How law departments can leverage analytics to become a strategic corporate asset

05
Apr
2012

David Samia

General Counsels and their staffs are under intense pressure to keep external and internal legal costs under control, while assuming a more business-oriented role and increased participation in strategic business decisions.  This is a task that is easier said than done as legal departments need to embrace these responsibilities.

However, technology and the metrics it provides are literally changing the way savvy law departments do business.  It’s no longer enough to reduce overhead or outside counsel spend, now is the time to improve legal services both internally and externally, lower the overall cost of these services, and become strategic partners of the business.

While some use technology to streamline or automate processes, many do not yet extend the value of their technology investment to create viable metrics that can be analyzed and used to make the information actionable.

Metrics gleaned from matter management/e-billing systems supporting key performance indicators (KPIs) are enabling legal staff to go beyond merely tracking spend.  These metrics also provide the transparency to demonstrate the value of the legal service being delivered and:

• provide the insight needed to drill down and make critical decisions such as what matters can be in-sourced rather than outsourced – and in the case of outsourcing, if a firm’s offer to take on certain litigation is beneficial in terms of cost and performance,
• identify risk and various cost drivers and address those issues in real time,
• identify key trends such as specific types of litigation and related performance,
• identify when it is beneficial to spend more to protect intellectual assets,
• accurately predict annual spending,
• provide specific data for compliance reporting, 10K reporting, financial planning, and more.

However, there are law departments that have mastered the process of harvesting and analyzing legal data to make better business decisions.  For instance, The Dow Chemical Company, a Fortune 500 multi-national company in the chemical industry.  Dow has a large legal department with personnel located in numerous cities worldwide.  “By generating more precise intelligence and reporting from legal activities, we are able to see exactly what’s happening at any given time, what the ramifications might be, and how to react and correct any issues,” says Chad Andrews, Dow’s Legal Systems Services Leader.

The Dow Legal team now knows that whenever a new legal matter is spawned, all the information and resources for controlling its cost are put in place as well.  The moving parts that drive this sophisticated process include a detailed financial assessment and scheduled matter review dates.

Because the matter management system automates the workflow, the in-house team has become better at rejecting invoices that do not adhere to approved billing rates.  Analytics measure the team’s invoice review effectiveness, showing for example “number of exceptions approved” by in-house counsel and/or outside counsel and conversely “number of exceptions denied.”

“We have also implemented a liability change approval process,” explains Andrews.  “If it changes by a certain amount, the system automatically flags the issue and calls for more review.   As a result, our quarterly closing process has become painless.  The depth of reporting and the high reliability of the data result in more accurate and available financial intelligence.”

The right metrics can help align the law department as a strategic asset instead of a cost liability.  However, automating processes and procedures are an important part of legal technology adoption, but it is the disruptive aspect of technology that is truly changing the way legal professionals plan and deliver improved legal services.

With analytics, departments are showing that they can analyze the costs, performance, and effectiveness of the legal services they provide, whether they’re provided with, or without, outside counsel.  With this level of transparency, law department executives are better prepared to demonstrate the value of the legal services their department provides.