Surveys: Value and Metrics
Author: Richard Stock - Lexpert (July-August 2012)
A number of fresh talking points have been brought into the discussion around the value of in-house counsel. In its annual survey of legal department leaders, the Canadian Corporate Counsel Association posed a series of new questions on the subject. These included questions on how to measure and provide value, as well as on how performance indicators fit into management of the legal department. Each is an important subject in its own right.
Measuring and Adding Value
One question asked of the 411 respondents was, "Which of the following represent the main ways in which your department provides value within your organization?"
Far and away the most common response involved risk management, with 84 per cent of respondents citing "managing or reducing risks associated with business decisions. "Forty-eight per cent, meanwhile, cited "ensuring the organization is in compliance with sector regulations”; 44 per cent cited “controlling costs for use of external counsel"; 28 per cent cited "managing lawsuits for the organization"; and 16 per cent cited "controlling costs by advising on legal settlements."
These options may be somewhat limited because general counsel tend to define value in ways that are specific to their own organization. Still, the results are pretty clear. The way to add value is to help management get business done.
In-house counsel were asked to rank eight areas of business by the difficulty associated with each. These business areas included matter-management software; ethical screens; alternative fee arrangements; encouraging equity; workloads; and three areas involving privilege.
The top challenge? Workloads, by far. On average, workload was cited by five times more respondents than the second-ranked challenge. Moreover, when asked specifically whether “the day-to-day workload leaves little time for ‘big picture thinking’ or the development of initiatives which would benefit the organization as a whole,” 65 per cent of respondents agreed. Other surveys have also suggested that providing interesting work to members of the legal department is a challenge.
For a moment, though, step back and consider the irony: while the vast majority of in-house counsel (84 per cent) cite the ability to provide strategic risk-management insight as their most valuable contribution, most lawyers (65 per cent) simultaneously report being overloaded - which no doubt stands in the way of such higher-level strategic contributions.
In the first of four subjects in the chapter on “Measuring the Value of In-House Counsel,” the survey asked a two-part question. The first one asked, “Are there hard metrics by which the value your department contributes is evaluated by your organization?” And the second asked individual lawyers whether they have specific key performance indicators (KPIs) by which their own performance is judged. The term “KPIs” is not defined, but it is clear from the way KPIs are used in the report that they are not the same as “hard metrics” for the legal department.
The results are broken down by sector. At publicly traded companies, 42 per cent of respondents reported having lawyers with KPIs, and 26 per cent reported hard metrics within the department; at wholly owned subsidiaries of publicly traded companies, those figures, respectively, were 31 and 36 per cent; at private companies, 33 and 21 per cent; at government departments, 44 and 28 per cent; at not-for-profits and other organizations, 30 per cent reported having hard metrics; and, as a whole, 40 per cent of respondents reported having lawyers with KPIs, and 27 per cent reported having hard metrics.
These findings are disappointing. Our experience suggests that a greater proportion than 40 per cent of lawyers have annual performance objectives, but that these objectives may not take the form of either key performance indicators or hard metrics. Clearly, performance management is a developing area when it comes to legal departments and needs a further investment of resources.
What does this all mean? In my experience, legal departments that have performance metrics in place say that they are useful. But they also say that many performance metrics are a poor fit and not relevant to their current legal function.
Again, there are no clear definitions and differentiation yet of hard metrics for the legal department, KPIs for individual lawyers, and performance metrics for legal departments or for individual lawyers. There is much work to be done in defining, measuring and communicating the value of legal departments and of individual lawyers working in-house.