MEASURING WHAT MATTERS:
EFFICIENT LEGAL
DEPARTMENT STRUCTURE

In this new world order, many departments collect and analyze data about their external legal spend and law firms’ performance. In fact, many departments have law firm/vendor scorecards to share feedback as well as structure year-end conversations. But what happens when legal departments turn the mirror on themselves and assess the legal department’s structure, value and the efficiency at which they complete such work? What metrics might a general counsel utilize to talk about internal corporate counsel performance? Is there data to celebrate the contributions of the internal attorneys and staff?

The 2016 Thomson Reuters In-Sourcing and Efficiency Report validated a common trend: More legal work is moving in-house and off the plates of outside counsel. Anecdotally, general counsel sing the praises of their internal team’s ability to identify quick, practical solutions and to be highly responsive to internal clients. But beyond anecdote, what data points demonstrate that it is more valuable to have an in-house attorney respond to a particular legal matter versus having an outside attorney bill the company by the hour to wrestle the same problem? In this article, we explore certain data points that leading legal departments collect to demonstrate the maximization of current internal resources. Why look internally? Perhaps, at year-end you want to demonstrate that you (or your current team) have efficiently and effectively responded to legal work, or that you have recognized a need to procure additional technology to add to the arsenal of existing tools available to the legal department; according to the 2015 Altman Weil CLO Survey, nearly two-thirds of legal departments (59%) rely on greater use of technology to make their departments more efficient. Or, rather than relying solely on technology and outside counsel, you have recognized a need to develop a business case to request additional headcount for the department. This series explores legal department metrics beyond external legal spend; specifically, this second article focuses on data points a department might consider to better understand its internal team’s capacity and capabilities and to demonstrate legal department structure efficiencies and contributions.

Allocation of legal matters between in-house and outside counsel

As discussed in the first article of this series, each legal department should develop an understanding of its entire legal portfolio, namely the total number of matters handled per annum by the legal department. Start by mining existing data from matter management systems, e-billing systems, or other department platforms and technology. In addition to collecting data about the volume of matters, this aggregate matter data should be further dissected by substantive law, complexity, and value to the company. Finally, it is equally important to understand how these matters are allocated between outside and in-house counsel. Is your department the type that relies heavily on outside counsel for a majority of its work (and your in-house staff act as mere managers of the firms and this outsourced work)? Or, perhaps based on this matter allocation data, is your legal department one that turns to law firms infrequently and only for the most complex matters? By understanding the allocation of work between in-house and outside counsel – volume, type of work, and complexity – a legal department can better strategize how to use outside counsel, and if the data supports this, redistribute particular matters and legal work to more efficient and responsive in-house counsel.

Internal workload assessment

In the in-house world where work is not documented in six-minute increments as it is in the law firm, what information might be valuable to better understand how time is spent by the internal staff? In addition to developing a better understanding of the company’s legal matter portfolio, many leading legal departments are deploying internal surveys to their corporate counsel and paralegals in order to assess workloads. Survey questions can be task-based and can determine how much time is spent on:

• Providing advice and counsel
• Meetings (to understand what contributions are made by the lawyer attending those meetings)
• Drafting and review of documents
• Conducting internal trainings
• Administrative activities
• Managing outside counsel
• Managing teams or developing team talent

In connection with these questions, it is also important to assess whether the in-house attorney believes there will be a change to this allocation. For instance, is a particular project or litigated matter winding down in the near future, allowing this attorney to direct his time to supporting other legal matters or business units? Other survey questions can include for whom this work is done (i.e., which business units or divisions consume these internal resources), distribution of time by matter type, value of such work to the business, and complexity of such tasks.

Should general counsel require their staff attorneys to collect this time in six-minute increments like their law firm brethren? Indeed, some departments are doing limited “time-collection” exercises, limiting the collection of time to a few weeks to a few months or a quarter. However, the benefit of creating this baseline and the value of this type of data outweighs the pains of collection. Once this baseline is established, department leadership can react to the data and set goals about work and task allocation among its internal staff. For instance, it might be the case that the data reveals too much time is spent on administrative and operational tasks for the legal department; this might support the decision to hire a legal department operations professional to accommodate more of this type of work, and so attorneys can focus on the highest value work for the company.

Internal counsel “hourly rate”

As discussed above, one of the cherished benefits of being in-house is not collecting time in six-minute increments and having performance based on value rather than the number of hours billed like their outside counsel brethren. In addition to departments that are asking in-house attorneys to collect data on time spent, some departments are investigating what the hourly-rate for an in-house attorney is compared to the hourly rate of outside counsel. While this is not a perfect “apples to apples” comparison, many departments find it helpful to demonstrate the value of an in-house attorney and the cost savings to have that work performed in-house versus outsourced to a law firm. For instance, the fully loaded cost for an in-house attorney making $185k is approximately $250k (including benefits and other overhead costs). At 40 hours a week, this in-house attorney is approximately $120 per hour. Based on the work allocation (see above) and the in-house attorneys’ rate, is the appropriate work being placed on this attorney’s plate? And because of the value of this attorney’s rate, should we try to drive even more work to this in-house resource?

Department of slow

Speed is often one indicia of efficiency and effectiveness; and unfortunately, too often legal departments are labeled “the department of slow.” For routine matters (like the drafting or review of the company’s standard agreements), how long does it take in-house counsel to complete this task? Some departments will measure the time it takes from contract request to final execution. The tasks involved often include some sort of client intake, identification of the precedent document or standard agreement to use, drafting and revisions, and of course the back and forth between the parties. By breaking down the process for these routine agreements and understanding where time is spent, departments can reimagine and restructure the process as necessary. Moreover, once a baseline is established for turnaround times, the value of new processes can be measured accordingly. Perhaps you’ll discover, as did one technology company general counsel who undertook this exercise, that the slowdown wasn’t any fault of his department’s process or staff; rather, the opposing party far exceeded their time expectations and held on to agreements and revisions. Armed with data, the GC was able to demonstrate the delay was not actually caused by his department’s inefficiency along with communicating that his team was aiming to work more closely to improve these turnaround times.

Legal departments can be quick in their criticism of outside counsel – for their expense, inefficiency, and lack of responsiveness. Many collect data to measure performance of their firms; this data only strengthens the relationships between in-house and outside counsel. Legal departments can benefit from collecting information about their own performance in order to demonstrate their own internal staff efficiency and effectiveness. Data about allocation of work, in-house workload assessments, in-house hourly rates, and turnaround times can help improve internal processes and optimize the time and contribution of the department’s attorneys and staff. The third and final article in this series will address perceptions of the legal department and share data that leading departments are collecting from their internal clients about performance and client service.

Complete legal metrics series

Overview: Beyond legal spend metrics

Part 1 of 3: Measuring what matters: Gathering data on your legal department

Part 3 of 3: What have you done for me lately? Launching a legal department client satisfaction survey