Legal leadership gauges performance
Legal leadership gauges performance
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An extensive new report helps measure performance, improve efficiencies and save costs for corporate and government legal departments.
The ACLA/CLANZ Legal Department Benchmarking Report 2008 delivers the results of a survey of more than 125 companies and government agencies that together spend over a billion dollars on lawyers each year. The report was commissioned by the Australian Corporate Lawyers Association (ACLA) and Corporate Lawyers Association of New Zealand (CLANZ).
Millions of dollars in savings
“Many legal teams could implement systems to improve productivity and save money” says former CLANZ president Ron Pol, whose professional services company Team Factors conducted the survey.
“The hold-up is not usually financial – there’s always budget to boost productivity – but more to do with attitudes. One general counsel recently told me that his legal department would rather just tell the chief executive that they’re doing a good job than take the risk that objective measures might indicate areas for improvement. For most of the participants in this research, however, ‘it works, so why change?’ is probably the wrong question. ‘It works, but can it work better?’ is the mark of a new breed of legal managers, constantly on the lookout for new ways to improve the effectiveness of legal service delivery. For some companies and government agencies, even a 10% improvement can mean millions of dollars in savings.”
Leaders whose legal teams seem constantly in ‘overdrive’ often express concern about seemingly constant urgency pressures, which simple ‘size of legal team’ comparisons can’t address. This is because legal departments with the same number of lawyers might deliver services to different sized organisations, making direct comparisons difficult.
Introducing ‘like-for-like’ measures, the report delivers ‘normalised’ data in which actual figures are translated into findings more capable of comparison across different organisations.
Cost comparisons with law firms
Financial data also highlights the gap between the hourly cost of in-house lawyers and law firm hourly rates.
The median fully-loaded in-house counsel hourly cost based on total hours worked is A$149 in Australia and just NZ$81 in New Zealand. Even on a ‘chargeable hours’ basis similar to law firm measures, the median hourly cost of in-house counsel is A$222 and NZ$121 in Australia and New Zealand respectively; considerably lower than the top rates paid to law firms, which are sometimes as much as $600 per hour, or more.
“Little wonder”, says Peter Turner, chief executive of the Australian Corporate Lawyers Association, “that not a single respondent reported anticipating even a moderate reduction in the size of their legal department over the next two years.”
“This correlates closely with the top issue facing legal department leaders,” adds Richard Stock, founding partner of Catalyst Consulting. “Workload/time pressure is the number one issue, with the need to reduce outside law firms’ costs another. Although many issues need to be considered in decisions about the optimal legal department size, the quickest way to relieve both issues at once is to increase the size of the legal department.”
“The findings support this. Most legal departments predict growth, albeit at a moderate pace over the next two years”, Stock added. “This presumably reflects that workload and cost pressures are tempered by the need to make carefully considered decisions, and difficulties facing in-house teams and law firms equally, particularly the need to attract, retain and motivate good lawyers. This also features as a key issue facing legal department leaders.”
Detailed management information
The report contains detailed information about the management of legal departments in Australia and New Zealand, including reporting structures, the types of work performed in-house and by law firms, top monitoring practices and metrics, and key factors affecting legal department growth; with numerous graphs and tables outlining financial and other findings.
Financial measures and metrics also include total legal spend, legal costs as a percentage of revenue, legal costs per employee, the ratio of in-house to outside legal costs, and internal legal costs per lawyer employed. Many of these metrics are further analysed by country, sector and other relevant criteria, such as the size of company or legal department.