A Guide for Legal Ops: Developing Key Performance Indicators

If you are new to the legal operations role, you likely arrive at work prepared to drink from a fire hose. Coming at you at 100 PSI are issues like data security, financial reporting, outside counsel management, maximizing technology, budgeting and alternative fee arrangements, and cross-functional alignment. And somewhere mixed in, is the need to develop key performance indicators (KPI) for the legal department. 

Done right, implementing KPI in the legal department can show value, change behavior , identify needs and track trends, all of which can have a positive, long-term impact on the effectiveness of the legal department. 

If developing KPIs is on your short list as a new Legal Operations Officer, and you have to get up to speed quickly, keep reading.

We identify for you all the fundamentals: The definition, questions you should ask, a list of challenges you will likely need to address, a collection of suggested metrics to consider, and links to the best research we have found for further reading.

What are KPIs?

Technically speaking…

The Law Dictionary defines KPIs as “measures of a firm's (company’s or department’s applies here too) performance in critical areas. Typically, monitoring is essential for such business activities that would likely cause severe losses or outright failure if done incorrectly… measuring progress or lack of it are essential for achieving the firm's objectives or strategic plans.”

In simpler terms, KPIs measure the performance of a department, company, firm, business unit. Typically, these metrics use numbers and are tracked over a period of time.

There is no ‘right answer’ for what metrics you should use to evaluate your department. But going through this exercise will get you closer.

METRICS TO CONSIDER

As consultants for law department operations, we are often asked, “What should I measure for my department?” The answer is, “It depends.” (We know that’s not the answer you’re looking for.)

• We have pulled together our collective experience and review of the research, and have prepared an initial list to use as a starting point. Some will matter to you, some will not, and some will matter but you will have no way to measure. All of those factors have to come into play. It’s okay to start small and simple.

Cost Effectiveness: Optimizing Department Spend

• Inside and outside spending, typically expressed as a percentage of company revenue.
• Total cost of resolution, on an average per-case/type basis. Track and compare year over year (YOY).
• Total cost per FTE (including both compensation and benefits costs associated with each in-house employee)
• Spend to budget, compare YOY or as a percentage of matters completed in budget
• Ratio of inside spend to outside spend
• Reduction in spend, tracked YOY

Staff Productivity: Optimizing Department Time, Money and Resources

• Number of in-house attorneys per 1,000 company employees
• Number of in-house attorneys per $B in company revenue
• Number of matters (or other volume metric) handled per in-house attorney
• Percentage of cases successfully resolved (against predefined success criteria)
• Spend to budget per in-house attorney
• Percentage of cases handled internally, without outside counsel
• Work type by position

Process Efficiency: Executing Efficiently and Effectively

• Time spent on legal vs. administrative tasks
• Time spent per month processing outside counsel invoices
• Number of matters handled within budget
• Cycle Time processing invoices accurately
• Compliance with Outside Counsel Guidelines (e.g. invoice bouncebacks)

Matter Statistics: Throughput & Disposition

• 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 Experience: Tracking Business Unit Satisfaction

In the absence of established service levels, surveys tend to be the most effective way to track and measure client satisfaction. On a scale of 1-5, how do internal clients rate the law department in:

• Efficiency
• Response time
• Accessibility
• Cooperation

Do you have a system in place to track complaints? Measuring volume and severity trends are also possible options for metrics.

Outside Counsel Performance: Efficiency and Effectiveness

• Average cost of resolution by firm
• Total spend by firm (YOY)
• Compliance with Outside Counsel Guidelines (e.g. invoice bounce-backs)
• Actual spend vs. budget per matter (or matter type)
• Average blended rate by firm and by matter type
• Law firm ratings (surveys by inside legal team)

8 QUESTIONS TO GET YOU STARTED

Developing and implementing KPIs is a complicated process that tends to be fraught with political sensitivities, change management challenges, alignment issues, and infrastructure problems.

Think these questions through.

1. Why are you developing KPIs? What is the main objective? Justify value? Demonstrate results? Track trends? Identify training? Benchmark spend?
2. What are the department’s goals? What are the company’s overarching goals? Is there a strategic plan you could review?
3. What aspects of performance are of value to leadership (company, law department, business units)? Be sure to interview each of the leads, including the General Counsel, heads of the business units, and others who will be using your KPIs. You have to know what’s important to them and build buy-in.
4. Does anyone internally have extensive experience developing and implementing KPIs within the organization? If so, seek them out and talk to them about their experiences. This could save you a lot of time as you embark on the effort.
5. Are metrics being tracked in other areas? What do those look like and what is the process for evaluating and measuring them?
6. In general, what is the company’s experience with key performance indicators? Have they implemented them before? If so, what worked? What were the lessons learned?
7. What processes and tools are in place already that could help with measurement and metrics? What processes and tools would need to be implemented and what does that effort look like? “Not everything that counts can be counted (so says Einstein or someone!).”
8. Where does the KPI program fit in with other department priorities? High enough to tackle now? Or will it have to wait? Make sure you have enough time and resources to focus on the effort before you start. A stop and start approach is frustrating for everyone.

 

CHALLENGES

Developing and implementing an effective KPI program is a ginormous effort that will require attention while the team is still pursuing “business as usual.” This, in and of itself, is a significant challenge.

Here are some other challenges you should be prepared to tackle.

• Developing the actual list of metrics is not easy or fast. It will take collaboration across the legal team to secure their buy-in from the beginning and a schedule with milestones to keep the effort on track.
• Be mindful of “silos, politics, and turf wars.” (Also, Sheri’s favorite book!) Aligning performance metrics to the company and business units you serve will require careful navigation around organizational dynamics. Know what is most important to be effective, get buy-in early and often, and revisit alignment regularly.
• Implementing KPIs may have unintended consequences in your culture. Be sure to think through what kind of behavior you’re trying to encourage and discourage before solidifying your KPI.
• Identifying WHAT to measure is difficult. Identifying HOW to measure is more difficult, and often requires infrastructure improvements and change management. This is usually overlooked in the early stages of KPI development. Understanding up front your infrastructure’s capabilities and how gathering data will affect your team’s processes will help you in the long run.
• Analyzing the data is a minefield. As you review and analyze the data (especially early on), be critical of the numbers and ask a lot of questions before sharing across the team, company or business unit. It will take some time to refine the process, and avoid the pitfalls of “garbage in, garbage out.” Critical review of the data should be a milestone in your overall plan for executing KPI. Only when you are comfortable with the data shou