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Key Performance Indicators for the Law DepartmentAuthor: Richard G.
Stock Lexpert March 2005 at p. 87
An anonymous CEO
is quoted as saying, “I want the data that shows whether the
resources spent by the law department are focused on the right
priorities and generate value we can measure. Until l get that data,
my best option is to keep pushing for lower costs.”
For decades,
corporate and support functions such as legal, human resources,
accounting and IT have escaped the scrutiny to “demonstrate” value.
Despite the pressure to deliver smarter–better–faster service, they
have been allocated comparatively fewer resources over the years. In
part, this is because they have not been readily identified with the
products, programs and services which make the business run. At
least, not until recently.
Adding
Value
Comprehensive
performance management programs are being introduced by corporations
in every economic sector. Most include key performance indicators (KPIs).
These indicators and the programs they
support are comprehensive because they are much more far-ranging
than budget and other financial indicators. Shareholders in the
private sector and stakeholders in the public and not-for-profit
sectors want programs which reduce waste and which encourage all
resources to be dedicated to the top priorities set by executive
leadership. A recent case is worth re-telling because it reflects
the transition of the legal function from a classic position of
support to one which is likelier to add value.
A seven (7)
member law department had its lawyers responsibilities aligned with
the primary internal “clients”. Most of the lawyers had an area of
legal speciality (labour, litigation, capital projects, and so on), but
there had been turnover in the ranks in the last two years. Four
months of time-keeping by all department members were used to
allocate direct legal costs to internal departments/business units
with a goal of zeroing out the legal budget at the end of the year.
However, outside counsel costs were not centrally budgeted and
allocated. The law department did conduct a client satisfaction
survey and achieved good results, but the survey was not annual.
Finally, the law department reported corporately on only two
indicators: number of logged hours and cost of inside counsel (per
hour) compared to cost of outside counsel.
Demonstrating
Performance
Some malaise
lingered about whether the law department’s contribution was truly
appreciated by the company. It was agreed that new performance
indicators (KPI’s) were needed to better reflect the efficiency and
the effectiveness of the legal function. The corporation agreed but
it required that the new “ legal ” KPI’s use the quadrants of the
corporate framework: customer service, service levels, impact on
(external) clients, and efficiency.
Several
objectives were kept in mind in choosing the new KPI’s for legal
services. They had to be useable by other corporate services groups
and not be unique to legal services. They had to be fairly easy to
administer and lend themselves to benchmarking with other
corporations, even those in other economic sectors. Finally, the
KPI’s were to feature the strategic and leverageable value of the
legal function within the organization. The following KPI’s
emerged:
Achieving a
balance
By using the new
KPI’s, the law department was able to abandon activity tracking. It
was able to argue in favour of centralized control of expenses for
outside counsel. It became necessary to achieve a greater
involvement earlier on with its internal clients, and to learn to
focus on the more significant priorities rather than trying to
please everyone.
Finally, it
began to achieve a better balance in its choice of initiatives:
internal versus external clients, growth in the lawyers’ involvement
in strategic initiatives and the sound management of legal
expenses.
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