Metrics for the Modern In-House Legal Team

The in-house legal team’s work is largely subjective and controlled by situational stimuli. It is hence, not privy to the same assessment standards as the rest of the business. Choosing the right metrics for your in-house legal team is therefore mission-critical in making the department transparent, marketing the value of the team, identifying patterns and bottlenecks, and more importantly aligning your objectives with organizational goals.

Choosing the right metrics for your legal team

As mentioned earlier, KPIs for legal teams are quite new.

Cookie-cutter metric options do not exist, hence it rests upon you to create one from scratch. But, don’t worry, you’re not alone in this!

3-time GC and legal thought leader - Sterling Miller, has a handy method to get you started. According to him:

“The biggest mistake most legal departments make, in my opinion, is trying to track too many KPIs.  If you have more than ten you’re in trouble and in danger of over-analyzing things.”

Instead,

1. Establish what you want to measure and why it is important to your business
2. Understand the objectives of affiliated teams that you will be closely supporting
3. Understand the objectives of affiliated teams that you will be closely supporting
4. Do an umbrella scan on all the readily available data that can help you identify any pitfalls you need to optimize for

 

Ideally use data from previously generated reports or utilize data nested within your contracts to uncover insights.

 

5. Speak with leaders on potential projects and budget
6. Work backward from tangible outcomes

 

Use points 1 to 4 and establish what an achievable outcome looks to you. Work backward to identify what KPIs to set.

 

7. Set a framework to present your analysis simply but effectively

 

Use graphs, dashboards, and integrated presentation methods.

 

Once you have a fair idea of both your organizational and team objectives, you can break down that information to understand which of the following metrics make more sense to your team.

Top metrics for the in-house legal department

 

📢  Note: Following is a list of the most accepted metrics across the in-house legal industry. Since the work of an in-house legal team is highly specific to the industry they cater to, all of the following may not apply equally. Utilize the steps in the previous section to judiciously select what makes more sense to you and your business.

 

Number of contracts

Track the number of contracts requested, processed, and produced by the in-house legal department over a period. Defining the periodicity of this assessment is dependent on a few factors:

- The average length of a contract cycle
- Customer or vendor cycles and periodicity
- Internal resource or external help availability

Contract KPIs are the rare occasions where you can quantitatively assess your legal team’s output. They also provide a benchmark for you if you are evaluating or looking to onboard a contract automation tool at a later stage.

If you already have a contract automation tool, you might also need to track the number of contracts you have made self-serve within your determined period, to exhibit that you are accelerating the business.

Types of contract processed

Segregate the contracts by categories such as type, value, complexity, counterparty, and more. You also need to keep track of the deviation in contract terms from standard clauses.

This will help you identify the commonly requested contract types, allowing you to prepare templates and allocate resources better. It also allows you to analyze contract-specific trends that could potentially put your business at risk such as unauthorized changes or incomplete execution of the documents.

Contract value

The best way to determine the immediate monetary impact of your team on the business is to understand the incoming or outgoing value of the contracts you directly generated, reviewed, or helped automate.

A good idea is also to separate recurring/renewed contracts from newly generated contracts to help your business discover more information about their top lines.

Contract quality

Speak with dependent business teams on what the acceptable risks in specific contracts are. Post templatization/execution, analyze the turnaround time and degree of iteration required to complete the contracting process.

You can utilize this data to understand the quality of your overall contract templatization process or even identify the efficacy of a particular member in handling contract requests and delivering business-focused solutions.

Contract success rate

This is calculated as the percentage of contracts executed successfully from the bulk of contracts sent to the legal team. This can help uncover usual roadblocks and promote discussions towards solutions. You can also explore the success rates for specific contract types.

Also, consider computing the contract renewal rate as part of this KPI.

The contract success and renewal rates can help you assess the quality of your contract output although it depends a lot on the industry you work in and the type of contract you enter into.

Administrative costs

Contracts aren’t the end of the responsibility for in-house legal teams. Hence, it is also important to assess the time, effort, and people engaged in non-contract-related tasks. This includes repository management, compliance management, IP management, outreach programs, and more.

Getting an understanding of these auxiliary assignments will help you prepare your quarterly and annual budgets better.

Legal spends per business unit

Analyzing legal spends per business unit allows you to keep track of who your major dependents are, and helps you establish a business case for your team in front of the C-Suite. It also helps decision-makers understand your inherent value to the organization, and conversely allows you to understand and plan better by identifying your most frequent tasks/functions.

Litigation Expenditure

Tracking what works (or does not) for your litigation tasks is a direct subset of the industry you operate in. And therefore, while there is no silver spoon solution, there are a few factors to consider while trying to account for them:

  1. Threshold value: There will invariably be some matters with a greater monetary consequence than others. Establish a threshold value (e.g. $100,000) and track the number of litigation issues above that value.
  2. Average cost per litigation: This is calculated as the net spend on litigation matters divided by the total number of litigation matters and should include everything from external counsel spends to settlement costs.
  3. Percentage of wins
  4. Percentage of matters settled before trial

Ease of interactions

This is a purely qualitative metric to have in your KPI plan for your team, but since an in-house team is continuously interacting with other non-legal members of the business, it is best to understand how comfortable your peers are working with your team members.

Periodic assessment of how difficult others find interacting with your team can uncover a wealth of information about your approachability and can sometimes dictate the ease with which you can establish your team’s value amongst peers.

Documentation index

A lot of times critical data whether in your contracts or other communication/documentation channels can slip through the cracks and cause larger repercussions.

Striving towards continuous documentation is therefore not only a bureaucratic compulsion but also a corporate necessity. Use a Likert scale to rank team members on the basis of their ability to comprehensively document or arrest data.

This also helps future-proof your team and aid knowledge transfers during onboarding new members.

Net Promoter Score

This is especially crucial for legal teams in scale-up businesses. Unlike in larger conglomerates, the in-house legal department in startups are ones communicating with most other business teams, are fairly exploratory in their role, and have multiple business objectives to take care of.

Understanding ease of communication and business favorability for such a team and its members is a good indicator of work efficiency and fluidity.

The best way to do that is to undertake a quarterly survey of all business/client-facing lawyers in your organization. Question your business team members on their ease of working with the legal team on the following parameters:

- Understanding of business goals
- Responsiveness
- Timely counseling and proactivity
- Flexibility to accommodate business goals
- Approachability

This should give you a fair idea not only about the ability of the legal team to work with others in the business but also their understanding of business principles and their ability to contribute to growth.