There’s an old and oft-cited saying in our business: “There are tests and there are opinions! I usually resort to the mindset – “If you can measure it, you can manage it.” Measurable results, it is widely accepted, enables clearer visibility of performance and provides valuable quantitative data to evaluate what is working and what is not. And as platforms, software and systems continue to evolve and improve, the availability and breadth of data and analytics have vastly expanded, empowering organizations to set, track and report more Objectives and Key Results than ever.
Objectives and Key Results “OKR’s” measure data metrics used to determine how effectively a business or business unit is achieving its most important objectives. Common marketing OKR’s include, sales/marketing qualified leads, site traffic, conversions, and cost per acquisition. Common Call Center Support OKRs include availability, call handle times, utilizations and client satisfaction. These and other responsible business units rely on OKRs to demonstrate their performance on a data metrics basis.
In-house legal departments, on the other hand, fail to measure their performance or at best have been late OKR adopters and many have generally avoided the same data measurement and reporting requirements of their sister departments. Organizations may not readily recognize the application of metrics and analytics to legal work and performance. But, as this article will describe, OKRs can generate illustrative and valuable data for legal departments to better measure the quantity and quality of the support function it provides to the business. Below are a few ideas for consideration.
Perhaps the simplest and most obvious commercial legal metric is the number of contracts a business closes in a fiscal quarter and/or fiscal year. Signed or executed contracts is indication of commercial legal work volume. Signed contracts can include product sale agreements, employment agreements, license agreements, revenue agreements, subscription agreements, services agreements, list management agreements, order documents, insertion orders, statements of work, nondisclosure agreements, and so forth—whatever contracts the legal department is called upon to develop, draft, review, redline and negotiate with customers, suppliers, subcontractors or partners. A signed contracts OKR demonstrates not just workload, but workload that is tied to revenue and business won. Admittedly, though, it’s an incomplete measurement of commercial legal work volume.
Not every contract undertaken and negotiated will close, and usually that result is by no means Legal’s fault even though it may sometimes feel presumed that it was Legal’s fault. And many contracts are of the nature of an expense to the Company for goods, services, resources or tools that will generate revenues e.g. employment agreements. A signed contracts metric necessarily ignores the time and efforts expended on deals that don’t close and those contracts that are not revenue generation. And while those efforts are worthy, they are really not worthy of reporting. However, reporting commercial activity that directly ties to signed transactions and revenue shows contributions to and alignment with desired business results.
Tracking this data quarter over quarter has another meaningful effect. It shows differences in commercial legal activity by quarter. Signed contracts also enables a manager to better oversee attorney workload and balance work among the team. In sum, a signed contracts OKR provides some cdata of workload and effort while simultaneously directly evidencing contributions to the Company and assisting the team members with the desired business outcomes and/or generating revenue.
Another deeply illustrative commercial legal OKR is contract quality. It is a measurement of how standard or favorable to the business the resulting terms and conditions are of the signed contracts. Or, alternatively, it captures if nonstandard or risk-inducing terms were added. Contract quality can be measured by creating a list of the most key and important terms of a contract and creating a grading scale.
Terms such as limitation of liability, indemnification obligations, termination rights, payment terms, etc., are given a numerical value whereby standard or favorable terms would yield the best grade whereas nonstandard or unfavorable terms will drive a lower grade In the end, every contract can have a grade or numerical value that demonstrates the favorability or risk of the contract. And that, in turn, demonstrates the quality of work Legal is doing. If the aggregate grade of all contracts signed in a quarter is an “A” or “B”, it stands to reason Legal has done an admirable job negotiating with customers, maintaining contracting standards and mitigating risk.
If on the other hand, the aggregate grade for contracts is low, Legal may be permitting too much deviation from its contracting standards and is saddling the business with too much risk. Organizations can even choose to make a rule: All A or B contracts can stand, but all C, D or F contract require improvement. And contract grading not only has the effect of characterizing the favorability of signed contracts, it also inherently drives a culture of accountability among the commercial lawyers.
Knowing their work will be graded after the fact encourages the commercial lawyers to more carefully negotiate contracts in strict alignment with the business’ contracting standards. Similarly, the exercise can identify to a manager if an attorney may need additional training and guidance in navigating certain contract issues.
At least one other OKRI for consideration is internal client satisfaction. Measuring internal client satisfaction is a powerful mechanism to gain valuable perspective on the perception of the legal department and its work. It generates important and actionable feedback. And, perhaps most important, it provides a clear and predictable forum and mechanism for internal clients to provide that feedback.
Contract volume and quality are important, but if the sales organization does not see value in Legal’s work, something is wrong. Client satisfaction surveys help bridge the gap between work output and the internal client’s impressions of that work. The right number of questions and ideal frequency of a client satisfaction survey program will vary based on business and organizational dynamics.
Altogether, the results and comments generate great data to share with both the business at large as well as with the Legal team itself, and compliments and contextualizes the contract volume and quality metrics. Internal clients appreciate a (right-sized) opportunity to share feedback, and the supporting attorneys appreciate hearing how well they’re doing from the client’s perspective. And the aggregate satisfaction rating becomes a standard by which Legal can strive to consistently meet with their dedicated hard work.
“If you can measure it, you can manage it.” Obviously every business wants to manage its legal function as well as possible, and measuring relevant quantitative data is an invaluable tool to do so. The best legal departments have data to prove they’re the best. The best legal departments measure and report metrics in a similar manner as other business units. But the exercise need not be elaborate or burdensome.
A few verifiable data sets that duly demonstrate Legal’s work and support of internal clients can generate meaningful visibility into performance and perception. In sum, every modern in-house legal department should be utilizing data and metrics for better visibility into its work output, client support and its achievement of objectives, and better management of the team itself.