4 Steps to Improve Legal Department key performance indicators with CLM

4 Steps to Improve Legal Department KPIs with CLM

Legal contract management software is booming business due to the usefulness of these programs as well as the forced move to digital solutions during the coronavirus pandemic.

Any and all legal contract management systems can benefit greatly from this software, so in this article we will go over legal department KPIs and how they can be improved with contract lifecycle management.

Legal Contract Management Process: KPI Characteristics

Analytics are important in the modern business world, and this includes all legal departments as well; key performance indicators (KPIs) are crucial for all commerce and should be instituted in a way that helps the business monitor and track how they are performing.

Legal contract management - KPI characteristics
Legal contract management – KPI characteristics

In order to stay competitive, KPIs should be done properly; many businesses use the wrong KPIs and use metrics that are unimportant or useless. 

Now, before we get into the exact KPIs that you should consider using in your legal team, here are some characteristics that your legal departments KPIs should have:


This is a key characteristic that many businesses’ KPIs lack.

Without a simple and straightforward KPI then you may be creating unnecessary confusion – an effective KPI should drive decisions instead of raising questions.

team discusses the importance of KPIs
Your team should understand the KPIs of a contract management

All team members should be able to understand a KPI and their role in achieving it… no reason to make it more difficult than it should be.


This is yet another key characteristic of KPIs that many forget to be important; relevance.

Are KPIs within your legal team relevant to the legal team, or the business as a whole? Your legal team should have KPIs that exclusively matter solely to the legal team, and no other departments.

Relevant KPIs result in successfully achieved KPIs.


KPIs should be aligned with the overall goals of your legal team and the company as a whole; if not, these indicators may defeat the purpose of them in the first place.

arguing about contract KPIs
Make sure that all KPIs are aligned with the main goals of your legal team

Ensure that your legal teams KPIs support the general strategy of the business you belong to.


If a KPI cannot be easily measured, then it is not effective; these indicators should be clearly established so that it is easy to follow and compare to reality.

This means no abstract or too-general KPI goals – instead of ‘improve the legal department’, it should be ‘increase legal team revenue by 10%’, for example.

The more measurable your KPIs, the better.


KPIs are there for a reason – to be acted upon and strived for; your legal team should know what action they must take in order to meet your KPIs, otherwise, they will be difficult to achieve.

Each system consists of small mechanisms, so start measuring KPI with small indicators
Each system consists of small mechanisms, so start measuring KPI with small indicators

Starting small is best; realistic KPIs that can be worked towards is much better than big and complex goals.

Remember, these are general characteristics of KPIs – although it is suggested that your indicators contain all these characteristics, it is not 100% required.

Now let’s take a look at four different KPIs that your legal team should consider.

The Legal Contract Management Process: 4 Main KPIs

As it pertains to legal teams and the legal contract management system, here are the four main KPIs you should follow:


Contract management software for legal departments helps to evaluate how much contracts are worth in terms of the revenue they are responsible for.

4 main KPIs of a legal contract management process
4 main KPIs of a legal contract management process

The metrics you may choose to include in cost effectiveness are:

  • Number of contracts per type
  • Number of contracts per vendor
  • Number of contracts per customer
  • Value of terminated contracts
  • Historical contract trends
  • Order value variance

Using CLM software, annual contract value can be evaluated as well as the value of contracts based on their type.

Productivity Statistics

The best legal contract management software will drastically cut down the amount of time legal teams spend on meticulous administrative tasks involved with drafting contracts.

The KPI of productivity is crucial – legal teams must be able to evaluate how much time is spent on various contracts. If productivity is not being evaluated, legal teams run the risk of spending far more time on contracts than necessary, sometimes labor time that exceeds the value of a contract.

contract management system
Parley Pro – CLM software made for today legal team needs

CLM software helps legal teams measure their productivity statistics as it relates to contracts.

Contract Effectiveness

Legal contract management solutions also help with the KPI of contract effectiveness, which is a very crucial indicator to measure.

Metrics you might want to measure for contract effectiveness are:

  • Contract cycle time
  • Customer trends
  • Vendor trends
  • Contract value assessments
  • Missed milestones

Contract management software for legal teams helps manage these metrics.

Contract Risk And Accountability

Legal contract management software helps mitigate risk from the planning to review phase of contracts; that said, the main focus is monitoring the risk in the post-signature period.

Contract management solutions help to reduce contract risks
Contract management solutions help to reduce contract risks

A system should be in a place that records the monetary impacts of potential risks.

KPI needs

This KPI needs:

  • A system to assess risk
  • A system to assess impact of various risks
  • A checklist to follow for contracts
  • A system to record possible risk outcomes per each contract
  • A system to aggregate various risk outcomes over multiple contracts

Legal contract management solutions help to manage contracts and evaluate contract risks; also, accountability is established as the software instructs different involved parties as to what is required of them at all times.

Benefits of Legal Contract Management Software

Contract management software for legal departments has many benefits; all the KPIs outlined in the article can be better tracked, measured, and reached when CLM software is incorporated in the legal contract process.

Before investing in software, make sure to research the best legal contract management software reviews to find the best solutions for your business.

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