Where should in-house legal teams start their transformation journey?

November 01, 2021

Partner, Legal Business Solutions and Tax Reporting & Strategy, PwC Canada

Establishing the right metrics and collecting insightful data is key to rethinking compliance and managing risk within the legal function.

A cultural shift is underway within many in-house legal functions. As they respond to a host of new demands—be it pressure to reimagine operating models, cut costs or adopt new legal technologies—they also have fresh opportunities to elevate their traditional risk management role and strengthen their positioning as business partners to senior leaders within their organization.

But legal functions can sometimes struggle to align their activities with—and their impact on—the broader enterprise-wide objectives. It’s a challenge that often stems from a lack of clarity around the vision and positioning of the legal function and how it supports the business.

Consider your ability to answer the following questions:

What is the mandate of the legal function? How does it support the business? Do you have the right mix of capabilities on your team?
How does the business perceive the value of the legal function? Is the legal spend aligned with the organizational objectives and risks? How can you reduce legal expenses?
What legal technology solutions would best unlock efficiencies?

But amid this desire for change and to do things differently, legal functions are often missing a critical component necessary to start their transformation journey: data.

Transforming your legal function across your people, processes and technology can help you meet rising expectations, reimagine and enhance your compliance programs as well as align your activities—and budgets—with broader organizational priorities.

Measuring the right metrics

Legal function transformation is a tangible, multi-phase journey supported by a business case and return-on-investment analysis. Building that business case and analysis requires data. And data collection requires tools and technologies to properly capture the information. But a transformation effort is needed to introduce new tools and technologies—leaving many legal functions feeling caught in a Catch-22.

The solution is to find a way to capture data informally. This enables a high-level analysis to support the business case for introducing new tools and technologies, which in turn collect additional data and facilitate further insights to fuel the transformation effort.

But the first step is to identify key performance indicators and metrics, which typically fall into two general categories: internal assessments and external measurements communicated to stakeholders outside the legal function.

For chief legal officers, general counsel and other leaders, identifying the right external metrics typically starts with several fundamental questions:

What is your vision, mission and objective?
What does the legal function exist to do?
What are the organization’s expectations of the legal function?
How do you ensure your activities and budget are aligned with the business’s expectations of the legal function?

If your answers revolve around managing risk, for example, your KPIs may involve minimizing material deficiencies or missed contract obligations. On the other hand, organizations that are very active in pursuing mergers and acquisitions, investments or other deals may look to their legal functions primarily to facilitate business. In that context, a key metric may measure the average time it takes to review a contract, as opposed to risk-focused KPIs.

Similarly, your internal performance metrics and KPIs should be specific to your legal function and organizational objectives. Key measurements and questions can include the percentage of your team’s time spent on work that’s aligned with the strategy of the legal function as well as whether work is being assigned equitably to resources within the department.

Legal technology tools can help track this data as well as introduce workflow efficiencies. A matter management system, for instance, can assign tasks to the appropriate team members, track lawyers’ capacity and automatically notify specific individuals when a matter exceeds a risk threshold.

It’s also critical to understand your legal costs—both for external counsel and internal resources. Correctly harnessing the data collected in an e-billing or legal spend management platform will help you extract information on your per-hour costs as well as gain more granular insights, such as expenses related to specific areas like privacy or intellectual property matters.

Tools and technology can also provide greater visibility into contractual obligations that are difficult to monitor manually. A contract lifecycle management platform can track the status of payments and renegotiations as well as recognize savings by flagging instances of non-compliance early. It can also assist the legal function advise senior managers on opportunities to increase revenues by, for example, exercising unrealized pricing adjustments.

Elevating your role

Once you’ve established your key metrics and collect a sufficient volume of data over time, your legal function can better grasp—and quantify—its current operations, establish a clear picture of its current state and identify how it wants to change. You’ll be better able to track and manage impact, as well as ensure your alignment with the organization’s objectives. And it becomes easier to demonstrate progress on your KPIs—as well as your organization’s priorities—and communicate your results to senior management.

Additionally, pain points that were previously only anecdotal become backed by data. Armed with objective criteria and metrics, legal functions can build the case for investments in areas such as talent or technology to address those pain points.

Collectively, these insights can inform action plans for boosting the value of the legal function as well as making progress on data-driven KPIs. With greater visibility into their operations, legal function leaders can become even better stewards of their organization—elevating their role as a strategic business advisor.

We’ve seen how powerful the outcomes can be when organizations identify the KPIs and metrics that inform their legal function transformation. This is a key step to rethinking how legal functions are organized, identifying opportunities for process improvements and implementing technology-enabled solutions that elevate an organization’s compliance program from a cost of doing business to a competitive advantage and source of value creation.

Are you ready to start your own transformation journey? Reach out to start the conversation today.