You can have any color you want, as long as it’s black. Ford’s Model T was a classic example of a market-creating blue ocean strategy that allows companies to unlock new demand. For centuries, people were content with horse and buggy until Ford showed people what they were missing.

Currently, some in-house lawyers fear the idea of having the outside counsel engagement process wrapped up into the auspices of their enterprise’s competitive bidding policies. However, they desire all the benefits that competitive bidding provides. Namely, driving for more competitive rates, obtaining cost predictability, and gathering qualitative insights into how the firms plan to strategically approach the engagement. So, why the disconnect?

“I think that it is a good concept and could work well for simple, repeatable cases, but all my cases are really complex commercial litigation matters so I don’t think an RFP really makes sense for me,” If only I had a dollar for each time I heard that excuse….

Today, the role of legal operations has been more frequently tasked with finding opportunities to run RFPs and this task can be challenged by push-back from managing attorneys. While there are many use cases for RFPs that include establishing a panel of firms company-wide or by practice area to properly align the selection of firms with their greatest area of expertise, among other considerations, bidding to select firms for a specific case is less common. There are many common misconceptions amongst managing attorneys about competitive bidding aka RFPs aka Sourcing on a matter-by-matter basis. The most frequently cited misunderstanding is that RFPs and competitive sourcing only work for commoditized work and that the greater the risk or complexity within the case or project, the less workable the case is for an RFP. However, RFPs are a great means for selecting firms in complex litigation matters for 3 key reasons:

1. More Competition and Firms’ Desire to Work Big Cases

The first reason complex litigation matters are ideal candidates for RFPs is that they are big and sexy… No, seriously. The complex nature of the work necessarily means that there is likely to be a greater amount of work involved. With more revenue potential for the firms, there is a greater incentive for firms to provide added discounts in order to earn the selection. Also, firms want the assignment so they can tout high-profile case outcomes to other clients. Therefore, a competitive selection process is more likely to be fruitful in these cases than in simple projects because firms want the business more and are more willing to lower their fees to win the assignment. This can lead to multi-million-dollar savings for the client in a single RFP. Clients completely lose out on these savings by sticking to the status quo – simply selecting their panel firms at preexisting, “discounted” rates.

2. RFPs can account for ambiguity and define price in case of change

Projects don’t have to be simplistic in their scopes of work to be candidates for an RFP. RFPs can be set up in a way where you account for the ambiguity that comes with complex litigation matters. One of the reasons that hourly billing is so pervasive in the legal industry is because of the ever-changing nature of litigation matters, whose timelines are heavily dependent on external variables – such as the whims of the judge. For this reason, the industry has (despite all its proclamations to the contrary) resisted AFAs. It’s just easier to get the firm started and have them bill you at what you’re told is ‘competitive’ hourly rates (but do not really know for sure?). However, the rate is only half the equation. And negotiating an hourly rate can be like squeezing the center of a tube of toothpaste – as the rate decreases, the firm can easily make up the difference on the backend by billing more hours.

Selecting a firm immediately without requiring the firm to submit a fixed fee proposal amongst competing firms causes the client to lose all leverage. Once the firm is engaged and the longer they are engaged, the less leverage the client has to negotiate a lower rate or to implement an AFA later on. That’s because firms know that the learning curve to bring in a new firm would be costly to the client. For this reason, its critical to run an RFP at the start of a new matter or project so that you can obtain a fixed fee proposal that provides price predictability for the duration of the case. In contrast, hourly budgets are horribly inaccurate and provide zero price predictability. With a fixed fee proposal obtained in an RFP, clients can get the total price while defining the types of changes that would trigger a “material deviation” (for example – a 30% increase or decrease in the number of these 5 key activities). After defining these triggers, the parties can also agree on how much it will cost to add additional activities into the scope (i.e. $100,000 for each additional motion to dismiss) and how much the total will be reduced if they are removed from scope. In this way, you can use the RFP process to obtain overall price predictability whilst also ensuring that you have an easy mechanism for making adjustments.

3. RFPs allow clients to set expectations for staffing and strategy upfront

A third reason RFPs are great for selecting firms in complex litigation matters is that they help the client set expectations early on. Expectations can be defined in the RFP in several areas such as a client’s preferred staffing mix, definition of a successful outcome, and preferred vendors and billing guidelines. Further, clients can define the level of seniority that it prefers to handle various tasks (for example – no first- or second-year associates on expert depositions). This allows the firms to provide pricing based on common assumptions so that the client can truly compare apples-to-apples total fee proposals. Also, it ensures that the client has set the right expectations before the work begins, which allows them to avoid time-consuming and difficult conversations that might occur during hourly invoice review.

You can have any AFA you want, as long as it’s competitively bid

Although the terminology, “Request for Proposal,” comes from procurement, where the purchase of commodities used to be the department’s only charter, the process is something that greatly benefits corporate law departments. An RFP doesn’t have to be a 60-page, lengthy exercise that is designed to evaluate whether a company “qualifies.” It can be a short 5-10 question template with pricing obtained at the phase and/or activity level that is sent only to panel law firms that the client has already ‘pre-qualified’. This streamlined process can then be replicated on a matter-by-matter basis such that panel law firms get into a rhythm of bidding for each case and can provide their best price during periods when they have their greatest capacity – creating a win-win scenario for both the firm and the client. By dispelling the misconceptions about the proper use of RFPs, the legal industry can move away from the misery-induced billable hour and towards a fair, transparent selection process. Clients can let the market dictate the true price of the work. This would allow them to spend less time worrying over hourly rate hikes and invoice review while achieving the budget predictability that CFOs have been asking of their GCs for decades.

About PERSUIT

PERSUIT™ is a Software as a Service (“SaaS”) company specializing in legal services sourcing technology. Founded in early 2016 by Jim Delkousis (a former BigLaw partner), PERSUIT was designed to be easy enough for in-house attorneys and law firms to use with little to no training. The tool is self-service enabled and is an out-of-the box, cloud-based software application, providing corporate law department attorneys the ability to launch Requests for Proposals (RFPs), Requests for Information (RFIs), Hourly Rate Information Requests, Panel Counsel Inquiries, and Alternative Fee Arrangements (AFAs). Each request type can be set up to drive price competition amongst participating law firms such that true market price is achieved. PERSUIT is reinventing the way companies engage with outside counsel with a mission to Kill the Bill(able) hour in favor of outcome and value-based fixed and certain pricing models. Have questions? Reach out to David@persuit.com or visit our website at https://persuit.com.

HBR Consulting will present an educational session at CLOC’s 2019 Corporate Legal Operations Institute — “Don’t Gamble Your Future . . . Advance Your Operations Maturity” — in which we will explore strategies to help corporate law departments advance on the CLOC Legal Operations Maturity continuum. This is the third in a three-part series of blog posts to provide CLOC members with context regarding several of the major strategic areas in which law departments can advance in their maturity.

In this post, we will be focusing on the topic of legal analytics. “Data Analytics” is one of CLOC’s advanced level core competencies. Within the field of legal analytics, however, there is a wide range of maturity. This post briefly touches on some of the broad areas where there are opportunities for law departments to use analytics. Watch in the next month or so for HBR’s forthcoming whitepaper on legal analytics maturity.

The Emergence of Analytics in Corporate Law Departments

Companies across all sectors of the economy have been investing heavily in the development and use of data analytics for years, but the truth is that the application of data science in the legal sector is still in its early stages. However, the steady expansion of business expectations for in-house legal professionals — i.e., the law department is often required to measure its business performance just like the other departments in the organization — appears to have lit a fuse in the marketplace.

No matter how late the start, corporate law departments are now increasingly embracing data science and analytics as a strategic lever for more effectively measuring, managing and reporting on their business performance. Based on our work with corporate law departments of all sizes and across multiple sectors, there are three broad areas of legal analytics that have emerged in the field:

1. Financial Analytics
   The common starting point for most departments is to focus on spend or revenue analytics. This is a natural area for investment in legal analytics, as it helps department leaders to better understand their spending patterns and gain more control over their spending on outside counsel in particular, but also other costs such as discovery providers, etc. Twenty-six percent of corporate law departments are planning to implement legal spend analytics in the next one to two years, up from 24 percent in 2016 and 2017, according to the 2018 HBR Consulting Law Department Survey. Additionally, 49 percent have already implemented a legal spend analytics solution, up from 46 percent in 2017 and 39 percent in 2016.
2. Operational Analytics
   A second area of data analytics that has emerged is the application of quantitative methods to specific functions in the department that play a supporting role in the delivery or receipt of legal services. For example, a department might create a quantitative method to rationalize the consolidation of outside counsel with whom the company does business, or perhaps to objectively evaluate a department’s progress toward diversity and inclusion. These types of applications are valuable ways to optimize the legal talent and professional services utilized by the organization.
3. Practice Analytics
   The third major area of the corporate legal analytics landscape is the application of data science to the practice of law itself. These sorts of analytics seek to inform matter strategy, refine legal advice, enable experts to make better determinations of risk or forecast possible outcomes. Examples of questions that might be answered with practice-oriented analytics include: What does a case like this typically settle for? How long will it take to resolve this matter? How have we fared against this opposing counsel in the past? What are the chances this deal will close by the end of the quarter? Practice analytics are the least explored area of corporate legal analytics, but they are a growing point of emphasis for progressive department leaders and may offer the greatest opportunity for innovation.

Driving Innovation with Analytics

Earlier this year, HBR Consulting conducted “flash surveys” at a series of roundtable events (in New York, Chicago, San Francisco and San Jose) for corporate law department professionals. The surveys focused on questions related to the internal strategy, use and staffing of data analytics within corporate legal operations.

Our findings from these surveys confirmed our anecdotal observations from conversations with in-house legal professionals over the past couple years: law departments are increasingly relying on data analytics to drive innovation, from financial reporting improvements to operational changes to high-value, practice-oriented advancements.

First, it is clear that corporate law departments are taking data analytics more seriously than ever. Three in four survey respondents reported that they either have a data analytics program in place now or have plans to develop one in the future. While our survey participants were from larger law departments (median of 123 lawyers), it is clear that the field of data science is now a top priority for in-house counsel and operational leaders.

Second, the corporate legal market appears to be at a key stage in its evolving use of analytics, with greater emphasis being placed on improving service delivery and informing legal decision-making. Using analytics for these substantive KPIs — i.e., non-financial measures, such as matter cycle time, damages realization, etc. — will allow in-house legal professionals to better understand the drivers of cost, mitigate risk and more precisely determine value provided by outside counsel. More than half (56%) of the corporate law department leaders we surveyed said they either “have” or “have plans” to implement substantive KPIs.

Third, our observation is that corporate law departments are searching for the optimal staffing approach to achieve these analytics-fueled innovation goals. Four in 10 (41%) of our flash survey respondents said they employ dedicated analytics personnel within their law departments who are solely focused on legal operations, two in 10 (22%) said they draw on shared experts who reside within another group at the company, and one in 10 (9%) said they engage third-party vendors for specific data analytics projects. The remaining respondents (28%) reported they have no formal resources in place. The analytics staffing model remains a work in progress and it will be important to monitor which approaches seem to best support corporate legal innovation.

Conclusion

After getting a late start, corporate law departments are increasing their use of data analytics and expanding their application beyond financial metrics to include higher-value uses. For those departments that have the patience to keep on the data analytics path, the continued development in perspective and capability will yield greater results over time from these more complex applications. As they become more sophisticated users of data analytics, in-house legal professionals are certain to drive the industry forward, obtaining greater visibility into their department operations and uncover new insights into how to improve their business performance.

See You in Vegas for the 2019 CLOC Institute

Register here to attend CLOC 2019 Vegas Institute – and please join our CLOC session:

Don’t Gamble Your Future…Advance Your Operations Maturity
Wednesday, May 15th at 1:30pm
Speakers:

• Kevin Clem, Chief Commercial Officer, HBR Consulting
• Marc Allen, Senior Director, HBR Consulting
• Molly Perry, Chief Operating Officer, Office of Legal and Administrative Affairs, Hewlett Packard Enterprise
• Greg Bennett, Sr. Manager, Legal Operations, Gilead Sciences

Questions? Email info@cloc.org.

The goal of the CLOC Metrics Initiative was to deliver a core set of metrics and a common language to be used within law departments to measure performance. The resulting set of metrics should be easy to implement and are based on readily accessible data using a number of common underlying systems such as eBilling, matter management or contract management. Over time, the broad adoption of a standard set of core metrics such as these will support more accurate benchmarking across the ecosystem.

The CLOC Core Competency Reference Model provides the steps to build an effective legal operations function. The CLOC Core Metrics Initiative summary presented below focuses on the following critical and impactful competencies when developing the metrics needed for your legal operations function.

• Strategic Planning
• Data Analytics

The CLOC Metrics Initiative cohort presents a high-level introduction to a core set of metrics and a data dictionary and glossary. In this document, you will learn why a core set of metrics and processes matter and how you can build and implement these practices into your legal department.

It seems that all of us, especially those in the corporate space, are being asked to do more and more with less. Being more efficient is something that we all want, but how should we quantify it? Can we measure the changes we are driving? How do we determine if we’re operating efficiently or measure the impact of the changes we’ve already made? Can we, or should we, compare ourselves against others in the same space? What data points are most important to measure and how do we gather data on those points? These are just a few of the questions we’ve been asking ourselves.

Metrics are a big topic, too big to define completely in one initiative. The Core Metrics Initiative worked to establish a core set of metrics that could be universal to everyone, today. This, they hope, will form the basis for a common language and taxonomy that, over time, will evolve into a standard.

Why Standard Metrics Matter

Metrics not only allow law departments to measure their performance against internal standards but also, when there is a common language, against comparable external benchmarks. HBR Consulting’s 2018 Law Department Survey indicates that legal organizations continue to deal with increasing demand; however, budgets are flat and in many cases are declining. Law department leaders are often looking for external measurements to see how they stack up on key operational metrics such as spend, additional uses of technology, outside counsel, and many others. The need for consistent metrics is critical across those data points. Whether you need to evaluate how your department stacks up in its current state, as part of a broader operational review, or just to identify ways to take the department to the next level. Metrics must be used objectively to quantify, analyze and report on performance over time.

A large majority, 81 percent, of departments reported an expectation that their legal needs will continue to increase in the next year, citing commercial contracts, regulatory compliance and mergers and acquisitions as the top practices areas likely to require legal attention next year.
– HBR Consulting’s 2018 Law Department Survey.

A thorough benchmarking analysis can be a critical tool to determine best practices; however, if a law department’s metrics are not clearly defined, and in writing, the information may not be reliable. There are a growing number of surveys in the industry; yet there is also a lack of consistency in the types of companies that participate, as well as in the specific areas of focus of the benchmarking surveys. Gaining alignment on which data points are the most important and, at a minimum, creating an inventory of the metrics that should be used by law departments is a gap addressed in the CLOC Metrics Initiative.

Part of the CLOC Metrics Initiative goal was to identify a core set of metrics that could be incorporated into underlying systems like electronic billing, matter management, etc. to allow for a common taxonomy regardless of which software vendor used.

“Intel’s legal department grew up around a number of different tools across the practice areas and we never had one central place for data that was similar. Whenever we wanted to benchmark it was really difficult to pull together the data with high confidence. We would typically start off with our finance team to get our financials. But, since the finance team couldn’t see into our e-billing System, they could only give us our spend totals. The spend totals couldn’t give us any real insight into whether we were being efficient. I was constantly looking for ways to show the results of the programs we are running.”
– Sandy Owen, Director of Business Services, International Legal and Operations, Intel Corporation

Finding ways to accurately capture data the right way, and benchmark it, is a fairly common refrain amongst all legal operations professionals. Everyone is trying to collect data and metrics on their law department performance. Each person, in their own silo, is capturing data in the way that they deem best for their own use. While that works for the individual, it doesn’t always create a common standard that can be used to compare department performance with peers or with best practices.

Creating a Standardized Language

We began to see metrics as a kind of language. What we’ve seen in our industry is that each person is creating their own language. We were determined to take all of the metrics – the languages that have been created – and use them to create a common language with common words and common definitions. The CLOC Core Metrics Dictionary and Glossary was created to provide a foundation for any legal operations professional to generate a financial profile and communicate key performance indicators about their law department. The Dictionary and Glossary ensures that there is consistency in how all legal operations professionals are calculating their core metrics.

The CLOC Core Metrics Dictionary The ultimate common language which all legal operations professionals should speak along with calculations, formulas, and how to interpret the results.

The CLOC Core Metrics Glossary Explanations of the data elements and what other law departments typically include.

The CLOC Core Metrics Dictionary and Glossary also shows how to generate reports, what systems to generate reports from, and how to apply filters. In keeping with the language analogy, the dictionary contains the word and the glossary defines the word.

Getting Started with Your Department’s Metrics Program

We put together a suggested set of metrics to develop – what we consider to be the baseline, or foundation. In reality, if you’re capturing the 5-6 data elements that make up these core metrics across the categories of spend, resourcing and demand, you can create a much more robust metrics program across various practice areas for your organization.

This is by no means the end of this effort. Much like a “normal” dictionary, words will continue to be added. We look forward to growing a common dictionary across the ecosystem, but for today let’s get started with what we have!

Step One – Gather the Data

Starting a metrics journey may be a little daunting at first. The key is to take baby steps and know where to look for the data that you probably already have. We found that the key core tenet of metrics is related to spend. Spending and staffing are most often the areas that people look to for their key core metrics.

Many law departments have already implemented an e-billing system. Consequently, data on spend by firm, by practice area, or by region can easily be obtained. However, the core metrics that we’re really looking for rely upon a higher-level category of spend data — internal, outside counsel, and other non-law firm vendors.

Look for other sources of data that will provide any missing information. For example, every company should be able to gather information from their AP system, even those that may not have an e-billing system or are in the early stages of technology adoption. It doesn’t take a significant amount of work to gather some of the core elements needed to begin a metrics journey.

Step Two – Cleanse Your Data to Ensure Accuracy

Our goal in developing the Core Metrics Initiative was to simplify the process and only require a handful of data points to be captured. However, it’s important to keep in mind that your metrics are only as good as the data that you’re able to collect. We all agree that you can’t manage what you can’t measure. But if what you can measure is based on bad underlying data, your management decisions will be negatively impacted.

You’ve got to start somewhere. However, you also need to complete a thorough review of your data to get a sense of whether your data is clean, or needs additional cleansing. Make sure to identify incomplete, incorrect, inaccurate or irrelevant parts of the data and then replace, modify, or delete the dirty or coarse data. Cleansing your data on a regular basis is an important step in accurate data analytics.

Step Three – Analyze and Interpret the Results

Once you’ve captured your data and ensured that it’s clean, you’re only a few steps away from viewing your law department’s core metrics. There are many options to analyze, visualize and communicate your results.

The CLOC Core Metrics Dictionary includes calculations that you can use with a few data points and minimal effort. By using those formulas, you can recalculate your core metrics in a basic tool like Microsoft Excel or Google Sheets. As you begin a more advanced metrics evaluations and link to the rest of your data, you may want to consider utilizing a business intelligence platform designed to consolidate and analyze data. The goal is to put the power in your hands.

Calculating core metrics is something that you can easily do on your own, but it’s important to know that you have options and that you’re supported by the CLOC community.

So what’s in it for you and why should you care?

It can be a challenge to undertake a metrics project. However, we hope you’re getting excited about the benefits that data metrics can bring to your legal operations and that you’re starting to think about what you can do with your own data. If you’re just beginning this journey remember to start small. Take small steps with incremental improvements.

The benefits to metrics collection are huge. Not only will you have a tool that you can use internally, but you’ll have the ability to share data and benchmark your results.

“Probably one of the most immediate benefits we got from our metrics project at Intel was to identify areas we were operating inefficiently and put programs in place to fix them. Starting small with the data we already had allowed us to deliver immediate value and build credibility as we expanded our metrics program.”
–Sandy Owen, Director of Business Services, International Legal and Operations, Intel Corporation

Key Takeaways

1. Download the CLOC Data Dictionary and Glossary (Access for Members Only) so that you can begin to understand the data that you need to collect, and then you can begin to identify the data that is easily accessible.
2. Take small steps with incremental improvements.
3. Identify data streams and determine how to collect and cleanse the data.
4. Use programs to analyze, visualize and present your findings.

Attend a CLOC Institute to learn more about this, and many other topics of interest to legal operations professionals. Are you an in-house legal professional? Join CLOC as a member and be part of the discussion!