Six Sigma Tutorials -> Balancing Your Legal Scorecard - Part 2   by Richard Hall

Benefits Of The Balanced Scorecard

The Balanced Scorecard's prescriptive approach to performance measurement requires performance measures defined in each of the non-financial perspectives to be linked to each other and to the financial measures, ensuring that the organization's ultimate goal that of continuing to be successfully in existence, remains paramount.

The extent to which business results can be improved by decisions taken based on a Balanced Scorecard view of the organization is significant. Furthermore, these business results tend to be very sensitive to minor improvements in performance in key areas (such as the legal department). The following table illustrates the point:

Balanced Scorecard Perspective Potential Impact
Typical Profit Impact (*)

Organization Decrease in legal costs 7%
Legal Department Reduction in wastage 2%
Innovation and Learning Improved efficiency and identify best practices 5%
TOTAL Increase in profit 14%

(*) Based on historical LexTech, Inc. figures

Information Systems To Support The Balanced Scorecard

Information systems play an invaluable part in assisting managers to analyze beyond the summary level Balanced Scorecard measures. When an unexpected signal appears on the Balanced Scorecard, managers need access to underlying data to investigate the cause of any problem or to analyze trends and correlations.

If the information system is unresponsive, however, it can significantly impact the effectiveness of performance measurement.

Such an information system must then incorporate all of the following features:

• At-a-glance exception alerting
• Rapid access to summarized data
• Drill down to successive levels of detail
• Easy to follow dependency paths to identify the causes of performance
  Reporting initiative, objective and process information
• Reporting of impacts of underlying objectives upon Scorecard measures
• Reporting of the impacts of objectives upon each other
• Graphical creation and modification of objectives, measures and relationships
• Support for dynamic re-planning for change
• Integration with other office tools
• Inclusion of rich text information
• Graphical trending and tabular representation of data
• End user configuration and analysis options
• Integration with existing organizational data sources - with support of additional direct entry of values and annotations

Solutions

To meet the challenges ahead, legal departments need to develop a perspective on the role of the legal function in both qualitative and quantitative business terms. They may use a Balanced Scorecard of metrics that integrates the law department's short-term actions with long-term organizational objectives. Effective solutions should meet this criteria:

• Be specifically designed to support the implementation and ongoing evolution of a Balanced Scorecard measurement system, alone or integrated with other performance management approaches and initiatives, such as Six Sigma, process review and benchmarking.
• Be backed by expert consultancy for strategy and training
• Implement services without the need of additional staff or technology.
• Enable corporate legal managers to put into every day use the best practice recommendations that in the past may have seemed impossible to achieve, with minimal additional overhead, time or other resources.
• Maximize the benefits to be attained from existing performance measurement and management.

The Balanced Scorecard, with a comprehensive information system to support it, provides a means to make a real difference throughout the legal department, and organization as a whole, from individual team member satisfaction right through to significant improvements in the bottom line.

About the Author

Richard Hall is founder/CEO of Hall's Benchmarks & LexTech, legal information companies that help public & private entities Manage the Business of Law. Rich's meld of technology & statistics produced a techno-analytical model of law practice. In 1994, he invented linguistic SW which automatically budget codes, reports GAAP accrual financials & conducts compliance analysis. t 530.820.4070, f 530.820.4071, rhall@hallenterprises.us, www.managingthebusinessoflaw.com