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NATL61_062 03/08/2007 10:06 AM Page 62 Closing The Deal The Metrics System How to create your legal department’s performance metrics. e often ask executives to tell us if IT) and which are diminishing to ensure • summary of preventative steps taken Wthere are any aspects of their organi- proper internal allocation of legal resources. (e.g., bulletins circulated, policies and zation’s business, strategic objectives or procedures developed, training done); competitive challenges that they wish their “New”Matters Sent to Outside Counsel. • summary of new matters opened,broken in-house lawyers understood better. Here Provide a clearer understanding of which down by area of law and tracked on a are some frequent responses: areas of law are most frequently outsourced departmental basis; “Our lawyers need to be much faster at get- to external lawyers, and why. • report on significant matters closed (e.g., ting work done.There are no clear agreements transactions completed, litigation con- on when something is going to be completed.” Internal vs. External Cost Comparison. cluded); and “We need Legal to have a better understand- Compare the average hourly cost (fully • recommendations for further work/focus. ing of our area of business – how they can help, loaded) of in-house counsel to the cost of be better integrated, and provide us with quick a billable hour (blended) charged by the Managing Expectations. Develop “Service opinions when required.” average outside law firm to show the sav- Level Agreements” with major client “There’s too much ‘Why you can’t do some- ings achieved by using in-house lawyers. departments that provide consensus on thing’ and not enough of ‘How we can make what constitutes high-value work, what this work.’” Litigation Successes. Estimate the savings work could be channeled away from legal, Whether we like it or not, we will be to your organization from the successful what turnaround times are appropriate, and measured by our clients.If we take a passive defence of a litigious exposure (actual what sort of proactive information the approach,the measuring stick will be exclu- results vs. reserve). client can expect from your department. sively a creation of our client.Alternatively, Finally, hold one-on-one discussions with we can help create and shape the measure- Financial Contribution. Estimate the rev- the key executives of your client departments ment criteria. enues your department has contributed to to establish your unique metrics. In most There are many different metrics avail- the organization through success on mat- cases, this will be an important opening for able to you for demonstrating the efficacy ters such as enabling new program rollouts. you to work with your executives in a com- of your legal department. municative partnership that helps you to: Non-Financial Metrics • engage your clients in a discussion of Financial Metrics Regular Client Meetings. The proper your goals and objectives; Budget Performance. Report on the alignment of legal work to corporate needs • enhance dialogue and candour between extent to which your department meets requires regular two-way communication. you and the management team; and its forecasted budget (on monthly, quar- Schedule regular meetings with the senior • obtain meaningful feedback. terly and annual bases), together with an executive to learn the issues that matter to explanation of any budget overages. the executive and share information about Patrick J.McKenna (www.patrickmckenna.com) legal issues and trends of importance. is a principal in Edge International (www.edge.ai) TLS/Revenue. “Total Legal Spend” as and since 1983 has worked exclusively serving percentage of revenue remains the accept- Monthly Reporting. You should assume the legal profession in matters of strategy and prac- ed standard and best metric whereby one that your executives are not really aware of tice management. can review the trend-line on legal costs. much of your legal department’s day-to-day Derek E. Patterson sits on the Board of the work.Your monthly reports should include: Canadian Corporate Counsel Association and Number of Matters Handled. Show what • high-level summary of significant legal presently serves as General Counsel and types of exposure are increasing in impor- issues (e.g., new legislation, significant Corporate Secretary for the Insurance Corporation tance (e.g., legal compliance, competition, court decisions); of British Columbia. 62 CCCA Canadian Corporate Counsel Association MARCH 2007