LEGAL
Law firm professionals live in a world of numbers: hours billed, realization rates, and profits per partner, to name a few. Not surprisingly, these data points are meaningless in the corporate counsel universe. For a corporate legal department, what types of data about the department’s work can be collected?
And more important than the mere ability to collect and measure, what should be counted? What counts and has an actual impact on the department and the greater business the department serves? These are the questions faced by many legal departments in the early stages of building formal metrics programs. I spoke with NetApp’s general counsel, Matt Fawcett, and his chief of staff and director of legal department operations, Connie Brenton, about the impact of data on NetApp’s performance as a legal department and how they built a sophisticated, world-class metrics program.
BERNADETTE BULACAN: Many departments are simply “chasing numbers” and wrestling with the data collection processes. How does a department transition from simply collecting data to using metrics to create action-based plans?
MATT FAWCETT: I wouldn’t say that we collect metrics. I would say that we collect data. And from that data, we create metrics. There’s an important difference. We collect data that might never become a metric. But you have to collect lots of things in order to find the metrics that speak most importantly to the management and the administration of your business. From a collection standpoint, we collect lots of different things. We collect information from external stakeholders. We collect cost-related data. We collect internal team data, and we collect customer satisfaction data.
CONNIE BRENTON: We also collect benchmarking information from the industry, specifically from our peers.
BULACAN: What are good examples of the metrics that changed the behavior of NetApp’s legal department? Are there data points that helped to drive innovation and change within the department?
FAWCETT: Let me give you three. And you’ll probably find that in my world, most things follow the “Rule of Three.”
First, just the fact that we started an operations function, at all, came from a point of data, that point of data being that I had observed that large multinational companies with legal departments in excess of 50 lawyers were beginning to create this function. NetApp Legal was certainly that size when I arrived in 2010, but didn’t have an operations function. And that was the impetus for deciding we needed to build that as my first priority, starting with Connie, my first hire. And with time and data, we were able to demonstrate return on investment. Second is our investment in electronic signature technology. The process of converting to an electronic signature process costs money and takes time; there’s a change management element to it. So you have to demonstrate that there are savings commensurate with the investment. And with the data demonstrating return on investment with electronic signature early on, we were able to convert several internal processes over to electronic signature technology.
My third is a different and interesting example – it’s contract terms. If you have the data to show you which terms really do or don’t matter from a financial standpoint, or from a potential liability standpoint, you can avoid lots of wasted time. We have been able to architect the way we negotiate agreements to remove much of the friction around “hypothetically important” but “pragmatically not important” terms – and we needed data to come to that conclusion.
BULACAN: Let’s turn to spend metrics. For those departments that are in early stages, this is their initial focus. Which metrics were most meaningful for NetApp?
FAWCETT: For me, spend metrics are most valuable for the purposes of benchmarking. I still hear people reject cost benchmarking, saying those comparators are subject to manipulation or potentially misleading. All that might be true, but I believe you can normalize for that. Because you need to understand: Are we running an efficient, productive organization or are we not?
This is also the area where data collection on legal departments is most mature.
Some very common metrics that we can find for hundreds of organizations include “total legal spend as a percentage of revenue.” We can look at a variety of different slices – company size, company complexity, size of legal department – and compare our total cost to the cost of other organizations. If you are running much higher than others, then you can go figure out why that is the case.
A second metric I find quite valuable is the “percentage of legal spend inside versus outside.” Across companies and across industries, you’ll find that the average is 55 percent [of a department’s legal spend] is outside and 45 percent is inside. We have really good data to suggest that the more you can shift that number to inside, the more efficient and productive your organization can be. An example: The cost of an inside resource, for us, is about a third of an outside resource on a per-hour basis. So if it costs you $1 for an inside person, the same work would cost $3 for an outside person. If you have the right work profile so you can insource the work, it makes economic sense to do so.
The third isn’t my favorite one, but “number of lawyers per billion dollars of revenue” can be another helpful indicator. There are different data points across different industries. By way of example, a software company tends to have a lot more lawyers per billion dollars of revenue than a commodity hardware company – it’s just the nature of the work.
But if you can normalize this, then you can develop a sense of how you have built and deployed your staff. If you can bring that ratio down, for example, by training paraprofessionals on work that you would otherwise give to a lawyer, then the department can become more cost-effective.
BRENTON: I’ll take it to a different level. Matt is more macro; I’ll take it down more micro. We capture a lot of spend data in order to save money, create efficiencies, and ensure compliance with our billing guidelines. This is where the benchmarking technology is relatively new. We can benchmark individual timekeepers across the country. This has been useful to ascertain whether we are pairing a fair price and hourly rate. And this also raises questions about data integrity and “junk in, junk out.” If your data is not clean at this point in the process, then you have a completely new data cleanup project!
You can leverage some of the benchmarking data at this micro level. You can run timekeeper averages on your own portfolio, and that helps determine where to place work and better partner with outside counsel. This all leads to one of the metrics that we have recently added: how much of our portfolio is being billed at fixed fees.
BULACAN: How do you create a culture of metrics where there hasn’t been one before?
FAWCETT: In terms of transforming a culture, there’s a saying that I frequently remind myself: “No one cares how much you know until they know how much you care.” Metrics feel very cold and “number-ish.” Until people realize that you are invested in their career and you care, you just don’t go bashing people over the head with the numbers.
If you have data that can show your team that you are doing something special and innovative and extraordinary, or better than your competitors, boy, that’s a really great validation. It’s a very valuable way for us to have relevance inside our company.
BRENTON: And you can see why I like working with Matt!
Originally published in Forum Magazine from Thomson Reuters. The insights, ideas and information in Forum are shared, discussed and argued by legal professionals in law firms, corporations, government, academia, as well as by innovators and entrepreneurs in the legal markets.
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