How to harness data analytics

The question “How are we doing?” is never simple for general counsel and their teams. It has different meanings depending on who’s asking it and why.

How are we doing against budget? How are we doing at protecting the business? How are we doing with contract turnaround? With litigation? With compliance efforts?

Historically, the legal department lacked the data and insight it needed to cleanly assess its value. For instance, they chose outside counsel based on intuition and relationships, with no overall assessment of how that spend contributed to business results.

Now, though, businesses of all sizes expect their legal departments to work with and report on data the same way as the rest of the company. Strikingly, the most recent State of the Corporate Law Department Report from the Thomson Reuters Institute finds a visibility gap between how general counsels (GCs) believe their departments deliver value, and how that value is perceived by other business leaders.

In fact, 86% of GCs believe their department to be a significant contributor to overall organizational objectives, but only 17% of the C-suite agrees. A full 42% of the C-suite say the legal department contributes little or not at all.

To combat this disconnect, Legal teams need better data. Departments of all sizes are looking to their legal operations teams to measure the most important metrics for their business and report those metrics to their partners and leaders.

Unfortunately, many in-house leaders lack practical guidance on how to drive more transparent, accountable, and strategic legal operations reporting. This white paper addresses the role of data analytics for in-house legal teams and provides guidance on how to start implementing reporting or improve existing reporting.

The evolving role of data analytics in legal departments

Legal teams have been working for years to better align their department outcomes with business goals. We can see this in the way they are shifting their spend to match business growth and operational needs. According to the Corporate Law Department report, legal spend continues to rise in areas such as M&A and regulatory concerns. This data shows a direct connection to business priorities of growth and risk mitigation.

Having that basic spend information is one way legal teams can show alignment. Data analytics includes the process of creating, categorizing, and examining data sets to draw inferences and conclusions. The data and findings inform business decisions or increase operational efficiency. For in-house legal departments, this cuts across various issues, including budgets, spending, and litigation outcomes.

The role of artificial intelligence

Particularly for in-house legal teams unsure of how to begin with data analytics, artificial intelligence can provide some quick wins. AI can help make large data sets more manageable, as it is good at quickly finding patterns. Modern matter management and spend management systems will incorporate AI in some ways. For instance, you can use AI to review a few years’ worth of outside counsel bills in minutes to look for entries that added little value..

AI-powered tools can also help attorneys deliver routine work more quickly than in the past, potentially allowing lean in-house teams to in–critical tasks. Legal research and drafting tasks in particular benefit from AI tools. These tasks often would have taken days or weeks without AI

As businesses integrate AI more fully into their operations, the expectation will be that you can deliver work much more quickly. So, when implementing AI solutions, you will want to report both on the time saved on routine tasks and the larger benefits your department saw. Did the average time for contract review go down, speeding up deals? Are your attorneys able to handle more matters in-house, saving budget on outside counsel spend? Think about the benefits your department is seeing and find the metrics that tell that story.

From guesswork to data-driven decisions

When it comes to the practice of law, corporate legal teams have long proven their ability to deliver sound guidance and outcomes grounded in data and legal authority.

They have traditionally been less rigorous about framing their spend and business decisions. In the absence of reliable data and analytics about outcomes, risk mitigation, and spend management, they have relied on intuition and law firm, or even law school, relationships. With the growing sophistication of available internal and benchmarking data, Legal teams are starting to put the same rigor into their legal operations as they have in their legal practice. By using data analytics, they can make and track informed decisions.

Data analytics provides visibility and insight, creates actionable intelligence, and informs better legal decision-making.

Identifying and leveraging key data sources

The first step in building a data analytics program in your legal department is to identify all the data sources available to you and your team. From there, you’ll follow a process that may be familiar to legal professionals — gather evidence, analyze it, and draw conclusions.

Here are some places to start:

• E-billing systems or paper invoices
• Matter management systems
• Reports generated by the legal department or other parts of the company
• Data available from legal-related tools utilized by the legal department
• Publicly available data, either free or purchased, like benchmarking data
• Government data

If you’re just getting started, the best datament data, whether electronic or manual. From this core, you can develop some initial insights without much additional cost. Start small and simple with your biggest buckets of spend, prove success by finding efficiencies there, then move on to more complex analytics

Practical steps and best practices for implementation

The ways in-house lawyers can utilize data analytics are virtually endless. In this section, we provide some practical tips to get started. In general, a “crawl-walk-run” approach can help you make meaningful progress without getting overwhelmed. Start small, ask for help, and develop a reporting system.

Start small: Determine what you want to measure

Soon after you understand your own data sources, your next step will be to determine what you want to measure. The “what” is the fundamental purpose behind data analytics. Think about questions where the answers help the department run more effectively and efficiently or reduce risk to the company. According to the most recent Legal Department Operations Index from the Thomson Reuters Institute, the four most tracked metrics are:

• Total spend by law firm
• Total spend by matter type
• Number of legal matters opened and closed
• Forecasted or budgeted spend versus actual spend

While most of the most common metrics tracked focus on spend and the past, there are several categories of measurements. Consider using your data in the following ways:

• Descriptive — what happened. Total spend, number of legal matters opened and closed, litigation win and loss rates
• Diagnostic — why it happened. Why litigation costs increased for a specific business unit, the root cause behind contract review bottlenecks, or the impact of invoice guideline violations on spend overruns
• Predictive — what will happen. Forecasted spend by matter type for the next quarter, predicted probability of settlement versus trial for specific major disputes, or anticipated volume of commercial contracts during peak sales periods
• Prescriptive — what you should do. Recommended law firms based on historical performance and cost efficiency, suggested staffing models for different matter types, or recommendations to settle versus litigate based on historical outcomes

Here’s an example of a predictive measurement in action:

1. Historical billing data shows complex litigation matters involving multiple jurisdictions usually exceed budget by 20%
2. Using prior matter characteristics, the legal team sees that several active cases are likely to go over budget
3. The Legal Operations team alerts the matter staff early so they can adjust budgets proactively

Ask for help: Find out what has worked for other teams like yours

Look to Legal teams who have started implementing data analytics to avoid getting overwhelmed as you determine the best place to start. There are several organizations where you can find wisdom and even mentors. Here are some examples:

• Corporate Legal Operations Consortium (CLOC). One of the two leading bodies for legal operations professionals is CLOC. Data analytics is a core competency for its members.
• ACC Legal Operations. This is the other main group for legal ops professionals. Like all ACC groups, it offers toolkits, benchmarking, and other benefits. It also provides an operations maturity model with a specific component dedicated to metrics and analytics.
• Thomson Reuters legal tech blog. This is a helpful resource for lawyers interested in technology. It includes many articles on data analytics.
• Your company. If you have seen others in your company use data analytics, perhaps in a finance or centralized reporting context, invite them to lunch and pick their brains. They will have useful business context and can help you focus your efforts.

Visualize your results

Legal department analytics lend themselves to visual storytelling through dashboards. While straight numbers might not be compelling, charts and dashboards can help you communicate your progress and insights in a compelling and influential way. 

Businesses commonly use dashboards to give a visual summary of the status of a project, goals, spending, or trends over time. These allow for the discussion of critical points in easily digestible snippets revealed

Embracing data analytics and measuring goals creates an opportunity to show your work in a way colleagues can easily understand, while demonstrating that you follow the same operational and reporting norms as the rest of the business. A basic dashboard might include:

• Summary of outside spending versus budget or average hourly rate or legal spend as a percentage of company revenue
• Summary of the number and type of commercial agreements completed
• Discussion on the status of a key case or a legal department IT project
• Summary of the company’s intellectual property 

These are just examples; what you measure on your dashboard depends heavily on what is important to your company leaders and your team.

Share your wins: Demonstrating immediate value

The smart play for those starting out with legal department data analytics is to go slow and find quick wins. No in-house lawyer has time or money to spare. Start with the data on hand, develop some simple questions to measure, and get into a rhythm of generating simple, helpful reports. Share the results with the department to showcase the good and the bad.

Here are some quick wins legal departments have developed:

• If your average hourly rate for outside counsel is higher than the benchmarks suggest it should be, your data-informed team can help reduce that by engaging with outside counsel.
• Look at your average turnaround time on contracts and compare it to external benchmarks. If your team is taking more time than other departments like yours, identify bottlenecks and smooth them out. Watch your turnaround time drop.
• Analyze outside counsels’ track record of staying on budget and delivering favorable outcomes. Shift work to those with better performance against these metrics to generate measurable savings and improve predictability quickly.

Transparency is good for any in-house legal department, even when the initial findings lead to uncomfortable conversations or disruption of the status quo. 

That said, you may want to keep this work internal as you develop your own baselines and shift your way of working. Providing numbers to the business without context or trendlines can create its own challenges.

Spend time refining your processes and ensuring you understand the results and how you will utilize them. As you gain experience and figure out different data sources or questions to ask, you can expand your use of data analytics. The goal is always to use this data to improve the department’s operations and support the organization’s objectives.

Once you have used data to create wins and change outcomes, start proactively sharing the information outside of the legal department.

Driving broader change and collaboration

This work will likely live with your Legal Operations team to begin with. They can build the baseline dataset and implement systems to improve your ability to track critical metrics.

Over time, more people in the legal department will engage with the metrics and begin to use them to make decisions and communicate with the business. Colleagues across the business will see how metrics affect your team’s decision-making and may have ideas to expand your use of data analytics.

Over time, these colleagues will know two things — that your team provides excellent legal advice and that you make decisions and give guidance based on data. While the legal side may feel like a mystery to them, the data-driven approach will likely be relatable, particularly to influential colleagues in Finance and Operations. In this way, data analytics can be a way to enable closer partnership with the business. Your colleagues will have creative questions about how you can work together and what you can measure.

Next steps

The disconnect between a legal department’s assessment of its impact and that of the C-suite’s assessment is startling but can lead to better alignment. Using data analytics to make operational decisions and communicate impact is one powerful way to show company leadership how the Legal team contributes to organizational objectives and prove the value Legal is providing.

Corporate attorneys can drive measurable improvements in efficiency, value, and risk management with a data-driven approach. Start with small, practical steps and build toward broader transformation. Industry organizations and peers ahead of you in this work can help identify the systems and steps to use data analytics to move your department and company forward.

Solutions from Thomson Reuters can put this transformation well within your reach. See how AI-powered systems, including CoCounsel Legal and Legal Tracker AI, can help your team work more quickly, report more efficiently, and align more closely with your business partners.