Key legal department metrics that help your team make better decisions

In the not-so-distant past when legal departments were consigned to a support role in their organizations, ‘metrics’ and ‘legal’ were two words you’d rarely hear together. Now, thanks to the evolution of processes and technologies, in-house legal departments often have a wealth of metrics available to them to support vital decision making.

But how can this impact be quantified? Legal metrics in the form of data and reporting help busy legal departments and in-house counsel measure their impact and clearly demonstrate their contribution to the business.

Other teams like marketing and HR, have effectively used data for years. Modern legal teams are now doing the same. By leveraging quality data, legal professionals can develop informed strategies to improve operations.

Laptop with Analytics Dashboard Screen

Dazychain CEO Katherine King says during her years working closely with in-house legal departments, she’s seen the benefits of becoming a data-driven team.

“I’ve seen first hand that departments who make the effort to incorporate metrics tend to do more lawyering and less administration. Additionally, those teams often have a bigger place at the table, able to demonstrate their value within the organisation and not just as another company expense.

What do we mean by corporate department legal metrics?

Legal department metrics can function as key performance indicators (KPIs) that objectively measure performance in key areas like cost management, case outcomes, compliance and operational efficiency.

In the way legal precedents shape the trajectory of future cases, these KPIs serve as a compass, guiding strategy and pointing to areas that could benefit from review or improvement. As modern platforms have evolved, so have the veracity and relevance of data giving teams confidence that they’re making decisions based on useful and up-to-date information.

Evaluating performance with metrics and measurement

Legal metrics provide a broader context for performance evaluation and deliver a more meaningful snapshot of your department’s efficiency. Looking at the time it takes to move a contract from submission to execution is a measurement, capturing a single data point at a specific time.

A metric puts a measurement into a comparative context. For example, you might choose to compare contract turnaround times across different teams or external legal firms. It’s an accurate way to measure productivity and guide decision making about which external counsel to use for certain types of cases.

Lagging vs leading indicators

To fully leverage legal metrics, your department must look at the past, present and future.

Lagging indicators, such as comparing the department’s legal spend year-on-year, can help identify trends and guide long-term planning.

Leading indicators, like tracking the cadence of incoming requests or anticipating workload spikes shape day-to day operations and improve resource workload allocation.

Both metrics help align legal operations with broader business objectives. They ensure informed decisions at every level.

What can your department measure?

Workload and resource allocation

To optimize legal department performance, senior management must consider how work and resources are allocated — both internally and externally. Are all staff members billing at full capacity, without being over or underused? How effectively are you using attorneys based on their skill sets and experience?

An effective in-house legal team allocates work based on the complexity of matters. While experienced attorneys manage the high-stakes aspects of a case, more junior team members tackle lower-risk tasks. Having a clear record of qualifications and continuing legal education (CLE) for each team member will ensure you pick the right people for each project.

Such assessments help develop internal capabilities and make engaging external expertise more strategic.

Legal spend

Legal spending metrics are among those most frequently tracked by in-house counsel. In comparison with other metrics, they’re easy to track as the information is often readily available.

It’s often said that you “can’t manage what you can’t measure”. It’s impossible to prepare budget forecasts without knowing what your department is spending now. Quality data enables you to identify variances and cost overruns by comparing your budget with your actual spend. Armed with this data, your department can make real-time adjustments and forecast future budgets more accurately.

One area that legal teams need to manage closely is expenses related to external counsel. Average hourly rates, and costs by practice area and matter type can offer useful insights into the performance of external firms and spot legal services that may operating outside of existing agreements.

Compliance and risk management

Compliance and risk management metrics are vital tools for legal teams seeking to stay ahead of potential liabilities.

Tracking non-compliance incidents can uncover patterns that reveal deeper vulnerabilities. A sharp focus on the frequency and nature of these events allows the department to deploy remediation efforts and refine compliance training programs.

Quantifying risks across data privacy, intellectual property and supply chain management enables legal teams to mitigate legal exposure while safeguarding the bottom line. Analyzing data privacy breaches doesn’t just fix issues — it offers a roadmap for enhancing data governance.

Process efficiency and workflows

Recording KPIs at each stage of the legal process offers a chance to smooth out operational bumps. Recording key data points makes it easier to pinpoint bottlenecks that are stalling case progress so you can make changes to contract workflows.

Assessing response times for legal claims can uncover delays in resolving disputes which helps ensure your team stays on track with compliance requirements and internal KPIs.

7 legal metrics you should track

1. Matter cycle time

Matter cycle time is the average time taken to resolve legal issues, from start to finish. This metric offers valuable insights into workloads, workflows and bottlenecks. Cycle time should ideally be tracked alongside matter complexity to allow comparisons of similar matters.

KPIs to track:

  • The average time based on matter type
  • The break down of resolution times by each stage of the process and comparisons to industry benchmarks.

2. Legal spend as a percentage of company revenue

How does the financial performance of your legal team relate to the organization’s overall financial performance? The ratio of total legal expenditures to the overall company’s revenue reflects the cost-effectiveness of the department and ensures expenditure aligns with revenue growth.

KPIs to track:

  • Total legal spend
  • Year-on-year variance in legal costs

3. Outside counsel performance

A data-driven assessment of external providers ensures value for money and quality of work. Over time, the performance data can be used to make informed decisions regarding strategic partnerships and internal resource investment.

KPIs to track:

  • Average response times
  • Resolution timelines
  • Adherence to budget
  • Cost per matter.

4. Internal and external spend ratio

Comparing legal spend allocated to internal teams with spend on external counsel gives team leaders useful information about resource allocation. Is your team spread too thin? Is there internal capacity that could be utilised instead of being so reliant on outsourcing? Are external law firms spending too much on certain types of cases that could be brought in-house?

KPIs to track:

  • Fees paid to and incurred by outside law firms
  • Expenses for in-house legal staff
  • Internal team utilization rate
  • External counsel spend per matter.

5. Litigation success rate

The ratio of successful litigation outcomes to the total number of cases managed by the department is a crucial indicator of the legal team’s effectiveness. When balanced with cost-efficiency and time to resolution, a high success rate reflects sound legal strategy and effective risk management.

KPIs to track:

  • Success rates by type of case
  • Cost per successful outcome
  • Time to resolution for winning cases
  • The financial impact of successful litigation.

6. Cost per matter

Cost per matter covers the total expenditure incurred for resolving individual legal matters. It can be used to forecast future budgets for your legal department’s operations and evaluate whether specific legal tasks are more cost-effective to handle in-house or externally.

KPIs to track:

  • Average cost per matter by type
  • Cost variance across similar cases
  • The cost breakdown between internal and external resources.

7. Compliance and risk

Proactive compliance and risk management play an important role in corporate reputation management. By tracking compliance incidents and legal risks, your team can demonstrate their role in risk reduction and what this means for the company’s bottom line. This data can also guide future improvements and helps to avoid regulatory penalties.

KPIs to track:

  • The number of compliance breaches and associated penalties
  • Risk exposure by business unit
  • Success rates of mitigation strategies
  • Year-on-year reduction in compliance incidents.

Creating a legal metrics dashboard

Data dashboards are now essential tools for in-house counsel. Simplifying complex information into easy-to-understand insights, these visual tools display key metrics in one customizable interfacethat monitors and analyzes performance across the board, from resource use to risk, and legal expenses to success rate.

The work of a legal department involves the complexities of law and people, nuanced by factors often difficult to explain to other business units. With a data dashboard, legal ops professionals can easily share information with different stakeholders and integrate relevant data with company-wide metrics.

Less admin, more lawyering

Tracking and measuring metrics allows in house legal teams to do more lawyering and less administration. Additionally, teams with their finger on the pulse data-wise often have a bigger place at the table, due to their ability to demonstrate value to the organisation.

Katherine King highlights that “decisions made with metrics are clear and if needed, defendable. Where are we spending most of our time as an internal team? Do we have too many external matters on that could have been done in-house? Do we need more people? The list of answerable questions is endless.”

“Metrics are an invaluable part of the in-house legal operations toolkit. One that, in my opinion everyone should be familiar with and utilise. In today’s world of falling budgets and increasing workloads, metrics tell the story of your department and the value your team provides.”

Data-driven decision-making with Dazychain

Dazychain centralizes all matter-related data, documents and workflows so you can track your legal department’s performance accurately, reducing the chance of errors. See Dazychain in action by booking a demo today.

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