Most in-house departments measure costs, but not value delivered

Most in-house departments measure costs, but not value delivered
When asked what metrics were being used, in-house leaders told Acritas the area they measure most is spend at 33 per cent with internal client satisfaction much lower on the list.
According to a recent survey by Acritas, 25 per cent of legal departments in large organizations have no metrics to measure the value they deliver to the organizations they serve, and those who do are primarily focusing metrics on costs.

In a recent survey Acritas asked what metrics general counsel are using to measure success as a department. While 75 per cent say they do use metrics, few align to a range of legal department goals. Of those that responded, only nine per cent measure the quality of work they produce, and just six per cent measure how much work they handle. There is in fact an “over-emphasis” on cost at 33 per cent, as opposed to proactive risk management, effective legal support, and creating value through efficiency.

“Bearing in mind everybody we interviewed was at least a $1 billion or more in revenue it was quite a surprise that that high a proportion wouldn’t be doing anything in that regard,” says Acritas CEO Lisa Hart Shepherd.

Of those that are tracking some metrics the most common was around legal spend.

“They are measuring budget as opposed to value. They are measuring more the cost — either external spend or the total spend of internal department plus external spend with law firms etc,” says Hart Shepherd. “The problem is the overemphasis on cost — if it was just cost that were important you wouldn’t spend anything and that’s certainly not what shareholders are looking for. They want to know the organization is being safeguarded and they are maximizing the commercial value ad, protecting IP, looking at contracts, and minimizing litigious situations, things like that.”

The survey also found a number of general counsel that would measure quality but in different ways such as internal satisfaction and measuring how the clients in the business are satisfied with the provision of legal and others might be taking a more subjective view.

“They might see it as ‘Well, we get no complaints’ then no complaints means they are happy with the service,” says Hart Shepherd.

Out of the 1,000 responses there were between 50 and 100 doing something more interesting with metrics. From those best practice approaches, Acritas created the Acritas Peer Model — a metrics-based framework to measure the value generated by legal departments and to help facilitate a deeper conversation around value.

“We’ve done it as a thought-leadership exercise to try and help develop the profession,” says Hart Shepherd. “It’s meant to be food for thought and then they can look at it and apply what is most important in their business. Ideally we’d like them to take part in our survey and then we can provide benchmarks they can filter to look at by similar peers.”

So a large energy company based in Canada can compare themselves to similar sized organizations in the energy sector to see if their spend is in line with what it should be — where do they fit in the spectrum, team size, etc.

“That can help give them a more objective assessment they can take to the C-suite,” she says.

The survey also looked at metrics around risk prevention — measuring and mitigating risk better.

“We looked at how often are they mapping the risks faced by their organization, do they have embedded lawyers in the organization — some more practical aspects,” she says.

Acritas surveys more than 2,000 general counsel every year.

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