5 strategies to maximise the value of law firm analytics

The most strategic legal operations teams use law firm metrics to accurately measure how well a law firm is doing and make sure they are getting the most out of their legal budget. This is exactly why law firm metrics are used. If you don’t have access to concrete information, the most you can do is make informed estimates about how effectively your suppliers are fulfilling your requirements and whether or not their prices are reasonable. However, these guesses may easily wind up costing you thousands of dollars.

Metrics for your law firm can be a useful way to track how well your business is doing and find places to improve. By keeping track of key metrics on a regular basis, you can learn about your company’s efficiency and productivity, as well as how well your marketing and business development efforts are working. Here are five ways to get the most value out of your law firm metrics:

1. Create a vendor scorecard

Not all metrics are created equal, and it’s important to focus on the ones that will provide the most useful information for your business. Some common metrics that law firms track include billable hours, client acquisition and retention rates, and profitability per partner. Consider what information will be most valuable to your firm and focus on tracking those metrics.

Create a vendor scorecard utilising law firm metrics in order to standardise the way in which you evaluate your vendors. A standardised scoring system allows for accurate assessment of outside counsel and establishes measurable criteria for performance.

If you do not have a predetermined procedure to evaluate the performance of your vendors, it will be difficult to compare your various legal firms to one another in an accurate manner.

Despite this, a large number of legal operations teams continue to conduct their business in this manner, with 45% of respondents in CLOC’s 2021 State of the Industry study classifying their vendor review process as “ad hoc.”

You will be able to increase the overall quality of your vendor evaluations and make judgments that are both more strategic and more cost-effective if you switch to a method that is formal and recorded.

Even though legal operations scorecards will be different depending on the objectives of the department and the business, integrating law firm metrics from each of these four areas will provide you with a comprehensive overview of the performance of the vendor across the board:

Spending information broken down as follows:

  • spending by company, spending by topic, spending relative to budget, and spending by practise area
  • Accruals against actuals, billable hours, time to process bills, invoice approval rates, and billing rules breaches are some of the types of data that are included in billing.
  • Information about vendors, including typical timekeeper fees, discounts on those rates, and other charge alternatives (AFAs)
  • Data on issues, including the number of cases handled by each company, the average length of time a case takes to resolve, and resolution rates

In addition, an increasing number of legal operations teams are using diversity data from outside counsel as a success indicator. This guarantees that they are working with suppliers that have the same commitment to fostering diversity, equality, and inclusion within the legal profession.

In order to keep track of this measure, encourage third-party suppliers to provide information on the diversity of their employees using the American Bar Association’s Model Diversity Survey or the Diversity Scorecard developed by the Minority Corporate Counsel Association.

After you have collected all of your performance data, use a scale from 1 to 10 to grade your overall relationship with each vendor. Despite the fact that this is a more subjective statistic than objective data such as billable hours, its significance cannot be discounted. Your outside legal counsel should not be a source of conflict for the team but rather a helpful partner who contributes to its success.

Once you’ve identified the metrics you want to track, it’s important to set goals and benchmarks for each one. This will give you a clear target to aim for and help you measure your progress over time. For example, if your goal is to increase billable hours, you might set a benchmark of a 5% increase each quarter. By setting goals and benchmarks, you can ensure that you are continuously improving and meeting the needs of your clients.

3. Support price discussions

When it comes to establishing reasonable fees for legal services, one of the most significant benefits of using law firm metrics is the fact that these metrics may be used as proof. Although finding out that you are being overcharged is never an acceptable situation, the good news is that you may use this information as leverage in law firm rate review negotiations with outside counsel if you bring it up.

When you are benchmarking law firm rates, you will look at market data from the legal sector as well as legal expenditure statistics provided by vendors that you engage with. If you do things in this manner, you will have a complete view of the price situation, which will provide you with more support to construct a convincing case than you would have if you had just looked at the facts on your own expenditures.

You will be able to review factors such as volume discounts and the utilisation of alternative fee arrangements (AFAs), both of which can reduce your legal spend even if your vendors are unwilling to budge on their hourly rates. These factors are outside of the average costs associated with legal representation. Finding strategies to save money other than decreased fees helps with long-term legal cost containment. Ernst & Young estimated that general counsels are trying to cut the cost of legal representation by around 14–18% by the year 2024.

Figure out the situations in which you need in-house counsel as opposed to outside counsel.
Although it may not be immediately obvious, the management of outside counsel has a significant impact on the internal hiring choices that you make. It’s possible that you have a hunch about whether it’s better to insource (purchase) or outsource (rent), but even informed estimates are still just that: guesses. Your instincts may be turned into data-driven judgments with the aid of law firm metrics, which will assist you in maximising the efficiency of your legal staffing over the long term.

What do we have on hand that qualifies them to manage this assignment with their expertise? (partners, senior counsel)

Comparing how much you typically spend on IP-related problems internally and outside
When comparing costs internally and externally, the overall historical cost of IP is important.
Armed with this information, you will be able to make a confident and well-informed choice about where to assign your future intellectual property cases in a manner that is both within your financial means and safeguards the time and expertise of your lawyers.

You now have data-driven justification for taking on a new job if, for example, you discover that the expense of retaining outside contractors is larger than the pay of an in-house attorney. This not only increases your return on investment but also reduces the burden placed on your existing team members.

4. Share your metrics with your team.

Metrics for your law company might help you spot areas for improvement in how you work with vendors and money. Using these data, you will be able to devise certain key performance indicators (KPIs) that represent actual results in order to demonstrate the value and effectiveness of legal operations.

our metrics are not just for your own benefit – they can also be a valuable tool for your entire team. By sharing your metrics with your attorneys and support staff, you can help everyone understand the goals of the firm and how their individual efforts contribute to the overall success of the business. You can also use your metrics to identify areas where your team may need additional support or training to help them achieve their goals.

Engage in communication with your suppliers in order to strengthen your ties with them.
Metrics for a law firm make it easier to have transparent conversations with outside counsel on the latter’s performance. If you don’t have proof to back up why it’s a legitimate ask, expecting a vendor to alter the way they operate or the methods they use is an unrealistic expectation.

Let’s imagine you work for a legal firm that has a high proportion of effectively settling things, but their matter lifecycle time is longer than the average. It is not beneficial to just remind them that they need to speed up the turnaround time for their work. You will have an objective opportunity to improve inefficiencies, and you may work together to come up with a proactive solution, but, if you provide visual data graphs on their typical lifetime in comparison to other organisations that are comparable, you will have this chance. If you have facts on your side, you can set fair expectations that are beneficial to both parties, which will make it easier to address any tension or arguments that may arise in the future.

The other side of the coin is that if you share data with your vendors and their performance continues to be objectively sub-par, the law firm metrics will serve as hard evidence that supports a decision to end the relationship and work with a vendor that will give you a stronger return on investment (ROI).

Conclusion

Overall, law firm metrics can be a valuable tool for tracking the performance of your business and identifying areas for improvement. By regularly monitoring and using your metrics to make data-driven decisions, you can ensure that your law firm is running as efficiently and effectively as possible.

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