I have been intrigued of late with the potential power of big data and data analytics to disrupt the practice of law and provide insights into areas previously governed by lawyer “gut instinct.” For example, litigation data analytics can provide useful and significant insights into such things as experience and tendencies of opposing counsel, judicial inclinations, and timing. Analytics is revolutionizing the counsel selection process as clients use data to learn the truth about lawyer marketing claims and determine the best fit for matters.
However, there is yet another perhaps even more disruptive use of data. Let’s face it: legal bills are the most comprehensive description of what lawyers do. The time to do tasks, what the lawyer does on a matter, and the steps taken to get from point a to point b is typically and scrupulously written down in excruciating detail. By systematically mining this data and taking a hard look at what it shows, clients can not only learn what a lawyer is doing but also demand data based change.
Today’s billing software products are becoming more and more sophisticated and robust and can scrutinize bills to see irregularities and billing guideline violations. These programs can also take billing data and develop more accurate budgets and then better monitor how lawyers are doing against those budgets as cases progress. And by looking across industry-wide data—which several vendors are now obtaining—firms and lawyers can be benchmarked against others in the industry.
Clients could then identify best practices for handling similar matters and mandate the use of those practices across their lawyers and law firms.
Here is the most intriguing use of billing analytics programs: by looking at bills across an industry or across matters, clients could make a quick and valid comparison of lawyer efficiencies and results. By identifying the most efficient and successful lawyers and looking at how they do they do their work, clients could then identify best practices for handling similar matters and mandate the use of those practices across their lawyers and law firms. Law firms would then have little choice but to adopt the best technologies and work processes.
One such program already using both analytical tools and industry benchmarking is a Consilio product called Sky Analytics. According to Doug Ventola, a Managing Director of Consilio and one of the creators of Sky Analytics, the program collects data from various companies and firms, cleans it so comparisons can be made and then uses it to do benchmarking. Consilio clients can easily compare what their lawyers are doing and charging to what the lawyers for other companies in the same industry are doing. Sky Analytics also provides in house counsel with information showing where they are overspending by highlighting inefficiencies.
It can provide information about the typical duration of matters with related issues and how long it is taking individual lawyers to resolve similar matters, again leading to a better understanding of which work process flows work the best. It is through this understanding that the development and use of data-based best practices can happen.
A similar product, called Insights, is offered by CounselLink (a LexisNexis company) and also provides in house legal with the tools to assess lawyer performance. According to Kris Satkunas, Director of Strategic Consulting for LexisNexis, it is becoming more and more routine for clients to demand law firms submit their bills through companies like CounselLink so that analytics can be run. CounselLink maintains a $30 billion database on legal spend which includes nearly 7 million invoices across approx. 1.7 million matters.
Use of billing analytics tools are becoming more and more sophisticated and automated, reducing the time needed in manual review to gain insights.
While Satkunas and Ventola agree there still must be some manual review of what the analytics programs find, use of billing analytics tools are becoming more and more sophisticated and automated, reducing the time needed in manual review to gain insights.
Moreover, analytical programs are not just being run on law firms. Ventak told me that the tools are also being used to assess in-house counsel who manage various law firms to evaluate how well an in-house lawyer or insurance adjuster is managing the caseload and legal spend. Just as with law firms, these programs evaluate in house efficiencies and workflows. The upshot: ultimately, the C-suite will require in house counsel use these tools to spot efficiencies and impose those efficiencies on outside counsel.
Law Firm Use
Also, smart law firms might use these tools as well to create their own best practices. Ventak says he would be happy to sell Consilio’s analytics program to law firms although none have asked for it. But other analytical products are being designed and directed towards law firm use. Headnote, for example, provides tools to assess realization rates among lawyers inside a firm which helps determine the cause of reduced realization rates. According to Sarah Schaaf, CEO of Headnote, these analytical tools could be used not only to assess whether a line of work is profitable but also whether the value of a client compares favorably to the cost of obtaining and maintaining that client. This gives a look into how much of a firm’s resources are being expended and the reward. This would drive a much more business-oriented examination into profitability as opposed to the simplistic hours and revenue analysis many firms use. Says Schaaf, “This changes the transparency equation.” (For a fascinating podcast on this subject, check out Schaaf’s interview on Lawsome).
This changes the transparency equation. Non-transparency is dead
These programs open the doors to see behind the veil into areas heretofore sacrosanct. Law firms and even individual lawyers within law firms are notorious for obfuscating what they are really doing by manipulating the language of bills, assuming that it would be impossible or too time-consuming for the in-depth review necessary to figure it out. Now, those who manage lawyers can make valid comparisons, know precisely who is doing what and how long it takes and develop and insist upon best practices. Those managing law firms can figure out why and how matters are not profitable on a more holistic basis beyond revenue and billable hours.
Non-transparency is dead: once information flows freely, clients will demand change, and law firms will be hard-pressed to resist in the face of big data. Change is coming.
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