The Litigation Balancing Act

As career-performance management aficionados (and self-proclaimed experts), we are bewildered about a glaring problem we find at establishments in market sectors we guide ' but, we're sure, not as bewildered as the firms, individual practitioners and prospective clients we seek to advise often find themselves when confronted with the problem.

Here's the source of our bewilderment: The principles of “you get what you measure” and “you cannot manage what you cannot measure” seem self-evident. And, to be sure, in most large commercial and public-sector entities, integrated performance-management systems have evolved into foundational elements that support how these organizations are run.

But it seems odd that one of the highest-risk and highest-exposure ' and politically and economically sensitive ' business processes has escaped proper measurement: litigation response.

This gap is particularly alarming, and should be a source of considerable concern, in this age of growing electronic evidence gathering and processing requirements.

Perhaps the reason for this apparent lack of attention to proper measurement is because most organizations don't really look at litigation response as an organized business process. Despite the fact that most large organizations accept being sued as a part of doing business, litigation response is still largely an aggregation of discrete actions without a formally structured framework, and without a proper performance-measurement and performance-management system.

We can only assume that it will not be long before a tangible measurement system will be imposed on in-house counsel, and chances are good that the measurement system will not be limited to general counsels' ability to effectively, and efficiently, manage their departments' operating expenses. But assumptions don't make good components of business plans ' for us or for enterprises lacking the capacity, or the will, to properly measure and then properly address salient issues of litigation response.

Consider this: Lawyers are paid to balance risk and reward as part of litigation. But in-house counsels' reliance solely on their lawyering capabilities is an exercise in futility in an era when litigation is often a “bet-the-company” exercise. The litigation-balancing act now requires that the general counsel balance lawyering with solid business management.

Measure Down to Measure Up

As with anything, there's more than one way to approach filling a void. The most obvious mechanisms are top down or bottom up.

The steps required for the bottom-up approach are fairly straightforward:

• Assess an organization's current litigation response process;
• Identify the gaps relative to some proven practice model that might be used or created for litigation response; and then
• Implement an active litigation-response process that fills the gaps.

Keep in mind that the process should outline the following elements:

• Sequential steps;
• Roles;
• Responsibilities;
• Tasks;
• Tools; and
• Technologies.

This seems pretty simple, but, conceptually, it's probably not simple to execute. Still, it is a good way to go when beginning the journey toward implementing a litigation-response system.

But it is in the top-down approach where performance management comes into play. In all our years of honing performance-management radar and techniques, one lesson has stood out, and has remained most memorable, among the other lessons in litigation response that we've seen. That dictum says practitioners or organizations come up with and implement a success measure first, and then create a system that allows them to gauge what must be measured. The benefit of this approach is creation and use of a management dashboard as the mechanism to regulate what should be done and ' equally important ' what should not. This approach will help prevent unnecessary costs, such as spending crucial capital on a measurement system that might detect only what the organization already knows.

So, then, which measurement mechanism is an appropriate starting point? Why not one of the most pervasive measurement systems in use today – the balanced scorecard?

The 4-Dimensional Scales of Justice

Success in litigation response hinges on efficiently and effectively mining information typically found in four key dimensions. The balanced scorecard is a conceptually simple, yet operationally complex, measurement methodology. In its most primitive (and original) iterations, its four key measurement dimensions are:

• Financial;
• Customer;
• Learning and growth; and
• Internal business process.

Keep in mind, however, that the operational complexity is often a result of overengineering the core tenets of the methodology. Software companies have made a bundle on applications to facilitate a balanced-scorecard measurement system. Consultants have made at least 5 to 10 times what the software companies have generated in revenue by implementing these systems. These services and technologies certainly have value, but in the domain of

litigation response, it is best to crawl before walking, as the cliche ' albeit a true one ' goes. It's critical that the in-house legal department ' an oft-neglected organizational domain, at least when it comes to professional business management/process techniques ' has a simple framework as a starting point. With that in mind, let's take a look at these four key areas of the balanced scorecard approach to measuring litigation-response needs and process.

The Financial Dimension

Litigation response is plagued by perceptions of large, but untracked, cost. But these appearances can be distorted. First, the cost of outside counsel is pretty simple to determine. And the cost of time in-house counsel spends litigating a matter is also easy to discern. Any outside services used (eg, electronic-evidence processing) are also easy to track and aggregate.

But the soft costs of litigation response are where the greatest gaps exist. For instance, consider these questions:

• How much time (and, therefore, soft cost plus opportunity cost) does the information technology (IT) department incur by helping lawyers respond to discovery requests?
• What is the cost of line managers combing through their hard drives for documents that are potentially relevant to a lawsuit?
• What is the full, loaded cost of litigation response?
• What is the ratio between exposure on a matter and the total cost of litigation response for that matter?

Any or all of these can become tangible, quantitative measures that fulfill the financial dimension of the balanced scorecard. But they become these things when counsel and others involved in designing litigation response first determine which are salient and useful to a firm's litigation-response plans, and then proceed to the next step.

The Customer Dimension

Clarifying need in this dimension requires clarifying terms, and chief among those definitions is determining who the customers of the litigation-response process are. The answer is cut and dry: The primary customer is the organization being sued. A question that most logically follows is how does one measure progress on this (customer) dimension? What is being done to advance the objectives of “the customer?” The most obvious answer to both questions is the ability of the legal department to fend off litigation. But other measures could include:

• Ratio of lawsuits settled vs. lawsuits litigated;
• Ratio of favorable outcomes as a percent of total lawsuits;
• A mix of lawsuits and their trends over time (relative to what is most desirable); or
• Measuring total exposure on a year-over-year basis.

In any case, putting measurements in place similar to the ones outlined here will provide good perspective on how to design and build a litigation-response system to achieve the desired measurements. Counsel also needs to confirm that the customer is savvy enough to identify how e-discovery may play into pending or expected litigation.

Learning and Growth

Of course, any procedure worth designing, implementing and using carries a learning curve, plus the much-sought potential of helping users to learn and to grow. To measure the educational value and business growth that a litigation-response system might provide, consider such questions as the following, once at ease with using a well established, smoothly functioning litigation-response process. They are:

• How does the litigation-response process contribute to an organization's ongoing ability to respond to litigation?
• Can the tools used to respond to one lawsuit be used to respond to the next lawsuit?
• Is there an organized evidence-collection system in place that can improve every time evidence is collected?
• Are the technologies to gather data being improved so that data/evidence can be better filtered and collected more quickly?
• Are the criteria being used to select outside counsel to help litigate a matter continually augmented to include nuances of dealing with new aspects of 21st century litigation ' eg, the ability to properly host, handle and review the large volume of digital data that is part of litigation today?
• Does the litigation-response system allow an organization to properly manage the activities of outside counsel?
• Is response to the next matter more efficient than the last one?

Internal Business Process

This dimension is in the most need of a measurement system. As a support function for the rest of the organization, it is crucial that the in-house legal department does not cause undue stress on the company during litigation response. In-house counsel have relied on their expertise as lawyers to fulfill the demands of their function. When they did not have the resources to lawyer on their own, they hired outside counsel to supplement their capabilities.

However, it's no longer sufficient for in-house counsel to be “good lawyers.” With such factors as the burgeoning amount of electronic evidence complicating already complex litigation, in-house counsel need to be sensitive to how their actions are affecting operating units of their company. Is a “bet-the-company” fire drill created every time a lawsuit is filed? Is this panic used as the rationale for organizational upheaval ' eg, “If you don't provide me this information by tomorrow, the CEO could go to jail!” or “We don't want to be the next headline in the daily paper!”? Perhaps some lawsuits are of sufficient magnitude to justify this sort of melodrama, but in-house counsel must realize that litigating in the 21st century requires a business-process approach that blends good lawyering with good business management. To ensure that lawyering and business-management best practices are identified, implemented, monitored and refined, managers in a position to do it should ask such questions as:

• Does the company perceive the legal department as unfairly using its position in the so-called panic chain to justify operating inefficiencies?
• How much cost is the organization incurring because the legal department has not put in place a litigation-response system that outlines roles, responsibilities and process steps for all participants in litigation response?

Some tried, truly helpful and easy to handle preprocesses can be used here. A tool as simple as a satisfaction survey, for instance, could be a useful measure of success in this category, as could a measure tied in with the financial dimension. For instance, does the ratio of soft costs to hard costs of litigation response improve over time? Another question to ponder would be how long it might take for ratios like soft costs to hard costs of litigation to improve.

At any rate, if the current level of litigation-response dysfunction is any indicator, probably the next lawsuit litigated under the auspices of an organized litigation-response system will yield improvement. One thing is nearly certain: The organization will appreciate an organized approach to responding to a lawsuit, because any process resembling (let alone actually being) well-reasoned order is preferable to a fire drill.

Immeasurable or Priceless?

No elixir exists to remedy all aliments in the body of litigation response, and there is no substitute for a data-driven, fact-based, process-oriented approach to managing the inevitable need for such business-process management. But if an organization's leaders think about how to track and measure (and, as a result, manage) progress in litigation response, then the organization will find it much easier to put an organized process in place for responding to a lawsuit than if the planning hadn't been done. The balanced-scorecard approach is a fairly straightforward mechanism that any legal department can put in place, even manually, to start the journey toward a litigation-response system that works, and works well.

As career-performance management aficionados (and self-proclaimed experts), we are bewildered about a glaring problem we find at establishments in market sectors we guide ' but, we're sure, not as bewildered as the firms, individual practitioners and prospective clients we seek to advise often find themselves when confronted with the problem.

Here's the source of our bewilderment: The principles of “you get what you measure” and “you cannot manage what you cannot measure” seem self-evident. And, to be sure, in most large commercial and public-sector entities, integrated performance-management systems have evolved into foundational elements that support how these organizations are run.

But it seems odd that one of the highest-risk and highest-exposure ' and politically and economically sensitive ' business processes has escaped proper measurement: litigation response.

This gap is particularly alarming, and should be a source of considerable concern, in this age of growing electronic evidence gathering and processing requirements.

Perhaps the reason for this apparent lack of attention to proper measurement is because most organizations don't really look at litigation response as an organized business process. Despite the fact that most large organizations accept being sued as a part of doing business, litigation response is still largely an aggregation of discrete actions without a formally structured framework, and without a proper performance-measurement and performance-management system.

We can only assume that it will not be long before a tangible measurement system will be imposed on in-house counsel, and chances are good that the measurement system will not be limited to general counsels' ability to effectively, and efficiently, manage their departments' operating expenses. But assumptions don't make good components of business plans ' for us or for enterprises lacking the capacity, or the will, to properly measure and then properly address salient issues of litigation response.

Consider this: Lawyers are paid to balance risk and reward as part of litigation. But in-house counsels' reliance solely on their lawyering capabilities is an exercise in futility in an era when litigation is often a “bet-the-company” exercise. The litigation-balancing act now requires that the general counsel balance lawyering with solid business management.

Measure Down to Measure Up

As with anything, there's more than one way to approach filling a void. The most obvious mechanisms are top down or bottom up.

The steps required for the bottom-up approach are fairly straightforward:

• Assess an organization's current litigation response process;
• Identify the gaps relative to some proven practice model that might be used or created for litigation response; and then
• Implement an active litigation-response process that fills the gaps.

Keep in mind that the process should outline the following elements:

• Sequential steps;
• Roles;
• Responsibilities;
• Tasks;
• Tools; and
• Technologies.

This seems pretty simple, but, conceptually, it's probably not simple to execute. Still, it is a good way to go when beginning the journey toward implementing a litigation-response system.

But it is in the top-down approach where performance management comes into play. In all our years of honing performance-management radar and techniques, one lesson has stood out, and has remained most memorable, among the other lessons in litigation response that we've seen. That dictum says practitioners or organizations come up with and implement a success measure first, and then create a system that allows them to gauge what must be measured. The benefit of this approach is creation and use of a management dashboard as the mechanism to regulate what should be done and ' equally important ' what should not. This approach will help prevent unnecessary costs, such as spending crucial capital on a measurement system that might detect only what the organization already knows.

So, then, which measurement mechanism is an appropriate starting point? Why not one of the most pervasive measurement systems in use today – the balanced scorecard?

The 4-Dimensional Scales of Justice

Success in litigation response hinges on efficiently and effectively mining information typically found in four key dimensions. The balanced scorecard is a conceptually simple, yet operationally complex, measurement methodology. In its most primitive (and original) iterations, its four key measurement dimensions are:

• Financial;
• Customer;
• Learning and growth; and
• Internal business process.

Keep in mind, however, that the operational complexity is often a result of overengineering the core tenets of the methodology. Software companies have made a bundle on applications to facilitate a balanced-scorecard measurement system. Consultants have made at least 5 to 10 times what the software companies have generated in revenue by implementing these systems. These services and technologies certainly have value, but in the domain of

litigation response, it is best to crawl before walking, as the cliche ' albeit a true one ' goes. It's critical that the in-house legal department ' an oft-neglected organizational domain, at least when it comes to professional business management/process techniques ' has a simple framework as a starting point. With that in mind, let's take a look at these four key areas of the balanced scorecard approach to measuring litigation-response needs and process.

The Financial Dimension

Litigation response is plagued by perceptions of large, but untracked, cost. But these appearances can be distorted. First, the cost of outside counsel is pretty simple to determine. And the cost of time in-house counsel spends litigating a matter is also easy to discern. Any outside services used (eg, electronic-evidence processing) are also easy to track and aggregate.

But the soft costs of litigation response are where the greatest gaps exist. For instance, consider these questions:

• How much time (and, therefore, soft cost plus opportunity cost) does the information technology (IT) department incur by helping lawyers respond to discovery requests?
• What is the cost of line managers combing through their hard drives for documents that are potentially relevant to a lawsuit?
• What is the full, loaded cost of litigation response?
• What is the ratio between exposure on a matter and the total cost of litigation response for that matter?

Any or all of these can become tangible, quantitative measures that fulfill the financial dimension of the balanced scorecard. But they become these things when counsel and others involved in designing litigation response first determine which are salient and useful to a firm's litigation-response plans, and then proceed to the next step.

The Customer Dimension

Clarifying need in this dimension requires clarifying terms, and chief among those definitions is determining who the customers of the litigation-response process are. The answer is cut and dry: The primary customer is the organization being sued. A question that most logically follows is how does one measure progress on this (customer) dimension? What is being done to advance the objectives of “the customer?” The most obvious answer to both questions is the ability of the legal department to fend off litigation. But other measures could include:

• Ratio of lawsuits settled vs. lawsuits litigated;
• Ratio of favorable outcomes as a percent of total lawsuits;
• A mix of lawsuits and their trends over time (relative to what is most desirable); or
• Measuring total exposure on a year-over-year basis.

In any case, putting measurements in place similar to the ones outlined here will provide good perspective on how to design and build a litigation-response system to achieve the desired measurements. Counsel also needs to confirm that the customer is savvy enough to identify how e-discovery may play into pending or expected litigation.

Learning and Growth

Of course, any procedure worth designing, implementing and using carries a learning curve, plus the much-sought potential of helping users to learn and to grow. To measure the educational value and business growth that a litigation-response system might provide, consider such questions as the following, once at ease with using a well established, smoothly functioning litigation-response process. They are:

• How does the litigation-response process contribute to an organization's ongoing ability to respond to litigation?
• Can the tools used to respond to one lawsuit be used to respond to the next lawsuit?
• Is there an organized evidence-collection system in place that can improve every time evidence is collected?
• Are the technologies to gather data being improved so that data/evidence can be better filtered and collected more quickly?
• Are the criteria being used to select outside counsel to help litigate a matter continually augmented to include nuances of dealing with new aspects of 21st century litigation ' eg, the ability to properly host, handle and review the large volume of digital data that is part of litigation today?
• Does the litigation-response system allow an organization to properly manage the activities of outside counsel?
• Is response to the next matter more efficient than the last one?

Internal Business Process

This dimension is in the most need of a measurement system. As a support function for the rest of the organization, it is crucial that the in-house legal department does not cause undue stress on the company during litigation response. In-house counsel have relied on their expertise as lawyers to fulfill the demands of their function. When they did not have the resources to lawyer on their own, they hired outside counsel to supplement their capabilities.

However, it's no longer sufficient for in-house counsel to be “good lawyers.” With such factors as the burgeoning amount of electronic evidence complicating already complex litigation, in-house counsel need to be sensitive to how their actions are affecting operating units of their company. Is a “bet-the-company” fire drill created every time a lawsuit is filed? Is this panic used as the rationale for organizational upheaval ' eg, “If you don't provide me this information by tomorrow, the CEO could go to jail!” or “We don't want to be the next headline in the daily paper!”? Perhaps some lawsuits are of sufficient magnitude to justify this sort of melodrama, but in-house counsel must realize that litigating in the 21st century requires a business-process approach that blends good lawyering with good business management. To ensure that lawyering and business-management best practices are identified, implemented, monitored and refined, managers in a position to do it should ask such questions as:

• Does the company perceive the legal department as unfairly using its position in the so-called panic chain to justify operating inefficiencies?
• How much cost is the organization incurring because the legal department has not put in place a litigation-response system that outlines roles, responsibilities and process steps for all participants in litigation response?

Some tried, truly helpful and easy to handle preprocesses can be used here. A tool as simple as a satisfaction survey, for instance, could be a useful measure of success in this category, as could a measure tied in with the financial dimension. For instance, does the ratio of soft costs to hard costs of litigation response improve over time? Another question to ponder would be how long it might take for ratios like soft costs to hard costs of litigation to improve.

At any rate, if the current level of litigation-response dysfunction is any indicator, probably the next lawsuit litigated under the auspices of an organized litigation-response system will yield improvement. One thing is nearly certain: The organization will appreciate an organized approach to responding to a lawsuit, because any process resembling (let alone actually being) well-reasoned order is preferable to a fire drill.

Immeasurable or Priceless?

No elixir exists to remedy all aliments in the body of litigation response, and there is no substitute for a data-driven, fact-based, process-oriented approach to managing the inevitable need for such business-process management. But if an organization's leaders think about how to track and measure (and, as a result, manage) progress in litigation response, then the organization will find it much easier to put an organized process in place for responding to a lawsuit than if the planning hadn't been done. The balanced-scorecard approach is a fairly straightforward mechanism that any legal department can put in place, even manually, to start the journey toward a litigation-response system that works, and works well.