Data-Driven Decision Making for Corporate Counsel: How to Devise Effective KPIs
Data might be the greatest untapped resource for driving legal department success. Every corporate legal department, regardless of size, possesses a trove of valuable data from many sources and in many forms.
Matter files, invoices, records of outcomes and settlements, digital correspondence, contracts, meeting notes and other types of material must be retained. We can get even more granular with this, and consider what individuals on the legal team digitally archive in terms of past files worked on and outdated contacts—you get the picture.
As an Enterprise Legal Management vendor, Mitratech encounters a lot of different corporate legal departments from different industries and geographies. We’ve found that one of the most common barriers to data-driven decision making is the lack of defined goals and the processes to achieve them.
In this installment of an ongoing series on data-driven decision making, I’ll discuss Key Performance Indicators (KPIs), the building blocks of goal setting, tracking and measurement.
It sounds obvious, but KPIs should map directly to specific goals. If there’s not a clear and agreed-upon alignment of goals and KPIs across the legal department, you could end up devising strategies and tactics that can be tracked and measured but do not achieve meaningful results.
Reducing legal spend on outside counsel is a good place to start, and there are numerous strategic and tactical paths that can get you there.
One approach is to rationalize the number of outside firms you’re using. If you’re able to aggregate work with a single law firm and negotiate better prices or rates you can realize legal spend savings. That could take the form of better hourly rates or an alternative fee arrangement. The KPI you might track around that is the percentage of spend with preferred firms, versus non-preferred firms, and there are many ways to slice and dice that data.
But before you can do that, you have to collect and analyze baseline data. First, consider how many firms you do business with, how many matters each firm handles for you, how much you pay them and at what rates and how long it takes for each firm to complete the work.
That can be interesting at a macro level, but when you really want to talk about rationalizing firms, you’re going to need to have a little bit more information. For example, you might need to consider the types of work being done and where. Jurisdictions can matter a lot, because real estate law differs from place to place.
As you work through your rationalization process, you might need to get very granular with the level of detail required. That level of analysis requires sophisticated, powerful tools that allow you to mine insights from the data you’ve collected.
Equipped with the right tools, you can get a handle on things like what you currently pay so you can drill down into data on each firm, compare average total spend and billing rates, see how they stack up, where they are higher or lower and how the work they’ve performed for you compares with your ideal profile for firms working in that area.
Analyzing KPIs for Performance Comparisons
Once you’ve established your KPI profiles, you can analyze how they performed over time. You’ll want to consider factors like how rates changed year-over-year, how things stack up across outside firms performing similar work, what those increases look like and which firms contained spend versus firms whose rates and cost per matter steadily rise. With that analysis in hand, you can have data-based, constructive relationship conversations with your law firms.
The next step in analysis drills down to the tactical level of invoices and asks questions like “What types and amounts of work do partners perform versus associates?” At that granular, invoice-by-invoice level, data analysis tools enable you to determine whether the right people perform the work and to spot billing anomalies requiring closer scrutiny (rather than having attorneys perform that work).
At that point in the process you’ll be armed with enough data to evaluate performance among your firms and start making data-based outside spend rationalization decisions with a high level of confidence in their success.
To find out more about how to make data-driven decisions for your legal organization, be sure to watch our recent webinar, which explores how to leverage data insights to improve efficiency, reduce costs, and help ensure regulatory compliance.