Best Practices Uncovered: Incorporating Data Analysis Into Department Management

Thursday, February 1, 2007 - 00:00

For law departments who have invested in systems (matter management and/or electronic invoice) the result has been a proliferation of available standardized data which holds valuable insight into the management of the department, if mined appropriately. One company, RJ Reynolds, has been actively mining its data for years and with great success. Reynolds' success is built upon its vision, its investment in resources and its commitment to change the way it manages its matters, cases and clients. Mark Holton, RJ Reynolds' General Counsel, has been instrumental in leading the program and continuing to push it forward and is a pioneer in the area of managing with a combination of objective and subjective analysis. The maturity of RJ Reynolds' program lends itself to a leading practice, but it is always changing as new information is gathered and new questions are asked. We are pleased that Mr. Holton agreed to be interviewed by Tricia Harrison, from Duff & Phelps, who understands the importance of an effective data management program based on experience as Director of Operations at MCI and VerizonBusiness.

This is the first of a two-part series; the second will take place via a live web-cast in March of 2007. Please contact Tricia at tricia.harrison@duffandphelps.com, if you would like to be added to the invitation list. During the webcast, Tricia will continue her discussion with Mark and will field questions from the attendees.

Harrison: When did RJR begin to mine its data?

Holton: We began in earnest in late 2005. The company implemented an electronic billing tool several years earlier, and we were evaluating more effective ways to review the enormous amount of billing information we received from our outside law firms and other legal service providers.

Harrison: What was the impetus?

Holton: As I mentioned, we had several years of experience with e-billing. It became obvious that e-billing was a necessary and important step in our overall management approach. It allowed us to improve the efficiency of bill receipt, review and approval, and allowed us to use the tool to help enforce basic billing guidelines. We quickly realized that the use of the ebilling tool was really just a first step. With the electronic submission of invoices came data. The challenge became how best to utilize the data contained in those bills with the multiple goals of knowing where our money goes, managing our legal spend more effectively, and forging even better collaboration with our outside counsel. That latter point is especially significant. We are committed to aligning our outside counsel with our department goals - ensuring that we achieve both high quality results and our financial objectives. Effective data mining is key to making that happen. In addition, data mining is an essential tool in evaluating how effective we are at communicating our expectations as well as testing and validating our forecasting ability. I believe that this latter point is particularly important. We don't limit the scope of data analysis to measure the performance of our outside firms. We also use the data analysis to measure the performance of the department.

Harrison: What type of financial/data analysis is used in the legal department?

Holton: I am pretty sure we can do virtually any analysis that any smart financial analyst can dream up. The key is to effectively prioritize both the human and system resources performing the work. Through experimentation, as well as trial and error, we tend to focus on those few analyses that enable us to design and support meaningful performance metrics, both for our assessment of internal performance and for reviewing outside counsel. We use management dashboards that describe our spend at a macro level (overall spending by categories/lawyers/firms) and a micro level (matter-specific). In addition, we capture time/trend data to enable us to spot trends sooner rather than later and better predict our future spend. And since we have been at this for a couple of years now, we have more complete and reliable data.

Harrison: Why are these analyses performed?

Holton: In my experience, effective data mining and reporting unlock the door to transparency, management, and control of legal spending. Consequently, we use these analyses to identify, evaluate, refine, control and predict. In today's environment, where the business people are continually seeking better predictions and forecasts, data mining provides opportunities for us to be more responsive to the needs of our financial managers than ever before. These analyses also allow us to engage more readily and more effectively with our outside counsel. Rather than discussing each potential issue identified in an invoice review as they occur, we can discuss relationship, strategic, and billing issues on a much higher level. Both sides can better focus on the big picture, which means better use of time for ourselves and our outside firms.

Harrison: What types of decisions are made with the help of the analysis?

Holton: As I mentioned, we (and I think GCs everywhere) are being asked to be more responsive with respect to cost control, predictions, and forecasts. Data mining and analysis are simply the best tools to help us get there. We are so much more informed about where and how we are spending money. We can focus resources much more effectively. Moreover, the effective analysis of the data enables us to spot trends or divergence from expectations in real time and enable us to change course if necessary. In addition, we, and outside counsel, can make better decisions on staffing, case tactics, and risk management. Indeed, data mining allows us to have a better grasp than outside counsel of what they are doing for us. Imagine the interesting and productive discussions you can have!

Harrison: What have been the most significant challenges you have faced in performing high quality analysis?

Holton: I believe we struggle most with distinguishing between what can be done with the data and analyses (a virtually limitless universe) and what should be done to enable us to make meaningful and correct decisions. Once we had the capacity to data mine and report, everyone on our team had to think a little bit differently. We had to take a hard look at what information we needed and could put to use to achieve our objectives. The analyses we depend upon today are far different from the analyses we looked at 12-18 months ago. Finally, we had to be comfortable with trial and error.

Harrison: What advice do you have for a GC, VP of Litigation or Director of Legal Operations who wants to begin to mine their department's data?

Holton: Be prepared and be committed to the process. The technology available is staggering; the amount of data produced can be paralyzing. Technology is available to everyone, so in some ways, that's the easy part. Effective collaboration is the key variable, and data mining and reporting are foundation elements leading to that. On the inside, we began to achieve our best results when we brought in strong IT and financial people. If everyone is committed to the process and to the results, the debate and pushback from every discipline adds to the quality of the results achieved.

Please contact the interviewer at tricia.harrison@duffandphelps.com or telephone (312) 697-4909 with questions about this interview.