An article in CCCA Mag., Vol. 1, March 2007, at 62, advocates a set of financial and non-financial metrics for demonstrating the efficacy of a legal department. Most are typical, but of the seven financial metrics, one I do not support.
The authors recommend “’new matters sent to outside counsel.” Their rationale for the metric is that it will “provide a clearer understanding of which areas of law are most frequently outsourced to external lawyers, and why.”
For several reasons I reject this metric as a benchmark. One is that there are no reliable metrics from comparable law departments. Every department defines matters differently, some do not even have a matter management system or a way to count matters. Even what constitutes a matter is hardly set in stone (See my post of April 17, 2006 on definitions of “matter.”). Even if many law departments could clear those hurdles and share their data, it is obvious that not all matters are created equal.
To count the number of matters sent outside tells nothing about why the department chose to involve external counsel. Also, does this metric suggest that virtually all the work on matters is done by outside counsel – what about the percentage contribution by inside counsel?
Most tellingly, what is the law department’s goal if it tracks this figure? Benchmarks should guide a law department toward a higher or lower number, and this metric as written does neither. It is descriptive only, not prescriptive. One department that outsources all its collection matters might have a very high number of matters sent out, whereas another department might handle them in-house. On those facts alone you cannot determine which department is the more effectively managed. This metric, as a comparative benchmark, is a very leaky boat.