Legal Data Analytics Fundamentals, Part 1: The Who.
We recognize that the phrase “legal data analytics” can be intimidating for Legal Departments, and we understand: If your team relies on emails or Word or Excel documents to track your matters and spending, you may feel light years away from legal data analytics.
The good news: You’re not. The fundamentals of legal data analytics are universal, and data collection can be simple and relatively painless. Our next four blog posts will cover the basics of legal data analytics – the who, what, when and why components behind the metrics that can drive efficiency and results.
Legal data analytics for in-house departments covers much more than spend: Done right, it will provide actionable clarity about your Legal Department’s capacity, capability and cost.
To build a successful program, you need to start with an understanding of the who, what, when and why behind the numbers.
First: The who. For your legal department intelligence, this comes down to two questions:
- Who are you working for?
- Who is doing the work?
Business Clients: Who are you working for?
Inputs: While every company’s organizational chart is different, and systems for chargebacks vary widely, every in-house department provides legal work to various business units – from Human Resources to Marketing to Finance. Using your own context, start to chart:
- Business unit. Where is the work coming from?
- Cost. What is the cost – or cost equivalent – of the work you provide?
- Type of work. What exactly are you doing for them? Drill down into the size of the project, complexity and strategic value (we will cover this in detail in future blog posts).
Outputs: This data will inform important conversations with your department, your business clients and your company’s leadership team:
- Trouble spots. What business units are your frequent flyers? Why? Are some departments more prone to legal troubles, and if so, are there opportunities for new policies or training?
- Value. According to The GC350, only 27 percent of legal departments measure their value. Even if your department does not charge back your time, charting the cost can help you justify your budget, new hires and more.
- Relevance. Look at who is requesting the work combined with the type. What is the company’s most significant work, in terms of risk and strategic value, and how well is your department equipped to handle it?
Resourcing: Who is doing the work?
Inputs: The first step in understanding your resourcing is calculating the split between your internal and external resources. Although every Legal Department is different, according to The GC350, 42 percent of legal budgets are spent internally and 58 percent go externally. The GC350 benchmarking survey found these proportions hold true across industries and company sizes.
For your external resources, in order to generate meaningful data you will need to understand:
- Type of firm. First, sort your outside providers into law firms and other legal service providers. For law firms, drill down further – consider sorting your firms by size (solo/small, midsize, AmLaw 200, AmLaw 100, Magic Circle, et cetera) and specialty (full service or boutique).
- Type of work. What work are you outsourcing? Collect as much as you can about the client, size, complexity and strategic value of the matters sent outside the Legal Department.
- Spend analysis. A straightforward metric – how much are you paying to whom?
For your internal resources, determine:
- Seniority and speciality. What are the experience levels of the personnel in your Legal Department? Do you have subject-matter experts, generalists or both?
- Type of work. Just as you gathered for external resources, what kind of work are you handling internally? Again, consider the client, size, complexity and strategic value of these matters.
- Workload. How are assignments divvied up throughout the Legal Department?
Outputs: Once this data is assembled, you can slice it and dice it dozens of ways. Among other considerations, legal data analytics can help you address:
- ROI. Are you sending simple, straightforward work to your most expensive firms? Where might there be opportunities for cost savings?
- Internal vs. external balance. Are you sending out too much work – and is it work that could be more efficiently handled in-house?
- Department experience levels. Do you have the right mix of junior and senior lawyers and legal staff?
- Department capacity. Are some members of the department overworked while others are underutilized?
- Risk management. Is your highly complex, most strategic work being handled by the right people?
Collecting Your Data
It’s possible to collect and crunch this data using spreadsheets or other tools. It’s possible, but you will lose thousands of hours (and perhaps your sanity). Matter management software for legal departments, like Xakia, makes it as simple as possible to assemble your inputs; information is collected for each matter in less than 30 seconds. Our legal operations software generates outputs automatically through dashboards and reports.
According to the latest Altman Weil Chief Legal Officer Survey, over the past 12 months more than 40 percent of legal departments have started collecting and analyzing metrics to improve their efficiency; 38.3 percent of those already report a “significant improvement in performance.” Are you ready to join them with legal operations made simple?
How do you ensure your resourcing choices - the WHO - give you the highest return on effort or investment?
Download our infographic to see work types and resourcing plotted on a quadrant for highest impact.