In recent years, the role of in-house counsel has evolved to become a more strategic business partner that supports the company's general goals. As in-house teams hold an increasingly relevant position within their organizations, it is essential to set performance objectives that reflect this shift.
One of the primary differences between average in-house legal teams and the most successful ones is their ability to identify and evaluate issues, and implement effective solutions quickly. This article will discuss the objectives that high-performing corporate counsel should strive for and the best ways to pursue and track them. We'll also look at the key metrics to help measure their success.
How Clear Objectives Can Benefit Corporate Legal Departments
You can articulate your department's functional purpose and value by defining objectives and corresponding key results that align with the business goals.
Setting objectives and KPIs can also be extremely helpful in measuring and improving an in-house legal team’s performance. However, setting too many goals can be counterproductive and limit the team's ability to achieve them.
Reducing the number of objectives to just three or five per quarter can help the team focus on what's important and increase their chances of success.
New Goals of In-House Legal Departments as Strategic Business Partners
An emphasis on clarity of goals, proactive communication, and reporting can go a long way when aligning department objectives to the company goals. The legal department's goals as strategic business partners should be purpose-driven, forward-focused, actionable, and measurable.
Recent studies forecast that the main challenges in-house counsel will face in coming years are leveraging technology to increase efficiency, managing costs in an inflationary environment, and focusing on Environmental, Social, and Governance (ESG) issues.
With these in mind, here are some examples of the most common goals forward-thinking legal departments are aiming at:
- Meeting budget targets
- Decreasing external legal spend
- Optimizing billing systems
- Create or amend legal contracts and general policies to include ESG compliance
- Expand diversity and inclusion initiatives on legal departments
- Better defend and protect the interests of the company — litigation, IP, government affairs, compliance
- Implement technology to automate traditionally manual workflows
- Create a data breach mitigation strategy
- Find the best firm for each matter
It's tricky to find key metrics that fully encompass the nuanced work of in-house legal departments. However, it’s important to find ways to break down the legal team’s goals into individual KPIs to track progress and identify potential roadblocks.
The Top 6 KPIs for In-House Legal Teams
Because every legal department has different priorities, the metrics used to evaluate its performance will vary by industry, budget, and overall goals.
Below are some standard metrics that most in-house legal teams can use to track how they’re pacing towards goals and make better, more informed decisions, increase efficiency, and reduce legal spend.
Measure Budget vs. Actual Spend
This is a crucial KPI because it reveals how close you are to your budgetary goals and highlights where inefficiencies may occur.
You need to track this by Year to Date (YTD) and Month over Month (MoM). You will want to report on the overall YTD expenditure vs. planned over the previous year.
Ideally, you would track by sort of subject, such as litigation, contracts, corporate secretary, intellectual property, etc. You can additionally track the average hourly rate for outside law firms and how the department is doing against any savings measures that might be in place.
Measure Department Spend as a Percentage of Company Revenue
Measuring the law department's spend as a percentage of company revenue can show how changes in the department's management or operations can influence whether legal spend is slowing down or growing on par with the company year-over-year relative to revenue.
It can also help set benchmarks for the department and show how it is performing compared to other departments within the company. Specifically, you'll want to track internal spend on legal matters, external spend on legal matters, and the combined total of spend as a percentage of company revenue.
Evaluate Outside Counsel Performance
As one of the most significant budget lines for the law department is the outside firm expenditure, there are several reasons why you should formally evaluate outside counsel. Formalizing evaluations will set quality management expectations and enable discussions about external counsel performance.
You can track specific metrics like the actual spend against the initial budget, the number of law firms used the number of legal matters each law firm handles, and fees paid to each firm. This information can help in-house legal teams make informed decisions about assigning work to certain law firms in the future.
Measure the Source of Legal Spend by Business Unit
By identifying which business units require the most legal assistance and why, the General Counsel can make strategic decisions around distributing incoming work.
It may make sense to increase headcount or to hire specialists to meet a certain corporate division's needs. Teams might also decided to invest on training, especially if various business units have seen a rise in the same types of legal problems.
Track Legal Team’s Productivity
Keeping track of lawyer and legal assistant workload and productivity is an important aspect of running a law department.
Using metrics to evaluate productivity in the legal department may help a General Counsel identify employees that are meeting or failing department expectations, find ways to improve team performance, and recognize high-performers.
Measure Attorney Performance
General Counsels can use several metrics to measure attorney performance. Some of the most important ones include the number of matters opened and closed, the amount spent on outside legal services, and the cycle time per matter.
Measure Legal Ops Staff Performance
Likewise, you might want to consider the efficiency of contract management, eDiscovery projects handled, amount of documents reviewed, or legal issues researched for legal ops staff.
Before implementing productivity metrics, a General Counsel should ensure that each team member understands how their performance will be measured.
They should also consult with the company's human resources department to verify that the metrics are consistent with the employee's job responsibilities and the company's employment policies.
Measure Completed Contracts
Contract Lifecycle Management is concerned with the lifecycle of contracts, from start to end. Reviewing and optimizing this process could find the most significant cost savings.
It might be simply a raw number, or you can track it against a target established at the start of the year. If you'd like to be more precise, you can break out the number of contracts by type, such as commercial, NDA, vendor, complex, simple, value, or any other type of contract your department deals with.
Checklist to Setting the Right Goals for Your In-House Legal Team
Here’s a simple checklist that can help you set strategic OKRs for your legal department:
- Brainstorm your goals. What do you want to achieve? Keep your company’s targets in mind as you develop your action plan.
- Determine your measuring system. Find the data that you already have and how to organize it.
- Write down your Objectives and Key Results. Drill down to the most important 3 - 5 objectives and the metrics you’ll use to track them.
- Give each key result an owner. While key results are a result of the whole legal department’s performance, one individual should be in charge of monitoring progress.
- Create a report. You'll want a visual representation that allows you to present your progress and provide qualitative observations and interpretations.
- Periodically review for alignment and utility. Establish a system to keep you informed of broader company goals and objectives (this might be a routine meeting with key stakeholders or constantly tracking business OKRs.)
As in-house legal teams evolve from cost-centers to opportunity-creators, setting performance objectives aligned with their new role within the organization is essential. By taking the time to establish measurable objectives and track progress, you can ensure that your team is contributing effectively to the company's overall success.