KEY PERFORMANCE INDICATORS BY SHERI PALOMAKI

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01 / definition

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Technically speaking… The Law Dictionary defines KPIs as “measures of a firm's (company’s or department’s applies here too) performance in critical areas. Typically, monitoring is essential for such business activities that would likely cause severe losses or outright failure if done incorrectly… measuring progress or lack of it are essential for achieving the firm's objectives or strategic plans.”

01 / definition

In simpler terms, KPIs measure the performance of a department, company, firm, business unit. Typically, these metrics use numbers and are tracked over a period of time. There is no ‘right answer’ for what metrics you should use to evaluate your department. But going through this exercise will get you closer.

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02 / questions

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Developing and implementing KPIs is a complicated process that tends to be fraught with political sensitivities, change management challenges, alignment issues, and infrastructure problems. Think these questions through.

1. Why are you developing KPIs? What is the main objective? Justify value? Demonstrate results? Track trends? Identify training? Benchmark spend?

2. What are the department’s goals? What are the company’s overarching goals? Is there a strategic plan you could review?

3. What aspects of performance are of value to leadership (company, law department, business units)? Be sure to interview each of the leads, including the General Counsel, heads of the business units, and others who will be using your KPIs. You have to know what’s important to them and build buy-in.

02 / questions

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4. Does anyone internally have extensive experience developing and implementing KPIs within the organization? If so, seek them out and talk to them about their experiences. This could save you a lot of time as you embark on the effort.

5. Are metrics being tracked in other areas? What do those look like and what is the process for evaluating and measuring them?

6. In general, what is the company’s experience with key performance indicators? Have they implemented them before? If so, what worked? What were the lessons learned?

Developing and implementing KPIs is a complicated process that tends to be fraught with political sensitivities, change management challenges, alignment issues, and infrastructure problems. Think these questions through.

02 / questions

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02 / questions

7. What processes and tools are in place already that could help with measurement and metrics? What processes and tools would need to be implemented and what does that effort look like? “Not everything that counts can be counted (so says Einstein or someone!).”

8. Where does the KPI program fit in with other department priorities? High enough to tackle now? Or will it have to wait? Make sure you have enough time and resources to focus on the effort before you start. A stop and start approach is frustrating for everyone.

Developing and implementing KPIs is a complicated process that tends to be fraught with political sensitivities, change management challenges, alignment issues, and infrastructure problems. Think these questions through.

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03 / challenges

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Developing and implementing an effective KPI program is a ginormous effort that will require attention while the team is still pursuing “business as usual.” This, in and of itself, is a significant challenge. Here are some other challenges you should be prepared to tackle.

Developing the actual list of metrics is not easy or fast. It will take collaboration across the legal team to secure their buy-in from the beginning and a schedule with milestones to keep the effort on track.

Be mindful of “silos, politics, and turf wars.” (Also, Sheri’s favorite book!) Aligning performance metrics to the company and business units you serve will require careful navigation around organizational dynamics. Know what is most important to be effective, get buy-in early and often, and revisit alignment regularly.

03 / challenges

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Developing and implementing an effective KPI program is a ginormous effort that will require attention while the team is still pursuing “business as usual.” This, in and of itself, is a significant challenge. Here are some other challenges you should be prepared to tackle.

Implementing KPI may have unintended consequences in your culture. Be sure to think through what kind of behavior you’re trying to encourage and discourage before solidifying your KPI.

Identifying WHAT to measure is difficult. Identifying HOW to measure is more difficult, and often requires infrastructure improvements and change management. This is usually overlooked in the early stages of KPI development. Understanding up front your infrastructure’s capabilities and how gathering data will affect your team’s processes will help you in the long run.

03 / challenges

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Developing and implementing an effective KPI program is a ginormous effort that will require attention while the team is still pursuing “business as usual.” This, in and of itself, is a significant challenge. Here are some other challenges you should be prepared to tackle.

Analyzing the data is a minefield. As you review and analyze the data (especially early on), be critical of the numbers and ask a lot of questions before sharing across the team, company or business unit. It will take some time to refine the process, and avoid the pitfalls of “garbage in, garbage out.” Critical review of the data should be a milestone in your overall plan for executing KPI. Only when you are comfortable with the data should you share outside of the core group.

03 / challenges

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04 / metrics to consider

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Cost Effectiveness: Optimizing Department Spend

• Inside and outside spending, typically expressed as a percentage of company revenue.

• Total cost of resolution, on an average per-case/type basis. Track and compare year over year (YOY).

• Total cost per FTE (including both compensation and benefits costs associated with each in-house employee)

• Spend to budget, compare YOY or as a percentage of matters completed in budget

• Ratio of inside spend to outside spend

• Reduction in spend, tracked YOY

04 / metrics to consider

As consultants for law department operations, we are often asked, “What should I measure for my department?” The answer is, “It depends.” (We know that’s not the answer you’re looking for.) We have pulled together our collective experience and review of the research, and have prepared an initial list to use as a starting point. Some will matter to you, some will not, and some will matter but you will have no way to measure. All of those factors have to come into play. It’s okay to start small and simple.

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Staff Productivity: Optimizing Department Time, Money and Resources

• Number of in-house attorneys per 1,000 company employees

• Number of in-house attorneys per $B in company revenue

• Number of matters (or other volume metric) handled per in-house attorney

• Percentage of cases successfully resolved (against predefined success criteria)

• Spend to budget per in-house attorney

• Percentage of cases handled internally, without outside counsel

• Work type by position

04 / metrics to consider

As consultants for law department operations, we are often asked, “What should I measure for my department?” The answer is, “It depends.” (We know that’s not the answer you’re looking for.) We have pulled together our collective experience and review of the research, and have prepared an initial list to use as a starting point. Some will matter to you, some will not, and some will matter but you will have no way to measure. All of those factors have to come into play. It’s okay to start small and simple.

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As consultants for law department operations, we are often asked, “What should I measure for my department?” The answer is, “It depends.” (We know that’s not the answer you’re looking for.) We have pulled together our collective experience and review of the research, and have prepared an initial list to use as a starting point. Some will matter to you, some will not, and some will matter but you will have no way to measure. All of those factors have to come into play. It’s okay to start small and simple.

Process Efficiency: Executing Efficiently and Effectively

• Time spent on legal vs. administrative tasks

• Time spent per month processing outside counsel invoices

• Number of matters handled within budget

• Cycle Time processing invoices accurately

• Compliance with Outside Counsel Guidelines (e.g. invoice bouncebacks)

04 / metrics to consider

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Matter Statistics: Throughput & Disposition

• Number of matters by type/each year

• Average legal spend by matter type

• Average per-matter cycle time: track separately for litigation, contracts, transactions

• Average time to trial (or settlement)

• Matter count by location (or business unit)

• Return on investment

04 / metrics to consider

As consultants for law department operations, we are often asked, “What should I measure for my department?” The answer is, “It depends.” (We know that’s not the answer you’re looking for.) We have pulled together our collective experience and review of the research, and have prepared an initial list to use as a starting point. Some will matter to you, some will not, and some will matter but you will have no way to measure. All of those factors have to come into play. It’s okay to start small and simple.

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Client Experience: Tracking Business Unit Satisfaction

In the absence of established service levels, surveys tend to be the most effective way to track and measure client satisfaction. On a scale of 1-5, how do internal clients rate the law department in:

• Efficiency

• Response time

• Accessibility

• Cooperation

Do you have a system in place to track complaints? Measuring volume and severity trends are also possible options for metrics.

04 / metrics to consider

As consultants for law department operations, we are often asked, “What should I measure for my department?” The answer is, “It depends.” (We know that’s not the answer you’re looking for.) We have pulled together our collective experience and review of the research, and have prepared an initial list to use as a starting point. Some will matter to you, some will not, and some will matter but you will have no way to measure. All of those factors have to come into play. It’s okay to start small and simple.

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Outside Counsel Performance: Efficiency and Effectiveness

• Average cost of resolution by firm

• Total spend by firm (YOY)

• Compliance with Outside Counsel Guidelines (e.g. invoice bounce-backs)

• Actual spend vs. budget per matter (or matter type)

• Average blended rate by firm and by matter type

• Law firm ratings (surveys by inside legal team)

04 / metrics to consider

As consultants for law department operations, we are often asked, “What should I measure for my department?” The answer is, “It depends.” (We know that’s not the answer you’re looking for.) We have pulled together our collective experience and review of the research, and have prepared an initial list to use as a starting point. Some will matter to you, some will not, and some will matter but you will have no way to measure. All of those factors have to come into play. It’s okay to start small and simple.

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05 / our favorite links

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05 / our favorite links

Source Year Title Kris Satkunas, Metro Corp Counsel 2015 The Mojo in Metrics: Validate Law Dept. Value by Adopting Right Metrics

Harrison Underwood InsideCounsel 2015 Key Performance Indicators, Part 1 & Part 2

Mike Haysley, Metro Corp Counsel 2014 I Don’t Know What You Should Be Measuring, but You Do

Cristina Tareta, Performance Magazine 2014 KPIs for Legal Departments

ALM 2014 Law Department Metrics Benchmarking Survey (full survey behind paywall)

Patrick Johnson, ACC 2013 Top 10 Metrics that Your Legal Department Should be Tracking

Catalyst Legal 2013 Performance Data for the Legal Department

Association of Corporate Counsel Europe 2012 Metrics and Concrete Measures to Demonstrate Increasing Tangible Legal Value

Law360 2012 Operationalizing Law Department Performance Metrics

ACC Value Challenge Toolkit 2009 How to Utilize Metrics

ABOUT THE AUTHOR Sheri Palomaki is a SeyfarthLean Advisor at SeyfarthLean Consulting. In that role, Sheri is an evangelist for the transformational power of process improvement and project management in the delivery of legal services. She works with Seyfarth Family legal teams and their clients to facilitate the application of SeyfarthLean. In addition to her bachelor’s degree from the University of North Carolina at Charlotte, Sheri earned an MBA from the University of Maryland. Follow her @sheripalomaki or contact her at spalomaki@seyfarth.com. ACKNOWLEDGMENTS Many thanks to Susan Hackett, past Senior Vice President and General Counsel of the Association of Corporate Counsel, for her generosity in providing experiential insights. Visit Susan at http://www.legalexecutiveleadership.com/susan-hackett.

© 2015 SeyfarthLean Consulting. SeyfarthLean Consulting LLC is a subsidiary of Seyfarth Shaw LLP. Seyfarth Consulting LLC and its employees do not provide legal services.

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