2012 Redwood Analytics® User Conference

Analysis. Insight. Action.

View From the GC World

Kris Satkunas Director Analytic Consulting LexisNexis CounselLink

2012 Redwood Analytics® User Conference

Analysis. Insight. Action.

Agenda

• Why this topic?

• Analytic priorities for general counsel

• How inside and outside counsel can benefit from collaborative analysis

2

Why this topic?

• Your clients are measuring you

• Customer satisfaction is one of your most critical KPIs – consider a 360° review

• People are realizing that being a “relationship business” and making data informed decisions are NOT mutually exclusive

• Cross pollination of good analytic methodologies is how we all get smarter

3

Are legal departments thinking analytically?

Big, complex corporations Leads to lots of legal work Which brings them to large data sources

In the United States alone: • 1900 large corporations with

significant litigation activity • 55% have E-Billing/Matter

Management systems

4

Changing Culture

• Negotiating is distasteful

• Analysis is not something lawyers have time to do

• Others in the organization are tasked with performing analysis but many don’t have the background

• Lots of reports that don’t get reviewed

Similarities between in-house and outside counsel

Change doesn’t happen quickly in the legal industry

5

Analytic Maturity

Why are we spending more in employment matters? Are the AFAs I am using effective in reducing costs? Which vendors are best and worst at adding value to our organization? Which types of matters tend to show similar patterns of expense growth? Which matters are irregular in terms of activities, intensity of effort, etc.?

Where do we have the opportunity to negotiate better rates? Where might we try AFAs? How much outside legal expense will we incur next quarter? What can we learn from that huge litigation case where expenses were through the roof?

What have we spent this year? Who are our biggest vendors? What rates do we pay? What activities are lawyers performing? How much am I saving due to CounselLink?

WHAT? (Information pulls)

WHY? (Interpreting a series of information pulls)

WHAT’S NEXT (*Applied* analytics)

6

The Analytic Framework for Law Firms

•Bill work promptly according to client guidelines

•Follow up on receivables

•Minimize losses

•Evaluate matter/client profitability

•Measure lawyer contribution

•Strategically plan for practice/market growth

•Staff appropriately

•Manage matter projects

•Strengthen client relationship

•Minimize capacity

•Identify business development targets

•Reduce risk via client/matter intake

•Price and plan matters profitably

Bring in Work

Manage Work

Bill and Collect

Measure, Adjust, Improve

7

The Analytic Framework for Legal Departments

• Make settlement decisions

• Pay vendors for rule-compliant bills

• Evaluate vendors and select panel

• Learn from high-cost matters

• Assess value

• Avoid surprises

• Accurately forecast expense

• Balance workload

• Quantify risk

• Make versus buy decisions

• Establish pricing/budget

Early Case Assessment

Manage Work

Complete Matters

Measure, Adjust,

Improve

8

What sort of analytic help do GCs want most?

• 76% want forecasting help • 62% want a means of flagging

matters that deviate from normal patterns

• 50% want ways of: • Aggregating information about

similar matters, both internal and external benchmarking data

• Informing pricing decisions • Performing what-if scenario

modeling

9

What sort of analytic help do GCs want most?

Anecdotally,

• Total cost of outcome is the most important metric

• Outside counsel fees/expenses

• Settlement costs

• Internal costs

• Understanding if outside counsel fees are “fair” is hampered by the every matter is unique syndrome AND the lawyer tendency to focus on the outliers

10

Aggregating Information About Like Matters

11

Matter Lifetime Task Comparison

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

Matter 1 Analysis and Advice

Trial Preparation and Trial

Unknown

Discovery

Case Assessment, Development andAdministration

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

Matter 2 Case Assessment, Developmentand Administration

Unknown

Discovery

12

Matter Management: Duration

Average Matter Duration

Relevant Matter Duration (90% total

spending)

• Managing the “tail”

• Invoice approval, forecasts, accruals, matter monitoring

1 2 3 4 5 6 7 8 9 10 11 12 13 14

13

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

Ave

rag

e M

att

er

Co

st

20

11

Fe

es

an

d E

xp

en

se

s

Informing Pricing Decisions

Law Firms

14

Benchmarking Data – Are we paying fair rates?

To spot opportunities,

look for where:

Volume is high AND

a) My median is

materially higher

than that of my

peers

b) Variability is high

My Peers

Ho

url

y P

art

ne

r R

ate

s P

aid

My

Company

$1,000

$900

$800

$700

$600

$500

$400

$300

$200

$100

$0

15

What is being benchmarked?

Source: Millions of invoices from thousands of law firms

Metrics: • Hourly rates • Matter cost • Staffing Ways to slice metrics: • Matter type • Law firm size

• Matter duration • AFA usage • Vendor consolidation

• Geography • Industry

16

Predictive Analytics - what leads to success?

17

Matter Success Analysis

Defining Success: • Depends on matter type • Combination of “win” rate, duration, and total cost

Analysis best suited to matter types with high volumes Variables: • Geography/jurisdiction • Law firm • Staffing • Pricing

18

Go

al:

B

uil

d A

Su

sta

inab

le O

rgan

izati

on

Grow Firm

Revenue

Manage Drivers

of

Profitability

Deliver Value Balance Practice

Specialization &

Breadth

Exhibit Civic

Responsibility

Client Relationship

Management Operational Excellence

Quality outcomes

Efficient work

Expertise in key areas

Complementary products Support community

Enter selected new markets

Engage new clients

Increase client LTV

Utilization

Realization

Leverage

Margin/Yield

Matter

Management

Client

Relationship

Management

Operational

Excellence

Staffing

Project Management

Cross-selling

Trusted advisor

Rate setting

Intake

Cash flow optimization

Recruit & Retain

Talent

Succession

Planning

Create Efficiency

Through Technology

Attorney development Roles & accountabilities Knowledge management

Establishing a Balanced Scorecard: Law Firms

19

Example of Metrics on a Law Firm Partner Scorecard

20

Example Of a Legal Department’s Vendor Scorecard

Law Firm Cost

AFA

Offering

Complies

with Billing

Lawyer

Turnover

Community

Outreach Outcome Expertise Diversity

Communic

ation

Average

Weighted

Score

Rank

(Weighted

Score)

Adams & Burr 6 8 3 10 8 8 6 6 6 6.3 3.0

Adams Hamlin 3 10 10 8 8 6 3 3 6 6.9 1.0

Barkley & Kennedy 6 8 0 6 10 6 6 3 6 6.2 4.0

Cleveland Tyler 0 10 3 3 10 6 6 3 6 6.4 2.0

Garfield & Jackson 8 3 0 8 10 6 0 6 6 4.8 14.0

Grant Wilson 6 8 3 6 6 3 3 6 6 5.6 7.0

Harding & Dawes 3 6 0 6 6 6 6 6 6 4.9 12.0

Harrison Johnson 3 3 3 3 8 6 6 6 6 5.2 9.0

Harrison Morton 3 8 0 6 8 3 6 6 6 5.6 5.0

Jackson Calhoun 3 6 6 6 6 3 3 6 6 5.3 8.0

Johnson & Pierce 0 6 3 8 6 3 6 3 6 5.0 10.0

Kennedy & Kennedy 3 6 3 6 6 6 3 0 6 4.8 13.0

Lincoln & Colfax 6 0 3 6 3 8 0 3 6 3.1 21.0

Lincoln & Hamlin 3 6 0 6 10 0 6 3 6 5.6 6.0

Madison & Grant 0 0 0 8 6 6 3 3 6 3.1 20.0

Marshall Taft 3 3 0 3 10 0 6 0 6 5.0 11.0

Nixon Hayes 3 3 0 3 6 3 3 0 6 3.9 15.0

Pierce & King 6 0 3 6 3 0 0 6 6 3.2 19.0

Polk & Hayes 3 0 0 0 10 6 0 3 6 3.7 17.0

Taylor & Fillmore 0 0 3 3 10 0 0 0 6 3.8 16.0

Truman & Morton 0 0 0 0 6 3 6 3 6 3.5 18.0

Tyler & Harrison 0 0 0 6 6 0 0 3 6 2.7 23.0

Washington Adams 0 3 0 6 3 0 3 3 6 3.1 21.0

Wheeler Adams 6 0 0 3 0 3 0 3 6 2.2 25.0

Wilson & Arthur 8 0 0 6 0 0 0 0 6 2.3 24.0

21

Inside and Outside Counsel: Where’s the overlap?

1. Benchmarking

2. Pricing decisions

• AFAs

• Staffing

• Hourly rate setting

3. The anatomy of a matter

• Project management

• Gaining efficiency

4. Forecasting and budgeting

22

Questions?