legal pricing

Data, Diversity & Delivering Value: Reflections on Buying Legal Council Americas 2019

It was a privilege to attend and participate in last week’s Buying Legal Council Americas conference. We enjoyed reconnecting with old friends, meeting new industry professionals and sharing our passion for actionable data.

Here are some thoughts, as we reflected on the views shared by the many insightful speakers:

Data quality impacts the effectiveness of data driven decision-making

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“82% of respondents reported that law firms are leveraging insights from total data intelligence and taking a holistic look at their own data,” according to a recent report by Ari Kaplan. With this increased spotlight on data, we believe it is imperative that law firms and legal departments are using high quality data to make important decisions around scoping, matter management and pricing.

Digitory’s Catherine Krow addressed the importance of data quality in her session, emphasizing that the legal industry cannot harness the power of data without first paying its “data debt" and transforming dirty and poorly structured data into actionable insight. We define actionable billing data as task level, well-labelled, accurately coded and connected to context.  When law firms and legal departments have actionable, decision-grade data, they will achieve better results for themselves and their clients.

Legal procurement teams want a better understanding of value from law firms

Current billing data and fee structures make it difficult for legal procurement teams to understand the value that law firms are delivering on engagements. One panelist commented “show me the numbers that show me how you made this more efficient.” Procurement teams and legal departments need more detailed information from their firms to be able to move away from the frustrations of the billable hour model to value-based pricing.

We agree with Matt Beekhuizen who said, “hourly billing data is the information that we have now, and we can use it to bridge the gap to achieve value-based pricing.” When law firms gain a better understanding of their own hourly billing data, then they can provide clients with effective scoping, greater transparency and predictably which can deliver on the holy grail of value-based pricing. 

Legal procurement can play a key role in driving diversity

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Despite the encouraging number of law firms who received the Mansfield 2.0 Certification, there is still much to be done to move the needle on diversity in the legal industry. Jonathan Lovitz commented, “the commitment and the numbers just aren’t adding up.” We believe that one of the tools for advancing diversity is actionable billing data. As Catherine Krow said, “When you have actionable data you can see whether your diverse lawyers are getting career advancing opportunities . . . When you can see it, you can fix it!” 

The conference focused on the important role that procurement teams can play in supporting their legal departments’ diversity initiatives by requesting diversity information from law firms in all their RFPs. One of our favorite moments of the day was a call-to-action by Adrienne Fox, who asked all procurement professionals in the room to commit to including a diversity question in their RFPs.  Legal Operations consultant Vandana Dhamija joined in that call, confirming that she would be encouraging her clients to be doing this too.

Thank you to Silvia Hodges Silverstein and her team at Buying Legal Council and the many wonderful speakers who shared their insights.  We look forward to supporting the legal industry as it advances on its journey towards data-driven decision-making.

Contact us, if you would like to find out more about how Digitory Legal’s data analytics and cost management services can help you to gain a deeper understanding of your billing data and more effectively manage complex fee arrangements.

3 Tips For Getting The Best Budget From Your Outside Counsel

SAN FRANCISCO - March 19, 2018

Here are a few tips to getting more realistic numbers out of your outside counsel:

Use a Detailed Budget Format and Compare Apples-to-Apples. 

Pick a detailed task-based budgeting format that leaves no room for “BS” and ask all your counsel and prospective counsel to follow it. This may mean your initial budget proposals will cause “sticker shock”; however, they will also be more accurate.

Identify and Quantify Cost-Driving Variables. 

It is true that you can’t predict what will happen in litigation. But when the anticipated scope changes, it generally means there are more of a certain task than the budget assumed: more depositions, more gigabytes, more motions, etc. If your lawyers clearly identify their assumptions about these variables and quantify the average cost-per-task, you will be able to predict how changing circumstances will affect the bottom line (e.g., 10 unexpected deposition notices = $100k; 20 extra gigabytes of documents = $300k).

Insist on Frequent Updates. 

Changed circumstances should not lead to blank checks. Your lawyers should be updating their budgets when the schedule gets set, the rulings come in, the discovery gets served, etc. — that’s the best way to know if they are maintaining efficiency and keeping average costs-per-task down no matter what happens. To make this happen, schedule a cost-management call with your relationship partner every few weeks and get an updated budget before each call.

Digitory Legal has built these considerations and more into its easy-to-use litigation budgeting tool. Our detailed reports, average costs-per-task, and easily updated framework is the perfect solution for clients who are tired of hearing “but it’s litigation...“

Legal Budgeting 101: How Litigation Budgets Are Made

Leaving a top-tier law firm to start a software company may seem like a risky move, but in fact I am a very careful and deliberative person. So, before starting Digitory Legal, I spent a lot of time researching how other lawyers handle budgeting to make sure I was not missing anything. In this post I share some of the insights I learned from that research and explain the budget-making process from the litigator’s perspective (approx. 90 seconds to read).

Lawyers Budget Like It’s 1999. I wrote my first litigation budget in 1999. Since I was a second year associate with no clue what I was doing, I asked my mentor for advice. His words of wisdom: write down everything you can think of and how long you think it will take, then double it.

Seventeen years later, not much has changed.

Every lawyer I know creates budgets in Word or Excel. Some firms have created elaborate Excel spreadsheet templates to help standardize the process, but most individual lawyers make up their own format and then repurpose the same spreadsheet or word document again and again. As a result, even budgets from the same firm will come in all sorts of different shapes and sizes.

Given the high-tech age we live in, you would think legal budgets would be based on sophisticated data analytics from past invoices. Nope. There are basically two methods lawyers today use to get budget numbers (described below), and neither of them are particularly scientific.

Method 1: Percentage of Time Model. 

Sometimes called the”burn rate” or “supply side” approach, this is the easiest and most pervasive budgeting method by far. The lawyer writing the budget (hereinafter, the “budget master”) decides who will work on the matter, approximately how long the matter will take, and the percentage of time each timekeeper will dedicate to it over time. For example, if the budget master expects that case will take about a year and a timekeeper will spend 50% of their available time on it, they will budget about 1100 hours for that person (assuming 2200 billable hours per year).

Once the budget master has the total number of hours for each timekeeper, those numbers get sliced-and-diced to fit into whatever format the lawyer likes or the client asked for — generally a spreadsheet with quarterly spend and/or the five phases of litigation set by the American Bar Association (Case Assessment, Pleadings, Discovery, Trial, Appeal).

Based on my anecdotal research, the percentage of time method can give you an impressive-looking budget, but the final numbers will be a LOT lower than the actual cost. Accuracy improves if the budget is for small chunks of time in the near future (e.g., the upcoming quarter) rather than a full matter.

Method 2: Task-Based Model. 

Some of the lawyers I spoke with told me they create task-based budgets. This means they define the tasks in the case (e.g., 10 depositions, 3 discovery motions, etc.) and estimate how much time each timekeeper will spend on each task.

Overall, I was most impressed with the budgeting prowess of the lawyers who systematically consider the tasks involved in matter. This is a more time-consuming process than just estimating percentage of time per timekeeper, but these lawyers were less haunted by budget horror-stories.

Clients Are In Control. On this all lawyers were unanimous: lawyers will provide whatever form of budget the client wants. This should not be surprising; after all, the amount of time and money law firms will spend to win business is staggering. So, clients, if you want to get more detail in your budget, all you have to do is ask for it.

Digitory Legal’s software incorporates the best of both models by combining a detailed, task-based budget structure with timekeeper summaries. We provide sample budgets and numerous copy and customize features to speed up the process and provide guidance on the cost metrics.