How do you set legal department KPIs? How do you track them, and what are the right metrics to track? Let's find out how to create a data-driven legal team.
Every aspect of a business requires KPIs, and the legal function is no exception to this rule. For scaling businesses managing increasing volumes of contracts, legal KPIs are essential to measuring the success of your legal department, as well as identifying problem areas before they result in risk. But what are legal KPIs, how can you set them and what's the best way to track them in 2022?
This post explains everything you need to know about setting legal KPIs for your team. Keep reading or use the links below to navigate this resource👇
What are legal KPIs (key performance indicators)?
Key Performance Indicators are commonly understood in business. They’re the metrics that the company, its individual teams, or individual employees track in order to judge success. Legal teams - particularly in high-growth businesses - have KPIs too, to make sure they’re supporting the company’s objectives.
Legal team KPIs (also known as legal department KPIs) often relate to business enablement, a key part of which is supporting on a fast, efficient contract process in order to enable revenue growth. If this is a KPI your team is concerned with, get in touch to find out how Juro's contract analytics can help you to hit your targets👇 - otherwise, read on.
Why do you need legal KPIs?
For in-house legal, the days of being seen simply as a cost center are over. Just like legal can’t get away with being the department that just says ‘no’, it also can’t get away with being a reactive function that doesn’t have to measure its progress against targets.
In-house lawyers are often some of the coolest, smartest heads in the business - and it’s important that their wisdom and commercial judgement are brought to bear on projects, initiatives and processes that moves the needle. The business wants legal to add value - we know, because we asked them.
If every other team is proving its value by moving numbers - whether that’s revenue closed, leads generated, or NPS - then legal needs to prove its value too. So how do you define and track KPIs that measure legal’s success?
Working with legal data
Law school doesn’t always prepare in-house counsel to work with data, of course. Other functions, like finance or product, arrive at the company ready to work with numbers every day, but it can be a steeper learning curve for lawyers.
There are a few key things to remember when it comes to working with data:
- Data is essential but it’s not enough: you need to know what problems you’re looking to solve, rather than just being satisfied with gathering data in isolation.
- Not all data is useful: it’s important to filter in the early stages, to make sure you’re measuring things that are actually useful and relevant
- Getting data doesn’t always mean new tech: you can use many of the systems and solutions you already have in place. Microsoft Excel is possibly the most under-used piece of legal technology in existence.
- There’s a difference between having data and being data-driven: colleagues might need training to handle data, run experiments, visualize results, and so on. You also need to instill that culture in the organization going forward.
Keep these points front-of-mind when you get started with creating and tracking legal KPIs.
How to set legal department KPIs
To get to a point where you can set legal KPIs, you need to understand two things:
1. What does the business want to achieve?
Your goals need to be aligned with the business’ goals. This should be obvious but it often needs repeating. If the business has a particular revenue target, for example, your KPIs should be metrics that you believe will influence that revenue target.
2. What does the business want YOU to achieve?
This is a subtler point. Lawyers have a great understanding of what they believe their responsibilities are, when it comes to managing risk and supporting the company on legal matters.
But it’s less common for legal teams to actually do the obvious thing and directly ask their colleagues about what they want. Where do your commercial colleagues value your input the most? When and how would they like that service to be delivered?
Interested in what the business actually wants from legal? We asked them.
A simple customer satisfaction survey is a good place to start. Use this, together with the business’ objectives, to clarify your thinking on which numbers you should be trying to move.
It’s less common for legal teams to actually do the obvious thing and directly ask their colleagues about what they want. Where do your commercial colleagues value your input the most?
What to consider when setting KPIs for legal departments
Once you have a strong understanding of what is going to influence your legal department KPIs, it's vital that you craft KPIs that are attainable, measurable and relate back to your desired outcomes. This is best achieved by considering the following questions:
- Does this KPI relate directly back to the goal you're trying to achieve?
What data is required to measure progress against this KPI?
Who is responsible for tracking the data for this KPI?
Who has access to the data for this KPI?
Is there a single source of truth where the data can be accessed accurately?
How often will the data be tracked and updated?
- Is measuring this KPI worth the effort required to track the data?
Which common legal department KPIs should you track?
Having done all this important groundwork, you’re now ready to start tracking and moving numbers, in order to report KPIs to the business.
We’ve worked with dozens of legal teams who were looking to be more data-driven, and the same metrics tend to crop up again and again. These are by no means the right metrics for your particular company, but they’re definitely common to a majority of legal teams at high-growth businesses.
1. Incoming work
This should be classified by date/time and type of project. This gives both the legal team and their budget controllers a clear view of what’s actually in their pipeline each month.
Tracking this KPI encourages more efficient work management and ensures that every project is adequately resourced and prepared for.
If you have a contract automation software that enables your commercial teams to self-serve on contracts, it also means that you can delegate work according to its value, allowing legal to return to higher-value work.
"I never really see the contracts I used to have to worry about, because they’re all automated and captured in Juro. I’m freed up to do more valuable work” - Michael Haynes, Head of Legal, Cazoo
2. Time and cost per matter
These can be rough calculations rather than minute-by-minute increments, but this kind of data highlights bottlenecks and can help make the case for additional resources where the need arises.
It can also act as an indication for the resources required for future matters that are similar in nature and size.
3. Outside spend / Internal spend
Reducing your legal department's outside spending is often a key objective for pretty much any in-house lawyer, and this is easy to track in a dashboard. You can take it a step further and categorize spend by the risk and complexity attached to the project.
This legal department KPI is a popular one to compare against internal spend, as it provides a clearer picture of what percentage of work and spend is performed internally and externally.
4. Contract review time
Often, moving this number is the main motivator for legal teams investing in contract automation software. This is because it helps legal prove they’re not blocking contracts and it drives a more efficient contract workflow overall.
"Having the contract workflow on a collaborative platform like Juro makes it much easier to manage - the legal team provides business value rather than blocking" - Willem Wellinghoff, Chief Legal Officer at Shieldpay
5. Average contract value
Although it is mostly down to sales to track these figures, it's always useful for legal departments to know the level at which legal gets involved.
Maintaining a close eye on this KPI is a great way for the legal department to stay ahead in knowing their responsibilities and anticipating when their support will be required.
6. Missed renewals
Missed renewals is yet another important KPI for legal departments, as becoming more aware of and setting reminders for your renewal dates is essential to using your resources more efficiently. Having an ineffective contract renewal process can hurt your ROI and result in unnecessary burdens that last months, if not years.
That's why finding a way to reduce the number of missed renewals in your company is key, and Juro's contract automation can help businesses do just that:
“It’s a stressful situation when you end up in a new contract before you can end it. Juro’s custom reminders prevent this problem from ever happening again” - David Köröndi, Legal Manager at Eton Shirts
7. Matters per lawyer / paralegal
It's good practice (and expected) for any lawyer to know how many matters or contracts they are working on at any one time.
Not only does this legal KPI ensure that work is distributed sustainably, but it also provides more company-wide visibility on who is managing what, which eliminates back and forth to identify the key stakeholders for a contract.
With Juro's intuitive dashboard and advanced search functionality, legal and business teams can filter contracts by the owner, making it quick and easy to find out who's working on what in real-time.
What is the best way to track legal KPIs in 2022?
Once you've established what your legal department KPIs are, you'll need to track them.
To get started, you’ll need at least some rudimentary level of tooling in place. That might be a free Juro account, as it will give you a ready-made analytics stack for your contracts:
Click the image above to create a free account and try out Juro's analytics stack.
As with many legal operations projects, the most important thing when it comes to legal KPIs is simply to start. Start somewhere! Once you have numbers in front of you, it becomes much easier to work out which you’d like to move and which aren’t relevant.
Read more about legal metrics and data in this article from Liberis GC, Alexis Alexander: How can tech scaleups get started with legal data?
If you’re looking to create a data-driven legal department, and would like to start with your contracts, hit the button below to find out more.