Data + legal? Sounds like an odd combination in the traditional sense, especially in contract management. Yet, it has, in the modern business world, become a critical component of the legal counsel’s strategic contribution to organizational growth.

But data, in and of itself, is simply raw information. Without the right tools and skillset, turning it into actionable insights is incredibly difficult. Legal teams will continue to make decisions based on instincts and anecdotal evidence, potentially leading to missed opportunities in contract lifecycles, overlooked risks, and even financial losses.

In this guide, we will explore ways you can build a true data-driven legal team, covering key data points for contract analytics and steps you can take to effectively implement a data-driven legal strategy.

‍Also read: How to Use Contract Analytics to Uncover Insights

Extracting insights: key data points and metrics

Experience and intuition are no longer sufficient to meet the demands of the ever-evolving business ecosystem. Current realities of contract management require an unprecedented level of agility and precision, favoring a more rigorous, evidence-based approach to risk assessment and decision-making.

For you as a legal counsel, this means taking several steps away from your comfort zone. You need to become more rooted in business processes, familiarizing yourself with data, and exploring ways you can use it as a competitive advantage in contracting processes.

But what kind of data should you even be looking out for? 

Here are key metrics that come to mind:

#1 Financial metrics

These metrics help you measure the financial implications of your contracts. They provide insights into the value of your contracts, costs, revenue, and associated financial obligations.

They include:

• Total Contract Value (TCV)— The total revenue a particular contract generates over its entire duration, including recurring payments and one-time fees like onboarding, add-ons, professional services, etc.

Also read: Contract Value: Everything You Need to Know

• Cost per contract— The average cost incurred to draft, negotiate, and execute a contract. This includes legal fees, administrative costs, and any associated technology expenditures.

• Contract profitability— The difference between revenue generated from a contract and the costs associated with fulfilling it. This reveals which contracts are most financially beneficial.

• Contracts renewed per month: The number of contracts successfully renewed within a month. This is crucial for assessing ongoing value and relationships with vendors or clients.

#2 Operational metrics

Operational metrics focus on the various processes associated with contract lifecycle management. They take into account how efficiently contract-facing teams complete various tasks, highlighting potential bottlenecks and areas for improvement.

• Total reviews requested— The total review requests legal teams receive over a period. This can highlight what kinds of contracts get the most review requests, helping legal teams figure out how to optimize for more efficiency.

• Turnaround Times (TAT) by contract— The time it takes to complete each contract category. This indicates the level of complexity associated with each contract, helping legal and business teams identify ways to achieve shorter TATs.

• Average approval time— How long it takes before a contract gets approved by relevant stakeholders. Longer approval timeframes indicate the potential presence of bottlenecks and the absence of systems for streamlining notifications and follow-ups.

Also Read: Rethinking OKRs, KPIs, and Goals for In-House Legal Teams

#3 Risk metrics

Risk metrics offer valuable insights into areas of potential concern. They draw parallels between specific occurrences across the contract lifecycle, highlighting their potential impacts, and helping teams make proactive decisions. They include:

• Clause frequency— The number of times certain clauses appear across your contract portfolio. Identifying frequently occurring clauses helps with standardization and targeted risk assessment, helping legal teams create more compliant and legally sound contracts. This is also useful for troubleshooting. For instance, if delays in contract execution are consistently linked to specific clauses, it could signal a need for revision or clarification.

• Termination rates— The rate contracts are terminated before their intended end date. This signals potential dissatisfaction and the need for improved customer relationships.

• Dispute rate— The percentage of contracts that evolve into disputes or legal actions. This metric serves as an indicator of the overall effectiveness of the contracting process, as well as the strength of the relationships with contracting parties.

Also read: 4 Crucial Contract Management KPIs to Track for Legal Success

#4 Performance metrics

These metrics provide insights into the effectiveness and productivity of contract-facing teams, hinting at areas of potential improvements and helping the organization close more contracts in shorter timeframes.

• Average time spent per lifecycle stage— The time taken to complete various stages of the contract lifecycle, such as drafting, reviewing, negotiating, and executing. Longer timeframes at any stage indicate the presence of bottlenecks and the need for optimization.

• Contracts closed per month—The average number of contracts closed each month. This gives an idea of the overall contracting volume and team performance.

• Average contract closing time— The average time it takes from the initial draft of a contract to its final execution. A shorter contract closing time indicates high efficiency, while a longer timeframe suggests a need for optimization.

“One of the revenue leaders I worked with told me, "Time kills all deals; you gotta close deals fast," and I keep this in mind every time I’m pulled into a sales deal.”

~Sue So, Head of Legal, Hopin
Streamlining Contracts in Hypergrowth Startups

Developing a data-backed legal strategy

The role of the in-house legal counsel has evolved significantly in recent times, becoming more entwined with the realities of business. As a legal counsel, you're no longer a mere observer on the sidelines but an active participant right in the heat of action.

Your true value lies in your ability to sufficiently align legal strategies with the overall business goals, objectives, and priorities of your organization. This necessitates a deep-rooted grasp of your organization's competitive landscape, its business operations, and the dynamics of its markets.

But how can you do all that without data?

Driving real business impact with your legal strategy requires a precise, rigorous, evidence-based approach, which can only be found by communicating with data. Here are best practices to follow:

#1 Define clear objectives

"It is important, especially in a company like ours, to be dynamic about performance metrics. If we have a target of completing one hundred contract negotiations in a particular quarter, that does not mean that we need to complete one hundred twenty in the next quarter if the business has other initiatives that it needs us to focus on during that time period."

~ Adam Glick, Head of Legal at Intercom
Building a Value-Driven In-House Legal Team with Adam Glick

Establishing your objectives marks your first step towards building a data-driven legal strategy. What value are you looking to deliver for your organization? Is it to reduce legal spend, improve contract turnaround times, mitigate risk more effectively, or support new business initiatives?

Establishing clear objectives upfront paves the way for a more organized strategy development process.

#2 Have everyone onboard

A data-backed legal strategy cannot succeed in isolation. It's essential to have everyone on board, from top executives to frontline employees. 

This involves fostering a culture where data-driven decision-making is valued and integrated into everyday operations. Collaboration across departments ensures that the legal team has access to necessary data and insights. 

It encourages a unified approach to achieving business objectives, with everyone working towards the same goals and understanding the role of legal strategy in reaching them.

#3 Develop data literacy

Developing data literacy within the legal team is crucial. This means equipping your team with the skills and knowledge to effectively understand, interpret, and use data. Legal professionals need to be comfortable with data analytics tools and systems for extracting meaningful insights from data.

Invest in training to learn not just how to read data but also how to tell compelling stories with it. Because without storytelling, data is just a bunch of numbers on the screen.

Master how to utilize visualizations like charts, graphs, and dashboards to communicate complex information in clear terms. This allows you to present insights to stakeholders in a way that influences them to make the right decision.

#4 Identify Key Performance Indicators (KPIs) relevant to your organization’s goals

What are the organization's top priorities? Are they focused on growth, cost reduction, risk mitigation, or something else? Identify these and translate them into actionable KPIs.

KPIs provide a measurable indicator of progress towards achieving set objectives. Whether it's the number of contracts reviewed, litigation costs, or compliance rates, having KPIs relevant to your organization's business goals gives you a solid foundation for building legal strategies that drive meaningful impact.

‍“Most C-suite executives bank on data and hard metrics and not word-of-mouth. When you have certain metrics that shed light on how legal teams have contributed to growing the revenue stream of the company, it becomes easier for the GC to make business cases.”
‍
~ Gitanjali Pinto Faleiro, General Counsel, Company Secretary & CCO at Greenhill & Co.
The Counsel Corner: Navigating the C-Suite As a GC

#5 Start benchmarking

Benchmarking involves comparing your organization's performance against industry standards or best practices. This reveals how you stack up against your peers, highlights areas where you excel, and identifies potential areas for improvement. 

Incorporating benchmarking into your strategy development process gives you a competitive edge and positions your organization for long-term success.

Implementing data-driven strategies in contract management

Building a legal strategy is only one part of the equation. To move this strategy from concept to reality, you need to get hands-on. But how do you effectively implement these strategies for optimal results? 

The steps below provide the answer.

#1 Centralize your contracts in a unified repository

Centralizing contracts creates a single source of truth for all contract-related information, making it easier to track, analyze, and report on contract data.

Your central repository could be a cloud-based contract management system (like SpotDraft CLM) or a dedicated database accessible to relevant members of your organization.

SpotDraft offers a robust cloud-based repository where you can securely store, organize, and access your contracts with a few clicks. This repository seamlessly integrates with the platform's analytics tool, making access to insights convenient and efficient.

#2 Extract and make sense of data with a contract analytics tool

Contract analytics tools empower you to uncover critical insights from your contracts. Using advanced technologies like AI and machine learning, these tools can spot trends and patterns that might not be immediately obvious. 

For example, they can identify which contract types consistently lead to disputes or which clauses frequently cause delays. This enables legal teams to proactively address potential issues, streamline processes, and make more informed decisions about their contract portfolio.

Contract analytics is part of SpotDraft’s ecosystem of contract management solutions. Fitted with intuitive dashboards, charts, and filters, this tool allows you to explore contract data in a flexible and efficient manner. That way, you’re better positioned to proffer legal strategies that drive desirable business outcomes (more on this later).

#3 Prioritize change management

Implementing a data-driven approach to contract management requires a significant shift in mindset and operations. Change management is crucial to ensure a seamless transition and successful adoption of new practices and technologies. This involves not only introducing new tools and processes but also addressing the human aspect of change.

Start by communicating the benefits of a data-driven strategy to all relevant parties. This includes demonstrating how data can improve decision-making, reduce risks, and drive better business outcomes. 

Training sessions and workshops can help build data literacy across the team and ensure everyone is comfortable with the new tools and methodologies. It's also important to establish clear roles and responsibilities to avoid confusion and overlap. Ensure there is a designated team or individual responsible for managing the contract analytics tool, interpreting data, and disseminating insights. 

#4 Maintain a culture of continuous improvement

Implementing a data-driven legal strategy should not be approached with a set-and-forget mentality. There’s a need for constant monitoring and refinement over time.

Legal teams must continuously evaluate their strategies, processes, and tools to identify areas for improvement and keep up with evolving business needs. This involves regularly reviewing KPIs, soliciting stakeholder feedback, and staying informed about industry best practices and technological advancements. That way, you can ensure that your legal strategy remains relevant and effective over time.

Turn contract data into competitive advantage with SpotDraft’s Contract Analytics

Included as part of SpotDraft’s portfolio of tools, Contract Analytics is a powerful solution designed to help legal and business teams optimize every stage of the contract lifecycle and improve overall business outcomes.

Comprehensive data and insights are the backbone of informed decision-making when it comes to contract performance. Without these insights, teams essentially navigate in the dark. This often leads to decision-making based on gut feelings, anecdotal evidence, or outdated information, which can be a recipe for disaster.

Contract Analytics solves this challenge by offering an easy way for contract-facing teams to access and explore data when and how they want. This translates into reduced risk, faster contract cycles, and increased revenue.

Here are some of its most beneficial functionalities:

#1 Out of the box Dashboards

Contract Analytics offers four comprehensive dashboards out of the box. Each dashboard is designed for specific use cases and populated with relevant metrics, arming you with instant access to insights.

Available native dashboards include:

• Contract lifecycle—7 metrics
• Contract approval—7 metrics
• Contract review—7 metrics
• Turnaround Times—9 metrics

Instead of spending hours manually analyzing contracts and putting figures typing into spreadsheets, you can utilize dashboards to quickly see metrics relevant to your objectives. This saves time and gives you a big-picture view of how your contracts are performing.

Also Read: Contract Management Dashboard: A Comprehensive Guide 

#2 Prebuilt charts

Contract Analytics’ prebuilt charts offer an intuitive, easy-to-digest visual representation of contract data, allowing you to easily track progress and capture areas of improvement in no time.

Visualizations make it much easier to understand complex data. For example, your chosen chart might reveal that your contract cycle times are increasing, prompting you to investigate bottlenecks and improve efficiency.

Also Read: 5 Key Contract Reports to Share for C-level Review 

#3 Filters

Filters give you the flexibility to narrow down your contract data based on specific criteria, such as date range, contract type, department, or specific terms. This gives you the flexibility to answer targeted questions about your contracts, like what contracts are getting the most reviews, how long it takes to complete specific contract types, etc.

What does this mean for you?

Using Contract Analytics can translate into several benefits for your organization, including but not limited to:

• Clearer visibility, faster action— Gain crystal-clear insights into every phase of the contract lifecycle, pinpointing bottlenecks and optimizing every step for maximum efficiency.
• Improved negotiation wins— Access insights into past negotiations, market trends, and counterparty behavior. Confidently negotiate favorable terms, secure better deals, and ultimately maximize the value of your contracts.
• Better resource forecast and allocation—  Forecast resource needs accurately based on contract volumes and complexity. Ensure the right people are assigned to tasks at the right time, maximizing productivity and minimizing burnout.

“Showing leadership how busy we are in terms of contract request types helps us provide rationale to hire more support staff”

‍~ SpotDraft Customer

• Improved compliance and risk reduction— Stay on top of approval timelines, monitor team adherence to SLAs, and proactively address any deviations. This ensures your contracts are always in top shape.

What’s next?

Contract Analytics is a no-brainer for legal and business teams who want to provide value and maintain relevance in a highly competitive business environment. With access to powerful insights, you develop strategies that give you the edge.

SpotDraft offers an easy way in, with super-intuitive features and a responsive support team always available to help you kickstart your journey.

Ready to see Contract Analytics in action? Click here to access our personalized demo.