Do you have the data you need to understand your spend on legal services? It’s not about the volume of data, it’s about the quality of the reporting.
Very few organisations have the granularity of legal spend data they need – they often think they are capturing this information or can get it from their internal systems.
However, when it comes to trying to use this data for a panel review or any kind of spend management project, most organisations very quickly realise their data in inconsistent, limited and simply does not offer the level of detail they require.
Organisations, therefore, often turn to their law firms to provide management information to allow a better understanding of spend levels, cost averages and, to a degree, law firm performance.
Here are our top tips for efficiently collecting this data.
1. Clarity on your reporting requirements
Start at the end. What reports do you want to see created from the raw data? Be ruthless in listing the real drivers for your project. From this, make a list of the key data fields you will need to create these reports.
2. Stick to the above!
It is very tempting to add more and more data fields to your list as your project continues. Very few organisations can actually handle the amount of data they capture, and by handle we mean put to a practical use within your organisation.
3. Be honest and practical
Few organisations have unlimited resources. You need to stick to a core list of reporting requirements. Too often this kind of project is started and balloons into something all-encompassing, becoming impossible to complete.
4. Complete the project
This, again, seems simple but often this kind of project is abandoned or the vast amount of data captured is out of date by the time the analysis is undertaken.
5. Ensure law firm consistency
Ensure you have empowered someone to manage the law firms and insist the law firms comply with this new format. Law firms are known to tweak data fields to suit their internal system.
If the firms provide different data sets it means you can’t accurately compare performance.
6. Some analysis is better than nothing
This really underpins all the above. Have a core list of reports and collect the least amount of data to ensure you can create these reports.
Don’t fall into the trap of thinking you will fix all problems in one data capture. Data is quickly out of date and you do not want to waste everyone’s time.
What to Report On
If you’re not sure where to start, here are some reports you can create using your spend data.
- Spend by firm – an obvious metric as you need to know the overall spend by firm.
- Spend or hours by timekeeper – this metric allows you to accurately perform ‘make versus buy’ decisions. For example, whether hiring more lawyers internally would be more cost effective than using external firms. You would also need to consider liability risks associated with this approach.
- Spend by matter type – you need to understand this to understand the types of legal work being performed (is it M&A work, employment work, etc.).
- Spend type (fees or expenses) – it is important to understand how much of the spend is on lawyers versus other expenses, and what those expenses are.
- Number of matters – this allows you to look at overall volume relative to spend. Is spend increasing because matters have increased XX per cent or has the matter mix changed? For example, M&A matters are more expensive, raising overall cost.
- Spend by matter – this metric allows you to review the big spending matters to see if there is anything you can do to reduce costs.
- Timekeeper level – this metric allows you to look at the level of lawyer performing the work so you can analyse the efficiency of the lawyer.
Caroline O’Grady is a legal services procurement expert and a parner at Coote O’Grady, a specialist Legal Procurement Consultancy.