How to: set in-house KPIs

One attraction of being an in-house lawyer is the multi-faceted nature of the role. Working in-house is not just about providing legal advice, but also applying one’s legal knowledge in day-to-day business situations and being involved in key commercial decisions that shape the business.

With this in mind, key performance indicators (KPIs) can be useful management tools that help in-house teams define their goals, measure their performance against set objectives and, most importantly, demonstrate their value to the business.

Organisations will generally have over-arching KPIs in common around customer service. But in-house teams should have specific KPIs targeted to their departmental requirements.

Broad KPIs are unhelpful, explains Maaike de Bie, deputy general counsel for Royal Mail Group: ‘With our old legal panel, we had KPIs but they were not specific enough, so they were hard to measure. They became more of an “escalation discussion point” rather than a proper assessment tool.’

KPIs for Royal Mail’s legal panel were ‘generic’ and ‘self-certified by panel firms’ de Bie says. ‘I had no way of saying, “well, here’s our own data and that does not add up”.’

Royal Mail has now established an RMG Legal Community. This collaborates with its new panel of 12 UK and two international firms to deliver legal and value-added services to the organisation.

‘The plan is to meet on a regular basis, and discuss and decide what these [services] could be,’ says de Bie. ‘We have already set up a training community and agreed a way to help us stay informed of any upcoming law and regulation. We plan to discuss our diversity agenda with our firms and set any KPIs through this forum as well.’

Other KPIs the RMG Legal Community is likely to consider concern financial and budgetary matters: ‘We have made it clear to our firms that we look for either fixed or capped fees, with the hourly rate more of an exception,’ de Bie says. Additional measures could include a firm’s compliance with Royal Mail’s invoicing process; the way the panel firm agrees legal services requests; the accuracy of a firm’s estimates; and how well it keeps Royal Mail informed of changes in scope so that, for instance, fees can be reassessed.

Developing feedback

Demonstrating value to the business is especially important for local government lawyers, who operate against a backdrop of cuts that show no signs of abating.

Councils’ government funding has fallen by 28% in real terms since 2010, a figure that is expected to reach 37% by 2016, according to a National Audit Office report.

David Tatlow, director of legal and democratic services at Birmingham City Council, believes he is ‘reasonably well-placed’ to demonstrate how Birmingham’s legal services operation is performing. KPIs enable Tatlow to defend his service: ‘If I can’t do that,’ he says, ‘…finance [may] come and say “you’ve got to cut the service by £x”, and you won’t know for sure whether you can do that or not. You’re in danger of taking on work you might not be able to do properly and you could be in breach of regulations.’

Unlike in private practice, where profit maximisation is key, local government KPIs focus on spending. Tatlow says: ‘We strive materially to cost the council as little as possible, which is almost as challenging as trying to generate more clients and increase your turnover.’

Tatlow has indicators that monitor the volume of work coming in and out, and lawyer time spent for each work type. He is informed – via the council’s bespoke IT systems – what the average time taken is for each work type on a quarterly basis. He also seeks opinions from managers and directors to gauge their satisfaction with work undertaken in that particular quarter.

Results demonstrate the legal team’s strength, but, equally importantly, their weaknesses. The latter can become manifest for a number of reasons, Tatlow says, such as complex work or management issues: ‘With that information, one is able to do something to put something right that has gone wrong.’

Designing KPIs

Tatlow acknowledges that some lawyers will think he has gone too far with the level of detail in his KPIs, but he warns: ‘I would not be surprised if in local government there’s still a great reliance on the fact that most lawyers work hard and do their best. You can trust most lawyers and staff will do their best, but [without KPIs] you cannot produce any real evidence [to support that].’

Trying to come up with effective KPIs can be as difficult as monitoring one’s performance against them. So where should one begin?

‘Start with the basics,’ Tatlow advises. ‘If you want some data, I would want to know: level of instructions in; level of completions out by work type; and amount of work in progress.’

Too much work in progress could lead to inefficiency and stress, he says. Too little could indicate that the department has too many staff.

‘Ask questions or put something in place to evaluate that data,’ Tatlow advises. With too much work in progress, ‘throwing staff at the problem is not the answer. You need to find out why you’ve got too much work in progress’. Regulatory requirements can provide a ready-made set of KPIs.

The outcomes incorporated in the Solicitors Regulation Authority’s Code of Conduct describe what firms and individuals are expected to achieve in order to comply with the regulator’s 10 mandatory principles (do not allow your independence to be compromised, for example). With in-house teams, different outcomes may apply depending on whether you are acting for your employer or for a client other than your employer, as permitted by rules 4.1 to 4.10 of the SRA Practice Framework Rules. Each outcome can form the basis of a KPI.

As Weightmans compliance consultant Michael Black explains, one can establish a KPI around the management responsibilities that are required of in-house solicitors to set up systems and procedures for the identification and management of conflicts.

Private practice KPIs will predominantly be linked to finances (billing and work in progress, for example). But these are not always appropriate for in-house teams. Black suggests having financial KPIs, such as external spend on law firm advice, or KPIs on percentage of matters retained in-house.

The local government funding crisis has spurred a new wave of transformation and innovation in council legal departments. Responses include shared services arrangements and revenue-earning alternative business structures which, Black says, open organisations up to full regulatory scrutiny. ‘Financial KPIs would then apply, as would the need to comply with the Solicitors Accounts Rules,’ he notes.

Adding value

While KPIs can be helpful to in-house teams, establishing a raft of overambitious or impractical set of indicators can be counterproductive.

At biotech giant Roche, setting targets is not straightforward. Funke Abimbola, managing counsel (UK and Ireland), explains: ‘Some in-house teams have targets for turning around contracts. We aim to acknowledge emails on the same day we receive them with an estimate of when the work can be done. However, many of the contracts we deal with are bespoke, so we cannot set a target as such.’

That said, Abimbola’s legal team relies heavily on feedback from its internal clients, which ‘often shapes how we carry out our work’.

Roche’s lawyers ensure they add value in various ways. ‘For example, a key way that we help manage legal risk is by providing bespoke training to our clients,’ Abimbola says. ‘When it comes to contract negotiations, we make sure we provide input where it’s most valuable. We make sure we’re visible in the way we partner with the business.’

Roche has seven franchises covering different product lines and therapy areas. Each member of the legal team, Abimbola says, has at least one franchise team with which to partner.

Value is key

The in-house sector constitutes nearly a quarter of the profession and continues to grow. But while it is no longer the ‘second cousin’ to private practice, lawyers cannot afford to become complacent about their role within the organisation, particularly when the organisation happens also to be their client.

‘If you were an employer and had a significant in-house service, why are you allowing that service to grow to an extent that it is costing you more money?’ Tatlow asks. ‘You need to know that in-house services are providing better value than if you were buying [those services] from an external law firm.’

• The In-house Division of the Law Society provides support and advice on key issues facing all in-house lawyers, working in both the corporate and public sectors.