Measuring the performance of an in-house team is a topic guaranteed to divide opinion. Many lawyers feel that one of the reasons they moved in-house was to escape the measurement of time required in a law firm. Conversely, others may feel that the discipline of the time clock is needed to ensure that the extent and importance of their work are understood.
The risk of both arguments is that measurement is reduced to a consideration of time and cost. Arguably, both are the wrong measure of in-house work: self-evidently, bringing work in-house should cost less than the same person carrying out the work in a law firm, as the profit margin is removed. But why else might one measure the performance of an in-house team?
It is better to ask why the organisation has an in-house team, what it is intended to achieve, and how best success can be demonstrated. More than that, though, measurement can identify trends in the organisation’s legal needs, future risks, and opportunities. It can also help to integrate the legal team into the organisation.
Critically, all these measurements can be brought together to demonstrate the value of the in-house team, and what it does to protect and enhance the organisation, and manage its legal risks. Often a legal team is doing great work but is so busy doing it that it doesn’t capture what it is doing, learn from that for the future, or tell anyone about it.
The organisation then doesn’t see that great work, regards legal as a cost centre to be controlled and cut, and as a result, the legal team is on the back foot.
What to measure?
If you have developed a formal legal strategy – setting out what you do, why and how – for example as suggested in the CLL resources Designing a Legal Strategy and Framework for an in-house legal strategy – you will have a head start. You will understand what you’re trying to achieve and how. If you haven’t, don’t worry – here is an opportunity to start that process and to use measurement to help the organisation understand the true value of the team.
You should also look at what the organisation itself measures - its own key performance indicators, the measures it uses for other in-house professional functions – and the language it uses internally. Performance measurement is a real opportunity to allow the in-house team to show that it speaks the language of the organisation.
So, what might you measure:
- Money. Like it or not, most organisations will expect to know what law costs – the cost of the in-house team, what is spent on external lawyers, when, how, and why. They will also want to understand how that relates to the budget, which you are likely to have had to set and have approved for your financial year. This sounds very basic, but it’s still very common to find law departments that don’t have even the simplest financial information – and equally common to find that that lack of financial clarity sets them on a collision course with the broader organisation.
- Time. As we all know, law firms – and many professional services organisations – measure time, and charge out based on time spent. For an in-house team, unless you can charge out externally, or you want to use time as an internal management tool, this is almost always a false measure. It doesn’t identify how well you are carrying out the work, or whether the work is even necessary, and there is a danger it leads you to the wrong conclusion. As an example, a team that is spending a lot of time on a particular type of work may believe that is an indicator that it needs more resources to cope, whereas in fact what could be needed is action to tackle the root cause of the problem giving rise to the work in the first place.
- Comparative cost. If your legal strategy has determined what work you carry out in-house, and what externally, you can usefully measure comparative costs – both overall as a ratio over time, and if you use external lawyers for overflow work, how much a particular work type costs to deliver externally and by the internal team.
- What legal work is being done – and for whom? Law is a distress purchase in most organisations – given a choice, an organisation will spend money on what it sees as a more productive cause. Understanding what legal work is being done is a helpful starting point for showing value. You can devise a consistent set of descriptive categories – litigation, M&A, property, employment and so forth. You can then use these to develop a consistent reporting set over time, and also between different parts of the organisation. Much more than that, the reports can start to identify trends – if more litigation is experienced, why? If there is a growth in particular types of work, can you find a better and more efficient way of carrying it out? Does a trend represent a particular legal risk, and can you tackle the issue at source through training, development, or for example through a different product or service strategy?
- Compliance, penalties and costs. Regulatory penalties, fines and costs might be seen as an outcome rather than the input which legal costs normally represent, but their measurement can show where the organisation is going wrong, and over time what can be done to improve things. As fines and penalties in regulated industries or for breaches of competition or health and safety law continue to increase exponentially, measuring them over time can both show the impact of targeted legal work, and justify spending on activities to reduce the risk of non-compliance and mitigate the impact of issues.
- Legal trends, developments, risks and opportunities. Understanding what legal work is being done is, of course, important and allows trends to be identified and acted on – but it is only part of the story. Measuring potential developments and regulations affecting your organisation – even at the stage of conceptual proposals – and understanding the organisation’s strategic plans and their legal impact is equally important. If you can identify and measure the likely implications and risks, your value to the organisation is demonstrably more than simply that of a service provider. Equally, you can identify opportunities – not just to minimise risk, but to deliver the organisation’s work more effectively, more quickly and with less risk – perhaps by using trends to engineer out particular contractual problems, or to devise how to allow a product to be ordered and sold more quickly.
- People. All legal work is fundamentally a product of the intellect of your lawyers, and the human capital they represent is vitally important. You can measure recruitment, retention, development, training, and the contribution of your lawyers to the organisation’s operations and production. If you are losing key staff, this helps to understand why; it also allows you to highlight the need for lawyers to develop themselves and their professional skills.
- Process. Legal work is also, though, a product of process – although perhaps traditionally all legal work is thought of as one-off, bespoke, and in need of one-to-one attention, in fact in many cases, it can be capable of systemisation and standardisation. This can improve consistency, quality, timeliness and reduce the risk of missing something critical. You can measure instances where you have created and introduced a replicable process to legal work, and identify what has been learnt from that so it can be repeated on other projects.
- Technology. Increasingly, law is delivered through a combination of people, process and technology. You can measure how your legal team is doing this – for example, through the use of specific legal technology to improve contract work, disclosure software in litigation or regulatory contexts, portals to allow instructions to be given more easily, or self-service resources for the organisation’s operational teams.
- Quality. Most organisations operate quality systems, measures and structures across their operations. They use them to eliminate faults and risks, as a basis for audit to establish their success, and as a starting point for discussions with customers. Most law departments, and most large law firms, do not use such formal systems. Adopting a quality assurance system such as Lexcel or ISO 9001 allows a legal team to capture and standardise its processes, to demonstrate and report on the quality of its work, and crucially to measure itself to similar standards as the parent organisation.
- Team processes. Although not by any means uniquely an issue for law departments, measurement of the organisational team processes to which the organisation is subject should be seen as an opportunity, not a chore. It can ensure that everyone has a formal development plan, meets their line manager for a personal development review, and has a set of objectives that support their development and the organisation’s goals. And if the legal team has designed and implemented formal training for the organisation – for example in compliance, data security, health and safety or beyond – the fact it can show that all legal team members have completed that training is a firm foundation for insisting everyone else does so.
- Value. Numerically, it can be easy to measure cost. Measuring value is harder – but is well worth the effort. Can you demonstrate what costs have been avoided by a particular piece of legal work? Can you show how much faster something has been done and how much that has been worth? Can a reduction in a fine or penalty be identified? Often, your legal team will know exactly what it has achieved, but has moved on to the next issue – a brainstorming session can yield amazing results demonstrating what has been done.
How and when?
Measurement, of course, takes time and resources. Often, that is used as the rationale for not doing it. In fact, though, it leaves teams open to the criticism that as it isn’t being measured, it isn’t being done. It needs to be seen as everyone’s job. It can be made easier by having a formal structure so people know what they need to record and report, how and when, but it does need to be done. Teams with a formal legal portal or enterprise legal management system can use that; those without can use a spreadsheet or even report by email, but it needs to be somebody’s job to collect and collate it. That doesn’t need to be an onerous task if done regularly, but it must be done, and team members providing the information need to see the outcomes to understand it is a worthwhile process.
The ‘when’ should be established from the outset – daily, weekly or monthly as you prefer, but on a timescale which means that the output is timely and useful, and reflects the timescale of the organisation. If an organisation works to a monthly reporting schedule, it will look odd if the lawyers decide they only need to report every quarter, for example.
You might also want to consider whether you can automate record and reporting, at least of legal spending. There are several commercially-available legal spend and enterprise legal management applications that can be helpful.
Reporting is a real opportunity to integrate the legal team into the organisation. Understanding how the organisation reports, what it reports, and mirroring that structure, means that the legal team can be seen as a central part of the team, not as something separate. If your measures can be adapted from the corporate norm, so much the better. If your reported output can be in a similar format to the organisation’s other reporting, that will greatly increase the likelihood of it – and you – being seen to be of value.
The ‘language’ of reporting is also important. Organisations typically think in numbers. Lawyers typically think in words. If your reporting is solely textual, with costs being the only number involved, there is a real risk that that will be focused on as the only important things.
The format of reporting should also be carefully considered. Can you develop a dashboard showing your key measures in one place? Is there a standard reporting template that may be helpful to show trends and assist comprehension? Many organisations report graphically, and showing legal measures in the same way can be very powerful. Again, an enterprise legal management system may help here.
Think about how your organisation’s Chief Executive sees the legal team. Is it just as a line of cost? Or a report when litigation has cost money, or a transaction has been delayed and budgets haven’t been met? And how do you communicate your value to them? In many cases at senior level what is needed is a dashboard – perhaps even a single page making clear what is being done, why, how, at what cost, and with what impact – almost a legal elevator pitch. The credibility which is gained in that way allows you access and permission to communicate more complex and detailed issues.
This article is intended to give you some ideas on what to measure, why and how. Measurement is a hugely powerful tool to show what you are doing, the impact of your work, and the real value you are bringing to the organisation. It can form the basis of informed discussions with your key clients. It can allow you to flow your work on trends and developments into the core strategy of the organisation. Most importantly, it can demonstrate the value of the legal team in the language of the organisation itself.
Some further reading
Framework for an in-house legal strategy
Getting things done Allen, Piatkus – chapter 11 – Capturing Habit
In-house Lawyers’ Toolkit Tapp and Page, Law Society Publishing – chapter 10, Demonstrating Value from the In-House Team
Legal Upheaval: a guide to creativity, collaboration and innovation in law DeStefano, Ankerwycke Publishing