Telling the story of your law department: 12 metrics to convey the value of the in-house legal team

Leaders of corporate law departments struggle to change the continued perception that the legal function within a corporation is a cost center. Without doubt, legal matters are an inherently expensive part of running a business, but that does not mean that the core view of the internal legal department needs to center around how much it costs.

Rather, corporate general counsel (GCs) are striving to shift the discussion to center around the value that the law department contributes to the business. However, this new mindset is not an easy one to shift to, especially with the traditional metrics reporting that GCs often provide to the business.

Much of the discussion in the recent 2024 State of the Corporate Law Department Report focused on an examination of the four key areas of responsibility for today’s corporate law department: effectiveness, cost efficiency, protection, and enablement. Some of these are natural areas of strength for in-house legal teams, such as protecting the business and providing effective legal representation. Yet others are a natural fit as well: Cost efficiency is an area in which law departments have built deep experience over years of continual focus; and enabling the business represents a potential growth area for those GCs who seek to transform their function from the Department of No to the Department of How.

Yet, no matter how skilled a law department may be at performing in these areas, many still struggle with how to report on their performance. Even in an area like cost control on which GCs have been focusing for years, their ability to report on how that focus contributes tangible value and cost savings back into the business may be lacking.

Rethinking law department metrics

In the State of the Corporate Law Department Report, each section around these four areas of responsibility concludes with a portion called For your consideration. There, GCs can find a selection of three metrics for each of the key focus areas that can help in-house law departments better and more effectively tell their department’s story. Together, these 12 metrics can help progressive GCs transform how their law department is viewed by the C-Suite.

Effectiveness

1. 1. 1. Employee engagement score — taken across the legal team and compared with a company-wide benchmark
      2. Matter success score — taken as a 1 to 10 score ratings on how well a matter’s outcome met business objectives, which can be rated by outside law firms, the in-house legal team, and stakeholders across the business
      3. Satisfaction with outside counsel — rated by the in-house legal team and comparing scores across the firms with those other departments or internal leaders with whom your department works with on a periodic basis

Cost efficiency

1. 1. 4. Proportion of revenue spent on legal — this should be benchmarked against industry and geography
      5. Internal to external spend ratio — comparison on costs of outside counsel to work done internally by legal team
      6. Time saved through automation — comparisons should be made to previous work processes

Protection

1. 1. 7. Number of risks mapped — this should be compared to the number of critical incidents
      8. The amount of fines, penalties, and payouts — this should be compared to similar companies and may be anecdotal rather than hard data, but either way, it’s a good method to show the value of the absence of risk
      9. Prevalence of risk awareness and compliance training — this should track the level of internal risk-mitigation education across the whole business

Enablement

1. 1. 10. Percentage of legal team’s individual objectives aligned to company’s vision and goals — to show how the legal team is lining up with the C-Suite
      11. Number of new product or service pitches — Those in which the law department was asked for an assessment of costs and risks should be tallied
      12. Legal attendance — the presence of legal department representatives at Board of Director meetings and early consultation on strategic decisions should be noted

This collection of metrics will not be the complete answer. And determining the exact mix of metrics that best tell the story of a particular law department will vary based on a variety of factors, such as what matters to that particular company’s C-Suite, corporate board priorities, specific department priorities, industry sector macroeconomics, mix of matter types, and more.

Rather than being the secret formula to the question of which metrics matter the most, GC should see this list instead as a way to spark new ideas around gathering certain law department metrics and using them to demonstrate the value of the department.

A full story in one investment

For a brief example of how this can work, let’s build off the suggestion of savings gained through automation. A focused set of metrics centered around an investment in technology may actually serve multiple purposes. For instance, if a company were to invest in an automated document generation tool for non-disclosure agreements (NDAs), clearly there would be metrics around the cost of that investment.

However, that investment would also demonstrate a potential improvement to the effectiveness of the law department due to consistent quality of output, which are now based on form documents and managed inputs into those forms. This investment could represent overall cost-savings through a reduction in either: i) reliance on outside counsel; or ii) in-house working hours spent producing NDAs. Moreover, the business would theoretically be better protected through an increased prevalence of the use of NDAs when engaging outside partners. And easier engagement with outside partners could enable faster growth of the business through more streamlined pathways to innovation. Thus, we can see that one investment — if undertaken strategically and reported on effectively — can tell a compelling story that more clearly demonstrates the value of the law department.

Telling that story, however, involves rethinking how the corporate law department tracks and reports on its achievements. How that story comes together will very likely vary by department, but the key aspect of taking a fresh approach will be unavoidable and may result in the kind of shift in the mindset of C-Suite members that some GCs have been seeking.

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For more on this topic, check out the Thomson Reuters Institute’s recent 2024 State of the Corporate Law Department Report here.