When I managed the law department of a company, having data in the form of KPIs (key performance indicators) helped me manage the department. It also showed the risks my department and therefore the company was facing. It was in a sense a snapshot of the legal costs and expenses. The KPIs showed legal expenses incurred on a regular basis as well as litigation matters, cycle time for resolution of matters and of course outside legal spend. When summed up- the total legal spend of the company and therefore the approx. legal risk exposure can be ascertained. I had the KPIs displayed on my computer dashboard which allowed me to see all of the legal spend and associated costs, time, external legal spend, etc. on a regular basis as the appropriate data had to be inputted into the dashboard.
KPIs are an essential part of managing a law department. As a risk manager, KPIs when used as metrics also play an important function if used properly and of course if the associated data is properly inputted. Using KPIs, you can determine the number of legal related matters your department, division or company is facing on a regular basis. You can determine the number of compliance related reports that are generated in a given time period, you can estimate the money saved using loss control or the money spent in insurance related matters. If properly set up with accurate data, you can determine the legal risks you are facing or may face, you can determine the cost of or exposure to associated risks that your company face. Combine your KPIs with a Legal Risk Matrix and you can not only see the potential risks, but you can score and or categorize them. Create a heat map as well. This will show Management the legal risks and severity of those risks that the company faces.
So I counsel and advise all corporations as well as in-house counsel and risk managers to establish a set of KPIs that can ( if imbedded with the right data) measure your risk, legal spend, compliance issues, etc. on a regular basis as a tool or process to help manage your risk. For a law department, such KPIs can include:
-law departments total expense
-law department’s expense as a percentage of revenue
-expense of staffing for litigation matters
-number of litigation matters
-cycle time to resolve litigation matters
-total external spend on litigation matters
-number of compliance related matters
-number of insurance claims
-cycle time time to resolve HR related matters
-number of active non-litigation matters
These are but a few KPIs or metrics I would use to get a handle on law department expenses and compliance related exposure and risk. Obviously you can break down outside legal spend more using other metrics. Remember, KPIs if used correctly can help give you a snapshot into the legal risks and associated expenses you may face on a regular basis and therefore help you to manage them.