The Coalition of Technology Resources for Lawyers (CTRL) published its 2015 survey results reporting on the use of data analytics within in-house legal departments. The survey reports that most people believe the use of big data to drive profitability and decision-making will increase.
This report shows a growing trend for offices of General Counsel: that a client-centric dashboard, transparency, and a disciplined approach to matter management can all positively influence a law firm’s selection as outside counsel.
This blog outlines three critical areas for consideration.
How do you know who your most profitable clients are? If you are paying your rainmakers large bucks for bringing in the Fortune 500 customers, cutting rates because a client’s high profile status suggests you should, and then, spending large marketing dollars to retain them, do you truly have a mechanism for understanding who your most profitable clients are?
This is a particular concern when a handful of clients account for a significant portion of revenues.
Building that mechanism requires law firms to expand their definition of legal project management from a disciplined approach to providing legal services to a disciplined and consistent method of managing ALL projects within the firm. If a law firm is going to get serious about client profitability, it needs to factor in some portion of the time that is spent acquiring, servicing, and retaining clients; particularly directly attributable costs.
As we continue to move into an era when data analytics and artificial intelligence will become essential, how do we know we are focusing on the right metrics?
Finding just the right metrics (and too many metrics can confuse) becomes increasingly important as law firms build portfolio dashboards with the hope of improving executive decision-making.
Here are just a few examples of areas where Smart Projex can track and provide data:
- Task codes: Do task codes, in any format, offer guidance? How granular do task codes need to be if we want meaningful intelligence? Is there value in expanding task codes to administrative projects?
- Money Management: Does your firm have pricing data that is useful for pricing future engagements? Do you have a consistent process for pricing matters? Are you looking at the spread between the cost rate and the billable rate for each activity when you establish your pricing? Are you monitoring the actual time worked against the amount billed at the activity level?
- Lessons Learned: Is your firm tracking lessons learned in some meaningful format? Are you waiting until the matter has ended to begin the process of documenting those lessons, or have you created a process for periodically documenting them? Do you have an easy and speedy process for reviewing them before you start on a new matter to ensure that you don’t make the same mistake again?
- Risk Management: I suspect most seasoned attorneys are thinking about risk management, but are they documenting those risks and quantitatively analyzing them so that top ranked risks can be managed? Have you documented who the individual risk experts are? Are trigger events being monitored? Is a risk mitigation strategy in place for the top risks?
Getting project metrics right is challenging. Too many can confuse. The wrong ones can mislead. If you can’t reliably estimate activity progress, why are you looking at earned value, estimate to complete, or percent complete? Do your data metrics show you what you most need to know?
Law firms enter the compensation debate from differing perspectives. Some want to build an “eat what you kill” firm, while others want to create teams of people with varied gifts. The challenge is to align your data metrics with your value system and reward those behaviors that are most important.
How does Smart Projex help? Given the massive amount of project data that can be tracked by the software, we can produce a variety of metrics to align with your value system and improve your decision-making.
For example, if building effective teams is part of your value system, we can generate a report that gives you a measure of the upcoming workload for attorneys and staff, by competency. We can provide reports on which lawyers are hoarding work, and which attorneys are regularly running activities into the red zone.
In summary, law firm data analytics matter because outside counsel selection is increasingly driven by data and because strong executive decision making depends on your ability to measure what is most important. This includes understanding your client profitability, making tough compensation decisions, and knowing where things stand on a host of client matters and administrative projects.
Want to know more? Check out Smart Projex for Law Firms here.
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