Expertise In Data Analysis: A Path To Greater Predictability And Control

Wednesday, May 16, 2012 - 17:11

The Editor interviews Kris Satkunas, Director of Analytic Consulting for LexisNexis CounselLink. CounselLink is an industry-leading matter management, e-billing and legal hold solution for corporate legal departments. Kris leads the CounselLink solution’s efforts to advise corporate legal departments on improving their operations with data-driven decisions. Prior to joining the CounselLink team, Kris was Director of LexisNexis’s Redwood Think Tank, where she partnered with a group of industry thought leaders to develop advances in analytics and best practices that improve law firm performance. She has authored numerous articles and speaks regularly at legal industry conferences and events.

Editor: Tell us about your background and how that fits into your role on the CounselLink team.

Satkunas: The theme that is consistent throughout my career is “analytics.” Analytics is really my passion. I was a finance major in college – hence the business interest. I’ve always liked logic, breaking things apart and problem solving. All of that ties into analytics. So, I think it's just kind of in my DNA.

Editor: How did your professional path lead you to CounselLink?

Satkunas: Early in my career, I worked for one of the first banks to deploy business intelligence tools. When I came to the legal industry in 2000, it was as part of a new company serving law firms called Redwood Analytics. At that time, law firms didn’t have the ability to measure things like matter profitability. They also needed better ways to plan new matters and create budgets.

I consulted with CFOs, EDs and partners at large firms in North America, the UK and Australia. I used what I learned from those consultations to develop the metrics and analytic methodology underlying Redwood’s solutions. I also helped our clients get the most value out of the software by interpreting the data and showing them opportunities to improve.

The CounselLink team realizes that legal departments are looking for advanced analytics, including being able to better predict costs and determine where the use of alternative fee arrangements (AFAs) can be beneficial. It makes perfect sense to draw on my past experience to provide analytic consulting to legal departments looking to improve their use of data in managing the business of law. And, within the CounselLink tool, there is an abundance of data that can be used as the basis for advanced analytics. I’m excited to be in this role and to have the opportunity to use my expertise to analyze this rich source of data.

Editor: What are you seeing as the top management challenges that corporate legal departments face today?

Satkunas: I've been hearing a lot less about managing costs downward and more about predictability. Legal departments want to know what they’re going to spend on a matter, and they want confidence in their forecasts.

They have the data that can be a source for predictability, and CounselLink also produces substantial data; however, importantly, data alone doesn't answer questions. You need someone to interpret that data, and that’s not something that most lawyers have an interest in doing. Lawyers are trained very specifically to practice law, not to be data analysts.  Their DNA is really different from mine.

Thus, it doesn’t make sense for a lawyer to perform analysis to find patterns that might indicate if an AFA is appropriate. Combined with the fact that legal departments are lean, lack of such analysis is a big part of the reason AFAs don’t get used as often as they should.

Editor: How does corporate counsel tackle these challenges today?

Satkunas: Some legal departments are at the front of the pack, with in-house talent mining historic data to help do things like forecasting expenses. Other legal departments are hiring people who are analytically inclined, while still others get help from someone in finance.

But in most cases, analysis simply does not get done. Too many decisions are made based on gut rather than on data-driven analytics. CounselLink Analytics can help to provide the necessary expertise to aid in making better decisions.

Editor: Based on your experience, how can legal departments improve the management of the business of law?

Satkunas: They can start by setting goals and establishing metrics to assess their performance. When I've asked people what sort of things they're trying to achieve, the answers I get are often pretty eclectic. For instance, some legal department leaders tell me they want to move forward with AFAs, but they don't actually have a target in mind or specific types of matters to focus this effort.

Then there’s budgeting. Some legal departments require matter-level budgets, but even then, the budgets comprise just one number and are not spread out over a period of time or broken into phases. Even with complex litigation, which is expected to go on for years, you can look out over the course of the next year and establish a budget to cover the phases you know are coming. Overall, the process should be more granular. People often say they’re over budget or under budget, but there's no way to break down the drivers of that variance.

Essentially, if management hasn’t set targets, they won’t be able to evaluate how they’re performing, and no one is being held accountable. But accountability is important, especially when we're talking about major amounts of money being spent. 

Further, I don’t see enough “post mortem” reviews. After a matter finishes, you should do a deep-dive analysis to understand what happened. What did you spend money on? What could you have done better? What things seemed out of control? What actions were out of the ordinary?

Editor: Can you give us an example?

Satkunas: Take depositions. If you've had a major litigation that involved 100 depositions, how much on average did they cost? I don't think most people could answer that. If you had an answer to that question, using a solution like CounselLink for that data, you might rationally decide to cap deposition fees on major litigation at $50,000 going forward, giving you predictability and control over this big expense line item.

Editor: Are there common metrics used by in-house and outside counsel?

Satkunas: More than you might think. It’s two sides of the same coin. We’re seeing a lot of metrics regarding the relative portion of legal work done under an alternative fee arrangement, including how often these fee structures are offered, even if not ultimately agreed to.

Another metric that’s hot right now, and has been for several years, is the measure of cross sell. Law firms are setting goals to do multiple types of work for every major client. That's something that they're measuring constantly.

The counterpart in legal departments is measuring consolidation. Most legal departments want a smaller number of law firms to do the bulk of their work, and this often translates into providing more types of work to law firms selected as preferred providers. The metric that legal departments are measuring is the number of law firms used to get to 80 percent of their total outside counsel expenditure.

Consolidation becomes a point of negotiation and an opportunity for a legal department to garner more favorable rates because they're giving the law firm a bigger share of their business. Ultimately, both sides win.

Editor: How transparent do you think law firms and in-house counsel are in sharing information about the metrics they use?

Satkunas: The word transparency comes up a lot. I think transparency is very informal right now, but it's definitely a factor. I know for certain that there are partners in law firms who actually share their matter profit margins with some clients. They show how much revenue comes from the matter and the costs that get allocated to the matter, such as lawyer direct costs and overhead. They do it because they want to demonstrate the effect of different pricing scenarios to their clients. I’d love to see more of this sort of transparency because it ultimately leads to collaboration and a better understanding of the business of law from both sides.

Editor: How do legal departments assess value?

Satkunas: That’s the million dollar question. The best ones are using scorecards, some to measure the value they get from their preferred panel of law firms and some to measure the value of an overall department. Scorecards include financial metrics, metrics of efficiency and even some subjective metrics, like communication. Are you hearing about issues from outside counsel in a timely manner? 

And there could be a whole host of other subjective metrics pertaining to that question of value. Did we win or lose? How do you set a scale for outcomes? Non-financial metrics need to be part of an actionable scorecard. 

Much of the data for a scorecard can come from CounselLink, and I help to advise clients on choosing which metrics to use. But right now, I don't see a whole lot of measurement of value out there. If someone is responding to a question of value, they're answering it based on their gut, but there are more objective ways to assess value.

Editor: What sorts of metrics should legal departments include in management dashboards?

Satkunas: When we’re talking about management dashboards, again I’d suggest a scorecard approach. If you haven’t picked up on it by now, I’m a big proponent of scorecards. And I believe that people in different roles should look at different scorecards, although there may be some overlap in the metrics on them.

A scorecard for senior management should include financial metrics, an assessment of risk and an indicator of stakeholder satisfaction within the organization. You need to keep in mind that there isn’t a one-size-fits-all solution here. The dashboards should reflect the strategy and goals of the department. For instance, if expanding the use of AFAs in the department is a goal this year, a metric showing the percentage of matters with an AFA should be on the dashboard. If diversity is a hot area for you, you should be including some vendor diversity metrics on yours.

It’s also very important that a dashboard allow the user to drill into more detail if they want to. For instance, if I’m a GC and I see that I’m over budget, I may want to drill into the departments driving that variance. Because every GC has somewhat unique management needs, advising on metrics and dashboard design is a component of what CounselLink Analytics provides as a service to legal departments.

Editor: Everybody’s talking about analytics these days. Is this just today’s corporate buzzword? 

Satkunas: Analytics boils down to information that improves decision making, so if any entity, legal department or other is performing analysis and not making use of the information, they’re wasting their resources. Making well-informed decisions is not a passing fad. You’re hearing about it more because there are solutions like CounselLink that make it possible to mine data and get to the information that is essential for sound decision making. Analytics is not a passing fad. I’m certain we’ll be hearing more, not less, about analytics for legal departments.

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