False Measures of Value?

Author: Richard Stock - Lexpert (June 2011, Vol 12, No 7)

On April 4th, the Canadian Corporate Counsel Association (CCCA) released its annual In-House Counsel Barometer, which surveyed some 636 corporate counsel. Some of these findings were presented by Angus Reid’s Andrew Grenville, who highlighted law department metrics that, while providing value, were also somewhat disappointing.

To begin with, 57 per cent of corporate counsel respondents said they had no key performance indicators (KPIs) in place by which their contribution to the organization could be measured. Of those that did, 59 per cent said they were great in theory but poor in practice; 43 per cent said they were not relevant to their daily work; and 35 per cent said, “I think performance metrics were set by someone who has very little understanding of what the company needs from my function.”

It is clear that a large majority of counsel believe that KPIs are a poor reflection of what they do and how well they do it. When asked, “What types of metrics are you aware of that are used by your organization to measure the value provided?” only 153 out of 636 provided any response at all. Of those who did respond, 66 per cent cited the department’s budget; 64 per cent the amount spent on external counsel; 37 per cent the number of matters settled; 27 per cent the organization’s total budget; and 24 per cent litigation matters successfully resolved.

These metrics, however, are largely financial, and there was no mention of helping business get done. Instead, the resolution of disputes took precedence. Angus Reid’s conclusions are right when they say, “There is a need and an opportunity here.” Perhaps the right questions are not being asked.

Speaking of questions, there was one new question on this year’s survey: “Which of the following represents the main ways in which your department provides value within your organization?” Overwhelmingly, 85 per cent answered “managing/reducing risks associated with business decisions.” A distant 46 per cent said “ensuring my organization is in compliance with sector regulations.”

Of course, all will agree that a law department’s role is to reduce legal risk. But the results here make it sound like the department’s role is to be the business-prevention police.

My experience with private-sector law departments is that a large portion of their resources – about 70 percent – are involved in commercial work. Either they provide real-time operational support to business units, or they provide strategic business advice that helps deals get done.

Next year’s response options with regard to how the department provides value should include “enabling transactions to be completed more quickly and successfully.” It would then be easy to follow up with a KPI with which to score the law department. I expect that corporate counsel would see this as a more relevant KPI than budgets.

The CCCA’s plenary session featured a panel where Brian Armstrong, Bruce Power’s Executive Vice President & General Counsel, identified six performance indicators that go beyond finances or dispute resolution: (1) strategic objectives, improvement initiatives, capital programs and risk management; (2) internal client satisfaction; (3) the engagement score of the legal team; (4) unsolicited, positive, written client feedback; (5) board papers delivered on time (a corporate secretarial role); and (6) meeting performance targets for the legal division.

It isn’t that KPIs for law departments do not exist. Rather, legal departments are poor at planning and measuring their priorities and work, and then communicating the results. Too often, the focus is on costs or tracking processes or activity rather than on the results. Unsurprisingly, KPIs will default to viewing the law department as necessary overhead and as a cost centre instead of as a small group who contribute directly to corporate priorities. You get what you plan for and what you measure.