GCs are increasingly required to demonstrate the value of their team.
Well crafted KPIs and other measures are a valuable tool in demonstrating value. But before deciding what KPIs and measures to adopt it's important to ensure that the work of the legal team is aligned with the organisation's key goals and objectives.
KPIs as part of a performance management plan
You know the legal team is busy and stretched, supporting clients across the organisation. Yet how do you demonstrate what the team is doing and, more particularly, that its activity is focused on those areas of most importance to your clients and the organisation generally? Well crafted KPIs can be an effective aid in this respect in demonstrating, clearly and succinctly, not only what the legal team does but also the value of that activity.
KPIs should form part of a wider performance management plan for the legal team. There are different performance models you can adopt but, essentially, you're looking to: (1) spell out what the purpose of the team is and (2) align the objectives, targets and activities of the team with the key goals of the business teams and units and the wider organisation. With finite resources and under pressure to show your value, you will want to ensure that the legal work you carry out is targeted at the most strategically important areas of the organisation's activity. These are likely to be those areas of greatest legal risk and those which are most critical to meeting of organisational goals. In prioritising certain activities you will want to ensure that you have the right resources to meet client demands and have the tools in place to make effective requests for more or different legal team resources as those client needs change.
Selecting KPIs
You've agreed with the CEO and senior management what the purpose, goals and key activities of the team are. But how do you demonstrate what you do, why it matters and how you're improving?
With most measures, you are trying to support an argument that, as the business grows in size and complexity, then the legal function must also do so - or secure commitment to do less lower value work (i.e. increase business risk) in order to work with unaltered resources.
In most organisations the legal team will feed in certain data to be represented in divisional and organisational KPIs, often represented in periodic dashboards or scorecards. Consequently, it will be common for the legal team to capture data on some, or all, of the following areas:
Cost - A straightforward measure would be in relation to financial controls e.g. showing the cost of the legal team against budget and performance on spending targets. More complex measures would include comparing internal with external cost for like work and the extent to which external providers are tested against, and meet, value-for-money targets. Measures of staff member per £/revenue between legal and other departments or compared to legal teams in other businesses can sometimes also be relevant.
Activity - Reporting activity for its own sake is unlikely to win you plaudits. It may lead to perverse behaviours like reviewing more low value, low risk contracts to get the statistics up rather than spending more time focusing on fewer higher risk contracts instead, where real business value can be added. At the same time, colleagues can often be surprised at the scope and reach of the legal team's work. Ensure that activity is bundled to show how the team is supporting the organisation's key activities. For example, showing that the team worked on x number of contracts in the period is less informative than showing how those x contracts underpinned £y of new business, or how the team's dispute resolution work actively protected the organisation's brand/reputation/property and the value of that work.
Productivity - This is often represented by turnaround times against targets. If you use this, ensure the targets are real and realistic. Clients generally want a prompt response but identify those areas where response times are particularly business critical. Look to show how you're working with clients to ensure that legal input is not bottle-necked and that legal is not being blamed for slow responses from other departments within an overall workflow - e.g. finance in approving discounts in sales contracts. For example, show what percentage of queries were dealt with via FAQs and self-help initiatives rather than on a bespoke basis.
Risk - Legal risk may not be represented as a distinct category in your organisation's risk management plan (something that you need to fix!). So you need to be clear what you mean by it and how it's measured. Two major areas of risk are often contract and litigation risk. On contracts, for example, you could show how the organisation's contract management plan sets agreed levels (tolerance) for risk in relation to key standard and business-specific terms and how many contracts were processed at each risk level. This will help show that you are not only actively engaged in managing risk but also in ensuring that business contracts are processed at the right level to promote efficiency. On disputes, you may show, for example, how protocols have ensured rapid escalation, where necessary, and how disputes have been resolved at different levels of authority with the consequent saving of time and cost. Be careful to ensure that the business understands the difference between risk that crystallises in a legal issue i.e. the business not actually doing what it has contracted to do and getting sued and risk that results from a legal team failure. For example, poor drafting leading to a difference of understanding between the two parties as to what has been contracted for.
Quality /Competence - While you can highlight the quality checks and balances in the process to ensure that the work of the team is correct, prompt and consistent also consider building in some external measure, perhaps in relation to client feedback against a scorecard of responses measuring their key requirements. Or look at engaging an external reviewer to periodically measure against certain key benchmarks for the team. The key thing to remember is that what the business will want is an objective measure of competence, not some subjective measure of "the highest possible quality" that private practice law often talks about in order to justify premium charges.
Teamwork - Building a team with a strong collegiate and client service ethos will be a key objective. But how do you measure and demonstrate this? Retention rates can be illuminating but there are pitfalls in linking this to performance and KPIs. High retention rates may signify experience and understanding of the business but it could also be regarded as a sign of a team lacking ambition and diversity. Look instead to measure the benefits of a strong team by reference to such matters as promoting business understanding in the team; the sharing of knowledge within the team and with clients; promoting self-help and 'legal-lite' solutions; client and stakeholder engagement; training and development initiatives; and employee engagement.
Client feedback - As well as being informative it can provide useful performance measures. In identifying what to measure, speak to your clients about what matters to them. This is likely to include such matters as promptness; clarity; solution-focused advice; accessibility; consistency; business knowledge. To be measurable you'll need a scorecard type of approach. You can also score by reference to individual lawyers, a team, the legal department or a business unit.
Reporting
Generally, focus on a narrative-lite approach and avoid reports heavy with statistics. Rather, look to present information via a scorecard or dashboard as this makes it easily readable and understandable. And remember the importance of comparing performance over a period and in like-for-like periods. Ideally use presentation styles and measuring and reporting formats that are identical to or at least similar to those generated by other parts of the business in order to make the audience for your data feel at ease with what they are looking at. This is not "form over substance", it is simply form making substance more palatable.
After all the whole point of reporting is to inform and to satisfy the reader, so always focus on the needs of the reader in preparing information and consider doing multiple reports/reporting methods given that there may be different audiences for the information.
Make sure that the data you rely on can be easily collected as you'll want to avoid spending too much time gathering data and reporting on a bespoke basis.
Also make sure that it remains relevant and accurate and helps to make a point (e.g. on resource or budget levels) that you still want to make rather than becoming an outdated data point that continues to drive behaviours and perceptions that are no longer relevant.
Finally, make time to monitor the data you're gathering. You may not report all of it but it's likely to provide valuable management information about the focus and performance of the legal team.
Other ways of demonstrating value
Your value to the organisation should include factors that are less easy to reduce to performance measures. For example, trust, integrity, effective listening, communication, training and negotiation skills may be less easy to represent. Don't ignore these factors and take every opportunity to make clear what contribution the team has made to a successful business success or initiative. You could do this via your intranet, newsletter, business reports and employee engagement programmes or client surveys. And don't forget the importance of getting your lawyers involved in project teams and cross-organisational initiatives, where possible as well as attending business meetings and conferences. Also engage fully with sustainability and other organisational initiatives.
People who are widely seen and widely well regarded tend also to build better trust and rapport. Remember that most legal advice is meaningless to clients - they just want to be told what they can and cannot do in their own language by someone they like and trust in ways that are commercially aware. So you are measured on interaction quality on a day to day basis and only on technical accuracy (which is assumed) when you get it wrong!
In formal reports, where possible, look to quantify your contribution via hard data and numbers rather than subjective narrative. Linking your work to the bottom line, where you can, helps to focus minds on the positive contribution of the legal team rather than it being seen just as a problem-solving cost-centre.
Conclusion
KPIs should form part of an overall performance plan for the legal team built on a clear set of objectives that are aligned to those of your clients and the organisation. KPIs should be developed in collaboration with your clients so that you measure and report on what is important to them, as well as to you.
Well-crafted KPIs are likely to be a combination of hard and soft measures covering budgets, costs, targets and feedback. Use statistics and data that easily explain performance on a rolling basis.
Remember the overall context in which your KPIs sit. The board, senior management and your clients want to know that legal risks are identified and managed; that legal costs are controlled and appropriate for the risk profile of the organisation's activities; that you are proactively working to ensure that legal services are delivered efficiently, for example, through the use of technology, knowledge sharing, and value initiatives.
KPIs cannot highlight the full extent of the legal team's value to the organisation given that this will include nuanced factors such as integrity, trust and negotiation skills. Nevertheless they can play an important role in not only demonstrating the scope and depth of the team's work but, more importantly, how it supports key business activities and objectives and adds value to the organisation. And there are other ways in which you can, and should, highlight your overall contribution.
KPIs shouldn't necessarily be easily achievable or always show a 'Green Light'. Missing a target may highlight a problem in the team or organisation that needs to be addressed and might have been missed under an easier regime.
Finally look to peers and to external sources for relevant benchmarks and approaches to KPIs on issues, such as the Acritas innovative PEER model, to identify good practice and to help you to choose measures that are appropriate to your circumstances.
KPIs are an important part of your performance plan. Select a balance of hard and soft measures that demonstrate that you are attuned to the need to measure key areas of performance where improvement will benefit the organisation and add business value. Select measures that matter to your clients and make sure you report them in a user-friendly way. If you want to be seen as a valued business partner make sure the data you capture and report supports your case and identifies your improvements and successes as well as highlighting areas to be addressed. And don't ignore other ways of highlighting the legal team's contribution and value to the organisation.