Lean Legal: Measure
Measuring and tracking legal operations is an opportunity to demonstrate how legal impacts the business, and show the contributions of legal to the business goals. It can help the C-suite and Legal teams work together and be on the same page when it comes to reaching the company goals, and during these market conditions, that is increasingly important. It also helps the entire organization work more effectively with legal by increasing the transparency and understanding of legal processes and risk.
A way of measuring success is expected in all other aspects of business already – sales have targets and KPIs they’re measured against, as well as marketing, customer success, and product. So why don’t we measure when it comes to legal? Could you imagine your company not measuring digital marketing efforts? It seems like a no-brainer – you’re putting money and time into digital marketing so you want to know what your return on investment is. Almost everything we do in business is digital and measurable these days. It’s not just marketing or sales. So why wouldn’t we strive for the same standards in business legal operations?
Since there is currently no precedent for how to measure legal operations, we would like to propose one with the Lean Legal framework.
What to measure in your legal operations
Businesses and legal teams can use data to make informed decisions about how to allocate resources and prioritize initiatives. Having KPIs and metrics for legal operations helps ensure initiatives are aligned with business goals and strategies. It also helps us save time and money – two critical resources.
The first time you measure legal will be to simply establish a baseline for your company so that you can assess it for the first time in a more data-driven way. As the process repeats, you’ll be able to choose metrics and KPIs more strategically and align them even further with business goals. For the first iteration, simply aim to get an understanding of how your legal processes could be impacting your business, and areas to improve and prioritize.
How to choose your Legal Key Performance Indicators & metrics
Choose 3-5 KPIs (Key Performance Indicators) and 3-5 metrics that you will start with to measure your legal operations performance. The KPIs should be directly related to the overall business goals – basically, does management care about the KPIs related to legal – and the metrics you’re tracking should be related to improving and optimizing the specific activities that impact the KPIs? We say 3-5 because it is easy to over-measure and forget how what you’re measuring relates to the bigger picture. So start with a small number that you can focus on and improve. You can adjust them as you begin to improve and learn more.
What are some KPIs you can start with? Let’s say, for example, one of the business’s goals is to decrease the payback time of a customer. Legal can be involved in several areas when it comes to customer payback time. The first is typically the drafting and signing of the new customer agreement, or it could be even earlier with an NDA to start a proof of concept.
KPIs could be:
- Decrease response time on legal request tickets by 20%
- Increase the acceptance rate of standard contracts by 25%
- Decrease negotiation time on sales contracts by 10%
- Reduce spending on external legal fees by 30%
- Reduce share of third-party contracts handled by 15%
- Decrease the share of contracts processed in manual workflows by 30%
- Increase the number of low-legal touch* contracts by 40% (low-legal touch
Metrics could be:
- Amount of time spent on legal request tickets
- Amount of time from law change to updated contracts
- Amount of time it takes to draft a contract
- How many errors, on average, occur during the drafting process?
- How long does it take to get a new contract to a signing customer?
- Number of hours spent on reviewing third-party contracts
- Amount of time spent on high-urgency/low-risk contracts
Having KPIs and metrics in place also helps if the team is running an experiment to improve on anything specific so that you can measure the experiment’s success.
*low-touch legal is legal work that automates administrative and repetitive processes that are potentially high-urgency, but often low-risk. It allows the legal team to be involved as little as possible, and gives more autonomy, while maintaining quality and control, to the rest of the organization.
Incorporate soft metrics
Gather internal feedback from employees and customers about the contract process. These more qualitative data points will help add color to your KPIs and what is impacting them. You can do this with a quick survey you send out to your colleagues or by having a customer-facing team ask for feedback from customers and prospects.
Some examples of soft metrics you can incorporate,
- Sentiment (positive or negative) – you can gather data on what the perception is of your legal processes from an internal perspective, as well as from an external perspective. It’s always good to follow up with a “Why?” or, “Are you willing to elaborate more on your answer?”
- Engagement in legal processes – are the processes you have in place easy to use? Are they effective and easily accessible by the rest of the organization? Does the company find it easy to work with legal processes? This can help you develop better, smoother processes that the company is more likely to engage with and get it done right.
You can send out an internal survey – sort of like a Net Promoter Score (NPS), or Employee Promoter Score (EPS), but for legal operations. Gathering and incorporating these “softer” data points will shed a brighter light on the numbers and allow your team to adjust with even greater insight. You’ll be able to remove bottlenecks, and the entire organization will be able to work more effectively and efficiently with legal.
Create and set company benchmarks
Creating benchmarks and standards for legal helps you continue to measure and improve upon performance. It also gives teams a target to strive for and helps enforce a culture of continuous improvement.
Create benchmarks that relate to overall company goals (we keep mentioning it, but it’s super important!). For example, you can set a benchmark of 15 minutes maximum for creating commercial agreements. You know, then, that if you exceed this, it possibly indicates you’re not getting the contracts to customers and prospects quickly, which means the sales cycle is being delayed. It also could mean that you aren’t using automation in the best way and could be better at allocating resources for everyday contracts. It could also mean that you’re not prioritizing the right issues, for example, allowing negotiation times to run over because of a clause that is not important to include when considering the overall business goal.
The first time you create benchmarks, create simple ones that you improve upon as you go through the Lean Legal framework each time. The longer you measure, the better benchmarks you’ll be able to create for your legal processes. You can continue to assess and adjust the benchmarks you’ve created.
We hope this has inspired you to start measuring your legal performance, and that we’ve given you enough inspiration to get started. Next, we’ll be diving deeper into the innovate and assess steps of Lean Legal.
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