If general counsel want to change legal department practices, it’s important to be able to measure them. But it’s not always obvious to GCs and their in-house colleagues which metrics need to be identified and tracked.
A recent webinar from enterprise legal management solutions provider Bridgeway Software discussed seven helpful metrics, originally identified by the Blickstein Group and Inside Counsel in a survey of law department professionals, that law departments can leverage to run smarter. (Inside Counsel is an affiliate publication of Corporate Counsel.)
Below is a look at three key performance indicators and how to make them work for your in-house team:
1. Actual Spend vs. Total Law Department Budget
One of the metrics most frequently used by the law department professionals in the survey is a comparison of real law department spend to budget. “It shows just how important predictability is to law departments,” Brad Blickstein, principal at the Blickstein Group, told webinar listeners. “In a lot of ways and for a lot of folks, being predictable is just as important as managing overall costs or more so.”
Of course, actual spend versus budget needs to be broken down into finer points in order to be more meaningful. Reese Arrowsmith, head of operations for Lincoln Financial Group, explained in the webinar that each month his company examines legal spend and its various numerous categories, from litigation fees (by matter category), to travel expenses, to salary.
By getting all of the company’s legal leaders together with the appropriate numbers and data visualization, Lincoln Financial’s legal team can make sure it keeps its eye on the right tasks—and the right budget to accomplish them. “All of this emphasizes to the team on a monthly basis that they can’t stop thinking about spend across the board,” said Arrowsmith.
2. Number of Litigation Matters
Another important metric is how much litigation the company is involved with and for how long. It’s not difficult to track, but looking at the number of matters over time can provide important insights to help the GC make decisions.
Lincoln Financial makes sense of this metric by looking at the number of open matters in each of its business areas and comparing that to legal spend, quarter over quarter and year over year. By doing this, the legal department, with the help of its consumer complaint teams and partners on the business side, can locate spikes in litigation and attempt to understand why they are happening and how they can be corrected, whether that means reviewing the company’s operations, products, call centers or another aspect of the business.
“It sounds pretty straightforward and people often report it, but I guess my point is: don’t report it just for the sake of tracking it and reporting it,” said Arrowsmith. “Dig in to understand it, to figure out what you can do to impact your business.”
Blickstein added that tracking cycle time for the matters that the law department takes in also can be helpful, especially since in litigation saving time also tends to save defense costs. By figuring out how long matters are taking to get resolved, legal departments can see where an earlier settlement might make a big financial difference. “If you can incentivize legal teams to close matters quicker, you’ll find a large resultant cost savings just from that,” said Blickstein.
3. Total Cost of Outcome
Both Blickstein and Arrowsmith said they see this category as key to understanding where the law department can do better. “I think that there’s really no point in reducing outside counsel costs, or changing the way you do discovery, or any of other things we’ve talked about, if you can’t control your cost of outcome,” Blickstein said.
Arrowsmith said his company breaks down outcome costs into their component parts, such as outside counsel spend and settlement prices, and then calculates average costs and cost ranges for different outside law firms that Lincoln Financial works with and different jurisdictions where the litigation takes place. Using this data, the legal department identifies the value it is getting from each of its firms and considers possibly directing work to firms that provide better cost savings.
Sometimes considering sending work to a different firm can be a difficult process, but the data gives legal departments and their outside firm partners a good basis for conversations about spend. “We went back to the team of attorneys who handle these matters and we showed this to them and we talked through it,” Arrowsmith said. The conversations give the firms an opportunity to discuss variables in the data, such as jurisdiction or aspects of the plaintiffs’ cases, which might prompt matters to become more expensive.