Mining for Treasure In Your Own Backyard: Billing data, effectively analyzed, presents a trove of opportunities for corporate law departments to eliminate waste and redeploy dollars

Thursday, March 31, 2016 - 11:22

Bill Sowinski of Wolters Kluwer ELM Solutions works with clients to structure and analyze their legal data by developing and deploying measured strategies that improve legal and claims department performance. Here, he recommends how to implement business intelligence tools that improve the bottom line and reveals which reports have the most impact. His remarks have been edited for length and style.

 

MCC: You’re a lawyer and a certified litigation management professional with extensive experience in the legal and claims industries. Tell our readers a little about your background and how you came to your current role at ELM Solutions, working with clients to better understand their invoice data and deploy it to improve performance.

 

Sowinski: After graduating from law school in 1976, I served as a trial lawyer with a law firm and then a pharmaceutical corporation. The pharmaceutical corporation hired me to defend mass tort litigation around the country, where it was incredibly important to obtain as much information as possible relative to matters in contest. We developed sophisticated processes to farm and leverage information while deploying strategies for mitigating risk, and sharing that information throughout the company. I had the same opportunity with two other companies: a large building products manufacturer and an insurance company. Later, Wolters Kluwer ELM Solutions asked me to join the company and leverage my expertise on legal processes and data management, which I have been doing for several years now. 

 

MCC: It would seem that virtually every corporate law department is sitting on a trove of valuable data that can be used to help control in-house costs and shape the behavior of outside counsel for the better. What stands in the way? Is it a lack of understanding, or are there other barriers?

 

Sowinski: Recently, corporate legal departments have begun to leverage their data and are today aggressively acquiring additional information, utilizing the appropriate technology to enhance performance. So it is being done, and this trend is accelerating. 

It can, however, be done much more broadly. Progressive corporate legal departments with a strong leadership continually search for new ways to drive better results. They will invest in technology and solutions to accomplish some of their key objectives. For example, every legal and claims department that uses an electronic billing solution has a wealth of data about outside counsel billing practices that most have never tapped. If someone who can envision the preferred state makes it a priority to realize value from his or her data, it can be done. 

The best way to accomplish this is to identify the areas causing the most pain by driving the highest costs or risks. These are your most important objectives. You can’t tackle everything, but you want to take on the big drivers of cost and risk. A disciplined general counsel will attack those areas first. If you develop a lot of expertise and formalize discipline, you will have success, especially if you leverage the information and the technology. Then you can move to the less high-profile matters. You want to eventually find as much value as possible within the data throughout the organization. 

 

MCC: Your solution promises to make it relatively straightforward to get the report that a GC would need to identify problematic billing practices. Tell us about your platform and the factors a legal department should consider as it attempts to choose an appropriate technology partner to manage billing practices. What are, or should be, the most important drivers of that decision?

 

Sowinski: Our clients use our tools to help identify and resolve problematic billing practices, but the technology does far more than just address billing and spending management. We provide a platform – we call it an ecosystem – that allows a corporate legal department to integrate all the management tools that are essential for success: a matter management tool; an e-billing tool; tools that support the management of risk and compliance; and integration with other applications, such as HR, e-discovery or document management. You want a platform that gives you complete visibility across the corporation for all legal management. 

You then integrate and merge the data, share across those sources of information, and work with your outside counsel. That heightens efficiency and, most importantly in my opinion, allows you to leverage information across different types of matters so that you can get as robust a set of information as possible. This helps you identify opportunities and risks, segment information by importance, establish strategies and evaluate performance against those strategies.

An ecosystem approach allows a corporate legal department to perform extraordinarily well, but even more important than that, it encourages corporate legal departments to share information with their business partners and across the corporation so that it’s all very transparent and the entire organization benefits.

And of course, legal and claims departments should share the information with outside counsel when the data points to an issue with how they are billing.

 

MCC: It’s one thing to uncover problematic patterns in billing. Doing something about them is another. How do you work with clients on best practices for what must be some very hard conversations with outside counsel, who may suddenly be in a defensive posture? How do you deliver the news without undermining what might otherwise be a highly beneficial relationship?

 

 

Sowinski: We encourage our clients to share the information from their Actionable Insight reports with their law firms to identify potentially non-conforming billing practices. The best way is to review performance with the law firms on a semiannual or annual basis. When you meet with your law firms, there’s always going to be some good news, and there are going to be areas where they can improve performance. You want to review all of that with them, as well as where they stand generally relative to the other law firms with whom you have a relationship. This information can be used to reward firms that are in compliance or help correct undesirable practices. 

If you find, for instance, non-conforming billing practices that you want corrected, you need to go in with the attitude that the law firm wants to work with you. They don’t have access to this information, at least not in an aggregated way that’s been analyzed by a business intelligence tool. When you share that information with them, they should, and most likely will, embrace it. They probably will be a little bit embarrassed, but their attitude most likely is going to be that they will help you fix it. Now that it’s been identified for them, they will be on the watch for it, and they will help you manage your costs. 

It’s very much in the tenor and the tone. You’re showing the law firms the actual invoiced entries that they requested payment on, but in as positive a way as possible. We never suggest a “gotcha” or “blame game” approach. You’ve hired a law firm, and you’ve done it for a reason. They want to partner with you. Help them help you.

 

MCC: What types of information most excite the typical client?

 

Sowinski: All of the metrics are appreciated, but clients react most to the upbilling and duplicate billing reports. Jaws drop and eyes open. I think sometimes our clients don’t fully appreciate the power of business intelligence or even know that this sort of information can be generated. They are fascinated. General counsel sometimes get energized because they see opportunities for better management. 

The upbilling report identifies individuals who round their time up to the nearest hour or half hour. Virtually all of our clients require their law firms to bill in tenth-of-an-hour increments. If they perform a task, they’ll indicate 1.2 hours or 2.3 hours or 4.6 hours. The number to the right of the decimal point can be only one of 10 numbers, so statistically we know that x.0 or x.5 should be seen only 20 percent of the time. Yet when we run this report, if we see individuals with time entries of x.0 or x.5, and they are doing it 100 percent, 90 percent, 80 percent of the time, without a doubt that demonstrates that the time being tracked cannot be entirely accurate.

We do the same thing relative to duplicate entries, in which individuals use the same descriptor repeatedly on different invoice line items. Clients know that there is an opportunity to look at those line item entries and identify carelessness relative to billing practices. 

There are many other reports that work similarly to identify problematic billing behaviors, such as an overabundance of six-minute billing entries, use of nonspecific billing codes or billing for tasks a long time after the work was performed. It is difficult for invoice reviewers to spot patterns among timekeepers, but data analysis quickly reveals the issues and can document the specific problematic entries. In models we have run, using data from some of our largest clients, we see that these practices lead to tens of thousands of dollars in potential extra expense during the course of a year.

 

MCC: I’m a GC and my CFO is all over me about cost control. I’m concerned about rising regulatory risk, so I’ve got everyone fired up about the potential of mining invoice information. What steps will I have to take to get started?

 

Sowinski: Our clients have been most successful when the general counsel identifies one or two individuals to be responsible for identifying opportunities to improve performance, reduce costs and leverage resources. I generally prefer them to be lawyers who are respected within the organization and who have case management responsibilities. Developing performance metrics, embracing the tools and generating better results becomes part of their job description. It also helps improve internal department performance. Who is managing rates? Who is reviewing invoices to make certain that the quality of the information is good and that the fees and expenses being charged are appropriate? Performance metrics are essential to that. 

The second set of metrics we recommend is exception metrics. On a daily or weekly basis, you run a report showing which matters that require budgets are still awaiting those budgets from outside counsel, and which matters are exceeding their budgets. When you use performance metrics along with exception metrics, designating individuals responsible for driving this effort, and you make performance part of the evaluation of the lawyers, it works — fast

By utilizing business intelligence that analyzes information taken from your management tools and your electronic billing tools, you identify opportunities to reduce cost. It’s not so much a cut as it is eliminating waste. That frees up money you can allocate to other needs. You have insight, and now you have opportunities. 

 

Bill SowinskiDirector of decision support services at ELM, leading the design of client legal spend analyses and benchmarking disciplines. bill.sowinski@wolterskluwer.com