The Changing Definition of Value: What Matters Most to In-House Counsel

The rules have changed. Law firm partners worldwide reached professional maturity in a much simpler world: One delivered a quality work product and everything else fell into place. Clients were satisfied, lawyers were engaged in thought-provoking work, associates received good training and generous, albeit hard-earned, revenues and profits ensued. This worked. Until it didn’t.

As with all extraordinary ecosystem disruption, many are reeling, casting about for an anchor in the storm. Partners face seemingly conflicting demands from clients who require quality work product but refuse to pay premium rates. To the clients, however, and particularly to in-house counsel, there is little conflict. The definition of quality has simply been redefined to encompass the manner in which legal services are delivered, and not merely the price or the outcome. And clients are happy to describe what this means to them.

“We’re in the midst of consolidating the panel of counsel that we use. We’ve identified five decision criteria that reflect our values: the firm’s relation- ship to us, including years of service and any customer relationship we have; billing rates for partners and associates; diversity; approach to resourcing and budgeting; and innovation,” reports Anne Sonnen, deputy general counsel and chief administrative officer for BMO Financial Group. Marilyn McClure-Demers, associate vice president and associate general counsel of corporate and intellectual property litigation at Nationwide Insurance, offers a similar robust definition: “Our top metrics are result, diversity and cost- efficiency, but this is closely followed by communication. This refers to timeliness, understanding urgency, managing expectations and helping us avoid surprises with our business management.” James Partridge, formerly chief counsel for outside counsel relations with Ally Financial Inc., and now consultant with Duff & Phelps, continues the theme: “We developed a scorecard to capture the metrics the company values. These include service quality, program delivery, cooperation and teamwork, communication, financial management and price, which is really a component of financial management.” 

To in-house counsel, quality lawyering is merely table stakes. It’s how outside counsel manage the relationship that matters most. “Outside counsel can be insensitive to the amount and frequency of communication that the client needs during the course of a matter,” laments Ted Banks, a partner with Scharf Banks Marmor and formerly chief counsel of global compliance for Kraft Foods. This is echoed by Partridge, who notes how exceptional good communication can be. “One firm impressed us by going well beyond our expectations for normal communication, providing a monthly update on all matters whether we asked for it or not, offering unsolicited insights on litigation techniques, jury pools, judges and the like. This was better than what the majority of our other outside counsel were doing. I liked this approach so much that I worked to turn it into an early case assessment process and asked other outside litigation counsel to adopt the approach.” 

Many in-house counsel report that a well-crafted project plan and an accompanying matter budget are critical to managing expectations with business leaders. Yet, law firms tend to resist such requirements, believing that the ebb and flow of complex matters, and certainly the outcomes, are beyond their control. While this is true to some extent, reports Banks, experienced lawyers can still provide directional guidance based on deep experience: “If you’re using a law firm that holds itself out to be an expert in a certain area of law, you expect them to provide a budget for a matter. What most in-house lawyers are looking for is a budget that gives an order of magnitude. Is this going to take 10 hours or 50 hours or 200 hours?” For law firm partners who fear encroachment from low-priced competitors, budgets based on a nuanced understand- ing of the various decision trees involved in a complex case can clearly differentiate subject matter expertise from those eager to win on price alone.

Of course, price is still quite important, which is why “cost-effective delivery of legal services” is a critical component of the outside counsel selection process used by CIT, a bank holding company, according to Bob Ingato, executive vice president and general counsel. This is defined, in part, by being “creative and flexible in designing and accepting alternative fee arrangements [AFAs] that align our interests and allow for shared success.” 

While some law firm partners may view AFAs as synonymous with “low cost,” in-house counsel, not surprisingly, have a different perspective. Most wish their outside counsel would take the initiative and offer more options. According to McClure-Demers of Nationwide, “By and large we don’t see proactive innovation. We find ourselves encouraging outside counsel to embrace creative value-based billing arrangements and opportunities.” But outside counsel don’t have to blaze this trail on their own. Sonnen avers that the best arrangements are developed collaboratively: “Many of our in-house team, along with outside counsel, have attended the ACC Value Challenge workshops, and as a direct result, we are piloting several different types of AFAs and having better conversations with our counsel about value. Cost is one factor to consider in determining value, but predictability and outcomes are also key.” 

Ingato says CIT isn’t only looking for firms with the lowest hourly rates. Rather, it seeks “competitive rates compared with the efficient delivery of quality legal services.” In-house counsel are increasingly analyzing fee trends and applying bench- marking to identify which tasks can now be performed routinely by multiple providers and which, according to the immutable laws of economics, should there- fore decline in price. Such sophisticated analysis has become much easier in recent years as new tools have emerged. Sonnen reports that at BMO “we’re incorporating a new electronic billing system, TyMetrix, that can provide far more analytics and support for AFAs.” 

And these tools capture more than merely financial metrics. Partridge indicates that “Ally regularly surveys each of its in-house lawyers to collect feedback. It imports the metrics into our Sky Analytics system, and then conducts financial and non-financial benchmarking. When a new matter arises and Ally needs to retain a firm, its lawyers can then query the database to find a firm that meets certain financial and non-financial criteria.” Over time, he reports, “non-financial measures grew to become a significant factor in [outside counsel hiring] decisions.”

According to Banks, solid relationships are based on more than price and out- comes. “If it’s litigation, you win some and you lose some, and most clients understand that. It is when the outside counsel presents an overly rosy assessment of a case, or fails to communicate developments that affect the likely outcome, that the relationship will suffer long-term damage.” The mandate to “learn my business” results from a common frustration by in-house counsel. As Peter McDonough, general counsel of Princeton University, says, “Higher education is different. Period. The lawyers who have made the deep and consistent effort to understand it, including the faculty-centric nature of it, and—very importantly—know how to avoid corporate-speak and truly use the language of a higher education environment without faking it have a huge leg up. Not getting that right is a deal-breaker.” This mind-set is shared by Banks, who pays careful attention to his style of communication now that he sits on the other side of the table: “I try to make sure that what- ever work product is delivered, is delivered in the format that the client wants. Some want to have a personal conversation, some want formal memos, some want results in PowerPoint. Clients generally don’t want highly formalistic structures of communication full of lawyer-speak.”

A key and growing imperative for many businesses is diversity. Many in-house counsel, Sonnen of BMO included, expect their law firms to value diversity as well. “Diversity to BMO is more than a social responsibility; it’s a business case,” she says. “There is a direct link between our diversity profile and our financial performance. Shareholder earnings are enhanced when we employ a diverse work- force, and we expect our key suppliers to reflect and support the same rationale.” At Nationwide, confirms McClure-Demers, diversity is also a critical initiative that matters to everyone, including the CEO. “Our outside counsel voluntarily submit their diversity metrics today, and our chief legal officer reviews this at least quarterly with our CEO to discuss our progress. We’ve implemented a new program recognizing diversity in our outside counsel. We’re a supporter of NAMWOLF [the National Association of Minority & Women Owned Law Firms] and will also be recognizing a NAMWOLF firm in this most important area.”

Firms that get it right will earn more business. McDonough confirms that “if a lawyer in a firm has wonderfully served us, we’ll follow that lawyer. Yet, if that lawyer’s colleagues also served us well, and we appreciated the firm on other levels—such as a real service mind-set, a real understanding of higher education, quality and consistency, pleasant people, etc.—we will try to also keep his or her former colleagues, and maybe even the firm in general, specifically in mind as opportunities develop.” McClure-Demers says Nationwide is eager to recognize outside counsel for outstanding efforts. As she indicates, “One of our outside counsel took the initiative to combine their institutional knowledge of our business, information from matters they were working on for us and insights looming on the horizon, and recommended a two-year litigation strategy to address these issues. The result clearly addressed our needs, but it also helped set new law and helped our industry as a whole. Our business management loved it!” The firm earned not only more legal work, but became more involved in legal strategy.

The legal marketplace is indeed changing, and law firm partners should take heed of the evolving definition of value and what matters most to in-house counsel. For every client seeking a low-cost provider, many others are seeking law firms who understand their business, who communicate frequently, who manage expectations through budgets and project plans, and who acknowledge the importance of a diverse workforce. Law firms getting this right enjoy loyalty and repeat business, the most critical ingredient for long-term profitability. What matters to your clients? What do they value? Don’t guess. Ask them.

This article was first published in ABA Law Practice magazine, Vol. 39, No. 6, November/December 2013, p. 46. Reprinted with permission. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

Recruiting and Staffing Law Firm Pricing and Project Management Roles

Please join me and top recruiter Steve Nelson of the McCormick Group as we present our second webinar in a series on identifying and hiring the right talent for your pricing and project management roles: Putting All the Pieces Together. We'll focus primarily on law firm roles but the discussion will also be relevant to to in-house legal departments, as there are similar challenges.  What skill set is best equipped to drive innovative pricing discussions in your firm?  Some firms seek a trainer to help the partners better understand alternative fee models and when they apply.  Others are looking for a business analyst who can crunch numbers.  Still others desire a client-facing executive who can interact directly with the client's finance and operations counterparts in order to better connect the dots.  It's the same challenge for project management:  Some firms seek a heads-down manager to capably monitor a project plan and keep the team on track.  Others seek a firm-wide resource who can educate lawyers about this new skill.  And there are numerous variations on this theme. Additional issues to be covered include:

--Status of project management programs in the AmLaw 200

--The importance of doing a project management audit

--What training do your existing lawyers and administrators need before embarking on a legal project management program?

--The interaction between project management and alternative pricing, particularly from a staffing point of view

--How does project management fit into your organizational chart?

--Where do your project management professionals need to reside? Issues of geography and relocation

Please join us on February 4, 2014 at 1 PM ET for the on-hour interactive webinar.  For more details and to register, click here.

Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

Predictive Analytics - Gaining a Competitive Edge

Law firm leaders who embrace predictive analytics to manage their businesses and their practices can establish a sustainable competitive advantage over competitors who rely on gut instinct and sheer intellect to leader their enterprises.  There are multiple opportunities to employ predictive analytics in a law firm:  to run the business more efficiently and effectively; to pursue more lucrative clients and engagements; to recruit and train lawyers for success and longevity; and to practice law in such a way as to be a step ahead at all times.

Join me in New York or Boston as I discuss the role of Predictive Analytics in a law firm: Register 

Michael Lewis, in his book Moneyball, later made into a movie, uses baseball as a metaphor for the power of predictive analytics.  Many people assume the book is about baseball.  In fact, baseball is just the setting.  The point of the book is to demonstrate how insightful leaders, using data that may be readily available but ignored by most, can gain a competitive edge. But one doesn't have to know anything about or even like baseball to gain valuable lessons.  During my tenure as a corporate executive, I would purchase this book for all of my senior managers in order to foster a culture of predictive analytics in our business.

In a recent talk delivered at the LSSO Raindance Conference, Boston Celtics president Rich Gotham discussed the role of predictive analytics in managing a major sports franchise.  He acknowledged the heavy use of analytics on the court – the Celtics coaches regularly analyzed opponents’ tendencies and then devised game plans to exploit weaknesses. But Gotham went on to describe the critical importance predictive analytics play off the court as well.  As he explained, team management has to know who to target in order to sell the most tickets.  They need to know which combination of price and amenities will appeal to different target markets.

For example, by rigorously studying patterns in renewals and cancellations of luxury boxes, Celtics management discovered a critical miss in their sales strategy.  The target demographic for luxury box suites is high net worth individuals and corporate executives, but these buyers are also the most likely to have other commitments, including regular out-of-town travel, which limit their availability to attend multiple home games.  The Celtics addressed this problem in part by creating a secondary ticket market for luxury suite owners. If a luxury suite ticket holder can't make a game, the team will help resell that ticket. This approach removed the box holders’ concerns about a wasted investment and significantly improved the luxury box renewal rate.

How does this apply to law firm leadership?  Very simply, there are data available today that leaders ignore, instead relying on instinct and intellect to manage their enterprises.

In Moneyball, the crusty old baseball scouts who eschewed data but could recognize a “baseball body” were, statistically speaking, wrong far more than they were right.  This is not unlike recruiting in the modern law firm, where top grades from top law schools are used as a proxy for quality, when other factors are likely to play a stronger role in the recruit’s chance of success and longevity in the firm.

In countless practice group retreats when we list our client targets for the coming year, inevitably we identify multi-national companies with big legal budgets, or existing clients who have represented large billings in the past.  In fact, deeper analysis may reveal that our most lucrative clients are, for example, companies with less than $0.5 billion in revenues, doing business in a narrow range of SIC codes, with a certain geographic footprint and a management profile that suits our lawyers’ personalities.  Yet we ignore those prospects in lieu of the fruitless pursuit, along with hundreds of competitors, of the same old FTSE 100 or Fortune 500 companies.

And yes, these concepts apply even to the practice of law.  The increase of project management and process improvement has illuminated for lawyers that while every matter may be unique, each is likely comprised of tasks that we’ve tackled countless times previously.  As we learn how to break matters into component tasks, we recognize that reassembling these tasks into new combinations for purposes of budget forecasting gives us a competitive edge – not only can we confidently price a matter based on past performance, but our deeper understanding of how these tasks have interoperated in the past helps us minimize surprise as the matter progresses.  Start layering in knowledge about specific adversaries and even judges and jurisdictions, and our reasoned analysis of what’s likely to happen based on what’s happened previously will look like voodoo to an outsider.

I will discuss the role of predictive analytics in two upcoming sessions. The first is in New York on Wednesday, November 6, and the second is in Boston on Thursday, November 7.  I will lead an interactive discussion for law firm leaders, practice group leaders, law firm c-level executives and those leading business development and strategy. This will be followed by a reception hosted by Thomson Reuters, the event sponsor.  For more details and to register, click here.

Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

Crowdsourcing Legal Project Management: How to get started?

I was invited to contribute to Michelle Mahoney's recent ILTA blog series on legal project management.  In this series, numerous experts, pundits and practitioners with experience in project management offer insights and suggestions on how to embed LPM into a legal practice.  Contributors include Ron Friedmann, Liam Brown, Antony Smith, Toby Brown, Sheri Palomaki, Stuart Dodds, and other smart cookies. Here's my comment:

Embedding project management in a law firm is a challenge for many, but not because the subject is difficult or the technology to support it is in its infancy. The greatest obstacle is the average partner's perception that project management applies primarily to repeatable, commodity, low-cost legal practices.  When the lawyers are asked, or even forced, to adopt a new business process that feels inconsistent with how they practice law or earn a living, there is natural resistance.  The best project management programs start, therefore, with partner education.  Once partners recognize two key economic drivers, they often accelerate their adoption of project management principles.

The first driver is that regardless of billing type – hourly or non-hourly – and regardless of price sensitivity, the path to maximum profitability is to lower the cost of delivery, and this is done by finding efficiencies.  Lawyers should have embraced project management long before the economic downturn, but doing so now can quickly improve declining financial performance.  The second driver is client satisfaction and retention.  With clients increasingly demanding matter budgets, those lawyers who can deliver predictability in legal costs with confidence will improve client satisfaction and earn multiple repeat engagements, even as the competition endures RFPs and competitive bidding processes.

Project management is perceived by some to be an approach that primarily benefits clients. While clients indeed benefit, the greatest beneficiaries are the lawyers and the law firms.  Once this is clearly demonstrated to the partners, most firms can't move quickly enough to embed project management into the firm's operations.

The reality is that project management works. Partners raised on "law as art" resist this notion because they often equate LPM as part of the movement toward "law as commodity." Nothing is further from the truth. LPM can actually elevate law, particularly the law needed in commercial business transactions and litigation, from a costly, necessary evil that business leaders avoid at all costs to a strategic initiative.  If a business leader has improved awareness of business risk, has a broad understanding of the costs and impacts of various alternatives for business growth, and can proceed with confidence while competitors proceed timidly due to uncertain costs and risk factors, this provides a compelling strategic advantage.

Skeptical law partners reading this likely have 20 or more objections to the ideas offered in this ILTA blog series. With all due respect, others have raised these objections previously. Long before you. And yet, many partners have proceeded to vigorously embrace LPM into their practice. Do you really think they're choosing to make less money, that their practices are comprised solely of repeatable commodity tasks, and that their clients are focused solely on cost instead of value? Perhaps it's time to revisit your assumptions. The answers are out there.  What are you waiting for?

Read the other contributions here.

Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.

Big Data: Big Deal or Big Win?

One of the trending phrases in the legal marketplace is "big data," which refers loosely to the synthesis of massive amounts of data, often from disparate data sets, to provide leaders with predictive analytics and better decision support. While this has been the norm in business and industry for decades, only recently has there been a compelling need for law department and law firm leaders to embrace advanced business practices. The opportunities for a "big data" approach to provide a competitive edge are many, in large part because so few do it well. What is Big Data?

The definition of "big data" varies depending on the audience.  In a sophisticated corporate environment, big data might refer to analyzing and cross-referencing customer purchase trends to predict that a buyer of product A will likely be interested in product B. We see this all the time with Amazon.com's personalized recommendations based on a customer's past purchases or even browsing history: if you purchase a book of baby names, you are likely to see recommendations for books, clothing and sundries related to the care of newborns. This approach can be startling effective. In a law department or law firm environment the analysis might be more rudimentary, but can still provide excellent guidance.  For example, many law departments now employ dashboards to identify the average length and cost of similar legal matters, and this influences how much they budget, and what outside counsel fees they're willing to pay for representation on a matter. As Jobst Elster asks in his "Big Data: Hype, Reality, Myth or Legend" article, "Can businesses -- including law firms -- even compete, let alone exist, without a big data strategy?"

Big Data for Law Departments

Most law practices are by nature reactive. The in-house counsel don't know in advance what products liability suits will be filed or what transactions management will pursue, so the lawyers stand ready to tackle whatever might come their way. But some in-house counsel are looking into the business itself for leading indicators. One in-house lawyer I recently interviewed reviews production quality control data with manufacturing line managers in order to better understand the nature and frequency of product defects that are likely to have shipped. She combines this with customer service call histories, which are coded by product lines and model numbers, to chart the emergence of these potential defective products. This insight allows her team to develop proactive strategies, from product recall to settlement analysis to hiring defense counsel in advance of the first suit. Another General Counsel sits periodically with his colleague, the VP of strategy, to review the list of potential acquisitions, and then his team compiles a very brief dossier on each target indicating the relative legal complexities of the transactions. Not exactly deep analysis, but a step in the right direction.

More advanced legal departments seek to identify patterns related to positive legal dispositions, and then redirect outside counsel in related matters to apply the techniques that have worked elsewhere. Others employ predictive analytics to more quickly identify when a case should be settled rather than litigated, and employ other predictive analytics to accelerate the settlement negotiation process.  Craig Raeburn of TyMetrix, which provides data and analysis to law departments and law firms, confirms that "using benchmark analytics to improve performance and transparency and create competitive intelligence is the next great frontier in the legal industry."

Big Data for Managing the Law Firm Business

One of the more ridiculous tenets of law firm business generation is that "all revenue is good revenue." In a disciplined corporate environment, many top law firm rainmakers might be perceived as marginal contributors because the deals they bring in, while numerous, may incur high costs to service and therefore the contribution margin of the work is dilutive. But law firms typically reward origination, not profitability, so a partner generating $5 million in new fees with a profit contribution of $0.5 million often will be rewarded far more handsomely than a partner delivering $1 million in profits on a $2.5 million book of business.  By adding the cost of delivery and the cost of pursuit (what it takes to win the work) to a matter's hard costs and allocations, and then comparing this against the top line revenue, law firm leaders are better able to identify the matters, and the lawyers, who contribute the most to the bottom line.

Law firms have also begun to employ a big data approach to identifying the "ideal" client. While this definition varies from firm to firm, it generally encompasses clients generating profits from multiple matters over time rather than from one matter, and clients with legal needs spanning multiple practices and requiring numerous partner relationships rather than those with one key rainmaker tied to one key decision maker. A firm that can be more precise with its client and prospect targeting can improve profitability merely by walking away from dilutive work, and avoid raising rates. The analytical rainmaker will identify the characteristics of the ideal client, then identify prospects matching this profile, and then work with the marketing team on successful tactics to pursue these prospects.  Contrast this with the "traditional" approach to rainmaking where we talk about our capabilities to anyone we can, with the knowledge that sooner or later we will find a prospect in need of these capabilities, and you can see how an informed approach can easily surpass the results of a "shotgun" approach to rainmaking.

When it comes to business development tactics, partners tend to hold the marketing team more accountable than they hold themselves for achieving some elusive return on investment, or ROI.  However, a big data approach to measuring ROI can level the playing field. One firm deduced that prospects or past clients who subscribe to 2 or more practice newsletters and attend 3 or more events are 75% more likely to retain the firm than an average prospect. So when the marketing team identifies a prospect with the "right" newsletter subscriptions but who hasn't attended the "right" number of events, the prospect is flagged and a partner will personally call to recruit the prospect to an upcoming event. With such an approach, the firm has significantly improved its financial performance. Alina Gorokhovsky, who advises government departments and agencies on the use of data analytics to transform government and who previously served as a law firm Chief Strategy Officer, is a strong believer in data-driven decisions: "No law firm should operate in a fragmented fashion, with every practice group and office pursuing any client for any matter simply to grow revenue. A more rigorous approach based on analyzing internal and external data will reveal clear benefits in pursuing the right clients, with the right tactics, for the right matters."

In case it's not self evident, many law firms struggle with adoption of alternative fee arrangements, believing many to be dilutive to a profit stream that has long prized hourly billing.  Kris Satkunas in a recent Inside Counsel article offers some excellent insights into the benefit of big data to inform alternative fee analysis. Chris Emerson of Bryan Cave offers additional insights into big data and law firm profitability in this Information Week article. At the recent P3 conference hosted by the Legal Marketing Association, numerous experts offered commentary on the natural connection between analytics and profitable decisions.  And the list goes on.

Big Data for Managing Talent

Many law firms employ a growth strategy best described as "recruit lateral partners with portable books of business."  With such an indiscriminate mindset, it's no wonder that many law firms recruit laterals who don't fit the firm's culture or don't actually bring in as much business as promised.  And they often find that those who do deliver a robust book of business require a high cost to service, which is dilutive to profits, or whose new clients create conflicts with existing clients, so the net positive financial impact is minimal.  It may seem unrelated, but recruiting associates often follows a similar pattern:  recruit top students from top schools, often without regard to practice interest or personality, and rotate them through various departments until they find a home where they can toil away until making partner... although an overwhelming number depart long before making partner.  This approach isn't unique to law firms, as law departments often hire skilled technicians in certain areas of law under the assumption that, say, if we're an investment bank then an in-house lawyer well-versed in securities law is a good fit.

The reality is that law firms and law departments, like any other organization, have a certain personality, and succeeding in any environment has as much -- if not more -- to do with matching behavioral characteristics than with technical considerations.  Savvy law firm leaders are increasing the importance of cultural fit when recruiting laterals -- after all, if the ideal client is one with matters spanning multiple practices, then a lateral with a $5 million book of business who refuses to collaborate or provide access to her client is not as good a fit as one with a $1 million book of business that can grow substantially by cross-selling other firm services. Similarly, studies have indicated little to no correlation between Law Review participation (a proxy for academic excellence) and successful rainmaking (a proxy for understanding a client's business). One is not intrinsically a more desirable trait than the other, but at times a firm may place higher value or have a specific need to fill in one area more than the other.  Predictive analytics based on factors other than law school and class rank can dramatically improve the probability that a recruit will endure longer than the average. In Bloomberg Law's "Everything You Think You Know About Lawyer Recruiting is Wrong," article co-author Caren Ulrich Stacy declares that "armed with the knowledge of the particular success traits or competencies that exemplify a high performing lawyer, the firm has the ability to employ evidence-based and data-driven tools for lawyer selection."

And the same holds true in a law department.  Businesspeople value a counselor who looks to find ways to advance the business and who can quantify degrees of risk, not one whose risk aversion leads to the recurring advice to "make no deals because we can't eliminate all risk." Hiring to criteria other than technical excellence in the company's product specialty may lead to a better business advisor, one who can better instruct outside counsel because they can speak both the language of business and the language of law.

Big Data for Managing a Matter

Many lawyers perusing the above anecdotes will nod their heads, recognizing the inherent logic in employing predictive analytics on the business side of a law practice.  But far fewer will acknowledge the ready opportunity to employ such techniques to their own practices.  But it's already happening.  Venue shopping is merely a tactic employed by litigants to remove a matter to a jurisdiction deemed more friendly to one's side, based on past performance. Jury selection has evolved from art to science, with high stakes cases incorporating psychological profiles and mock juries to identify the optimal approach before even entering the courtroom. The recent increase in legal project management and process improvement tackle these same themes on a more basic level, helping lawyers to understand the repeatability of tasks in even high stakes transactions and litigation.  When a client demands a matter budget, essentially what he's asking is for the lawyer to draw on his experience to produce a set of decision trees, informed with probable timelines and costs. Predictability and "lowest cost" are not the same, though many in-house counsel and outside counsel confuse the two. Anyone can lower a rate or demand a lower rate. Only an experienced practitioner can provide informed insights into how a matter may or may not proceed.

In my recent column in Marketing the Law Firm, an ALM publication, I describe several clever new technology tools in use by law departments and law firms:  "New tools are available that collect and synthesize trends across multiple jurisdictions, providing lawyers with insights that may provide an advantage. Case Outcomes, offered by Thomson Reuters, is one such example of big data applied to a legal practice. Says Amy Hrehovcik, New York-based business development manager, 'It’s like breaking down film of an opponent in basketball. If you know your opponent prefers to drive left, you overplay that side and push him right. Lawyers can adjust litigation strategy based on studying the tendencies of opposing counsel and even judges, and offer more informed advice to clients.'" While it takes years to accumulate the sort of jurisdictional knowledge that makes local counsel invaluable in developing trial strategy, new tools are closing the gap.

The Technology Red Herring

It may be helpful to discuss big data from the perspective of those who are often on the front line in these discussions, namely the technologists.  Consider a use case:  a law firm wants to identify its "ideal" client, and this requires looking across multiple databases such as time & billing, CRM, conflicts, event registration, mailing list, website clients, Chambers and directories submissions, to first capture all of the clients.  Then it's necessary to go through a laborious process of matching and de-duplicating this raw client in order to ensure that, for example, "Eastman Kodak" in one system is the same as "Kodak" in another, and to ensure that "FPC Italia" is properly identified as a subsidiary but not Xerox, which is in a related line of business, with plants and offices in close proximity and some movement of executives between the two, but which is a distinctly separate company.

This "data cleansing" takes time and is never really done, because at any time a legal secretary might open up a new matter by entering EK (the suspended NYSE symbol for Eastman Kodak) and introduce yet another variation of the client name.  At some point we may want to introduce SIC or NAICS codes to the dataset, add in a more robust corporate tree, combine publicly available data with notes captured from our CRM system, add in a common "key" so future matching processes take less time and then put the resulting data set into a new "data warehouse" where we can run queries against it, though that's a task often restricted to a select few with both access rights and training on database reporting.  This is a real challenge for any business, but moreso for law firms which have long eschewed rigorous data management policies in favor of making life easier on partners who want to quickly open up new matters to begin billing. Because of these complexities, many law firm leaders are convinced big data is at heart a technology challenge. They're wrong.

Just Do It

The reality is that while the above technology tasks are often necessary to provide the greatest "big data" payback, there are plenty of techniques and queries that can be run against databases as they exist today, and there are plenty of insights to be drawn from simple manual analysis. The most common objection I hear when proposing predictive analytics projects to law firms or law departments is that they lack resources or tools to do it right.  That's not entirely true.  While a team of quantitative analysts poring over a robust, structured and fully-indexed data warehouse would be nice, the reality is few businesses have that luxury.  And while others hesitate to proceed, those who start with what they have and begin to better inform their business decisions will obtain a competitive edge.

Big data is here.  It's entered our lives in the recommendations we see when we shop online, when Facebook or LinkedIn suggests "friends you may know" and when our weekly issue of  Sports Illustrated has customized its advertising to appeal to our specific tastes and interests.  Law departments are increasingly using big data tactics to identify the "right" fees to pay for different legal matters, and which outside counsel are appropriate for different matters based on non-financial metrics.  Legal Process Outsourcing (LPO) companies have deconstructed complex legal tasks into bite-sized and measurable chunks, at once increasing throughput and quality and decreasing costs. And there are numerous law firms beginning to arm themselves with precise data about which clients to keep and which to pursue, which laterals to recruit, which partners to retain based on factors other than origination and what steps are necessary to improve the probability of obtaining a certain legal outcome.

Big data.  Those failing to understand it, and those avoiding it, may be making a big mistake.

 Note: The mention of a product or service in this article does not constitute an endorsement by the author. 

Timothy B. Corcoran delivers keynote presentations and conducts workshops to help lawyers, in-house counsel and legal service providers profit in a time of great change.  To inquire about his services, contact him at +1.609.557.7311 or at tim@corcoranconsultinggroup.com.