrics are often overlooked but can add significant value to a legal department’s operations.

Here are seven critical yet frequently underused legal department metrics:

1. Internal service delivery

The first metric is internal service delivery, which measures how well your legal team serves your organisation’s internal clients. This can be tracked by the average estimated time to allocate work internally and the average time to deliver legal advice or close a legal matter. Quicker turn-around times may reflect higher efficiency, although this must be balanced with the type and complexity of the matter.

Another helpful way of measuring service delivery is for internal clients to provide feedback using a simple two-question, 10-point scale opinion survey to gain feedback on the timeliness of response and overall satisfaction with the legal advice. Monitoring internal service delivery helps ensure your team meets internal client expectations, ultimately enhancing collaboration and trust between departments.

2. External equivalent value

This metric calculates the approximate cost of the internal legal matter if the equivalent work was briefed externally to outside counsel. While it can be challenging to measure this metric when in-house legal teams prefer not to track time, leveraging technology, automation, and making certain assumptions can assist in presenting a persuasive narrative.

Rather than time tracking, look to use automated time-logging to capture the estimated time taken to complete a matter or task using pre-configured workflows and “should take” analysis, with an ability to adjust manually. For example, a routine property matter “should take” 2 hours of work based on prior experience and this time is automatically logged. If, however, it is a more complex matter, the lawyer can manually adjust the time entry.

Then, using a built-in calculation within a logic-based workflow, a technology platform such as Lawcadia can calculate the external equivalent value of the work completed based on an estimated hourly rate of a similarly experienced lawyer in a law firm. This data can flow directly to BI reporting and dashboards to highlight the value the in-house legal team provides to the organisation.

3. Reasons for outsourcing

This metric can provide powerful insights for strategic decision-making. Essentially it captures data at the point of triage or external engagement that identifies the underlying reason why a matter is being outsourced.

Generally, the reason for outsourcing is either strategic, because the matter needs specific expertise, or due to resource constraints. Reports and insights generated by the use of this metric can support a business case to request additional team members. Further, when used in conjunction with other reporting sets there are numerous insights that this metric can support and facilitate.

4. Team capacity

Understanding your team’s capacity is crucial to ensuring efficiency and effectiveness. Overworked teams have the potential to make mistakes, while underutilised ones may cost more than they should. The metrics to evaluate here include the ratio of legal matters to legal staff, the types of work allocated to team members, and the average time to complete tasks. Self-reporting capacity on a weekly basis is also an excellent metric to capture to help inform decisions and discussions.

Analysing these figures can reveal if you need to hire more staff, adjust workflows, review development opportunities, or invest in legal technology solutions to improve productivity. Based on these metrics, capacity planning and resource allocation can lead to a more balanced, productive, and satisfied legal team.

5. Changes to scope of work

For many legal departments, a substantial part of their budget is allocated to external spend with law firms, so it is important to understand metrics that relate to project management of these matters. Metrics that are helpful to monitor in relation to this are the number of changes to scopes of work for each matter, the estimated budget changes that result, and the reasons for scope change.

Aggregating this data into reports can help identify issues, particular trends, and opportunities for improvement. For example, the changes in scope may be happening as a result of poor instructions, or there may be trends identified with a particular law firm or practice area.

Understanding the frequency and underlying issues in how external matters are managed can provide opportunities for continuous improvement and lead to more accurate budgets and strategic alignment with outside counsel.

6. Litigation and major projects

You can measure your legal department’s performance in managing complex legal matters by detailed tracking of litigation and major projects. Key metrics include the number of litigation matters or major projects, the estimated exposure amounts, the organisational and reputational risk, the outcome of cases or projects, and the resources invested in each matter. Detailed project management metrics can also help highlight progression, roadblocks, and budget blow-outs.

Furthermore, measuring the average duration of litigation or project completion can highlight efficiency levels, and examining the reasons behind won or lost litigation can provide valuable insights for future strategy. Regularly reviewing and assessing these metrics will enable your team to manage resources better, predict outcomes, and make informed decisions.

7. Law firm diversity and inclusion

An often overlooked yet increasingly integral metric is the diversity and inclusion (D&I) status of the law firms your organisation partners with. By assessing a firm’s D&I policies and practices, you demonstrate your commitment to social responsibility and potentially benefit from a broader range of perspectives and solutions.

You could routinely request diversity metrics from your law firms or even incorporate D&I expectations into your agreements with these firms to track this. Fostering a diverse and inclusive legal landscape not only aligns with ethical business practices, but research also shows that diverse teams tend to make better decisions faster.

Conclusion

These seven metrics are not exclusive but provide an excellent starting point for legal departments looking to broaden their performance. As with any business function, effective measurement and evaluation are vital to growth and improvement. By incorporating these metrics into your review process, your legal department can better identify areas of strength and opportunities for development.

Remember that what gets measured gets managed. By tracking these essential metrics, you can gain a comprehensive view of your legal department’s performance, uncover hidden problems, and devise effective strategies for improvement. In doing so, your legal team can become a more proactive, value-adding component of your business, ready to take on the challenges of an increasingly complex legal environment.

Capturing this information can require substantial time and resources if performed manually. A better option is to use a legal operations platform that captures the data as the legal team goes about their daily work and presents the outputs as easy-to-read reporting dashboards. The potential benefits of improved efficiency, risk mitigation, and value demonstration are significant. As the business world continues to evolve, embracing these metrics could be a game-changer, setting your legal department apart and contributing to the overall success of your organisation.

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