5 Key Metrics for Productive Vendor Conversations
Data continues to play an increasingly important role for in-house legal teams, most notably allowing general counsel and chief legal officers (CLOs) to speak the language of data – to quantify the value the legal department brings to the company and position legal as a strategic adviser to the business.
But data isn’t just used for more productive C-suite conversations, it’s emerged as a reliable vendor management strategy, empowering in-house teams to evaluate vendors and have a baseline to discuss expectations and performance. In today’s post, we’re going to share five key metrics that help drive more productive conversations with legal vendors.
Top Metrics to Focus On
Before we dive in, know that the below list isn’t comprehensive. It is, however, a great starting point for those just beginning the vendor evaluation process, or can be used as a “gut check” to ensure you’re measuring key foundational metrics. Whichever metrics you select to measure vendor success, be sure they highlight vendor performance in addition to illustrating how the vendor meets departmental and overall organizational objectives.
- Performance indicators: We’re lumping these together, but depending on outside counsel responsibilities, they may include the number of matters open, number of matters pending, total number of completed transactions, and total number of matters closed. A legal operations platform is helpful for extracting this data and packaging it up into reports and dashboards that you can quickly glean information from.
- Average cycle time per closed matter: Being able to pinpoint that a vendor takes a longer than average cycle time to close a matter, especially when compared to vendors completing similar matters, helps identify a potential issue. Using this information, you can dive deeper into the work the particular vendor is completing and see how you can help streamline the process, provide support, or in some cases, move the work to another vendor.
- Estimates vs actuals: There’s nothing like the shock of getting an invoice that’s significantly higher than the estimate. Legal operations professionals have emerged as the collaborative piece of the equation, working closely with finance and accounting to ensure effective tracking and management of estimates and actuals. If a firm is continuously going over their estimates, it’s time to initiate an honest conversation about their efficiency.
- Average hourly rate: Knowing the average hourly rates of your vendors and law firms will immediately shine a light on any firms that are charging significantly more than others that are doing the same work. Subsequently, if you decide the quality doesn’t justify the value you may want to utilize a more cost-effective vendor, renegotiate with your current firm, or utilize an alternative or fixed fee arrangement should the work warrant this type of payment structure.
- Overall spend: Arguably most important is how much outside counsel is costing you. Combined with the above pieces of data, you should have a clear picture of what outside counsel is accomplishing and how much you’re spending on those tasks. Once you have the key data points, you can further slice the data to provide insights that inform departmental decision making such as headcount, resource allocation, and more.
For additional information about these key metrics, download our reporting white paper that provides the top 9 reports that every GC (and in-house) legal team need.
Aligning Vendor Work with Overall Business Strategy
With the above data, you can have informed conversations with your vendors to ensure the work they are doing aligns with overall business strategy and budget. Of course, there are other ways to measure value that can’t be put on paper including the vendor’s knowledge of the company and company culture and their responsiveness.
Get a jumpstart on your vendor management program and get your copy of our ‘Basics of Vendor Management’ white paper. It covers 5 key steps for starting a vendor management program, a deeper dive into the above metrics and how legal tech can help you extract this data, strategies for initiating a conversation with outside counsel and more!