How Do I Know if My Legal Department is Ineffective?
In the global context of the effectiveness of corporate lawyers, there has always been the problem of evaluating the work of a lawyer by the owner of the company. Unfortunately, management is often far from understanding the nuances, details and specifics of the work of the in-house lawyers department.
The legal department of a large company is a type of insurance company, and it knows all the legal risks, how to prevent them, and how to turn them into an advantageous opportunities.
Therefore, it is very important to the legal department works effectively and for the benefit of the company. Here we will talk about how to determine the degree of effectiveness of your legal department.
What does an effective legal department look like?
Here are several criteria that determine the effectiveness of a legal department:
- The work of the legal department satisfies the company’s business units and is consistent with its global strategic goals;
- Legal department leadership has a say/participates in key business issues;
- The legal department monitors market changes, analyzes its internal processes, and pain points that can be improved with the help of technology;
- The amount of internal resources is optimal for solving legal tasks;
- The department plans for costs and exercises tight control over finances.
If you, as the head of a legal department, can say that your department meets the above criteria, you have laid a good foundation for your legal department. Let us explore other ways to evaluate a legal department.
How to evaluate the effectiveness of your legal department?
- The number of lawyers. One of the key factors in the effectiveness of a legal department is the number of lawyers. Companies usually decrease the number of employees to reduce costs, but this is fundamentally wrong. To gauge the effectiveness of a department, you would need to draw the organizational structure of the company and calculate how many lawyers are involved in it. Then, you would the performance of the lawyers.
How to calculate the performance of lawyers?
1. Their quality of work. Electronic document management systems allow department heads to see how many iterations it took for a legal task to be completed, and how relevant those changes were;
2. The number of mistakes due to human error. Incorrect punctuation marks can change the meaning of an entire document, but errors can be eliminated by using document automation tools;
3. The number of documents processed by a lawyer. This metric helps to correctly estimate the amount of the workload of each employee;
4. Response time shows how quickly an employee begins an assigned project. The response time in combination with customer satisfaction allows the department head to assess the quality of the legal service;
5. Quantitative Metrics Analysis, which allows the head of the legal department to monitor the status of tasks. Such tools are already built into document constructors and other document automation tools;
You can make a list of lawyers and rank them from best to worst in individual performance indicators. In front of each name, it should be noted whether technology can help improve their efficiency.
2. Interaction of the legal department with other departments. An effective legal department must, first of all, meet the needs of the entire company. One criteria for evaluating a legal department is the presence of a strategic plan. The plan must be cohesive with the other units of the company. Ideally, the legal department should report directly to the CEO of the company. In this case, the distribution of the workload between departments will be objective. It is also important to assess exactly how communication between departments is carried out; how much time is spent on assigning tasks; the control of the various departments; and their implementation.
Communication between department heads is also important. Let’s imagine that a company does not identify the person who is responsible for negotiating the contracts between each department. In such a case, documentation will often be of poor quality. The lawyer will either do everything by his own discretion, without taking into account the specifics of another department; or he will just provide a document filled with errors. The first would not have obvious mistakes but would not be ideal; the second would obviously be bad quality.
In both cases, the entire work of the legal department is based on a person. Because of this, as a department head, you should estimate your level of dependence on your lawyers. The higher it is, the greater your risk.
3. Estimation of legal department expenses. In assessing the costs of a legal department, you should analyze internal and external costs. The wages of a department’s employees are internal, and the costs of external consultants are external. To calculate the cost of a lawyer’s salary, it is best to divide it into separate parts according to the tasks they perform. This will help calculate how much it would cost the company for them to complete a task.
4. Key Performance Indicators.
What is included in the KPI of the legal department?
- Percentage of cases successfully settled out of court;
- Percentage of cases won in court;
- Slowing down the time for consideration of incoming claims;
- The absence of errors in the documents that led to violations and disputed fines;
- Response time to inquiries from internal customers;
- The share of expenses of the legal department in the budget of the whole company.
Let’s consider examples of performance measurement in a few directions of legal cases:
- Dispute. Judicial proceedings.
In order to evaluate the effectiveness of judicial proceedings, you should consider the following indicators:
- Percentage of the pre-trial cases;
- An average cost of judicial case (including lawyer’s salary, other staff’s salary, litigation, and other costs);
- The average time from the receipt of the application from the client department to the registration of the claim in court;
- Percentage of successfully completed cases;
- Percentage of court refusal to take legal action. This helps to assess the quality of case management and document preparation;
2. Work with contracts.
In a previous article, we gave an example of how a company can save $ 7,200 per year due to automation. In order to evaluate the effectiveness of working with contracts, you need to consider this:
- The time that lawyer of your department spends on creating and approving a contract;
- The quality of the document. The revealed number of violations under already agreed contracts.
3. Corporate governance.
- Average time of registration of a new legal entity;
- Percentage of successful registrations;
- The ratio of time spent on the task, expenses, and income from each transaction.
4. Administration of the legal department.
- Number of successfully resolved cases by one lawyer;
- The number of lawyers to the total number of employees of the department (management, assistants, secretary). It’s important to understand how much time highly skilled professionals do the routine work.
As an additional KPI, you can use the coefficient of satisfaction with legal support from the company’s internal customers. Such an assessment can be carried out in the form of regular surveys of the heads of other departments of the company.
So, what’s next?
After assessing and identifying the pain points of your legal department, you should not immediately lay off employees or give them more stringent performance metrics. Your next step is to minimize your employees’ influence on the company’s good performance.
According to the 2015 Altman Weil CLO Survey, 59% of legal departments rely on greater use of technology to make their departments more efficient. Instead of forcing lawyers to draw up each contract manually, install a document constructor. In this article, we talked about how document automation tools could save money for your legal department. If your internal communication is slow, try programs that autocomplete data with the help of bots.
