Richard Stock analyzes CEB's tool for assessing law department effectiveness
The Corporate Executive Board (CEB Inc) was acquired by Gartner in 2017 to offer talent management, best practices, and decision support. Legal is now one of the seven functional business areas supported by Gartner’s research and advisory services.
Some years ago, I reviewed one of CEB’s approaches to assessing the effectiveness of 20 law department activities, all with a view to improving law department functions. Their assessment tool was called “The Anatomy of a World-Class Legal Department” and set out questions in four broad categories:
- Sensing opportunities for creating value in the company
- Optimizing talent for higher-value work
- Creating operational efficiencies
- Managing outside counsel effectively
These categories are compatible with but not identical to the four perspectives anchoring a balanced scorecard: customers, learning and growth, internal business processes, and financial.
The balanced scorecard system, however, is not an assessment tool. With its initiatives and targets, scorecards are more a strategy performance management tool, typically accompanied by reference materials and templates to help managers track the execution of activities and monitor results. It is often used by companies and their law departments to ensure alignment with corporate strategy and priorities, and to focus on getting results. In that sense, it goes beyond being a planning architecture to serve as a management and communications tool.
CEB’s effectiveness self-assessment does help a law department evaluate whether it needs to take action on a number of fronts. In turn, the resulting improvement priorities can find their way onto a law department’s business plans and scorecard. An examination of the CEB’s 20 assessment statements did suggest a few opportunities to improve the assessment tool. Six statements are intended to find “opportunities” for creating value:
- Providing key legal services
- Spotting client opportunities
- Identifying risks early
- Collaborating effectively
- Enabling greater self-sufficiency
- Communicating clearly
The first two are important but under-emphasized in the overall scheme because they did not directly target a company’s strategic business priorities. The closest they come to this is in “spotting client priorities”. Moreover, this does not actively promote a strategic contribution by the law department. The last four statements in this section deal more with how the law department works and less with what it does.
Using department talent for higher value work is assessed in four ways. The first is in identifying key skills for lawyers. My preference would be to expand the targeted skills beyond legal to include leadership and business skills. The same should be said for targeting lawyer development beyond strictly legal competencies. I do like the last two effectiveness statements in this series: ensuring lawyer engagement and reducing low value work.
The third part of the self-assessment consists of six statements to assess the extent to which the law department is creating operational efficiencies. These include choosing alternative (non-law firm) providers, aligning non-traditional providers with legal needs, streamlining processes, creating workflow transparency — mostly with clients, measuring law department performance, and optimizing knowledge management. In my experience, the last two deliver the greatest improvement in operational effectiveness. Knowledge management in the form of a transfer of skills and knowledge to clients is a prerequisite to the quest for greater client self-sufficiency mentioned earlier. I would add two questions in this series: the first regarding practice management skills for individual lawyers and another concerning work intake and allocation protocols.
The last set of four statements is focused on managing external counsel. In that sense they are financial. The statements deal with assessing external legal spend, evaluating law firm performance, strengthening relationships with external counsel, and cost and quality management. These are excellent assessment criteria and should drive 75 per cent of companies to improve the cost-effectiveness of external legal spend. I would add two other areas of assessment: the extent to which legal project budgeting and management are applied for complex work, and migration to non-hourly based fee arrangements in order to secure measurable performance from law firms.
Looking over the revised set of 20 questions, I rely on four guiding principles when evaluating world class law departments and “accelerating” the legal function. The first is a significant contribution to strategic and developmental projects in the company, many of them market-facing. The second is specialization of the lawyers by type of law, by business sector or both. The third is formal training in leadership, business fundamentals, project management and negotiation skills. The last performance driver consists of retaining external counsel using performance-based fee arrangements.
It is easy to be an armchair critic of what is already a good diagnostic tool. Replacing five or six of the areas of assessment prompts a range of strategic questions aside from the operational concerns and will challenge corporate law departments that are already performing well.