Key performance indicators or KPIs exist so they can shed insight into how well your contracts are doing. Legal departments face ever-increasing pressure to deliver contract value, streamline legal ops with shorter contract life cycle times, and improve contract management performance. If you want to improve your organizational impact and calibrate your legal contract management process, consider regularly measuring the efficacy of your contracts against KPIs.
Essential KPIs for Your Legal Department
You’ve probably heard of the SMART acronym, which means specific, measurable, attainable, relevant, and timely. The same principle applies to legal department KPIs. Since contract management KPIs will vary by industry, legal departments should have their own particular KPIs.
The only way to manage the success of any legal contract management strategy is to measure your results. To do this, you need to utilize three common umbrella KPIs that are specific areas that can also be used to measure a legal department’s contract management software ROI.
- Annual Contract Value
- Contract Value by Type
- Valur Remaining after Contract Termination
- Inside and Outside Spending
- Legal Spend against Budget
- Spend by Business Units
- Comparison to Historical Contract Trends
- Productivity Stats
- Contract Lifecycle Time
- Time Spent on Legal vs. Administrative Tasks
- Counterparty Trends
- Trends in Potential Bottlenecks in Requests and Negotiations
- Invoice Bounce Backs
- Missed Milestones
- Contract Effectiveness
- Total Number of Contracts
- Contracts by Counterparty Type
- Compliance Management
- Renewal Opportunity Realization
The Most Common Legal KPIs to Track
Having done all this important groundwork, you’re now ready to start tracking and moving numbers, in order to report KPIs to the business. Most legal teams are looking to be more data-driven and use the same set of KPIs repeatedly. These are by no means the right metrics for you, but they’re definitely common to a majority of legal teams at high-growth companies.
- Incoming Work – incoming work is classified by date/time and the type of project. This gives both the legal team and their budget controllers a clear view of what’s actually in their pipeline each month.
- Time and Cost Per Matter – these can be rough calculations rather than minute-by-minute increments, but this kind of data highlights bottlenecks and can help make a case for additional resources.
- Outside Spend – reducing this is often a key objective for pretty much any in-house lawyer, and this is easy to track in a dashboard. You can take it a step further and categorize spending by the risk and complexity attached to the project.
- Contract Review Time – often, moving this number is the main motivator for legal teams investing in contract automation software. It helps legal prove they’re not blocking contracts.
- Other Contract Metrics – common metrics to track include monthly volumes, percentage negotiated, average contract value, plus a range of other metrics.
Monitor Your KPIs with Contract Management Software
If your legal department’s contract management process isn’t producing the results you’ve been hoping for, it’s best to use management tools that could easily help in measuring their success. Contract management software can help the department hit KPI goals with contract monitoring, increased productivity, superior visibility, and risk reduction.
KPIs are essential in contract management because they allow firms to determine the success of agreements, which could eventually lead to overall success. If you’re still starting out in contract management, it’s crucial to measure the most critical KPIs to help you make the most drastic improvements needed.
Legal Technology Finder partners with law firms, corporate legal departments, and private attorneys to help them run their practices more efficiently. We make this possible by reviewing hundreds of tech solutions that could be of great value to your legal team. If you need any contract management tools for your practice, feel free to contact us.