How Law Firms Can Leverage Legal Analytics To Boost Profitability

Daniel Farrar is the CEO of Assembly Software.

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When it comes to future-proofing their firms, attorneys should prioritize cloud adoption and embrace artificial intelligence (if they haven’t done so already).

But there’s a third, equally important step they should take: using legal analytics. Legal analytics provide insights into critical business metrics such as staff efficiency and client retention—and allow attorneys to take action to streamline operations and make data-driven decisions that ultimately increase profitability.

Legal Analytics: Key Metrics Every Firm Should Track

Data analytics can identify patterns and factors that impact profitability, such as the complexity of cases, time spent on specific tasks and the efficiency of different practice areas. This information enables firms to set competitive pricing structures, optimize resource allocation and enhance overall profitability. Below are seven key metrics that your firm should be tracking to achieve greater productivity and profitability.

Firm Profitability

First, law firm leaders should analyze their historical data on billing rates to determine whether they have a profitable pricing structure when factoring in expenses. Upon examining their data, attorneys might realize it’s time to raise their rates and possibly lower some of their costs.

Average Case Duration

Understanding the average case lifecycle can help firms increase staff efficiency and productivity. For example, having visibility into hours worked (per case, per case type and during specific time periods) can give a picture of staff performance as well as data-driven insights into areas where your firm can make improvements.

Resource Allocation

Law firms can optimize staff and resource allocation by leveraging data analytics. In analyzing attorney and support staff workloads, as well as case types and skill sets, firms can ensure optimal staffing levels, avoid the overutilization or underutilization of resources and balance workload distribution. Efficient resource allocation improves operational efficiency, streamlines case execution to outcome, maximizes billable hours and ultimately increases profitability.

Staff Utilization

Staff utilization rate is another metric attorneys can explore using legal analytics. A staff utilization rate tracks how much of each team member’s available time is used for billable compared to non-billable work. After evaluating the metrics, attorneys can reduce non-billable work to increase margins. Firms can also leverage legal AI software to eliminate these non-billable, time-consuming tasks—freeing up staff to move through cases faster.

Marketing ROI

As law firms implement marketing campaigns to generate leads, leaders need to keep track of results so they know what’s working and what’s not. Spending time and money on a marketing campaign that doesn’t yield results will cut into a law firm’s bottom line, making continuous monitoring of marketing ROI a critical task.

Realization Rate

Attorneys should carefully monitor the realization rate for their firms. This metric pertains to how much billed work has been paid for. If a firm has a low realization rate, its leaders need to figure out what’s behind it and rectify it as soon as possible.

Client Retention Rate

Finally, there’s the client retention rate, a key indicator of client satisfaction. Knowing the percentage of clients who stay with a firm over time allows attorneys to optimize their client engagement practices to address any underlying reasons clients might be parting ways with their teams. Of course, this metric will not apply to some practice areas. For instance, a law firm that only handles divorce cases will likely—and hopefully—have a low client retention rate.

Best Practices For Legal Analytics Vendor Evaluation

Many case management solutions on the market offer native legal analytics that can help attorneys make strategic decisions that can increase efficiency and profitability at their firms.

As law firm leaders evaluate different vendors, they need to consider several important factors, starting with their practice areas and the metrics they wish to track. Features can vary from solution to solution; vendors aren’t one-size-fits-all. Depending on the type of data a law firm wants to collect, some solutions can be better fits than others.

Law firm leaders should also look at their budgets and only invest in tools that make sense for their firms’ size and desired usage rates. Privacy and security are paramount factors as well. Legal teams work with confidential data, and any solutions firms deploy must adhere to established privacy and security regulations.

Once these baseline criteria are established, law firm leaders can narrow down potential vendors and evaluate each solution’s intuitiveness and ease of use, getting input from their team members. It should not feel like someone needs a Ph.D. in data analytics to use the technology successfully; however, law firm leaders should recognize that there will still likely be a learning curve. Lawyers should also ensure that any solution they’re considering has dedicated resources and staff on hand to help employees learn the application and troubleshoot any issues.

Getting The Most Out Of Legal Analytics

Once law firm leaders have selected the right solution, they need to be proactive to get the most out of it. The best way law firm leaders can ensure that team members are strategically using the tool is to appoint an internal champion of data analytics (someone at the firm who can function as the go-to person when anyone has questions or thoughts to share about the solution and who can also regularly collect feedback).

Moreover, management must keep employees involved and engaged in the implementation process (not just during the decision-making phase). Some employees might have concerns that leadership will put their performance under a microscope. It’s up to a law firm’s leaders to explain how analytics can help everyone at the firm work more efficiently. By clearly communicating their firm’s goals for using metrics to employees, leaders can help employees feel empowered by the data.

Data is valuable and can yield powerful insights. But law firm leaders must understand that it can’t capture the complexity and uniqueness of every situation. By using data to inform rather than dictate their decisions, law firm leaders can make nuanced calls that ultimately help them better serve their clients.


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