“Legal departments are going to need to defend the value of their output more than ever,” PwC NewLaw says
Metrics are important to legal departments, according to a report published by PwC’s NewLaw group.
In light of the economic impact of the COVID-19 pandemic, the firm said that it is especially crucial for legal departments to prove their value as “organisational costs come under more pressure and scrutiny.”
“Legal departments are going to need to defend the value of their output more than ever and using metrics to do so in an objective and scientific way will be critical,” PwC NewLaw said.
The report emphasised the supportive role metrics play in decision making.
“Every day, legal departments make decisions. Decisions are made about resourcing, spending legal budget, training staff, engaging with clients, planning for risk events and so on,” the group said. “Often the basis for this type of decision making is essentially ‘gut feel’. Applying metrics to analyse options reduces the uncertainty about decisions ordinarily made through gut feel.”
PwC NewLaw recommends that legal departments determine the key decisions they must make, and from there, identify the crucial metrics they need.
“It is also important to remember that not everything that can be measured should be measured. All measurements must support a decision,” the group said. “And something is a decision only if there are two or more realistic alternatives with potentially negative consequences if it turns out the wrong position is taken. In other words, there must be something at stake.”
The report identified some key decision-making areas for legal departments: strategy, outsourcing and vendor management, working methods, legal skills, finance management, knowledge management, technology and innovation, data and information, business partners and risk. It also determined the difficulty of obtaining metrics for each area.
For instance, obtaining metrics related to the type of work the legal department does is of “medium” difficulty.
“All legal departments should be able to define what work should and shouldn’t be done by the legal department, although considerable work is required to compile a master list and tag work,” PwC NewLaw said.
Determining metrics for work value done is more difficult, but can be a strong support for various decisions and reports. On the other hand, metrics to determine headcount can be easily obtained through human resources.
“For too long legal departments have been exempt from using metrics to support decisions and demonstrate effectiveness. This has been to the detriment of better decision making,” PwC NewLaw said.
PwC NewLaw was launched last year, and is led by partner Mick Sheehy.