The Mojo in the Metrics: Validate law department value by adopting the right metrics

Friday, July 17, 2015 - 11:48

Is your corporate law department sometimes viewed more as a cost center than as a key contributor to the company’s operational efficiency? It’s a common situation. Turning that perception on its head requires heavy lifting on the part of general counsels and law department operations personnel. The good news is that leveraging metrics can help lighten the load.

There’s mojo in metrics – as long as they’re the right metrics. The right metrics can cut the challenge of demonstrating a law department’s value down to size by providing tangible proof of the department’s contribution to the business. The right metrics can identify trends and patterns that indicate business opportunities and potential risks. And they can shine a spotlight on areas of the law department’s operations that are world-class – as well as highlight those that could stand to function more efficiently.

First Things First

As important as metrics are, they’re only a single part of the overall value-proving equation, however. And they aren’t even the first thing to consider when setting out to benchmark a law department’s value. The first is clearly defined objectives. Objectives are the foundation of a successful measurement program, so unless you first identify the goals that are important to your law department, your metrics may not be measuring what matters.

Ask and You Shall Perceive

Having a conversation with all the members of the department about what’s important to them is a good place to begin identifying objectives and the metrics best suited for measuring performance against those objectives. For example, for establishing metrics to manage outside counsel, asking what sets a trusted, go-to law firm apart from the other firms can produce information about expectations you can then translate into metrics. The discussion shouldn’t be framed as asking for recommendations about what to measure, but, rather, as simply asking in-house counsel to articulate what they expect from the firms they work with.

Once you’ve established expectations, brainstorm all the different ways you might measure progress against them. There are always going to be multiple ways to measure something, so the goal is to get to the one metric that’s best for what you want to measure. For example, most law departments want to know that they are paying a fair price for their law work. If your firms are primarily billing you by the hour, you can use many metrics related to rates. You could use the weighted average bill rate for the work the firm does for you. You could look at just the rates for partners or associates. You could measure how a given firm’s rate varies or compares to the median rate you pay all of your firms. Or, you might choose to measure how much your firms increase their rates each year. All of these are valid metrics, but unless the expectation that your firms charge fair rates carries a lot more weight than your other expectations or objectives, you should pick just one.

Using Charts and Dashboards

One of the most important things to think about when using charts and dashboards based on key metrics is how to best present the information to various stakeholders. Understanding the chart’s purpose and the information needs of the intended audience is critical. Although most corporate lawyers love the look and feel of dashboards, if the information must be formatted quickly, or you’re using it for internal operations, then a traditional grid-based report may suffice.

Dashboards are most useful when the law department wants to track things visually and make comparisons that require much more detail. There are four areas where dashboards lend themselves best to the law department:

  1. Tracking Key Performance Indicators (KPIs)
  2. Comparing data for multiple entities on scorecards
  3. Identifying areas of risk
  4. Data self-service/informational purposes

In these scenarios, a dashboard provides a high-level view of data at a glance and gives the user an opportunity to access additional levels of detail. Don’t lose sight of the fact that the data in the charts is only as good as the information being fed into them. Ensuring a steady flow of quality data requires the entire law department to be disciplined about inputting information in an accurate, timely manner.

Four Tips for Effective Data Visualization

Following these four tips will help accelerate your law department’s transition to consumers of metrics:

  1. Identify key objectives first and then develop metrics to support those goals.
  2. Opt for substance over sizzle. Usually a straightforward bar chart is the best solution for comparisons.
  3. Know your audience. Most executives like to see information presented in a straightforward and concise format.
  4. Practice restraint. Dashboards can be confusing and ineffective if they present too much information.
Building on Success

Once a law department has developed and mastered a process for defining objectives and determining the appropriate metrics, proving – and improving – its value to the corporation can be incorporated into the department’s routine practices. Its ability to provide useful, predictive insights that help guide the corporation’s business decisions will showcase the department’s important contributions to the company’s profitability and secure it the respect it deserves.

As a top data-mining and business of law expert, Kris Satkunas has noteworthy credentials in the areas of matter pricing and staffing, partner compensation, practice area metrics and scorecards. Prior to CounselLink, she advised large law firm leaders for more than 10 years as part of the LexisNexis Redwood Analytics organization, leading data-based research activities as director of the Redwood Think Tank and managing consulting initiatives as head of the Analytic Services group. She can be reached at kristina.satkunas@lexisnexis.com.