Showcasing Legal ROI

GCs understand that the legal role delivers significant value to the organization in countless ways and across numerous functions. Still, GCs and their legal departments are often unfairly viewed as cost centers and road blocks. It follows that to be effective, a GC must proactively position herself within the company as a key strategic partner with the ability to not only reduce risk and manage legal matters, but also to drive revenue and innovation (Part 1 of this article explores this point in greater detail). One way to encourage business teams to view the GC role in this strategic light is for the GC to demonstrate legal’s value as a calculable ROI that can be tracked and measured. GCs that embrace regular data-driven reporting can significantly boost visibility and support for the legal department.

The first step is to develop KPIs that track key legal performance metrics and demonstrate value.  Although KPIs for a legal department can vary significantly depending on the company’s business, products, industry, and size, the first step is to develop a strategic approach to the project as a whole by considering the following:

1. Identify audience & metrics  
Dashboards or reporting systems should be designed to provide executives with a high-level overview of KPIs that are tied to operational functions owned by the legal team, particularly those with a direct impact on the balance sheet/P&L. For example, a dashboard tracking contract activities might display key metrics such as the number of contracts in progress, total contract value, and additional cash flows resulting from revised payment terms. It may surprise executives to learn that a legal department is handling negotiations worth millions of dollars in potential revenue or critical services.

2. Create a dynamic dashboard
When building a reporting format or dashboard, pay close attention to the visual elements that will enhance readability. This detail can boost the GC’s image as an integral part of the business team, conveying expertise of key concepts through impactful presentations and reports that include graphic and other visuals. If possible, legal should involve marketing or a graphic designer to assist with this work; if necessary, include a small line item in the budget for this service.

3. Determine  reporting periods
Determine an appropriate cadence for regular review and assessment of the KPIs being tracked on the dashboard and whether you have the bandwidth to maintain your own reporting system. Most reporting in companies is updated quarterly, or at least twice a year, but decide what makes the most sense given resources.

4. Share your success
Provide regular reports to key stakeholders, with summaries that highlight successes, areas of improvement, and any opportunities for optimization or cost savings. Dashboards might be accompanied by concise, yet compelling, reports explaining the story told by the metrics and how your strategies have positively impacted the organization, including cost savings, risk mitigation, or increased efficiency.

KPIs by category
To further assist you in developing appropriate legal department KPIs, below are some of the more common data-driven functions I have seen tracked by legal teams to help measure their performance across various functions (in no particular order):

• Contract Management
  • Timeliness of contract review and negotiation (eg. # days turnaround)
  • Quality of negotiated terms; payment; liability caps; indemnifications
  • Renewals, re-negotiations, price reductions
  • Cost savings or efficiencies increases with contract management
  • Monitoring vendor or partner compliance with contractual obligations
  • Resolution of contract disputes or breaches

• Intellectual Property Management
  • Protection and enforcement of intellectual property rights
  • Monitoring of IP portfolio growth and strategic alignment
  • Tracking and projecting costs of program
  • Communication and reporting on IP issues
  • Number of cease and desists (issued or received)

• Data Privacy and Security
  • Compliance with data protection laws (e.g., GDPR)
  • Number and severity of data breaches or security incidents
  • Cost of obtaining legal expertise of the issues
  • Costs of non-compliance and risk assessment
  • Implementation of technology fixes (eg., click to accept)

• Regulatory Compliance
  • Costs of enforcement and implementation
  • Costs of obtaining outside expertise
  • Number of regulatory violations and penalties
  • Number of audit and investigations

• Legal Team Management
  • Ratings/feedback from internal clients (e.g., executives, department heads).
  • Responsiveness and quality of legal services provided
  • Workload distribution and case management within the legal department
  • Time spent on legal tasks and projects
  • Adherence to the legal department budget
  • Cost containment and cost reduction efforts
  • Staff turnover rate and team morale
  • Promoting diversity within the legal department
  • Tracking diversity and inclusion metrics in legal hiring and promotions

• Outside Counsel Management
  • Cost-effectiveness of external legal counsel
  • Evaluation of external counsel performance
  • Reduction in outside counsel spend
  • Innovative billing structures

• Risk Assessment
  • Identification and mitigation of legal risks
  • Risk reduction over time
  • Compliance with risk management guidelines
  • Employee participation in compliance training programs
  • Assessment of training effectiveness

• Ethics and Corporate Governance
  • Ensuring adherence to ethical standards
  • Compliance with corporate governance principles
  • Board and executive team satisfaction with legal services

• Strategic Legal Initiatives
  • Contribution to company strategic goals
  • Successful execution of legal projects supporting business objectives

• Litigation Management
  • Number of active legal cases
  • Reduction in the number of legal disputes
  • Cost of litigation per case
  • Settlement case – costs
  • Success of resolution

As a GC, you know that the value you bring to your clients and organization far exceeds the benefits reflected by data. To be viewed as a true strategic partner, however, a GC has to demonstrate that she is not just performing legal functions, but also acting as a business executive to drive value for the company and effect positive change. The best way to show value is to develop KPI’s that support and showcase your successes and the benefit they bring to the company overall. If you would like to discuss these strategies in greater detail, please contact Deborah Stehr at [email protected].

Deborah Stehr is a Partner with OGC and brings over 25 years of transactional and technology experience with a particular focus on the consumer goods industry, including digital services and e-commerce. Deborah has considerable experience in structuring both domestic and international arrangements for the manufacture, supply, distribution and sale of goods, as well as in protecting and monetizing brands and intellectual property throughout the product life cycle.