As an innovative international law firm, Eversheds has always focused on supporting the global in-house counsel community, including attending a number of in-house events in India over the past few years. Our efforts were recognised recently when Eversheds was named winner of the ASIAN-MENA (Middle East and North Africa) COUNSEL In-house Community 'Firm of the Year' further to our India...
As an innovative international law firm, Eversheds has always focused on supporting the global in-house counsel community, including attending a number of in-house events in India over the past few years. Our efforts were recognised recently when Eversheds was named winner of the ASIAN-MENA (Middle East and North Africa) COUNSEL In-house Community 'Firm of the Year' further to our India group jointly winning 'Most Responsive International Firm of the Year', as voted for by in-house counsels across the entire Asia-Pacific and Middle East region. At the events we attend, we are frequently asked by in-house counsels how to effectively demonstrate the value of in-house legal teams, and this article provides some guidance for General Counsels (GCs) looking to introduce Key Performance Indicator measurements.
The drive for increased efficiency and measurable performance has turned the spotlight on GCs and posed the question – 'What is the value of the legal team?'. It is a question that keeps many awake at night, struggling to identify quantifiable results that can be tracked and evaluated over time. The old saying is ringing true – how do you manage what you don't measure?
It specially concerns GCs who are being asked to achieve more for less, ensuring resources are optimised as efficiently as possible. Put into the context of a growing number of in-house legal teams moving from cost to profit centres, such as DuPont, GCs need a deep and granular understanding of their legal teams to achieve these demands.
Legal Key Performance Indicators (KPIs) are seen as the solution, but are a minefield for GCs who don't know where to start in setting the right KPIs for their legal teams. There are hundreds of possible KPIs that can be used to measure legal performance - from the percentage of legal budget spent mapped against matter outcomes, time taken to respond to legal emails, to external law firm invoice payments.
However, where KPIs are a potential solution, they can often turn out to be a laborious form filling exercise that does not drive improved performance. Without setting hundreds of KPIs, how do GCs ensure that basic tasks are completed, and yet teams are stretched and measured against improved performance? The starting point for GCs in setting KPIs is fraught with difficulty.
Eversheds Consulting has successfully led work across multi-jurisdictional and international operations including Africa, Europe, the Middle East, China and the US for clients such as Qatar Foundation, GE, DuPont and Volvo. Using this experience, Eversheds Consulting offers some top tips for GCs who are looking to introduce KPIs and performance measurement into their legal team:
Defining KPI Strategy
There are many competing priorities for GCs including controlling costs, demonstrating the value of the legal team, managing risks and providing quality services to the business. This is without the additional pressures of managing the legal team effectively. Clear decisions on KPI measurement priorities are required to ensure they are focused, measurable and achievable. GCs need to decide on the key focus of the team, as the KPIs used to measure this focus may determine that other priorities are not addressed as effectively.
Setting KPIs can reap huge rewards when an in-house legal team and law firm work together in setting the KPI strategy. Tyco, the international manufacturing group, struck a landmark deal with Eversheds in 2007, moving all legal work in EMEA from over 250 law firms to just Eversheds, for around £10m. This deal was recently renewed, based on the positive impact that the process has had on both sides. There has been a clear strategy with KPIs that demonstrate achievement for both Tyco and Eversheds.
This has included measurement of litigation reduction achieved, fixed fee agreements based on set hour targets with bonus payments for targets achieved, Tyco client satisfaction survey ratings and meeting diversity targets in legal staffing. It is the ability to clearly understand the goal required (cost reduction for Tyco, cost certainty for Eversheds) setting a strategy to achieve that goal, and then completing KPIs to realise the strategy that ensures a return on investment for in-house legal teams.
Avoid Isolation
A common mistake in using KPIs is that they are developed in isolation by the legal team, rather than in collaboration with the business. The KPIs should feed directly into the overall company strategy, the business unit strategies, the legal department strategy, and then individual performance appraisals. The KPIs that are integral to achieving company goals while ensuring that individual performances are aligned to this objective are a powerful tool. KPIs developed without wider consultation are often meaningless to the business, not implemented effectively, and quickly become cumbersome and outdated. KPIs should be a cog that seamlessly fits with the running of the business machine. Holding KPI workshops with representatives from business divisions and the legal team are an effective method of developing metric objectives from which KPIs can be developed.
Data Collection
Many KPIs fail due to the complexity in collecting accurate and current data to measure performance. Staff should not feel that collating examples of performance is an extra task to their daily schedule, otherwise the metric is in danger of becoming a daily chore rather than a complement to existing work patterns. Before deciding on a KPI, GCs should first ensure they have effective, simple and easy to access data collection and reporting systems. It is no good having a KPI which measures time spent on a matter if there is no easy way for staff to record their time!
A KPI is therefore only as effective as the method in which the data is collected (in which to report it). This may mean improving legal software systems (such as using Sharepoint applications) or changing financial reporting systems. KPIs will add strength and improve team performance when they supplement daily work patterns, not add extra tasks to already busy workloads.
Ongoing Review
The process of deciding on KPIs and the method of data collection leads to the implementation of the metric measurement system. However, achieving a set of KPIs is only the start of the process. Time is the biggest contributor to the successful implementation of KPIs. A system of regular review and feedback is needed to ensure that KPIs are integral to ongoing performance. Analysis of data collated from metrics should also be used in conjunction with narrative feedback to provide a full picture of achievement. Only over time can incremental improvements to performance be measured and tracked. Hence, KPI implementation is a long-term process that rewards sustained effort.
This can be evidenced by the renowned status of the DuPont legal team, having implemented a profit-making focus to the in-house team. This was not achieved overnight. The starting point for the DuPont legal team was to pursue an active focus on IP protection and infringement, and enforcing payment for this infringement. The success of this focus was then rolled over into ensuring all suppliers adhered to contract terms such as:
- Customer's failure to meet purchase requirements
- Supplier's poor performance
- Interest on late payments
- Collecting past due payments
This change in focus by the DuPont legal team has enabled it to generate income for the benefit of the business, and change its perception within the business as purely a cost centre.
Spreading the Net
KPIs can be used to increase external counsel performance and help reduce costs and budget. They can also be used to improve business unit performance when requesting legal team services. Again, there are hundreds of KPIs that can be implemented in both scenarios.
However, the same dangers lie in developing these metrics. It is often the case that these KPIs are developed independently of the internal legal team performance metrics, and sometimes at odds with the goals of the legal team. Hence, any KPIs used with external firms or internal business units should follow the same steps as outlined above to ensure a cohesive suite of metrics that drive performance of the legal team and those that deal with it.
Both KPIs and metrics measurement are tools in the variety of methods for GCs to demonstrate the value of the legal team to the wider business, but success relies heavily on having a clear and communicated legal strategy. Without one, metrics are often unfocused, meaningless and do not help GCs answer that fundamental question – 'What is the value of the legal team?'
Disclaimer–The views expressed in this article are the personal views of the author and are purely informative in nature.