Using metrics to help legal and compliance departments demonstrate value and reduce overhead

March 2023 | SPOTLIGHT | LITIGATION & DISPUTE RESOLUTION

Financier Worldwide Magazine

March 2023 Issue

Lawyers can be sceptical about using numbers to measure their value. However, in today’s aggressive business world, numbers are a rising language of communication. Excellent legal skills are a given, and serving as a strategic business partner is the new normal. To ensure the board, finance department and C-suite understand an individual’s value as a general counsel or chief compliance officer (CCO), and the importance of each respective department, it is imperative to learn how to use a wide range of data to provide an empirical picture.

Data can be used to prove the value of a legal or compliance department to a business. In this article we look at what constitutes valuable data, why in-house counsel must track it, and explain how data can justify new hires and new technologies at a time when companies are increasingly asking legal departments to reduce costs. Data can even make it possible to spot trends and reduce risks.

What is data?

When thinking about data, most people imagine graphs and numbers. However, data does not need to be numerical on its face. When considering what to use for documentation and support, consider nearly all activities, occurrences and services. Just about anything can be broken down and turned into data, and numerous elements can be dissected to show significant numbers and paint a definitive picture.

A few examples of data that may be relevant to legal leaders include time spent in getting contracts signed, how many law firms provide services, the types of claims brought against the business, the diversity of the department, and the number of emails on a particular point – all of which can be further categorised into types, situations, locations and so on, and counted accordingly.

The importance of data to in-house counsel

People appreciate seeing numbers, numerical reports, charts and pictures because each are easy markers to tell a story. They allow others to visualise progress as well as areas for improvement. Using data allows in-house counsel to speak the same language the rest of the business and board use. Many departments use metrics such as headcount, profit and loss, cash flow, and other data points as critical tools. Speaking this same language and demonstrating measurable support of company objectives creates the opportunity to be a true business partner.

Using data should also make several aspects of a job simpler to manage. For example, it can help identify work that could be automated or eliminated, create a system for managing budgets, and make it easier to decide how to allocate costs and even separate day-to-day business tasks from project work.

Perhaps most importantly, identifying and using data can prove the legal department’s value in ways that are compelling to finance and other business leaders.

How to identify and use data

The first step to using data and analytics to demonstrate value is determining what should be measured. It may be helpful to prioritise low-hanging fruit and any pain points within the department. These quick wins can show a cross-functional team of stakeholders the value of data measurement and insights right away while continuing to establish a high level of competence in the desired area. Remember, the approach does not have to be sophisticated to be meaningful.

A great deal of useable data likely already exists in legal departments and the company’s systems. Reports can often be generated with available information if the proper search criteria and queries are used. Data can also be easily obtained by simply requesting it. For example, statistics on the diversity of vendors may be disclosed in a request for proposal (RFP) or via law firm annual report cards. This data can then be transformed into charts and other formats to make it easier to consume.

It is necessary to be consistent with data measurement as time goes on. Create a schedule for periodically checking the progress or needed improvements on projects and other tasks.

Mapping data

Process mapping is a valuable tool that generates significant results. To determine the strategic value of the legal department, identify by quadrant what work has low complexity and low strategic value and consider outsourcing or automating it. The mapping process can also help pinpoint other insights, such as which business units send the most legal matters, how the legal department spends its time, and why.

Key performance indicators

Key performance indicators (KPIs) represent the major goals of the company or the department. While companies use KPIs to track performance against major goals, legal and compliance departments can develop and track KPIs or identify indicators that will roll up and support the KPIs of the organisation. This situation is where metrics and reports can really help demonstrate the value of a department – clearly documenting how all work supports the KPIs and overall goals of the business.

Many in-house legal and compliance departments use KPIs to evaluate outside counsel, track matter cycle time, measure outcomes against estimated recoveries for litigation, and calculate turnaround time on specific types of contracts, for example.

A few examples of how to evaluate outside counsel performance include: timeliness in delivering work product, diversity of the firm’s management teams, analysis of actual spend to budget, actual matter outcomes against estimated recoveries for litigation, tracking matter cycle time, the number of law firms used, annual fees paid to each law firm, the number of law firms offering alternative fee arrangements, surveys of in-house counsel, legal assistants, and business clients to assess law firm performance, and the source of legal spend by business unit.

Positioning the general counsel and CCO as strategic business partners

Without a doubt, the best general counsel and CCOs make a demonstrable impact on an organisation. Data is a tool that can demonstrate value to internal stakeholders.

Creating these analytics systems shows initiative to the company, particularly in areas like meeting budgets and staffing targets. Senior business leaders also appreciate a general counsel or CCO who can spot trends, reduce risks and benchmark against other departments, companies or prior business years, all of which can be accomplished through data collection. Data collection and analytics are necessary for making informed decisions within the legal department and have the power to affect every area of a business. Understanding and communicating your metrics shows the critical work a general counsel or CCO is completing. It can also make business processes smoother, help save the business money and create a strategy for making effective decisions.

Making the greatest impact

Clearly, there are numerous ways for lawyers and legal departments to utilise data to improve effectiveness and demonstrate value within a business. These include deciding the best use of talent, reducing costs for various business tasks, generating reports that roll up to other departments and company leaders’ KPIs, transitioning work to lower-cost locations, team building, and diversity metrics. Identifying the most crucial business functions and finding ways to support each one using data is an excellent way to make an impact.

Audrey Rubin and Haydee Olinger are senior advisers at BarkerGilmore. Ms Rubin can be contacted on +1 (585) 388 3110 or by email: arubin@barkergilmore.com. Ms Olinger can be contacted on +1 (585) 388 3110 or by email: holinger@barkergilmore.com.

Audrey Rubin and Haydee Olinger

BarkerGilmore