How to Understand Your Legal Department’s ROI

Return on investment, or ROI, measures the impact of any business decision on the business’s bottom line. As with any part of a business, a legal department’s ROI matters to the business’s overall health.

While companies often need legal departments, they also need their legal department to fit within the context of the rest of the business and its financial health. Here’s what legal departments need to know.

  1. Measuring ROI can improve a legal department’s performance.

By measuring ROI, a legal department can determine how efficient its operations and processes are. When the department understands where it’s losing the most time and money, it can streamline its work. The result is a department that meets the company’s legal needs more effectively.

  1. Don’t overlook all the benefits a legal department provides.

When measuring ROI for the first time, it can be tempting to compare the legal department’s spending to what the company would have spent for an equivalent amount of legal services provided by external law firms. This measurement, however, may not provide the full picture.

General counsel and in-house legal teams tend to be more business-minded. As a part of the business as well as of the legal team, they often have an understanding of the business’s core values, mission, strengths, and weaknesses that an external team cannot match. These contributions should be considered when evaluating the ROI of a legal department, and especially when comparing the legal department to similar services provided by external counsel.

  1. Pay attention to where time and money go, especially in unique circumstances.

ROI tends to be a general overall number for a particular fiscal period, such as a quarter or a year. As a result, this one measure can “flatten” the effect of events like a particularly complex set of contract negotiations or a litigation matter that required assistance from attorneys in practice areas that are not represented on your core team.

As a result, it can be valuable to analyze particular unique events, as well as analyzing ROI as a whole. For instance, a department that analyzes the ROI of hiring an outside law firm to handle a complex or unusual matter may find it would have been more cost-effective to seek the help of a temporary attorney with experience in the subject area instead, particularly when the time spent in communications or travel with an external firm are added up.

  1. Explore innovative ways to streamline costs.

Many legal departments find ways to become more efficient when they begin to evaluate ROI. One common target for streamlining is the department’s payroll, which is often the single biggest line item expenditure each year.

Keeping payroll within budget doesn’t require a legal department to go without vital assistance from qualified attorneys, however, options like working with temporary attorneys, provided by an experienced recruiter, can allow the legal department to meet its needs while being mindful of the bottom line.

At Assigned Counsel, all of our recruiters are former practicing attorneys. As a result, we understand the importance of having the qualified legal team members you need exactly when you need them. To learn more about the ways we help our clients reimagine their legal practice, contact us today.

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