Counsel Collaborative Roundtable Discusses Law Department Metrics
Dec 18, 2007
Several members of Counsel Collaborative met on December 5 to discuss a subject not yet taught in law schools: Law Department Metrics.
What's the purpose of law department metrics? Law departments (and/or individual in-house counsel) may be asked to provide metrics to demonstrate their value to the business entity or to document productivity. Metrics may also provide information to determine the optimum size of the law department, the appropriate mix of roles within the law department, or a cost-effective balance between outside and inside legal services.
To undertake metrics, the first step is to identify what should be measured. The next step is to measure, and then to improve the measurements over time. One of the biggest challenges in legal service metrics is to assess quality and value, not merely speed, quantity or activity. In addition, law department metrics should provide information that assists in-house counsel in improving their performance.
Benchmarking through law department surveys might prove a helpful starting point. But we have not identified a public source of benchmarking information. One metro area company is undertaking a collaborative benchmarking effort with other companies of similar size and legal complexity.
The roundtable group identified numerous measures that may demonstrate law department productivity or measure cost savings over time. For example:
1. Cost of the law department as a percentage of revenue;
2. Number of lawyers per sales revenue;
3. Fully allocated cost per attorney;
4. Response time - customer satisfaction;
5. Litigation costs as a percentage of revenue;
6. Litigation costs and payouts relative to other companies in the same industry;
7. Call volume received in certain law functions, broken down by issues;
8. Number of patents filed relative to R and D budget;
9. Number of days or attorney hours to complete certain legal tasks, such as contract drafting, trademark filing, and patent filing; and
10. Risk analysis (defense cost and liability exposure) compared against cost of preventive lawyering.
One tool used by some law departments is an internal client survey, which will hopefully focus on quality and priority of legal services. For example, are legal services helping to support growth of the business? Do legal services help improve compliance, mitigate business risk, and reduce liability exposure?
Another metric that can be useful for certain types of legal work is a comparison of inside costs with outside legal expenses. For example, what is the average cost of filing a patent or drafting a contract in-house, rather than using outside counsel? What is the fully allocated cost per in-house attorney hour in comparison with billing rates of outside counsel?
To improve law department efficiency, particularly in providing "preventive services", it is important that lawyers are engaged in "legal work", and not used to provide other helpful services that should be done by compliance, human resources, or other departments. One law department has used FAQ's and protocols for clients to follow before calling lawyers in an effort to assure that lawyer time is more efficiently and effectively used. Similarly, websites can be used to post standardized contract provisions, so that non-lawyers can accomplish initial drafting and legal review can be streamlined.
As we wrapped up our discussion, one member aptly sized up the challenge of law department metrics: "There are lots of ideas and approaches, but no golden egg."
If you have ideas or experiences you would like to share, please feel free to e-mail them to me by clicking here. I will compose a supplemental report of the additional ideas.
If you are an in-house counsel and would like information about Counsel Collaborative, you can contact Sue Halverson by e-mail or phone: (612) 349-8439.
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