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Evaluating the performance of an in-house legal department can be difficult. There's no billable hour game to be won. Showing how much litigation exposure has been reduced is a difficult art. Hence, many companies adopt sometimes frustrating performance metrics that look at legal department spending, staff workload, and cycle time to evaluate in-house lawyers.
But one insightful metric that is often overlooked is outside counsel. Evaluating outside counsel not only helps you justify performance and cost, but can identify the most valuable outside counsel to work with in the future.
Grading Your Outside Counsel
Once you start handing over work for hourly billing, you want to make sure that you're getting the best value. One of the ways to do this is to track the performance of your outside counsel. Of course, total cost and outcome are easy metrics. But they're not the only ones that can show outside counsels' value.
You'll want to take into account a variety of factors when evaluating outside counsel. Knowledge of company culture and the strength of outside counsels' work relationships should be considered. After all, you want someone who is skilled and has reasonable rates, but you also want someone who can work well with their in-house counterparts. Counsels' expertise should be considered, as well as their responsiveness. Finally, bonus points go to those outside attorneys who are willing to consider alternative fee arraignments which reduce overall legal costs.
Tracking Outside and In-House Legal Spend
Of course, don't forget the Benjamins. Patrick Johnson, of Serengeti Law, recommends looking at outside legal spend as a percentage of company revenue. But, tracking outside spend needs to consider internal legal department spending as well. Johnson says that this is a great "sleeper stat." In Thomson Reuters' Legal Solutions blog, he writes that "in my experience, very few legal departments are tracking this but it has the potential to add a great deal of value."
Comparing spending on outside counsel and in-house legal work can help demonstrate the value of an in-house team. For example, a company may spend $200,000 total on an in-house attorney. If hiring a new in-house attorney brings down outside legal spending by $300,000, it's a net gain for the company. If outside legal spending only goes down by $100,000, it's not.
Of course, when you're evaluating your in-house performance, a host of metrics will need to be considered. Outside counsel is only one piece of that puzzle -- but it's an important one. Analyzing the performance of outside counsel can help you justify the worth of your in-house work as well as the value of your outside partners.