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Corporate Legal Analytics Move Beyond Financial Metrics

May 2019 |
Andrew Baker, Senior Director, Legal Transformation + Innovation, HBR Consulting
Scott Springer, Senior Director, Software Solutions, HBR Consulting

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.