Doing Metrics Right

Good metrics should focus on effectiveness and efficiency indicators, and compare to a baseline
Richard Stock, Catalyst Consulting
Richard Stock, Catalyst Consulting
FEWER THAN 10 PER CENT of Canadian law departments have sufficient and solid data that can be analyzed in a useful way. Some of the trade literature has been featuring performance and metrics for law departments in the past five years — about as long as there have been awards for law department innovation.

Assuming that metrics for law departments are inevitable and useful, general counsel should include them in a four-part package along with the department business plan, the budget, and objectives and development plans for the lawyers in the department.

The first characteristic of effective metrics is that they are linked to the company’s business goals. It is the only way for a law department to position itself as a strategic partner that adds value rather than as part of the overhead.

Less than a quarter of law departments produce detailed business plans linked to corporate plans: plans that are more than the annual budget. And it is these plans that should anchor the metrics used to monitor and report the performance of the law department and of individual lawyers.

The second characteristic involves the configuration of metrics, which must be balanced to make them palatable for lawyers. Financial metrics such as external spend and the cost of the law departments are a start, but do not speak to the value provided by legal counsel.

Objectives and targets to improve the operational efficiency of the internal and external legal supply chain are essential. Some authors go further by proposing metrics to better manage risk and legal outcomes that are several levels beyond basic activity tracking. General counsel can then better answer the question, “What difference do the lawyers make?”

The third feature of effective metrics is lagging and leading performance indicators. Collecting historical data will help to set some performance targets for the future. Yet, not all performance can be reduced to readily quantifiable elements, such as the number of matters, legal spend and turnaround, just because they are compatible with a matter management system.

The trade literature falls short by not suggesting metrics or performance indicators for the value-added contribution for the law department, including special projects, strategic impact, knowledge transfer to clients, and the development of the law department’s skills and knowledge to take on increasingly complex work.

Most key performance indicators relate to financial control or to operational efficiency. The number of metrics for a law department should range from six to 10, and with no more than one third being finance-related.

I disagree with those who say that metrics should be “controllable” at the level being measured. This is much too restrictive and understates the value-added contribution that counsel can and do make on a regular basis.

Instead, formulation of objectives and targets that “can be influenced” by counsel makes sense because these are more suitable for an enabling department such as law in a company. The general counsel can set objectives and targets tied to the outcome of transactions and litigation. Stretch goals and targets for the department and for individuals can then make it to the scorecard.

It is hard to disagree with one argument for good metrics — comparability to a baseline — as long as the focus is on financial and efficiency indicators. This is difficult to apply to developmental objectives, to special projects, and to the strategic contributions that legal teams can make.

“Production line” metrics are unavoidable but insufficient. Activities that demand the special skills of experienced counsel should be featured: analytical abilities, written and oral communications, negotiating skills, leading teams and training clients to be more self-sufficient.

Add to this the need for most inside counsel to beef up their technology skills and to master the economics of their company. It is then that the configuration of developmental objectives and targets comes into focus with strong potential to add measurable value.

Some general counsel have reported progress with select achievements by the law department to the corporate executive team every quarter.

Metrics may give lawyers hives — evoking shades of law firm timekeeping and of having the legal artist paint by numbers. But getting metrics right depends on striking the balance between resource allocation and success in getting business done.

Richard G. Stock, M.A., FCIS, CMC is a partner in Catalyst Consulting. For law department management advice that works, Richard can be contacted at (416) 367-4447 or at rstock@catalystlegal.com.