Business Intelligence and Legal Matter Management
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In 1958, IBM’s Hans Peter Luhn defined “business intelligence” as “the ability to apprehend the interrelationships of presented facts in such a way as to guide action toward a desired goal.” Hans P. Luhn, A Business Intelligence System (IBM Journal Oct. 1958). In order to realize strategic goals, legal departments and law firms must have real-time access to business intelligence (“BI”) that is actionable intelligence by virtue of its basis in structural and consistent data integrity.

Legal departments today must integrate (i) matter management, (ii) e-billing, and (iii) reporting systems in order to maximize the effectiveness of their data. These are subjective qualities that technology cannot replicate. At the same time, however, harnessing actionable intelligence in order to make informed strategic decisions is a technological challenge first and foremost, and a human one with respect to enforcing data integrity and other protocols detailed below.

Why is business intelligence so important? Several factors in the legal market have spurred a shift to BI from a paradigm that was “constrained by tools that did not capture or provide access to the structured data essential to gain a comprehensive view of end-to-end process[es].”

First, corporate legal departments have reclaimed from their law firms control of legal matters. As I argue elsewhere, an example of this is the manner in which legal departments control the tripartite relationship between client, law firm, and third-party legal service outsourcing providers. As legal departments institute increasingly creative alternative fee arrangements to predict and control costs, they need objective data in order to negotiate rates. On the flip side of the coin, so too must law firms tap into actionable BI in order to assess factors such as trends in their historical billing rates, hours billed, etc. While legal departments may hold the reins in this relationship, firms must still engage in rational calculus to determine at which levels of service and compensation they can afford to be engaged, if at all.

Second, actionable BI leads to strategic decisions. Legal departments are better able to assess and manage risky matters. They can compare how effective individual attorneys are compared to colleagues in the same firm, as well as on an inter-firm basis. To the most effective go future spoils.

The savings that can be realized as a result of the oversight afforded by integrating e-billing and matter management can be profound.

Legal departments have found that putting an e-billing and matter management system in place can save between five to 15 percent in legal fees solely by pre-screening invoices for accuracy and compliance with performance guidelines. As they learn to capitalize on the data-driven business intelligence solutions, legal departments have been able to drive savings of as much as 50 percent by making fully informed decisions [that lead to] data-driven outcomes.

Id. This is particularly true when one considers that the cornerstone of success for many businesses is their ability to make critical decisions quickly. The ability to reallocate cost savings to first-order priorities makes corporations more nimble.

Actionable BI can facilitate even more nuanced observations. BI “might show that the best results were achieved by firms [that] had a high degree of partner engagement early and resolved matters within the first six months.” Results such as these are highly informative when it comes to making seemingly short-sighted decisions that in fact result in long-term savings and the efficient allocation of resources.

How To Leverage Business Intelligence

Law departments and law firms should expect the following qualities from their e-billing and matter management solutions.

  1. Structured, detailed data capture. This should entail highly granular details—hourly rates, hours billed, client codes, and timekeeper identities, for example—that can drive objective decisions confirmed by subjective and expert professional intuition. Metrics should be delivered through an easy-to-use dashboard interface for data analysis.
  2. Policy Enforcement. In order to ensure the integrity of data, stakeholders should consider appointing a corporate czar to oversee data input. Low-quality data on the front end is not congruent with actionable BI.
  3. Training and Support. A strong BI platform will likely produce data sets that are far larger than those clients are used to examining. Law departments should expect their solution providers to help identify and develop analytics that are process-specific. This requires a thorough knowledge of the industry in order to put process into context. When it comes to understanding process-driven data, certain industries—and law is not one of them—are much better than others. Consider the world of finance, where financial institutions stay in business precisely because of data accuracy. Think of customer deposits, portfolio summaries, and earning reports, for example. Or public companies whose financial statements have to meet accounting standards in highly regulated industries. A solution provider familiar with the legal industry should also make sure not only that law departments get the information they are looking for, but also that they know what they want to accomplish with that information. The two are hardly the same, and solution providers play an important role as teachers and long-term strategic partners in this regard.

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