Introduction
Paris, January 2016, annual seminar of the Group Legal Department of company “X” (a listed company, operating in 28 countries, that we shall call in what follows “the Company”, to protect its anonymity).
In his opening speech initiating the seminar, which most of the Group Legal Counsels are attending, the general counsel presents the team with a detailed picture of the Group Legal Department as it stands: staff, average age, gender diversity, training, as well as the number of trademarks and patents managed, volume of questions addressed, amount of fees invoiced by law firms, litigations initiated and defended, amounts of fines and damages for which the Company was held liable, payments retrieved within litigations, etc. It is clear that only a very few number of attendees have such comprehensive visibility on who they are and what they do. Each of the points raised is clearly outlined and commented, often in a positive way, and potential areas of improvement are identified. All relevant key figures are reflected on the presentation flyer used to promote the operational activities of the Group Legal Department internally. The general counsel shares one specific reason for satisfaction with his team: an informal benchmark based on legal departments in other similar companies shows that the Company is achieving the same results with half of the internal legal staff and half of the budget for external counsels. In other words, “you are achieving more with less (or at least less than the others)!” Above all the general counsel highlights the fact that he has managed to secure a commitment from the Company's senior management that it will maintain the Group Legal Department's budget and headcounts at current levels. This is certainly excellent news in a climate of restructuring, budget cuts and staff reduction within the Company. This internal success was made possible by demonstrating the performance of the Group Legal Department and the value created by its team, which would have been impossible without the metrics at its disposal. In this respect, the general counsel reminds each team member about the importance of properly entering all necessary input into the database in order to be able to extract and calculate the Key Performance Indicators (KPIs). While this requires some effort, it is most definitely useful for the whole of the legal team!Communicating, demonstrating the value generated by legal departments (LDs, or “legal”), and thereby reinforcing their role and influence... these are some of the possible uses and examples of potential usefulness of legal KPIs illustrated by the above short story (a true story, apart from a few details). Gone are the days when company lawyers were isolated in an ivory tower, disconnected from the reality of business and the way it works. In our fast-paced, changing and competitive environment, LDs are increasingly embracing the opportunity to effect a significant transformation. The aspiration of modern LDs is to go beyond their traditional role as specialists in legal disciplines, and to become relevant and trusted business advisors with a true “sense of purpose”. As in the case of other corporate departments (such as finance, marketing, human resources, R&D, etc.), the modern in-house legal teams understand how critical it is to be business-oriented, aligned with company strategy and fully committed to bringing true value to the business.
Today, the concept of “legal performance” has become part of both the vocabulary and practice of many general counsels (GCs) and in-house counsels. But how many of them have engaged in legal performance measurement? When GCs want to be acknowledged for adding substantial value to the business, how many of them offer transparency regarding the performance of their legal teams through figures and metrics? At the end of the day, how does the LD, together with the entire organization, know if it really brings true value to the business and the company as a whole?
In many corporate units, performance measurements are used to ensure that teams contribute to the business objectives and strategic goals.
From this perspective, key performance indicators (KPIs) are used to assess and demonstrate workload, required resources, results, productivity, client satisfaction, process efficiency, cost effectiveness, effective avoidance of value loss, long-term revenue generation/protection, etc. Incidentally, one can question whether it is relevant, or even appropriate, to measure the performance of intellectual outcomes such as the results of legal services: measuring the total amount of monetary penalties paid is one thing, judging the quality of the strategy adopted on legal matters quite another. Indeed, a widespread argument stresses that legal outcomes are of such a specialized nature that it makes it very difficult, if not impossible, to realistically assess them. But before trying to measure legal performance, it certainly seems critical for LDs to understand why they need to assess their performance. Section 2 of this chapter is dedicated to this simple but essential question.Section 3 focuses on what should be measured. Far too often, legal KPIs are merely based on the data traditionally available within in-house legal teams, without giving adequate consideration to what such KPIs are supposed to demonstrate and to whom. We believe that it is necessary to adopt a “top-down” approach: starting from the vision statement of what the LD should do to be in line with the business strategy, thereby making it possible to identify the objectives to target in order to support this vision. Once the goals and missions of Legal have been properly defined, relevant indicators may be identified which will help to monitor the achievement of the objectives set out.
Finally, by sketching out the key factors for the successful implementation of legal KPIs Sect. 4 addresses the question of how LDs can measure their performance. It proposes solutions allowing for the execution of a transformation program that enables the transition to running LDs like real Business Units.
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