Lisa Hart Shepherd, CEO of Acritas, interviews Andrew Magowan, general counsel and company secretary at British retailer and tech company ASOS, about why it is so important for legal departments to use metrics and how he uses them in practice.
Lisa Hart Shepherd: Why do you believe it is important to use metrics to help you run the legal function?
Andrew Magowan: We’re a part of the business just as much as any other department within ASOS. Metrics have a huge part to play in helping you understand your environment, as long as you are looking at it in the right way and understanding what you are looking at. It doesn’t just make us more effective; it is a core part of any business function.
Shepherd: Which metrics do you capture and why?
Magowan: Metrics perform different functions. Some are absolutely core and we will always be looking at them. They are fundamental to our business credibility, so that all of our colleagues see us standing alongside them, thinking and working in the same way as they do. Are we managing our resources cleverly and are we being efficient? Do we value the pound in the same way?
The core metrics include:
- Total spend
- Total spend against budget
- Head count
Other metrics help us understand whether we are as effective as we can be. Looking at these metrics over time reveals whether we are changing the way we approach things rather than just approaching work the same way year after year. The metrics are much more “situation specific,” and they should therefore change over time. For example, when facing major disputes, the only outcome that matters might be, “Did we win?” The key final metric is the satisfaction of our internal clients – are they getting what they need from us?
Examples of other metrics include:
- Percent of spend – internal : external law firms : external alternatives
- Percent of spend – hourly rates : fixed fees : capped fees
- Litigation win rate
- Satisfaction of internal businesspeople
Be cautious of being distracted by red herrings, i.e., taking time to look at things that don’t really matter. For example, the number of contracts reviewed. Knowing we reviewed 100 contracts won’t matter if we missed the most important contract that had a weak clause. We need to find the metrics to help demonstrate we are doing what we should be doing.
Shepherd: How important is it to have external benchmarks for the metrics you capture, and which ones in particular?
Magowan: External benchmarks are useful for everything, even down to the most specific ones that relate to the business we are in. The idea of looking at your own metrics in isolation, that you can’t learn from other people, would be horrendously arrogant. So any chance you have to compare your “apple” to what another “apple” is doing is absolutely valuable. There is no doubt about that. However, you do need to be comparing “apples with apples” as best you can, or at least understanding the extent to which a data set you have is different from the data set you are comparing yourself to.
Shepherd: What sources do you use to access metrics and benchmarks?
Magowan: The internal ones are easier to get. But you have to look anywhere and everywhere to access external benchmarks. You can learn a lot from talking to your peers, and they are usually happy to share given they will get something back. Keep an eye out for the right articles to read. Something like the Acritas Analytics tool (for legal departments) is really useful. It pulls things together for you and has done the hard work by going out and talking to far more of your peers than you could do yourself. Acritas Analytics has begun the thinking for you in how to present the data in a way that is easy to filter and extract – looking for the real nuggets of insight. That is hugely valuable because it gets over the biggest obstacle: finding the time to do it.
Shepherd: Acritas has analysed thousands of spend data points and found some interesting patterns by size, region and industry. ASOS falls within both the retail and the technology industries but our data shows technology companies have a much higher spend per dollar of revenue than retail. Why do you think legal departments in the technology industry have higher spend?
Magowan: Retail is a well-established industry – reasonably mature from a legal perspective, as a result of which they have established ways of working. Tech as an industry is still adapting, growing, working out where the opportunities are, being creative. If you are a legal department, you’re trying to keep pace with that, and you need to keep up with those dynamics. This is a good case in point of needing to understand exactly what benchmarks you are looking at – and I need to look at both retail and tech.
Shepherd: Would you say metrics are there more to help you understand historic performance or to help improve forecasting?
Magowan: For me it is all about forecasting. It is all about trying to diagnose what is coming up, what I need to do, how I prepare for next year and three years after that – whilst still recognising I don’t have a crystal ball. As we roll forward we will expand in the US, for example. I know there is a different legal framework there, a different dynamic and different challenges. Being able to look at existing US businesses and what they are currently spending immediately lets me know what kind of total costs I am likely to bring in if we push ahead and have a larger business in the US.
Shepherd: Our data analysis also shows that as businesses grow, legal spend should also grow but not at the same rate; therefore, legal spend becomes more efficient per dollar of revenue. Will that apply in tech given the challenging dynamics you have just outlined?
Magowan: The first part is to understand where you sit now relative to your business. If you are not at the ideal state now, you need to keep doing what you need to do to try and reach that optimal state. But if you believe you are optimally placed now, the idea that legal grows in line with revenue suggests that you’re already working in the perfect way to provide legal services, and that just seems preposterous to me. We haven’t yet found the perfect legal solution – think about tech, new ways of working, etc. I would be hugely disappointed if we were growing at a level rate with revenue. I would feel as though I hadn’t answered the fundamental questions I ask myself – how can we be more effective? How can we add more value with what we’ve got? If I answer those correctly, we should be doing more with the money we have.