Legal department metrics:

Understanding and
expanding your impact

June 2020
 “
When you measure
what you are
speaking about,
and express it in
numbers, you know
something about it,
but when you cannot
express it in numbers,
your knowledge is
of a meagre and
“
unsatisfactory kind.

Lord Kelvin
1883

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PwC
NewLaw

Preface
At PwC NewLaw, we advise on and execute Midway through our investigation, global stock
transformation for legal departments and law prices were at an all-time high and the economic
frms. For a long time, we’ve wondered why outlook was bright. In a very short time, markets
the legal profession has not been subject dramatically collapsed in the wake of COVID-19.
to, or for that matter subjected itself to, the
same quantitative scrutiny other businesses The repercussions for legal functions are still to
and professions do. We set out to explore be played out, but we predict a return to heavily
this question and see if we could contribute stretched legal teams and budget pressure.
to overcoming some of the perceived barriers Naturally we refected upon whether our project
that get in the way of measuring legal inputs was still relevant to an industry that was fully
and outputs. absorbed in fghting to survive the day to day,
with potentially less resources to invest in
Over the last decade since the Global Financial the future.
Crisis law frms and legal departments have
invested in operations functions to drive Our view is that metrics are just as important
effciency initiatives, process improvement now, if not more. Legal departments are going
and implement legal technology. Considerable to need to defend the value of their output
progress has been made by legal operations more than ever and using metrics to do so in an
and signifcant investment has correspondingly objective and scientifc way will be critical. We
fowed to alternative legal and technology hope you fnd the framework we’ve produced
businesses. To raise the bar higher, we felt a both insightful and practical. It is our hope that
more comprehensive set of metrics is required to it contributes to the discussion on how we drive
measure relative performance. better legal department decision making, which
ultimately improves not just the legal team but
also the organisations they support.

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PwC
NewLaw

Value of
metrics – how
metrics are
used to support
decisions
The typical lawyer displays mastery in
the use of words. But when it comes to
numbers, lawyers often feel outside of
their comfort zone. As a general rule, legal
departments have been historically poor at
quantifying performance.

Legal department metrics: Understanding and expanding your impact | 4

Most business functions, including other internal corporate support
services, have a long track record of using numbers to report past
performance, predict future needs, justify capital expenditure, report
risk and so on. Why have legal departments not been having the same
conversations? There are a number of likely reasons:

1. Legal departments tend to be smaller than most other business

functions and therefore under less scrutiny.

2. For their size, legal departments often punch above their weight in
terms of the materiality of the matters they deal with, and therefore
they have been under less pressure to justify their resources.

3. However, we suggest that the biggest reason is a belief within the

legal department that they do work of a special nature incapable of
being expressed in numbers and even if it can be, the effort involved
in capturing the data doesn’t justify the results.

Today however we have more data than ever, and as legal departments
increasingly invest in technology, we have the tools to capture the
data more effectively. In this current environment, especially where
organisational costs come under more pressure and scrutiny, these
reasons carry less weight.

As we explore in the next section, metrics are important to support

decisions. Every day, legal departments make decisions. Decisions
are made about resourcing, spending legal budget, training staff,
engaging with clients, planning for risk events and so on. Many of
these decisions are made based on judgement, experience, intuition or
qualitative information. Often the basis for this type of decision making
is essentially ‘gut feel’. Applying metrics to analyse options reduces the
uncertainty about decisions ordinarily made through gut feel. And so,
we contend that all of these decisions will be made better with
quantitative information.

Legal department metrics: Understanding and expanding your impact | 5

Measurements vs metrics
It pays to be clear on what we mean by metrics, particularly
as distinct from measurements. A measurement is a data
point at a single point in time. A measurement also does
not need to be 100% accurate or eliminate all uncertainty,
a measurement merely reduces uncertainty based on one
or more observations. A metric is a data point in context.
Metrics, for example, express information at one point in
time relative to another point in time, or data about one
organisation relative to another organisation. Metrics are
more useful than measurements because they provide the
context to support decisions.

Lagging vs leading indicators

It is also useful to distinguish between lagging and
leading metrics or indicators. A lagging indicator
is an output measurement compared against
other outputs, for example the number of lawyers
in the department this year compared to last year.
A leading indicator is a predictive measurement,
for example the number of deviations in a set of
contracts from standard positions is an indicator of
the overall risk associated with the contract set. The
difference between the two is that a leading metric
can infuence change whereas a lagging indicator is
really only a record of what has happened. Leading
indicators are typically harder to measure and even
harder to tie directly to future performance given
they tend not to be the only variable that will predict
the future. As a rule, legal departments that do use
metrics will likely be using lagging metrics more
than leading metrics.

Determinative vs indicative metrics

The fnal concept to factor into a metrics exercise is
separating determinative metrics from indicative ones.
A determinative metric will make it clear what decision
should follow, for example, a gender diversity score less
than target, whereas indicative metrics will highlight the
particular aspects of the legal department that warrant more
attention and investigation. An indicative metric alone will
not inform the decision that needs to be made, interpretation,
context and judgement needs to be overlayed.

Legal department metrics: Understanding and expanding your impact | 6

PwC
NewLaw

The what, when

and how of legal
department metrics
Our view is that legal departments can be quantifably
measured. We do not consider legal departments to
be unique in this respect, in fact we would go further
and say that legal functions are exactly the same as
any other function we might measure. To back up this
statement consider the following logic. If it matters at
all, it will be observable. Or to put it the other way, if
you can’t observe something how can it matter? If it is
observable it can be observed in an amount, or a range
of possible amounts. And if it can be observed as a
range of possible amounts, it can be measured.

Legal department metrics: Understanding and expanding your impact | 7

It is also important to remember that not everything that can be measured
should be measured. All measurements must support a decision. And
something is a decision only if there are two or more realistic alternatives
with potentially negative consequences if it turns out the wrong position is
taken. In other words, there must be something at stake. If there isn’t, then
it’s not clear why you would go to the trouble of measuring in the frst place.

So, the exercise we recommend, is to identify the key decisions you need
to make in your legal department. From there you need to identify the key
metrics to support the decision. Once it has been decided what needs to be
measured, the next question is how to measure and when to do it.

We know that collating these metrics can be diffcult, and have provided the
following scale which will help your legal team to understand the effort that
will be required in collating these metrics.

Easier Medium diffculty Harder

to obtain to obtain to obtain

Metrics based on data that Metrics based on data that Metrics based on data that
should be already available is not likely readily available will only be available after
through a desktop study. but can be obtained through considerable mapping,
You may fnd this data a relatively straight forward analysis and problem-
through systems, analysis gathering exercise. You may solving exercises. You may
of existing information/ need to engage with your need to engage with your
documents or with minimal legal team and stakeholders legal team and stakeholders
interaction from your legal through surveys, interviews, through detailed workshops
team and business partners. or simple workshops to or through observational/
obtain the metrics. time and motion studies.
Specifc legal technology
tools may be desirable.

Legal department metrics: Understanding and expanding your impact | 8

This catalogue is not exhaustive; however, it does refect the views of
a cross-section of legal experts from private practice and corporate
legal departments. The metrics are deliberately broad in range and
pitched at a strategic or higher level.

Within many of the catalogue categories, further drilling down to the

tactical level can be done but we recommend this be done only after
the higher-level metrics are in place. For example, the catalogue lists
metrics to inform how much work should be sent to different types
of legal service providers. This is an important strategic decision
that should be answered before delving into more tactical metrics
such as fee rates, budget adherence or quantum of value-adds, just
for example.

Within the catalogue you will see that a number of the metrics are
used to compare against benchmark data. Some benchmarking
data is already periodically published by service providers and
industry bodies. As legal departments become more sophisticated
at capturing and reporting data the breadth and quality of industry
benchmarking data will improve.

Which metrics you choose is an individual choice for every legal

department and will be based on the diffculty to collate, and the
value of measuring, a choice that directly impacts our fnal topic:
legal department dashboards.

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PwC
NewLaw

A dashboard must tell a

story that is personal to you
and your legal department

As we’ve already suggested, metrics

for the sake of metrics are a waste of
time. They must support a decision.
To support a decision, metrics must be
presented in a compelling and user-
friendly way. And that is why we use
dashboards. Dashboards need to tell
a story of past performance, highlight
measurements and trends that provide
insight, and most importantly aid the
decision-making process. Decades of
research and testing have been devoted
to designing airplane cockpits so that
the instruments provide pilots with
critical information in the most effective
manner. Whilst the stakes may not be
as high for corporate dashboards, the
same principles around intuitiveness,
simplicity and meaningfulness are
equally applicable.

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Importantly, not all dashboards will be the same. We would expect
dashboards to differ across industry vertical and legal department size.
We would also expect legal department maturity to be a major swing
factor. The metrics important to a legal department at the beginning of a
transformation journey will be different to the metrics needed when the
transformation journey is drawing to an end.

And fnally, always keep in mind the dashboard audience. A General Counsel
using a dashboard to make decisions about the day to day running of a
legal department will require a very different dashboard to a Chief Financial
Offcer forming a view about whether to increase next year’s legal budget
or not. Our catalogue should go some way towards helping you construct a
dashboard tailored to your legal department.

Conclusion
For too long legal departments have been exempt from using metrics to
support decisions and demonstrate effectiveness. This has been to the
detriment of better decision making. We hope this paper will help legal
departments better arm themselves with relevant metrics. And if you’re still
doubtful legal departments can be expressed in numbers, take a look at the
other functions in your organisation that use numbers every day. We think
that you will fnd they’re already measuring similar data points to the ones
you need. You likely already have far more data than you think, and you may
need far less data for key decisions than you expect.

We thank each member of our legal industry network who generously provided invaluable feedback to
help us construct the metrics catalogue. We also acknowledge the work of Douglas W Hubbard and
his book How to Measure Anything: Finding the Value of Intangibles which is a great resource should
you wish to explore this subject more thoroughly.

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PwC
NewLaw

Appendix
PwC NewLaw’s catalogue of key decisions and supporting metrics:
Visit www.pwc.com.au/legal-department-metrics for visual
examples
Page Page

1. Strategy 13 6. Knowledge management 25

2. Outsourcing and vendor 15 7. Technology and innovation 27
management
3. Ways of working 18 8. Data and information 29
4. Legal skills 21 9. Business partners 31
5. Finance management 23 10. Risk 34

Legal department metrics: Understanding and expanding your impact | 12

 1. Strategy
1.1 Work type

Decision What types of work should the legal department do and what types of
work shouldn’t the legal department do?

Why this decision How a legal department uses its scarce resources is one of the most
matters signifcant choices impacting the effectiveness of the function. Setting a
clear framework to determine what work is the responsibility of the legal
department and what isn’t, is important for the legal team and clients
alike. How the work that sits within the legal department gets done
becomes a secondary although equally important consideration.

Metrics % work strategically aligned (i.e. work that should be done by the
legal department)

How to measure • Establish criteria to defne ‘strategic alignment’ for the legal department
• Compile a master list of work that is strategically aligned to the purpose
of the legal department
• Auto-tag all strategically aligned matters as strategic in a matter
repository / platform (can be done in Excel if no platform exists)
• Ensure all new matters are logged
• Periodically report how many current matters are strategically aligned
• To be most useful, matters need to be broken down as much as
possible into sub-categories

How to use Legal departments should be targeting high % work that is strategically
aligned. If the % work strategically aligned is either low and/or trending
lower, a review of the type of work being undertaken by the legal
department is warranted.

Of course, not all work is of the same strategic value, but that is not
relevant to this metric as it is not measuring relative value, only whether
work is strategic or not.

Level of diffculty Medium - all legal departments should be able to defne what work should
to obtain metric and shouldn’t be done by the legal department, although considerable
work is required to compile a master list and tag work. The benefts of this
work to support other decisions (e.g. resourcing, outsourcing, automation,
etc) should justify the effort.

Legal department metrics: Understanding and expanding your impact | 13

1.2 Work value

Decision What is the right balance in the legal department between high strategic
value work and low strategic value work?

Why this decision Not all work has the same strategic value. Legal departments should
matters be applying their more expensive and experienced resources to work
of higher strategic value and fnding innovative new ways to execute
necessary work of lower strategic value.

Metrics • Ratio of high value work to low value work performed by legal
department lawyers
• Ratio of high value work to low value work performed overall

How to measure • Assign a relative strategic weight to each matter type in the master list
of work
• Allow weight to be adjusted at the individual matter level depending on
factors such as deal value and risk
• Through a matter repository / platform (can be done in Excel if no
platform) calculate the relative amount of time spent on higher value
work and lower value work

How to use The appropriate ratio of high value to low value work will differ between
legal departments based on factors such as size and industry sector. The
ratio of high value work to low value work performed by lawyers however
should always be high. Where lawyers are performing large amounts of
low value work, alternative resourcing solutions should be considered.

Level of diffculty Harder - considerable work is required to compile the master list of matter
to obtain metric types and tag work and assign relative weights. Once compiled this is a
very useful metric for a range of important decisions and reporting.

1.3 Fit-for-purpose

Decision Should my legal department strategy be more specifc?

Why this decision A legal department strategy should be aligned to the strategy of the
matters organisation it supports. However, this alone is not suffcient: a legal
department strategy must also specifcally address the operational
effectiveness and future direction of the legal department itself.

Metrics % of legal department’s strategic objectives that are quantifable.

How to measure • Compile list of strategic objectives

• Identify which have qualitative versus quantitative measures (if any)

How to use Where the % of legal department strategic objectives are less than
100%, consider how to quantifably measure those that are not currently
expressed that way.

Level of diffculty to Easier - assuming strategic objectives have been put in place.
obtain metric

Legal department metrics: Understanding and expanding your impact | 14

 2. Outsourcing and
vendor management

2.1 Legal work

Decision To what extent should the legal department outsource (traditional law
frm, alt legal, client self-service) specifc types of legal work, and if so
what types?

Why this decision Effective legal departments will become increasingly better at unbundling
matters legal work and allocating it to the most effective resources. Many of
those resources will be external providers to the legal department.
Right-resourcing of legal work is a critical decision framework for
legal departments.

Metrics • % legal work done by traditional law frm

• % legal work done by alt legal
• % legal work done by client self-service
• Ratio of high value work to low value legal work performed by legal
department lawyers

How to measure • Compile list of all work done by legal department in central matter
repository / platform
• Identify the work done by traditional law frms, alt legal providers and
client self - service
• Assign a relative strategic weight to each item in the master list of work
• Through the matter repository / platform calculate the relative amount
of time spent on higher and lower-value legal/non-legal work.

How to use %s of work done by different types of providers are useful point in time
measures. These measures are useful references against best practice
benchmarking metrics. Further, comparing these measures over time
provide useful trend information about how different types of providers
and solutions are being used.

A lower ratio of high value work to low value work performed by

legal department lawyers is a leading indicator that a more effective
outsourcing strategy should be considered.

Level of diffculty Harder - considerable work is required to compile the master list of matter
to obtain metric types and tag work and assign relative weights. Once compiled this is a
very useful metric for a range of important decisions and reporting.

Legal department metrics: Understanding and expanding your impact | 15

2.2 Non-legal work

Decision To what extent should the legal department outsource (alt legal, non-legal
providers, client self-service, tech) specifc types of non-legal work, and if
so what types?

Why this decision Not all work within a legal department is legal work (e.g. admin and
matters reporting). Unbundling work to separate non-legal work and fnding
optimal ways to execute it will be increasingly important for high
performing legal departments.

Metrics • % non-legal work done by traditional law frm

• % non-legal work done by alt legal
• % non-legal work done by client self-service
• Ratio of high value work to low value non-legal work performed by legal
department lawyers

How to measure • Compile list of all work done by legal department in central matter
repository / platform
• Identify the work done by traditional law frms, alt legal providers and
client self- service
• Assign a relative strategic weight to each item in the master list of work
• Through the matter repository / platform calculate the relative amount
of time spent on higher and lower-value legal/non-legal work.

How to use %s of work done by different types of providers are useful point in time
measures. These measures are helpful references against best practice
benchmarking metrics. Further, comparing these measures over time
provide valuable trend information about how different types of providers
and solutions are being used.

A lower ratio of high value work to low value work performed by

legal department lawyers is a leading indicator that a more effective
outsourcing strategy should be considered.

Level of diffculty Harder - considerable work is required to compile the master list of matter
to obtain metric types and tag work and assign relative weights. Once compiled this is a
very useful metric for a range of important decisions and reporting.

Legal department metrics: Understanding and expanding your impact | 16

2.3 Vendor rationalisation

Decision To what extent should the number of legal vendors be reduced/

rationalised?

Why this decision Whilst different vendors will be required for different types of work, having
matters too many vendors can be ineffcient and costly to manage.

Metrics • Total # of vendors

• Total external legal spend
• # of vendors per specialist area

How to measure • Calculate # of vendors (total and per specialist area)

• Calculate total p.a. legal spend

How to use Typically, the # of vendors appropriate for a legal department will have
a correlation with the amount spent by the legal department on external
vendors. Benchmarking information will be informative as to whether the
total number of vendors should be reduced.

Level of diffculty Easier - this information should be readily available from the legal
to obtain metric department fnance support.

Legal department metrics: Understanding and expanding your impact | 17

 3. Ways of working

3.1 Team alignment

Decision To what extent should the legal department be functional/practice area

aligned or organisation/business unit aligned?

Why this decision Organisational design of legal teams can have a signifcant impact on
matters the effciency of the function as well as the internal client experience.
The design of legal functions can range from fully business aligned, with
all legal team members dedicated to specifc business functions to fully
centralised with legal team alignment around practice areas rather than
clients. The optimal design for most legal teams will likely fall somewhere
within this range.

Metrics Ratio of Full Time Equivalent (“FTE”) lawyer centralised to

decentralised lawyers.

How to measure • Identify number of FTE lawyers that are only servicing a specifc
business unit(s)
• Identify number of FTE lawyers that are servicing the wider organisation

How to use The ratio in itself will not inform whether or not a shift in alignment will
be required, however a comparison over time is a useful metric for
understanding organisational evolution. Furthermore, a ratio where
decentralised lawyers are signifcantly higher than centralised lawyers
suggests there may be productivity opportunities to be obtained by
shifting to a more centralised operating model.

Level of diffculty Easier - this information should be readily available from the legal
to obtain metric department human resources support.

Legal department metrics: Understanding and expanding your impact | 18

3.2 Headcount: lawyers

Decision How many FTE equivalent lawyers should the legal department have?

Why this decision The most important assets of a legal department are its lawyers. Having
matters the optimal number of lawyers for the size and type of organisation it
supports is a key driver for effective performance of the legal function.

Metrics Ratio of # FTE equivalent lawyers in the legal department compared to the
overall internal and external legal spend.

How to measure • Identify number of FTE lawyers in the legal department (through
payroll data)
• Calculate overall internal and external legal spend

How to use This overall number of FTE lawyers as a ratio against total legal spend is
a number that can be tracked over time and compared to industry
relevant benchmarks.

Level of diffculty Easier - this information should be readily available from the legal
to obtain metric department human resources and fnance support.

3.3 Headcount: non-lawyers

Decision How many FTE equivalent non-lawyers should the legal department have,
and what roles should these be?

Why this decision Legal departments need to be run by skilled legal operations resources.
matters Legal departments also do non-legal work more appropriately performed
by non-lawyers. How many and what types of these types of resources
should be employed inside the legal department or alternatively provided
by third party suppliers is a critical decision for legal departments.

Metrics Ratio of # FTE equivalent non-lawyers in the legal department compared

to the overall internal and external legal spend.

How to measure • Identify number of FTE non-lawyers in the legal department (through
payroll data)
• Calculate overall internal and external legal spend

How to use This overall number of FTE non-lawyers as a ratio against total legal
spend is a number that can be tracked over time and compared to
industry relevant benchmarks.

Level of diffculty Easier - this information should be readily available from the legal
to obtain metric department human resources and fnance support.

Legal department metrics: Understanding and expanding your impact | 19

3.4 Ways-of-working

Decision To what extent should the legal department improve ways of working?

Why this decision Legal departments can deliver their legal work using a variety of different
matters team structures and collaboration processes. Depending upon a range of
cultural, structural and strategic considerations, there may be an optimal
level of transparency and collaboration between legal team members.
Factors such as trust and psychological safety are critical enablers for
high-performing teams.

Metrics • User survey - trust

• User survey - collaboration
• User survey - transparency

How to measure Run a survey periodically to understand team members’ perceptions

of trust, collaboration and transparency in the legal department and
wider organisation.

How to use The user survey measurements can be tracked over time and compared
to industry benchmarks. Further the measurements will typically be a
score out of 10 or % and low scores will highlight areas that require
particular attention.

Level of diffculty Medium - if they don’t already exist surveys will need to be designed.
to obtain metric distributed and analysed.

3.5 Diversity

Decision To what extent should the legal department increase diversity?

Why this decision Diversity across properties such as gender, sexuality, race,
matters background and age, has proven to be an important characteristic of
better performing teams. Understanding how a legal team compares
to the benchmark in diversity and knowing where to make
improvements is important to optimise team diversity.

Metrics • % of legal department with different personality / communication

profles (such as DISC or Caliper)
• % legal department headcount and YoY turnover by gender
• % legal department headcount and YoY turnover by age (decades)
• % legal department headcount and YoY turnover by ethnicity

How to measure • Run a personality / communication profle session across the legal team
(and subsequently also for new joiners)
• Measure gender / age / ethnicity ratios across the legal team

How to use The measurements can be tracked over time and compared to industry
benchmarks to inform how in line or not the legal department is with
market practice.

Level of diffculty Medium - whilst some information will likely already exist e.g. headcount
to obtain metric data, some information may need to be collected e.g personality profles.

Legal department metrics: Understanding and expanding your impact | 20

 4. Legal skills

4.1 Legal skills

Decision To what extent should the legal department consist of legal

specialisations versus generalists?

Why this decision Specifc types of legal work requires specialist lawyers. However
matters assuming that more work requires specialists than is needed can lead
to ineffciencies. Optimising the number of generalists versus specialists
should help improve productivity.

Metrics Ratio of FTE legal specialists vs generalists

Ratio of generalist vs specialist matters

How to measure • Defne specialised skill sets/legal practice areas within the legal
department
• Identify number of FTE lawyers that have deep expertise in a
specialised skill set, as compared to total FTE lawyer count
• Calculate the percentage of generalist vs specialist matters, and
compare this to the percentage of specialist vs generalist FTE lawyers

How to use The ratio of FTE legal specialists vs generalists in itself will not inform
whether or not more or less generalists are desirable however a
comparison over time is a useful metric for understanding capability
evolution. Further a ratio where specialist lawyers are signifcantly higher
than generalist lawyers suggests there may be productivity opportunities
to be obtained by shifting to a more generalist capability model.

Also where the ratio of FTE specialists vs generalists and the ratio of
generalist vs specialist matters is signifcantly different, consideration
should be given to adjusting the weighting of specialists vs generalists.

Level of diffculty Medium - work is required to identify generalist and specialist lawyers and
to obtain metric matter types.

Legal department metrics: Understanding and expanding your impact | 21

4.2 Training

Decision What legal and non-legal training should the legal department engage
with?

Why this decision Training is critical for all professional services. The bodies governing
matters professions set out minimum training requirements. Legal departments
need to determine what, if anything, is materially missing from
the prescribed training requirements and if necessary, arrange
supplemental training.

Metrics • cumulative time (total and per FTE) of formal legal (i.e. black letter law)
training p/a for legal department
• cumulative time (total and per FTE) of formal non-legal training p/a for
legal department

How to measure Identify all CPD training p/a undertaken by the legal team, categorised
according to whether it was legal (i.e. law) or non-legal (e.g. practice
management, professional skills or ethics).

How to use The measurements can be tracked over time and compared to industry
benchmarks to inform how in line or not the legal department is with
market practice.

Level of diffculty Easier - this information should be readily available from the legal
to obtain metric department HR support/training registers.

Legal department metrics: Understanding and expanding your impact | 22

 5. Finance management

5.1 Budget planning

Decision Should the legal department’s budget increase, decrease, or stay the
same next fnancial year?

Unlike all other decisions in this catalogue this decision will ultimately
be made by the business. The legal department should use data to help
inform and infuence how this decision should be made.

Why this decision Like all support functions the legal department competes for budget
matters each fnancial year. The amount of investment an organisation commits to
a legal department will be a combination of assessing the value of having
the legal department, the organisational risk it manages and protects,
the return on investment of the function and the relative performance to
other support functions. A legal department needs to have a perspective
on these values to inform discussions with the organisation about
future budgets.

Metrics • FYoY % change in legal budget

• % total legal budget as a % of total organisational revenue
• Legal department Return on Investment (ROI)*

How to measure • Identify legal budget for current and previous fnancial years
• Calculate the percentage change year on year
• Identify total organisation revenue

How to use The measurements can be tracked over time and compared to industry
benchmarks to inform how in line or not the legal department is with
market practice.

*Developing a Legal Department ROI is a very useful but complex metric

that is a synthesis of the other decisions and metrics in this schedule, and
that requires a bespoke in-depth diagnostic and formulation.

Level of diffculty Easier - this information should be readily available from the legal
to obtain metric department fnance support

*ROI - hard

Legal department metrics: Understanding and expanding your impact | 23

5.2 Control of legal spend

Decision To what extent should the legal department be responsible for all legal
spend across the organisation?

Why this decision Leveraging supplier arrangements is an important discipline for legal
matters departments to maximise quality of service and price effectiveness. Where
legal spend is dispersed across an organisation it will be harder to fully
leverage supplier relationships and adopt a consistent approach to risk.

Metrics % of legal spend outside of the legal department

How to measure • Calculate current spend on external legal from outside of the legal
department (through coordination with external vendors or survey
to business)
• Calculate current external legal spend by the legal department

How to use As a general rule legal spend will be more optimally managed by one
rather than multiple business units. A high % of legal spend outside
the legal department is a strong indicator that legal spend can be more
effectively managed.

Level of diffculty Medium - if legal spend is being directly made by the business most
to obtain metric likely work will be required to collect this data from fnance support
outside legal.

5.3 Billing guidelines

Decision To what extent should the legal department formalise external billing
guidelines?

Why this decision Billing guidelines specify what a law frm can and cannot charge for.
matters Having billing guidelines and enforcing them should have a direct impact
on the overall fees charged by a frm. There needs to be suffcient
volume of work to justify the effort putting in place and then enforcing
billing guidelines.

Metrics Monthly rebates / savings (from law frms) as a result of incorrect billing
expressed as a % of total monthly fees

How to measure • Use invoices to identify rebates / savings on monthly rebates

• Use invoices to identify monthly spend

How to use If the current rebates / savings level is very low or zero, consider
implementing, and enforcing, billing guidelines.

Level of diffculty Easier - this information should be readily available from the legal
to obtain metric department fnance support.

Legal department metrics: Understanding and expanding your impact | 24

 6. Knowledge management

6.1 Where to focus

Decision Where should the legal department focus its efforts in knowledge
management?

Why this decision As knowledge workers, effective storage, sharing and re-use of
matters information has a signifcant impact on the legal department’s
effectiveness. However, not all knowledge is equally valuable or worth the
same amount of effort to manage. Prioritising knowledge management
efforts will focus scarce resources on the right knowledge and
information.

Metrics Most commonly searched for information by %.

How to measure • Compile a list of all information searches across the legal department
and frequency of these (through system data and surveys)
• Identify top 80% based on frequency of searches

How to use The top searches by volume will inform where knowledge management
efforts should be focussed.

Level of diffculty Medium - this data will be easier to collect if a knowledge management
to obtain metric system exists but even without one useful data can be collected from
existing systems and supplemental surveys.

Legal department metrics: Understanding and expanding your impact | 25

6.2 How to deliver

Decision To what extent should the legal department have a formalised process,
governance and/or a technology platform for knowledge management?

Why this decision Which type of system is appropriate to manage knowledge will depend on
matters the commonality, frequency and value of specifc information types. The
more common, frequent and valuable the information, the more important
it is to have an effcient and effective knowledge management system.

Metrics Total time spent searching for (or assisting with searching for) legal
department knowledge and documents as a % of average working hours.

How to measure Compile a list of all information searches across the legal department and
time taken to complete these (through system data and surveys)

How to use As knowledge workers it would be typical for lawyers to spend a

considerable % of time information searching, and therefore justify
the investment in formal knowledge management processes and
systems. For the fewer in number legal departments where the % of time
spent searching for information is low then such an investment may not
be warranted.

Level of diffculty Medium - this data will be easier to collect if a knowledge management
to obtain metric system exists but even without one useful data can be collected from
existing systems and supplemental surveys. Some targeted time
recording may be desirable.

Legal department metrics: Understanding and expanding your impact | 26

 7. Technology and innovation

7.1 Enterprise tech vs legal tech

Decision To what extent should the legal department use enterprise versus specifc
legal technology?

Why this decision Utilising enterprise technology to leverage existing and available
matters resources is important for legal departments. However, understanding
where enterprise technology is not ft for a legal department’s purpose
and where those gaps need to be flled is increasingly important for legal
departments to build effective end to end digital workplaces for team
members, clients and suppliers.

Metrics • User awareness score for functionality of existing technology stack

• User satisfaction score for functionality of existing technology stack
• User satisfaction score for support for existing technology stack

How to measure Run a survey periodically to understand team members’ perceptions

of technology / systems functionality within the legal department and
support for the current technology stack.

How to use Where user satisfaction scores are high for both functionality and support
there may be less justifcation in exploring new or alternative forms of
technology. Conversely lower scores are indicators that new, ft for
purpose, legal technology should be considered.

Level of diffculty Medium - if they don’t already exist surveys will need to be designed,
to obtain metric distributed and analysed.

Legal department metrics: Understanding and expanding your impact | 27

7.2 Automation

Decision What documents and/or processes should be automated?

Why this decision Signifcant productivity gains, as well as better internal client experiences,
matters can be realised through automation tools. With all automation projects it is
important to ask whether the volume of work being automated will justify
the up-front effort required to automate the work as well as the ongoing
effort of maintaining the automated solution.

Metrics Highest volume, lowest strategic value work.

How to measure • Assign a relative strategic weight to each item in the legal department’s
master list of work types
• Through the repository / platform identify the types of work that are
both (i) lower in strategic value and (ii) requiring higher amounts of
overall time to deliver this work

How to use The highest volume, lowest strategic value work types are typically the
categories of work most suited for automation solutions.

Level of diffculty Harder - considerable work is required to compile the master list of matter
to obtain metric types and tag work and assign relative weights.

7.3 Legal department effciency

Decision How much effort should be allocated towards legal department-specifc

effciency and innovation initiatives?

Why this decision Continuous improvement should be part of the DNA for all legal
matters departments. For legal departments behind the curve more radical
transformation might be needed. How much effort needs to be invested
into continuous improvement and transformation turns in part on how the
effectiveness of a legal department compares against the benchmark.

Metrics % of FTE time is currently spent towards legal department-specifc

effciency and innovation initiatives?

How to measure Calculate the total time of legal department FTE that are working on legal
department-specifc effciency and innovation initiatives.

How to use The measurements can be tracked over time and compared to industry
benchmarks to inform how in line or not the legal department is with
market practice.

Level of diffculty Medium - targeted time recording will be required

to obtain metric

Legal department metrics: Understanding and expanding your impact | 28

 8. Data and information

8.1 Data strategy

Decision Should the legal department improve its data strategy?

Why this decision Legal departments typically sit on signifcant volumes of valuable
matters information. Managing information to inform better performance of the
legal department and provide insights to the business will be increasingly
important for legal departments as technology enables better data capture
and processing.

Metrics • Ratio of decisions about legal department performance made using

qualitative data vs quantitative data
• Ratio of decisions about legal advice made using qualitative data vs
quantitative data

How to measure Review legal department dashboard / report card and identify extent to
which these metrics are based on qualitative versus quantitative data.

How to use As a general rule, all important legal department decisions should refer
to metrics contained in some form of dashboard or report card. To the
extent those metrics are not quantifed, consideration should be given to
how they can be.

Level of diffculty Harder - unless best in class dashboards already exist, considerable work
to obtain metric will be required to construct them.

Legal department metrics: Understanding and expanding your impact | 29

8.2 Reporting

Decision What types of reporting should the legal department be undertaking?

Why this decision Good reporting enables better decision making both by leaders within
matters the legal department and also within the business. What should be
reported, how and when are important decisions to determine reporting
effectiveness.

Metrics • % time the legal team spends doing reporting

• End user/reader satisfaction based on utility of reports

How to measure • Identify total time the legal department spends on reporting
• Identify total time spent on all other legal/non-legal activities in the
legal department
• Survey business to understand utility of reports

How to use The measurements can be tracked over time. High % of time combined
with low end-user / reader satisfaction scores indicate opportunities to
improve reporting productivity.

Level of diffculty Medium - targeted time recording will be required and if they don’t already
to obtain metric exist surveys will need to be designed, distributed and analysed.

Legal department metrics: Understanding and expanding your impact | 30

 9. Business partners

9.1 Engagement

Decision To what extent should the legal department put effort into improving its
client engagement?

Why this decision Positive client engagement should always be a legal department priority.
matters Strategically and proactively managing the client relationship as opposed
to tactically reacting to individual client interactions will typically provide
a better overall outcome for clients and the organisation the legal
department supports.

Metrics Average internal client customer satisfaction score (e.g Net Promoter
Score).

How to measure Run a customer satisfaction survey for the legal team.

How to use The measurements can be tracked over time and compared to industry
benchmarks to inform how in line or not the legal department is with
market practice.

Level of diffculty Medium - if they don’t already exist surveys will need to be designed.
to obtain metric distributed and analysed.

Legal department metrics: Understanding and expanding your impact | 31

9.2 Expectations

Decision To what extent should the legal department improve legal advice to meet
the expectations of its clients (through quality, timelines and cost)?

Why this decision An important subset of a legal department’s overall productivity and
matters effciency measures is the level of interaction with its clients. A specifc
focus on optimising the client experience is warranted.

Metrics • Cycle time ratio of time taken to do work vs. time taken to return work
(aka velocity)
• % of legal advice leads to rework
• % of over / underspend

How to measure • Compile a list of all work

• Identify cycle time of work for each matter type (i.e. from receiving
instructions to completing work)
• Identify actual time spent by legal team on each matter type
(i.e. ‘recordable time’)
• Identify amount of work that required change (for any reason)
• Calculate actual cost vs budget cost of work sent externally

How to use The measurements can be tracked over time and compared to industry
benchmarks to inform how in line or not the legal department is with
market practice.

Level of diffculty Harder - considerable work is required to compile the master list of matter
to obtain metric types, measure cycle times, record changes and collect fnancial data.
Some targeted time recording may be desirable.

Legal department metrics: Understanding and expanding your impact | 32

9.3 Organisational value

Decision To what extent should the legal department improve the broader
effectiveness of the organisation?

Why this decision Innovative legal departments won’t limit innovation efforts to only
matters productivity initiatives. Better performing legal departments will fnd ways
to provide new material value to the organisations they support. One
example will be the synthesis of organisational data that fows through a
legal department to provide organisational insights.

Metrics % of legal department report card / dashboard focused on the delivery of

non-legal activities aligned with broader strategically aligned initiatives.

How to measure Review legal department dashboard / report card and identify metrics
concerned with non-legal activities.

How to use Strategic contributions of the legal department that are over and beyond
what is expected should be captured on internal stakeholder dashboards
/ report cards. The extent to which the proportion of these strategic
contributions can increase over time, will indicate how well the legal
department is comparing against typical legal departments in delivering
new organisational value.

Level of diffculty Easier - even if best in class dashboards do not exist it should be
to obtain metric relatively simple to roughly determine the relative amount of effort
dedicated to innovation.

Legal department metrics: Understanding and expanding your impact | 33

 10. Risk

10.1 Risk framework

Decision Should the legal department be more aligned with the organisation in its
approach to risk?

Why this decision A formal process that outlines both how and when the legal department
matters reviews risk (including its interface with any separate risk team
or enterprise risk policy) should be considered to ensure that risk
management is aligned with the organisation’s risk appetite.

Metrics Number of material legal risks for the enterprise not already identifed in
the enterprise’s risk management framework.

How to measure • Review the enterprise’s risk management framework

• Identify any gaps where material legal risks are not refected in the
framework

How to use All material legal risks for an organisation should be refected in the
enterprise risk management framework.

Level of diffculty Easier - this information should be readily available.

to obtain metric

Legal department metrics: Understanding and expanding your impact | 34

10.2 Risk appetite

Decision Should the legal department be more or less conservative in its approach
to risk?

Why this decision A legal department’s approach to risk should not only protect but also
matters enable the organisation. Lawyers are in general very competent in
identifying risks - however, this needs to be moderated to align with the
risk appetite of the organisation. Too little risk management of high-risk
matters can overly expose the organisation to risk, but equally too much
risk management of low-risk matters can stife an organisation.

Metrics Quantum of fnes, penalties, damages and settlements paid by the

organisation for a given period.

Negotiated contracts materially deviating from standard fall-back

positions captured in playbooks.

How to measure Calculate the quantum of fnes, penalties, damages and settlements paid
by the organisation for a given period.

Measure material variance from standard risk positions across contract

portfolios.

How to use A high quantum is an indicator that the legal department’s approach
to risk may be overly aggressive and a low quantum indicates it may
be overly conservative. Root cause analysis may also be required to
understand whether it is the legal department, other parts of the business
or external factors that is principally the cause of the fnes, damages, etc.

Material variance in contracts from standard risk positions is a leading

indicator of future risk. This metric is particularly insightful when compared
against actual future outcomes.

Level of diffculty Harder - calculation of fnes, damages and settlements should be

to obtain metric relatively easy with the assistance of the legal department fnance
support. Measure material variance from standard risk positions across
contract portfolios will likely require sophisticated contract lifecycle
management technology and processes.

Legal department metrics: Understanding and expanding your impact | 35

 Contacts
Mick Sheehy Marlo Osborne-Smith
Partner Director
+61 400 882 764 +61 417 974 416
[email protected] [email protected]

Adj.Assoc.Prof Krisson Nandha

Peter Dombkins Transformation Lead
Director +61 448 878 339
+61 416 940 875 [email protected]
[email protected]

Alex Rosenrauch
Manager
+61 488 008 146
[email protected]

PwC NewLaw Australia helps transform legal functions and law practices.
Our services cover global advisory and delivery for legal strategy and
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development, operational support and outsourcing.

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