When I speak with corporate legal professionals about their outside counsel management programs, it’s evident that there is a wide spectrum of approaches. One of the areas where I see a lot of variation is in the use of benchmarking data. Some corporate legal departments aren’t sure where to start, and even those with a benchmarking program sometimes struggle with it. Benchmarking is the process of comparing outside counsel performance, processes, and practices against industry standards or other legal departments. When paired with focused data collection, it’s a useful practice because it not only drives continuous improvement but can also enhance the value delivered by outside counsel.
Understanding benchmarking in the legal department
Benchmarking in the context of a corporate legal department involves systematically assessing various aspects of outside counsel management, such as billing rates, matter outcomes, and compliance with guidelines, against relevant benchmarks. These benchmarks might be drawn from industry standards, peer comparisons, or historical data within the organization. By understanding where they stand in comparison to others, legal departments can identify areas for improvement, negotiate better rates, and ensure their outside counsel is delivering the best possible value.
However, implementing or expanding a benchmarking program in a legal department is not without its challenges. Common obstacles include identifying relevant benchmarks, ensuring data availability and quality, resource constraints, interpreting results, and overcoming resistance to change within the organization.
These barriers, as well as difficulty encouraging adoption among busy internal teams, have led some legal departments to use minimal benchmarking – or none at all – in managing outside counsel while others make extensive use of this data. For those who wish to increase their benchmarking and data collection to improve their vendor management program, it is advisable to take it step-by-step.
Building a maturity framework: Crawl, walk, run
For legal departments looking to build or improve their benchmarking efforts, it’s helpful to think of the process in stages—starting small and gradually building sophistication over time. Using the “crawl, walk run” model can help:
- Crawl: Begin by leveraging existing industry reports to establish a baseline for benchmarking. Resources like Wolters Kluwer ELM Solutions’ Real Rate Report and LegalVIEW® Insights provide valuable data on billing rates, matter types, and other key metrics. These reports allow legal departments to start comparing their outside counsel’s performance against broader industry trends without expanding data collection beyond billing data.
- Walk: As the department gains comfort with basic benchmarking, the next step is to incorporate benchmarking technology into existing tools and workflows. This can include technology that allows access to rate and spend data segmented by factors such as industry, revenue band, timekeeper classification, and geographic location, such as LegalVIEW data and dashboards. Even collecting a few focused data points can provide significant insights and inform better decision-making.
- Run: At the most advanced stage, legal departments can add internal data collection to their legal benchmarking by implementing comprehensive outside counsel evaluations, using a combination of objective and subjective data to make informed decisions about counsel selection and rates. Objective data might include budget performance, compliance with billing guidelines, diversity metrics, and matter cycle times. Subjective data could encompass factors like the firm’s level of expertise, responsiveness, efficiency, and alignment with your business goals.
That final stage, particularly the inclusion of subjective data, can be difficult to achieve. Only about half of the legal departments I’ve spoken with use internal firm evaluations. I’ve heard from legal operations leaders at even large, technologically advanced legal departments, who have made multiple unsuccessful efforts to introduce them because adoption is very low among busy legal professionals.
With that in mind, targeting the right staff members and asking only the most valuable questions can help improve internal uptake. Legal professionals have shared that they find ratings of firm responsiveness, expertise, and outcomes among the most helpful data to collect.
Enhancing communication with outside counsel
For benchmarking to be most effective, it should be coupled with transparent and open communication between the legal department and outside counsel. This could involve regular reviews of monthly spend and invoicing, conducting a year-in-review analysis, and holding quarterly or annual business reviews with outside counsel. Legal teams I’ve heard from have cited relationship managers and partners as the best law firm contacts to share this information with.
Benchmarking is a critical component of a robust outside counsel management program. By starting small, legal departments can gradually build a benchmarking process that drives continuous improvement and maximizes the value of their legal spend, strategically positioning themselves for long-term success.
If you’d like to hear more about successful benchmarking and other aspects of law firm and rate management, I’d suggest listening to this episode of ELM Solutions’ Legal Leaders Exchange podcast series: How DHL is using data, annual reviews, and billing guidelines to tackle rate negotiations.
