Law Firm Data – Strategies for Making It Useful

By Rob McKay, General Manager of Coyote Analytics

Do you have all the data you need? As you currently prepare reports for management committees or shareholders, the answer is probably yes. If all you need is to continue preparing the same reports, no changes are necessary.

“To improve is to change; to be perfect is to change often.” – Winston Churchill

Do not let your data (or lack of data) govern which reports you run. Manage and understand what data you have and what data you need.

What is Useful Data?

“It is a capital mistake to theorize before one has data.” – Sherlock Holmes

Decisions are often made based on one’s experiences, or on a “gut feeling.” Both may work some of the time, but neither will work all the time. Would it not be easier to make decisions based on useful data?

If you asked ten litigators how long it takes to litigate a case, you would not get the same answer ten times. How about if you ask ten financial strategists about profitability? While their answers may be close, they will not all agree. Ask the same question after you have given them three years of data. The responses will likely be far more similar. The caveat is that data is useful.

Knowing how long a litigation case took is as simple as knowing the start and end dates. Would it not be useful to know the case outcome? Was it mediated, arbitrated, or a jury trial? Did it end on a dispositive motion? It would be useful to know the type of case, the industry of the clients, and the court jurisdiction. Having all this data will allow for a more analytical review.

Likewise, a basic firm profitability calculation would include expenses and revenues. It would not be a huge stretch to improve the data you have, to produce a profitability by timekeeper report. With this information, you can produce profitability rates by office, practice group, client, or employee type. Again, collecting more informative and useful data will allow for more meaningful analytics.

Ask the Right Questions

Recently, I was talking with someone about tracking compensation in a general ledger account. The firm had a single GL account for salaries. They did not break salaries out by employee or employee type. It was suggested that because they did not use these details, they did not need to break the information out by individual. At the time, that was a correct statement. However, if they had asked more questions, they may have discovered a need for tracking individual salaries. Going back to capture information is sometimes very difficult and always time consuming.

In an article entitled “Data Management Will Revolutionize Law Firm Operations’” posted on the CIO Review site Meredith Williams-Range of Shearman and Sterling, LLP discusses the importance of data. She suggests that by looking at every piece of data as an important piece of business intelligence, and seeking ways to manage and leverage the data, law firms can make operations more efficient, improve client satisfaction and loyalty, and enhance profitability.

‘Every Piece of Data as an Important Piece of Business Intelligence’

If you adopt this philosophy, you will be in a better position to analyze and report on the data. To know what data you need, you will need to know what questions you want to answer.

Perhaps, for example, the question is how much you collect on matters from a particular referral source. To answer this question, you will need to capture referral source information, and link that data to individual matters.

If the question is how many hours are spent on matters performing a specific task, you would need to use task codes on specific time entries.

Break the questions down into as much detail as possible. The more questions you ask, the more data you will capture.

The questions will begin to point to what data you will need, and will highlight where you have gaps in data.

Analyzing the Questions

Question number one was how much you receive from a particular referral source. The necessary data would be the referral source, matter information, and collection of data. If you expand this question and ask how profitable is a referral source? To compare profitability of referral sources, you need to calculate an overhead rate for each timekeeper. This would involve allocating all indirect and direct expenses to timekeepers. If we include practice types in the matter information, we can make even more comparisons.

Question number two related to how many hours are spent performing a specific task. The data necessary for this would be the billable hours, and the task codes. If you wanted to know the number of hours per employee type, you would need to include the employee type. Including data for both the value billed and the industry type will allow you to view the information in different ways.  It may, for example, be useful to know the value billed to clients in say construction defect matters for performing discovery? Because the information comes from a time entry, you can also report how long it takes (on average) to complete a particular task.

‘Seek Ways to Manage and Leverage the Data’

Managing and leveraging data involves data analytics. You may start by listening to questions asked by your shareholders. Many firms rely on “tried and trusted” reports. Hopefully, you have one or two shareholders who may be asking for different information. Listen to them. They can help you capture more useful and beneficial data.

You know what data you need, now capture it.  Most firms capture data by using their software applications. A CRM system will help capture contact and marketing information; your financial and billing information will capture all financial, accounting, time and expense, and billing data; your payroll software will capture all data relating to payroll and much of your human resource information.

The following steps will help you capture all the data you need.

• Be deliberate about the data capture. If necessary, force users to enter data in a certain field by making that specific field mandatory.
• Do not leave it up to the individual user to decide which fields can be completed and which fields can be left blank.
• Create custom fields to capture data not already being captured.
• Create a check and balance system to ensure that all the required data is captured by running reports or setting up grids that show if a particular column is blank.

Now you can begin to leverage that data. Some examples of ways to leverage data are listed below:

• Use of a business intelligence tool (Power BI, Tableau or others).
• Reports and dashboards.
• Visualizations including line, pie, area, bar graphs.
• Presentations – be creative, make sure it is different to how it has always been presented.
• Garner feedback from those to whom you are presenting the data, and respond to their suggestions.
• Use of key performance indicators (KPIs) or metrics.

Conclusion

This process may seem overwhelming, but it is easier than you may think. The first place to start is knowing what data you need to link. Create a group of three or four people and do a brain dump. Have a scribe and have them jot down all the ideas. Compile a list of all the information you have written down. The information will allow you to see whether you are capturing all the data you need.

If there are areas you are missing, speak to your software vendor and ask if they can help you track important pieces of data. If your software allows you to add custom fields, go ahead and add them.

This is a constant endeavor. You will not get all the ideas you will need in one session. Start going through your current reports and consider other ways to report on the data. Your goal is to provide your shareholders with thought-provoking data that can be used in strategic decision-making.

This blog post was originally published on March 22, 2022. Coyote Analytics empowers legal professionals to better serve their clients and optimize profitability while working at any time and from anywhere. To learn more, visit https://surepoint.com/resources/research/coyote-analytics/.

About SurePoint Technologies

SurePoint® Technologies is the leading provider of award-winning enterprise software that improves workflow and maximizes financial performance and profitability for law firms nationwide. Its distinctive cloud platform integrates client management, practice management, and financial management for powerful relationship-building and knowledge-sharing capability. With a community of more than 100,000 members, SurePoint continues to transform the legal industry by enabling law firms to unlock higher performance, freeing lawyers of administrative burdens so they can spend more time focusing on their clients and their practices.

Learn more at https://surepoint.com.