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Key Metrics That Matter: Questions from Legal Leaders Answered

Today, legal must contribute to the bottom line and help make the business more competitive, be strategic in their decision-making, enable the business to move fast, and measure key metrics along the way

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Key Metrics that matter: questions from legal leaders answered
Back when in-house counsel had only one job — to protect the business — in-house legal teams were more reactive than proactive, working on whatever was the issue at hand at the time. Today, legal must also contribute to the bottom line and help make the business more competitive, be strategic in their decision-making, enable the business to move fast, and measure key metrics along the way. Key Metrics that Matter: Questions from Legal Leaders Answered 2 www.linksquares.com Which metrics and KPIs should you collect, and how can you effectively report them to the business? That depends on your goals.
WHAT ARE LEGAL KPIs? Key Metrics that Matter: Questions from Legal Leaders Answered Legal KPIs are measurements of success for legal teams. KPIs are data-based signals that indicate how well your legal team is performing, how efficiently you’re executing established processes, and where there are opportunities for improvement. The metrics you track should ladder back up to company goals, so different legal teams may have different metrics for success. The metrics you track should: Be meaningful As LinkSquares CLO Tim Parilla says, “Meaningful KPIs show that you understand how important your role is in moving the business forward. It’s not enough for something to just have a number, it actually has to have some indication.” For example, the “contracts completed” KPI can show how your legal team is spending their time, how much revenue sales is bringing in, and how contracts are impacting the bottom line. Demonstrate how legal enables the business The key metrics you track should show how legal’s work helps drive business forward. For instance, when tracking turnaround time for the first pass of a service level agreement (SLA), the metrics you track can prove how efficiently the legal team enables sales teams to quickly close business.
Help identify opportunities, strengths, and bottlenecks Rely on metrics to highlight where your legal team is excelling and identify areas that need improvement. For example, if you find that your team members are exceeding the standard SLA turnaround time, tracking key metrics enables you to understand if that’s because of an increase in contract volume, employee performance, or something else. This ensures you find the right solution moving forward. Be data-driven The legal team’s performance shouldn’t be anecdotal. Tracking metrics provides empirical evidence for what’s happening inside the legal department. Putting a number behind common legal tasks and outcomes helps build your reputation as a productive and collaborative function in the business.
WHY YOU NEED TO TRACK LEGAL KPIs According to Jonathan Greenblatt, VP of Legal at LinkSquares, before legal departments tracked KPIs, “No one knew what work the legal team was doing, not even the legal team.” Legal processes and outcomes were pretty much a black box, so legal teams had to make estimates when making decisions instead of relying on real data. Legal teams can’t afford to do that anymore. As a strategic function in modern businesses, legal needs data to justify and inform their decisions. Here are a few more reasons legal needs to track key metrics: To be a better partner within the organization Part of legal’s long-standing reputation as a siloed cost-center was due to their inability to prove their value outside of showing how much trouble they weren’t in. Now, legal is a more proactive business unit that actively collaborates with other departments by bringing data to the table. When your legal team shows up to meetings with numbers, you become a critical part of important business discussions. By providing insight into legal processes, you give other functions the opportunity to ask questions, make suggestions, and use your metrics to inform their decisions. For visibility into how you’re investing legal time Despite reduced resources, more legal teams are being asked to increase output. This means investing your time into initiatives with the highest return and proving the efficiency of your outcomes using metrics. Tracking these metrics demonstrates how your team distributes their time — how long are you spending on admin tasks? How often are you manually reviewing NDAs? How much time are you investing in complex agreements that actually result in revenue? This data illuminates whether there’s too much time spent on low-return or repetitive tasks and lets you implement process changes to make your team more strategic.
To showcase value and advocate for more resources Tracking key metrics arms legal teams with quantitative data that verifies the hard work they’re doing and where they need more resources. For example, instead of saying your team is burnt out, report the increase in contract volume and employee workload as a result. Then, harness that data to advocate for more headcount or for process changes and technology to enable the self-service of standard agreements. This helps stakeholders feel more comfortable with an increase in legal spend. To prepare for the future of the business To excel in the current landscape, businesses need to be forward-thinking and anticipate shifts or changes in strategy. During times of economic uncertainty, it’s crucial that businesses make outcomes as predictable as possible. Legal teams can enable this by tracking historical metrics and using that to forecast the future. For example, when planning to enter a new market, metrics around historical turnaround times can show leadership what type of lead time they’ll need as they prepare for launch.
WHAT METRICS SHOULD YOU BE TRACKING? There’s no hard and fast rule about which KPIs to collect. Even when different legal teams track the same metrics, the story they tell around the data will be different. This is because each business has different goals, processes, and priorities, and KPIs reflect what is important to the business. If your business is litigation-heavy, your KPIs are more focused on metrics like outside counsel spend, how much you’re paying vs. how much is in dispute, and success rates of matters across business lines or jurisdiction. Legal spend is important to track, but it works better within the context of other metrics. Here are examples of three other common legal KPI categories: How many (Volume) Measuring volume helps your legal team display their workload and assess whether or not you have the right tools, teammates, and processes for managing your tasks. Examples: • How many contracts are moving in and out of the business? • How many contracts have been requested vs. signed? • Total agreements of each type • How many agreements are internal vs. external? • How many issues is your company managing? Combining this data with other metrics like deal size and revenue influenced is a solid way to connect volume to the bottom line and provide leadership with meaningful metrics.
How long (Turnaround) Turnaround time indicates how long things take and shows where there are bottlenecks and other process inefficiencies. Examples: • How long does the first pass take? • How long does it take from creation to signing? • What stage of the contract process takes the longest? • Average close time for all agreements? • How long does the longest matter take? • What is the timeframe for the initial turnaround for legal requests? By tracking turnaround time, you can better understand what an increase in volume means for your team. So, if turnaround times increase with volume beyond what’s contractually acceptable, then you have the data you need to deduce the source of the inefficiency. With whom (Team member) It’s important to have visibility into what your entire legal team is working on as well as how those tasks break down on an individual level. Tracking metrics lets you track the workload and output of each legal team member. Examples: • What work is being done by specific team members? • What is each person’s volume/workload? • Is there equity in the division of tasks? • How long is each team member spending on an issue, and what is the bottom line volume of this matter? • What matters do outside counsel handle and what is their success rate? This data is a strong indicator of whether your in-house lawyers are performing as expected, if they are branching outside of their comfort zones, and where they might need to develop additional expertise. This shows you what work your team is doing without micromanaging them.
BEST PRACTICES TO IMPROVE REPORTING ON KEY METRICS Reporting metrics to leadership and other functions is essential to being a strategic business partner. The metrics you report on have to tell a story, indicate a need, and help solve a problem. Here are some best practices for improving the way you report on legal KPIs: Visualize the data Present your KPIs in a visual format to make it easier to analyze. With legal technology, you can configure data in a way that’s meaningful to key stakeholders and empowers business leaders to confidently make informed decisions. Presenting your data in an easily digestible format promotes smoother conversations around the data, keeping legal and legal stakeholders on the same page. Provide context and tell a story The data is only as good as the story you use it to tell, so make sure you share context for the metrics and translate the data for your collaborators. The same KPI can be used to tell two different stories, so frame the data within the context of the story you most want to tell. For example, by comparing the number of contracts worked on with the number of contracts signed, legal can highlight the impact of their work on the bottom line, or they can work on narrowing the gap between those two metrics. Protect critical and sensitive data As Jonathan Greenblatt says, “Whoever controls the story, controls the outcomes.” So, whoever has access to the data determines how it’s used to further the company’s goals. Protect the data by limiting key stakeholders. Ensure that it’s shared on a need-to-know basis, and curate reports based on the access needs of the audience.
HOW TECHNOLOGY HELPS YOU TRACK KEY METRICS While not impossible, tracking legal metrics and KPIs without software can be very difficult. Modern legal technology comes equipped with data analytics and dashboards that give legal teams visibility into their work and uncover hidden trends within your legal processes. Legal tech allows legal teams to hold themselves to consistent standards. As Parilla says, “Even support functions like HR and IT have numbers that they bring to the table, and they have tech to help them.” Legal tech and contract lifecycle management (CLM) software help legal teams track key metrics and KPIs, getting as granular as they need to. CLM enables legal teams to: Break metrics out by employee With CLM, legal leaders can track individual team members’ efficiency and productivity. It provides both a high-level and detailed view of the work being done in your department, who is doing it, how long it takes, and how successful their outcomes are. Create dashboards to visualize data Dashboards increase the efficacy of your metrics. Better than numbers in a spreadsheet or percentages on a slide deck, CLM dashboards present crucial contract data in a format that resonates with leadership and collaborators. Uncover hidden trends using AI With AI technology, legal teams can create a dynamic, searchable version of their contracts and extract crucial data — like renewal dates and termination terms — within the contract itself and categorize it in a way that helps the team make smarter decisions. “The key to making sure you reap the benefits of the software,” Parilla says, “is truly using the tool.”
CONCLUSION Legal metrics and KPIs give legal a voice at the table when business-critical decisions are being made. They allow legal teams to understand how they’re spending their time and what impact their work is having on the wider business. Without KPIs, it’s nearly impossible to empirically illustrate legal’s value to the rest of the business. See how LinkSquares CLM can help you to track the right metrics. Request a demo today.