This article is the second in a four-part series, designed to help corporate law departments gain new insight into the application of “Big Data” in the legal industry. Read the first installment here.
As the business of law continues to evolve, corporate law and claims departments and law firms must identify new ways to optimize spend and increase efficiencies. The solution may be right in your hands: the big data housed in your daily operations.
It is clear that the business of law is advancing to a state in which understanding the data and facts related to pricing and staffing will be the difference between success and failure. To successfully accomplish this, law departments must transform their use of data from historical reporting to advanced analytics, not only understanding what happened, but also understanding why it happened and how to respond.
Benefit from change
The evolution is significant and requires corporations, claims departments and law firms to rethink how they operate and conduct themselves. Senior executives in these roles have recognized this shift, and as a result they are hiring traditionally business-centric staff. This is evident in the rise of the director of legal operations role within law departments, along with the director of pricing role in law firms.
In this article, you will read three success stories explaining how some of these new non-legal positions have leveraged big data to:
- Geographically redistribute caseloads to areas in line with rate increases
- Decrease matter cost through more intelligent staffing
- Lock in future client revenue with accurate rate and fee forecasting
These businesses found a balance between using their own experience and using data to validate, challenge or guide their decision-making process. Studies have shown companies that use data to support decisions outperform those that don’t. For example, an IBM-Sloan School of Management study of 3,000 companies found that high-performing organizations were five times more likely to use analytics, as opposed to relying only on intuition.
The next step
Many organizations focus their attention on running traditional reports that largely explore what happened, without going much deeper. For organizations to benefit from actionable insights, they must conduct a deeper line of inquiry and find answers to critical underlying questions:
- Why did it happen?
- What is likely to happen next?
- How can I leverage this new knowledge?
Answering these questions requires an expanded skill set beyond basic reporting and statistical analysis. Individuals must understand how to extract insights by pulling together disparate yet relevant data sources, isolating key variables and applying advanced statistical modeling. The next step is understanding the business context and market dynamics in order to turn these mathematical results into actionable business insights and recommendations.
For example, in the 2012 Real Rate Report, quantitative analysts were able to determine the five key drivers of an attorney’s rate and provide a numerical estimate for each of the drivers’ impact. This occurred through the use of advanced techniques and helped answer the question “Why did it happen?”
Here are the results of three legal big data champions who were not afraid to explore the art side of data science. As a result, they were able to:
- Geographically redistribute caseloads to areas in line with rate increases. Using a number of data sources and statistical analysis, the director of legal operations at a large technology company developed an internal data evaluation tool to help make decisions about rate increase requests and what regions they should be moving work to.
- Decrease matter cost through more intelligent staffing. Using cost and case outcome data and the appropriate statistical techniques, a large insurer was able to build a model to determine the optimal distribution of case assignments related to staff and outside counsel. This led to a significant decrease in matter costs without an associated deterioration in outcomes.
- Lock in future client revenue with accurate rate and fee forecasting. An Am Law 200 law firm recently mined its data set to produce a report on the average cost of a specific matter type amongst a number of various regions. Complementing this data were advanced models providing future projections of case costs. The director of pricing was able to secure future work based on comparisons of rates and alternative fees that were gleaned from those insights.
Using actionable data for smarter staffing
Although this article focuses on the business of law and the evolution underway, we recognize that these changes remain largely incremental today. The difference going forward will be in the magnitude of data available and the insights that are possible from its aggregation and analysis. Such analysis will influence attorney hiring decisions. Equally as important, it will help determine the quality of the talent you bring in to help you manage the business of law and to extract insights from the mountains of data available to you, both internally and externally.
The success of a corporate law department, claims department or law firm will be based on the team that organizes and mines the data. Legal professionals need to use data that is relevant to the question at hand and hire people who can responsibly extract targeted, accurate insights from that data. Only then will you be ready to make the most informed and timely decisions for your business.
Law and claims departments must evolve from historical data reporting to advanced analytics, not only understanding what happened, but also understanding why it happened and how to respond. Legal professionals must begin to use these insights now to develop the team structure and competencies to manage not only law departments and practices, but also the business of law itself.
In the next part of our series, we will look at the latest data tools available to help corporate law and claims departments achieve greater cost-savings and improve efficiencies. There will be more real-life examples of success that any corporate law department can implement.