Key Performance Indicators (KPIs) to Improve Legal Operations
In-house counsel and law firms' operations managers have many issues to address, from implementing data security, managing outside counsel, and financial reporting to budgeting and maximizing operations with technology.
And a common goal for organizations of all sizes is to develop key performance indicators (KPIs) for the legal department or law firm that are meaningful measures of the organization's health. With the right metrics in place, legal departments can influence staff behavior and show the department's value and effectiveness
Definition of KPIs
Consider these metrics:
Curated from the American Bar Association and Business Intelligence industry articles):
Identifying what to measure is the first step, and it is ok to start simple.
Analyzing Department Spend
- Calculate the total cost per full-time employee (FTE) including compensation and benefits.
- Convert your Inside and outside department spend to a percentage of company revenue.
- Compare the ratio of inside spend to outside spend.
- Analyze spend vs budget and compare it year over year (YOY).
- Summarize the total cost of resolution by averaging per case/type. You can track and compare these numbers year over year.
- Track your reduction in spend YOY.
- Identify staff work type by position
- Calculate the percentage of cases handled internally, without outside counsel services
- Summarize the number of matters handled per in-house attorney.
- Compare the spend to budget per in-house attorney.
- Percentage of cases successfully resolved.
- Track the number of in-house attorneys per 1,000 company employees
- Track the number of in-house attorneys per $B in company revenue
- Track the amount of time spent processing invoices accurately
- Track outside counsel invoice errors not in Compliance with Outside Counsel Guidelines
- Measure the number of matters handled keeping to the budget
- How much time is spent on legal vs administrative tasks
- Time spent per month processing outside counsel invoices
- Number of matters by type/each year
- Average legal spend by matter type
- Average per-matter cycle time: track separately for litigation, contracts, transactions
- Average time to trial (or settlement)
- Matter count by location (or business unit)
- Return on investment
Client SatisfactionSurveys are the most effective way to track and measure client satisfaction. Ask clients, on a scale of 1-5, how do internal clients rate the law department in:
- Response time
You can establish a system to track complaints and spot trends that you can act on.
Outside Counsel Performance
- The average cost of resolution categorized by firm
- Total spend by the firm (YOY)
- Compliance with Outside Counsel Guidelines
- Actual spend vs budget per matter (or matter type)
- Average blended rate by firm and by matter type
- Law firm ratings (surveys)
Start the KPI discussion in your organization:Creating meaningful KPIs requires you to be sensitive to the organization's politics, infrastructure issues, and change management difficulties.
It is wise to think through why you are developing the KPIs.
- Are you trying to prove your team's value? Show results? Identify areas that need staff training? Analyze spend?
- What are the department/firms' goals?
- What performance metrics matter to General Counsel or department heads?
- Do you have in-house talent who have developed KPIs before? Save time and lean on them for best practices. Find out what the lessons learned were.
- Is the KPI initiative high on the department priorities list?
- Verify you have the time and resources to tackle the project.
Developing and implementing an effective KPI program is a significant effort that will require attention while the team is still obligated to their daily work effort. You will need to collaborate with the legal team to get their buy-in and schedule to keep on track.
You may encounter unintended consequences – think about the behavior you are encouraging or discouraging with your metrics. Once you have decided what to measure (not an easy task), you may need to figure out HOW to measure – does it require a change in infrastructure?
Improve morale by incentivizing superior performance. With relevant measures, your team can self-regulate, reduce costs, and better manage legal spend.
The best time to develop and implement KPIs is when you are ready to improve efficiencies and can gain the buy-in of your team and management.
Be aware that you shouldn't jump to conclusions and spread KPI news too fast. Acting without verifying can cause headaches. Be curious and ask questions before publicizing KPI results. Is the data sufficient, or is there an error skewing the metrics? When viewing results, investigate if the metrics are a valid indication of performance.
KPIs require careful consideration and thoughtful planning. It is beneficial to identify the outcome desired, which activities or metrics are the best to monitor, and how the process of data collecting and analysis alone might affect performance. Once you have mastered them, use KPIs as a tool to measure and communicate to leadership and your colleagues the business health of the organization and suggest proactive actions to improve performance.
About the author:
Legal Suite is the worldwide leader in digital transformation for lawyers. We have delivered our state-of-the-art software for lawyers, law firms, and in-house general counsel to 65,000 users for over two decades. www.legal-suite.com
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