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  Performance Management in Legal Departments

What gets measured gets done. Legal departments must deliver results and service like all other business units. They must do so as a team and with each member of the department. Our firm's experience is extensive and covers

measurable goals for legal departments
stretch goals for business plans
balanced scorecards
key performance indicators
competencies for counsel
performance goals for law firms
knowledge management

For further information on Performance Management, contact Richard Stock at rstock@catalystlegal.com or (416) 367-4447.

Articles on Performance Management  

The Evolution of KPIs

Lexpert, September 2017, Vol. 18, No. 8

There are three steps to managing the performance of law firms: a forecast of the demand for legal services; choosing key performance indicators; and soliciting feedback from the law firm about the relationship with the company. Some law departments have compressed KPIs to four: results, innovation, service and costs. Others in a more mature relationship have distilled the value proposition with law firms to a single KPI for innovation designed to improve effectiveness and efficiency. A few companies are investing a significant portion of hybrid fees to reward successful innovation.

Budgeting Complex Legal Work

Lexpert, June 2017, Vol. 18, No. 6

Some 80 per cent of law firms have no templates or standards for budgeting complex legal work. Few in-house counsel feel at ease analyzing and challenging matter plans and budgets prepared by law firms.
Budgets should set out the hours for each fee earner by phase and task of a matter. This should be done after communicating planning assumptions to yield a budget plan that is 85 per cent reliable for a most likely outcome rather than a worst-case scenario.

Doing Metrics Right

Lexpert, April-May 2017, Vol. 18, No. 5

Law department metrics should be linked to corporate plans. Financial metrics should be balanced with KPIs for innovation, results and service.
Value-added contributions for special projects, knowledge transfer, work complexities, and strategic impact should be captured provided targets have been set. High-level business knowledge, skills and attributes should be targetted and measured against baselines.

Performance Plans for Firms

Lexpert, October 2016, Vol. 18, No. 1

The Royal College of Dental Surgeons of Ontario continues to move its professional liability program toward self-insurance and introducing best practices for staff and external counsel. File allocation to firms has been standardized. Expectations of firms for file management, strategy, resource allocation, pricing and reporting have been set out by the College as a way to reduce cycle times. Performance metrics for firms include semi-annual scoring of every file for responsiveness, efficiency, total legal spend and results.

Momentum for Innovation

Lexpert, September 2016, Vol. 17, No. 10

A recent ACC study profiled 6 Canadian companies and their law departments’ efforts to improve the value they deliver. The report focused on four areas : law department structure, professional development, the selection and management of external counsel, and technology. While there were several innovative successes, most represented sensible management initiatives. Three factors should be considered by GCs when they make changes : the availability of detailed forecasts of the demand for legal services, migration away from inside counsel working as sole practitioners in favor of team-based lawyering, and KPIs to drive priorities and behaviors.

Service Deliver Reviews

Lexpert, January 2016, Vol. 17, No. 3

The Procertas SDR evaluates law firm service delivery across 10 categories. Among others, these include Document Management/Mobility, Staffing Ratios/Delegation, Technology Training, and Billing Hygiene. SDR results are compared with all law firms. It makes sense to linke a firm's SDR score to the fees paid by the client.

Progressive Departments

Lexpert, November-December 2015, Vol. 17, No. 2

A comprehensive review of the department requires a written operating philosophy, a detailed annual forecast of the requirements for inside and outside counsel, protocols to manage work intake and turnaround, re-thinking the configuration of lawyers and technical staff by experience and specialty, and four performance drivers: service standards, results, reduction in total legal spend, and innovation in work processes and content.

Metrics are Not KPIs
Lexpert, July-August 2015, Vol. 16, No. 9

Four categories should be covered when choosing metrics and performance indicators for the law department: the extent to which the law department contributes to the company's strategic priorities law department specialization by area of law and business unit, lawyer training for leadership, business fundamentals, legal project management and negotiations; performance-based fees for external counsel. The initiatives and targets will vary over time, but the categories should not.

Innovation as a Performance Indicator
Lexpert, April 2015, Vol. 16, No. 6

Innovation as a stand-alone KPI accelerates discussion and action that can make a strategic difference to the company. Examples include greater self-sufficiency of business units, moving away from hourly to performance-based fees from external counsel, and raising the proficiency of the law department's lawyers regarding leadership, business negotiations, and project management. The best innovations are dedicated to corporate projects and business unit priorities.

Money in Brussels
CCCA Magazine, Fall 2014, Vol. 8, No. 3

Seminar highlights on how to hold a conversation with a CFO about the cost of legal services. Only 15 out of 40 companies attending had written business plans for the legal department. Only 8 used a range of financial and non-financial metrics. Critical success factors for a value-added law department followed. Good data underpins a good plan.

"Unspoken Expectations"
The Lawyers' Weekly, August 15, 2014

Few law departments are living up to their full potential, especially if they aspire to be strategic business contributors. Law departments must know their critical success factors. Lawyers must be proficient in each of the key competencies required for their level of experience. The department must execute a plan to perform against the success factors, a plan that builds on the key competencies of each of its lawyers.

"Four Elements of Effectivness"
Lexpert, Vol. 15, No. 6, April 2014

It is possible to isolate four factors that make legal departments more effective than others. The first is that they are more proactive and less reactive. The second is a sense of urgency because time is the most precious resource for a legal department. The third factor is leadership in the legal department at both the general counsel and associate general counsel levels. The last factor essential for effectiveness is interesting work.

"Tips from Value Champions"
Lexpert, Vol. 15, No. 4, February 2014

ACC's celebrated Value Champions for 2013 innovated in many different ways. Some included streamlining a range of internal processes related to scoping requests for work, analyzing legal and technical resources, and using legal project management tools. Others focused on processes to choose law firms and to manage the working relationship with them. Finally, some law departments described moving away from hourly-based fees. But none included value-based fees tied to results.

"Performance Data is Essential"
CCCA Magazine, Vol. 7, No. 2, Fall 2013

The second of a 2-part article on performance data discusses the last 3 metrics for the legal department : efficiency, user satisfaction and costs. Initiatives to customize access to the department and to improve individual practice management habits can generate a 20 % capacity in the legal department. Total legal spend and unit cost as performance indicators are discussed. Thirteen satisfaction survey questions are provided as a mechanism to measure client satisfaction from the legal department.

"Performance Data for the Legal Department"
CCCA Magazine, Vol. 7, No. 2, Summer 2013

Legal departments should carefully estimate that proportion of their resources dedicated to strategic and project work. Then they should consider making business units more self-sufficient for operational support work. The data is key. Next is an evaluation of the work against a complexity matrix followed by its re-alignment suitable to the lawyer's experience and expertise. Finally, legal departments must measure their effectiveness and the results they deliver against targets.

"Performance Measures Evolve"
Lexpert, Vol. 14, No. 7, May 2013

We are now seeing the use of performance measures for legal departments that are more both results-oriented and client-centric, but which do not lose sight of the need to demonstrate productivity and cost management. The article proposes three KPIs of the balanced scorecard quadrants; clients, business process improvement, people and financial. Turnaround and results are at the heart of the value proposition for every legal department. Better to seize the daty than react to someone else's metrics.

"Management Competencies"
Lexpert, Vol. 14, No. 1, October 2012

There are at least three competencies that inside counsel should master by the time they reach their 10th year of call. Efficiency to generate 10% more time per week, relationship-building especially with business units, and legal project management. The article provides detail for each.

"Structure in Service Delivery"
Lexpert, May 2012

Legal departments should introduce more structure in service delivery. There are 8 components: the annual forecast of matters by type, the relationship’s lawyer’s estimate of the hours required for the matters, a multi-year service level agreement with business units that reflects the estimates, accessibility and turnaround standards, systematic use of legal project management methodologies, workflow coordination through relationship lawyers, quarterly updates and notice periods for significant work from business units, and annual satisfaction surveys. Collectively, they represent more value from the legal department.

"Performance Indicator Basics"
Lexpert, Nov-Dec 2011

A scorecard for progressive legal departments includes KPIs that target both internal clients and external customers. A second performance category improves business processes in the legal department by addressing turnaround challenges with new technologies, precedent systems and protocols to work with external counsel. The third performance category is focused on talent and incorporates initiatives to increase the self-sufficiency of business units, the acquisition of competencies and proficiencies in the legal department. The last performance category is financial and includes the reduction of total legal spend and of the unit or hourly cost of legal services. Targets are set in every performance category.

"KPIs for the Legal Department"
ACLA Journal, Summer 2011

Four categories of key performance indicators (KPIs) for law departments are described. These are clients, busienss process improvement, people - usually the members of the department - and the financial category, typically encompassing the costs of internal and external counsel. Examples of initiatives and targets are offered.

"False Measure of Value?"
Lexpert, Vol 12, No. 7, June 2011

The article highlights several findings from CCCA’s In-House Counsel Barometer 2011, prepared by Angus Reid. A large majority believe that key performance indicators are a very poor reflection of what legal departments do and of how well they do it. Only about 25% of the participants answered the question on how they measure the value of the legal department to the organization. KPIs exist and are used but legal departments tend to be poor at planning and measuring their priorities and work, and then at communicating the results.

"Best of Breed"
CCCA Magazine, Vol 4, No 4, Winter 2010

Best practices are gleaned from 11 leading law departments. Annual goal-setting processes are profiled. Efficiency improvement initiatives to reduce business unit reliance, robust client-facing intranet sites, electronic acceptance for e-signatures are all designed to influence workloads and workflows. Some departments' service level agreeements (SLAs) are described and include standard response time techniques to level peaks and valleys in workloads. Resources and innovative cultures seem to be the order of the day.

"Effectiveness, Version 3.0"
Lexpert, Vol 12, No 1, November-December 2010

Three steps are suggested to develop a range of solutions to improve the efficiency of a law department. The first is to determine the capacity of the department by categorizing and quantifying the legal, advisory, administrative and strategic work it does. The second step is to characterize and measure the demand for legal services for a 3-year period. The last step helps to sort the cost of the department as a way to work with its "cost-effectiveness". This is done by establishing its fully-loaded hourly rate and setting KPIs for its reduction. Finally, departments must become much more forward in gathering data about their effectiveness from primary users.

"Reaching Legal's Full Potential"
Lexpert, July/August 2010, Vol 11, No. 9

The survey of 11 US national and multi-national companies focuses on talent management. Most legal departments collaborate with human resources in using formal systems to identify the most promising legal talent in the company. Core competencies for excellent performance are highlighted and cover select knowledge, skills, and attributes. The article ends with a discussion of leadership effectiveness and talent management systems.

"The Mature Law Department"
Lexpert, Vol 11, No 6, April 2010

The changing demographics of long-standing legal departments are discussed. The build-up of operational support requirements by business units compromises the availability of the legal department for strategic advisory work. Six competencies for senior corporate counsel are described in detail. In combination, they are designed to leverage their contributions within the organization.

"A Valuable Asset?"
Lexpert, Vol 10, No 9, July/August 2009

Three reasons are given why General Counsel should develop a working definition of the value of the legal department to their company. The question is posed about whether corporate counsel that have "clients and a practice" find it more difficult to make a strategic contribution. Five business competencies are defined and essential for corporate counsel of intermediate experience to master: customer focus, an achievement orientation, resourcefulness, critical thinking, and a strategic business sense.

"Are General Counsel Too Risk Averse?"
Lexpert, Vol 10, No 5, March 2009

A number of surveys of corporate counsel are referred to in addressing the severity and urgency of reducing total legal spend. The need for legal departments to acquire project management and other business skills is emphasized. Yet, there is a palpable reluctance in the corporate counsel community to initiating a substantive review of the legal economics of retaining external counsel.

"Competencies for Lawyers?"
Lexpert, Vol 9, No 7, May 2008

Four categories of competencies for corporate counsel are detailed. They are personal attributes (5), such as efficiency, commitment and adaptability; leadership and development skills (3), including innovation, impact and influence; business and client competencies (4), such as customer focus and strategic business sense; and functional/technical legal knowledge and skills such as legal drafting. The array of competencies and advanced degrees of proficiency support recruitment and promotion decisions.

"Should the Legal Department Be Audited?"
Lexpert, September 2007, Volume 8, No. 10

Comprehensive “audits” of legal departments are rare. They are designed to provide a reasonable assurance of the adequacy, effectiveness and efficiency of the management structure, process and controls of the department. The Institute of internal Auditors has produced a Development and Practice Aid to assist internal auditors. Audit criteria and principles are described for seven areas: strategic positioning, structure, six elements of the management framework, workflow management, information systems, external counsel, and client satisfaction.

"The Five Pillars"
Lexpert, November/December 2006, Volume 8, No. 2

Five functions must be well managed for a high performance legal department. They include organizational alignment with the corporate business plan and the deployment of human resources for maximum leverage of legal intellectual capital. legal departments should maintain multi-year forecasts of demand for legal services and they should rely on formal competency-based tools to achieve the desired influence. The third function consists of criteria for and the careful selection of initiatives that will keep the legal team focused on priorities. The fourth function is strategic communications and the fifth is a focus on best practices coupled with innovation.

"Lawyers and Retirement Planning"
Lexpert, July/August 2006

Smaller rather than larger firms will experience more acute financial consequences for failing to plan for succession in their partnership ranks. The article discusses the applicability of department payments and some of the factors that must be taken into account. Planning for the retirement of a partner should begin 5 years before the scheduled departure.

"The Peanut Principle"
Lexpert, January 2006

The article examines the alignment of workflows and work allocation with law firm pricing and billing practices. The trade-offs between cost and effectiveness in the delivery of legal services are core to explicit conversations which legal departments should have with their preferred law firms. Good data, clarity about intended results,and fair pricing will improve the odds that everyone gets and gives their money's worth.

"Key Performance Indicators for the Legal Department"
Lexpert, March 2005

There is malaise about whether legal department contributions are well communicated and appreciated. Results are now critical for effectiveness. The article describes 8 Key Performance Indicators (KPI's) in four categories for use by a legal department: (1) Service Levels (department) - accessibility, turnaround, teamwork / morale; (2) Service Levels (customers) - results, overall satisfaction; (3) the Strategic Impact on external clients, and (4) Efficiency - cost of legal services, Budget performance.

"Reporting Results from the Legal Department"
Lexpert, January 2004

Too many legal departments get the annual goals wrong. The goals lack strategic value and the measures and indicators do not drive performance. Activity tracking is superficial or only financial. The article suggests countermeasures.

"Auditing in Legal Services"
Lexpert, October, 2003

Auditing is a process which few lawyers welcome when applied to legal services. The article outlines the framework being used in a number of public companies to establish value for money. The focus of the process in on resource consumption. The methodology has not evolved to correlate efficiency with effectiveness indicators such as risk management. The use of critical success factors and key indicators is described as a means of staying ahead of the standard techniques for measuring performance.

"Performance and Service Standards"
Lexpert, October, 2002

Many legal departments have figured out how to integrate legal service standards with corporate performance management programs. Four guiding principles are presented. The application of a balanced scorecard architecture to legal department goal setting is described.

"Symptoms and Solutions for the Ageing Legal Department"
CCCA 11th Annual Conference brochure (1999 Annual Meeting)

Symptoms of the "ageing " legal department; why an ageing legal department presents problems for the organization and for the lawyers in the department; things General Counsel can do to re-engineer the ageing legal department, using positioning statements, measurable goals and variable compensation.

"Competencies for Counsel"
CCCA 10th Annual Conference brochure (June 1998)

General Counsel wanting to position the legal department strategically within the organization must demonstrate that members of the department are "best-in-class" performers. Based on substantial benchmarking, this article discusses the array of competencies corporations require of their lawyers for each of personal attributes, leadership and development capabilities, business and client competencies, and functional / technical knowledge and skills.

   
 
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