Data analytics: the foundation of a successful legal department

This is one of 13 chapters from our eBook, 'Legal operations: how to do it and why it matters'. Download the full eBook or explore the other competencies below.

Lucy Endel Bassli, Founder, InnoLegal Services, provides valuable insights into the importance of data to your legal department and how you can get started with it in a meaningful way. The views in this article are the author's own, and do not represent the views of Juro nor those of CLOC.

Imagine if the world that we’re working towards with legal operations comes to pass. A piece of legal work presents itself in-house. It’s then allocated immediately and automatically to the most cost-effective and efficient resource - whether that’s a legal assistant, a junior lawyer, the GC, a software platform, an ALSP, outside counsel, or even self-serve. That engagement progresses at the optimum rate, and afterwards, reporting on its progress and success is delivered to key stakeholders. This information makes the right-sourcing of work even more targeted next time. The business gets maximum bang for its legal buck; the legal department as a whole is freed from the low-value flood of work that clouds its effectiveness every day; business and legal are free to partner on high-value strategic work that takes the company to the next level.

All the mind-blowing benefits we’ve been promised with AI won’t get off the ground without good data as the foundation

This scenario isn’t even remotely possible without good data analytics. Similarly, all the mind-blowing benefits we’ve been promised that will arrive with AI, and with blockchain, and any number of other hype-heavy game-changing tools, won’t get off the ground without good data as the foundation. Without proper analytics you can’t prove you need those tools, you certainly can’t prove they work, and you can’t identify areas where you’d use them.

Gathering and deploying data is what every other sensible business function does. If legal wants to be a business partner, then the time when we could get by without data is gone. At the basic level, every outside counsel you employ should be providing you with data: on their costs, their timelines, the level of resources they’re providing to you, the volume and response times of communications; you should expect these as standard.

Make clear to your partner law firms that from now on, you expect a defined set of data points, delivered promptly and regularly. If they struggle, this is a great way to stoke competition between vendors - because why should you pay for an inferior service to the level that their competitors provide? Particularly with the arrival of business-savvy ALSPs, there’s no excuse for a modern legal services provider to be data-illiterate.

Get your house in order

When it comes to your own in-house department, measuring outside legal spend is the very first thing you need to do. It sounds logical and simple, and something that every experienced lawyer should have the basic skills to do - particularly with the advent of matter management and e-billing software - but the reality is different. In the corporate setting, where numbers of service providers are high, it’s easy for spend tracking to get out of control. Losing control might not mean a catastrophic collapse in operational capability, but the volume and complexity of spend can quickly get to a place where you can’t analyse, forecast or budget properly - meaning that planning goes out of the window and the department becomes reactive. Not good.

Basic spend is black and white, and should be easy to measure, so start there. Once that basic data is gathered, you can start to add more metrics - historical trends, payment cycles, vendor numbers - and these will unearth insights that can help you. For example, if your payment cycles are fast, can you negotiate better rates for prompt payments? If your vendor number has crept up, but without an increase in spend, can you consolidate work with fewer vendors to make billing easier? Basic insights can quite quickly become powerful when it comes to basic resource allocation.

The next must-have dataset concerns how you engage with internal business clients. The only question that the business really cares about, more often than not, is how long a matter will take. The quality, and indeed any other aspect, of the advice is almost irrelevant to them. They assume the quality is high and that legal issues are covered by the legal professionals. So, all that matters to them is timeliness. They want predictability and certainty so they can plan for a matter, engage legal on it, resolve it satisfactorily, and then move on. This means that tracking the time from a matter being requested to its outputs being provided is the very least that business partners should expect - but again, far too few legal teams do it. While this data has a profound impact on customer satisfaction, it helps legal to resource properly too. Is work going to the wrong person? Is it all going to a person the business likes to work with, inadvertently making them too busy? Is the time spent on uncomplicated matters really the best use of legal’s resources? Tracking data properly is the only way to answer these questions, and to provide the level of service that the business has the right to expect.

Legal data 2.0

Legal departments shouldn’t run before they can walk, and properly tracking the cost and allocation of work should really be considered walking. Even between those two critical data sets, spend management is really more of a crawl. That is really the first place to start. But legal teams that are ready to do more have begun to track contracts data in ways that add real value for the business. Every company deals with contracts - they’re the foundation of business - and an increase in the volume and complexity of contracts is often the decisive factor that compels a growing business to hire its first lawyer.

Capturing contracts volume is black and white at the start - there are a finite, knowable number. Ask your sales team how many deals they have and they’ll know immediately how many sales they’ve made. Similarly, HR will know straight away how many people they’ve hired. But ask legal how many contracts they’ve produced in a given quarter and you might be disappointed. Rectify this first of all to avoid embarrassment and make sure nobody knows more about contracts than legal does. Whether employment contracts, sales agreements other type of contracts, the business is likely more in tune with volumes than the legal department which is supporting all those contracts.

Arm your GC with hard stats for the tough conversations she or he has to have at their level - the CFO is likely grilling them for information, and historically legal hasn’t always been able to provide it

But smart in-house teams will move beyond this headline figure to capture turnaround time, type of contract, involvement of outside counsel, monetary cost, most and least negotiated clauses, and so on. These might seem like softer metrics but the lessons they bring will allow you to deliver actionable insight to the business - helping them close, procure or onboard faster has a direct impact on the bottom line, and works wonders to boost the reputation of legal internally.

Armed with data, it’s time to make sure the right people see it - and use it to make strategic decisions. There have never been more options when it comes to data visualisation, and even the most basic pie chart is a step up from a list of numbers. It’s also guaranteed to land well with business-minded audiences - nothing animates budget controllers more than pointing to a huge slice on a pie chart and advising that all their money is going to one or two firms, for example. I advise communicating spend monthly, as financial data always has a keen audience. Workload and workflow-related data is better suited to a quarterly strategic meeting, where it can be presented to the relevant senior leadership. Key legal department metrics like contract volume, headcount touched by legal matters, turnaround times - these are headline figures your GC needs to know. It’s important to arm your GC with hard stats for the tough conversations she or he has to have at their level - it’s likely the CFO is grilling them for information, and historically legal hasn’t always been able to provide it. Again, the era where this was acceptable looks to be over.

Bridging the skills gap

To become data-driven, and data-enabled, in-house lawyers will have to overcome inertia and a skills gap in the profession. While some progressive law schools are catching up, and the number of law schools teaching skills like forecasting and data manipulation is growing, there is still much progress to be made. More worrying is the huge cohort of mid-career lawyers who were never taught any data skills as part of their training, and now face another 20 years of practice without them. To stay competitive in the job market, it’s crucial for lawyers to try and address this, and in a way that holds their interest. For example, a transactional lawyer might find a financial management class interesting; a more process-driven lawyer might prefer to learn Six Sigma. However you choose to address it, make sure you’re keeping up with the kind of role that ‘in-house lawyer’ is becoming - not just now, but five or ten years from now.

To underline a theme echoed elsewhere in this eBook, change management is driven by leadership. Tone at the top needs to be right, with a mindful and proactive GC who creates and maintains the kind of operational rigour where data tracking is natural. That might mean setting annual numerical targets, instituting customer engagement metrics, or even enforcing a monthly reporting requirement. The mix of carrot and stick required to make good data a reality will be different for each department, but the key thing is to get started. So many businesses are undergoing digital transformation across the board - whether that’s publishing moving online, marketing being automated, or even cars becoming autonomous. Legal must be part of the movement, as a point of pride: collect and exploit data to enable a more efficient, digital future - or risk being left behind.

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