Legal metrics: “The missing piece”
When it comes to modernizing and accelerating the delivery of legal services, we have come so far. Just a decade ago, we were so much further behind in how we used technology, managed resources, collaborated… just about everything you can think of! It does, however, feel like there is still a missing piece: Metrics. Across Legal, it remains hard to define and use them in a meaningful way.
It’s a big gap. Just think about how much change is happening in the modern legal department… new technology, new approaches, new investments coming in from many directions. If we don’t have meaningful measures that show whether these new initiatives and projects are working, how do we progress? How can we possibly evolve and improve? Any team committed to bringing discipline and accountability needs some way to gauge direction.
This isn’t about achieving perfection, it’s about getting a sense of direction. We can’t seek to quantify everything but we do need some hard numbers that allow us to make effective decisions.
Why getting Legal metrics right is so hard
This is, after all, common in other parts of the company, other departments and disciplines. So why does it somehow feel harder to do in Legal?
To me there are three main obstacles when it comes to this challenge in Legal… these are the primary gaps that I see holding us back.
Setting baselines is difficult
It’s one of the things that I both love and hate about Legal operations: Everything is new! When you are doing something that is new to you and to the marketplace, it is very hard to define what your current state looks like and what “good” should be. There is no obvious way of setting the standard.
Say you are advocating for a new contracts management system and someone asks you to estimate its expected ROI (a fair question!). One obvious place to start would be to calculate the potential improvement in turnaround times. The problem, of course, is that most Legal teams don’t have a robust contract management system today and couldn’t accurately tell you what their turnaround times are now. Same thing with the ratio of first-party vs. third-party paper, or how much time will be saved with self service contracts.
Teams aren’t set up to collect data
Collecting data in the right way is neither straightforward nor easy. To be valuable, it must be collected in a consistent and clean way, and that usually requires some kind of infrastructure investment. Even if you have a technology platform, there is almost always substantial additional work required to redesign people and processes to ensure proper data collection. And even after you’ve finally gotten there, it could be a full year before you’re able to generate a baseline or start to see patterns or trends.
Legal operations people tend to be overloaded as it is. They lack the time and energy to gather metrics-grade data effectively. This isn’t to say we can’t do it at all – but we have to constantly ask ourselves, is the level of effort worth the return? If it requires heavy manual intervention and time, when is it truly worth it?
Metrics aren’t always oriented towards making decisions
So let’s say you solve the first two hurdles and are able to collect data… the next challenge is vital: How will you use it?
Because collecting data that doesn’t drive action costs time at every level, from analysts and line employees all the way up to senior management. Any amount of time spent on it that doesn’t lead to the potential of a new choice or course of action is wasted.
To be effective, metrics must be simple enough to understand and clearly connected to a possible decision or action. Most of the metric-gathering efforts I see fall well short of this bar.
A better way
There has to be a better way. To me, it comes down to bringing common sense and clarity to the way we approach metric-setting. With that in mind, here are a few core principles I would lean into when designing metrics.
Keep it simple, keep it relevant
As you begin to define metrics, resist swinging from one extreme – not measuring anything – to another: Attempting to measure everything. That isn’t just an invitation to waste time, it is actively harmful to decision-making.
The temptation to throw a lot of numbers at people (especially at leaders or lawyers!) usually comes not from confidence, but insecurity. One of the surest ways to know someone doesn’t understand their business is when they show you 10 slides with dozens of metrics on each of them. What, exactly, are you showing here? Why does it matter?
Clear strategic thinking should be supported by, and reinforce, the elegant and concise use of metrics. Ideally, you should have a few numbers that matter profoundly. Many people make dashboards and reports that really don’t create change or bring insight. This is the problem with many of the “benchmarking” efforts that I see. I call this “reporting the weather” which means you are showing the state of things, but not revealing the “so what”?
You should be able to get to the underlying data… if needed. But that doesn’t mean you should burn cycles chasing that detail on a constant basis. Don’t create multivariable reports that you just mindlessly update over time
Show change in something important
Remember: we want to create meaningful measures that can drive action. If you need help finding these meaningful metrics, just think about your business drivers. I tend to think in these categories to demonstrate impact or ROI. Anything that makes a significant difference to any of these values can be said to matter to the business and the team:
- Revenue acceleration
- Cost reduction
- Cost elimination
- Hours saved
- Quality of life
- Quality of work
Here’s a good example of an effective metric: Contracts turnaround time. It is a simple number, but one that communicates a lot. It impacts the Legal team, the Sales or procurement team, and several others. It connects to revenue and efficiency. A big bump up or down in that number probably means something important… and could potentially guide us to know if we need to shift our technology, our staffing, or some other lever.
One cautionary note… There is no such thing as a perfect metric, or one that can’t possibly lead to bad behavior. If contracts are being executed faster but at the expense of quality or service, for example, that could indicate an underlying problem. Sometimes metrics are important because they raise questions, rather than answer them.
Look for directional value and consider context
Accept approximation! You are looking for something useful and directional, but attainable. A metric that measures, say, 80% of the underlying value you are trying for but doesn’t tie the team in knots collecting it is a great response to your need. I see so many departments trying to measure total legal demand and rather than focusing directionally on what makes up 80% of the work, they kill themselves trying to capture that last 20%, which requires new systems and a ton of change management, all for little return. Measure only what matters.
A big part of understanding the real value of a metric is setting it in the proper context. As an example, one common metric people have been using since the early days of legal operations is “Total Legal Spend as a % of Total Revenue”. Whether it is 1% or 10%, or going up or down a bit, isn’t always the point. You can’t simply benchmark yourself against an industry average without considering the nature of your business.
In my experience, this metric can be valuable to validate or raise questions. For example, I would expect that percentage to be higher for a startup company or even, say, a search giant in the early days of establishing Internet law. Maybe we see that number decline as the company matures, but then see spikes as we enter new regions or launch new products. In this case, if we’re monitoring the metric, it should be to see if the numbers are in line with our expectations given our business, or if there is more we should be doing to manage them in the right direction.
There has never been a better time for metrics
There has never been a better time to begin looking into metrics. This is one area where AI will make a big difference for all of us. In short order, we will see AI agents capable of gathering and analyzing metrics, cutting the complexity and time required. In order to take advantage of that, however, you will need systems and processes in place. And you will need to bring your people into a new understanding of how to work with and make decisions based on data.
This is a process… but it’s an important one that can make you, and your decisions, better. Get started now!
To explore Ironclad’s analytics capabilities and how you can leverage them for reporting, check out Ironclad Insights.
Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.
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