By Virginio Basile, Vice President, Professional Services, Tikit North America
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Read blog 2 – How law firms can put a smart data strategy in place.
Read blog 3 – What a smart data strategy looks like in practice.
Why so many firms are missing the point about data
Data is a powerful and much underused asset which law firms ignore at their peril, according to Virginio Basile, Tikit’s Vice President, Professional Services, North America. In this blog Virginio argues that once firms can get to grips with data, they will unlock the potential to become more competitive and more profitable.
Let’s take a step back. What is the value of data? Well, in the context of legal firms, data gives you a number of important things. The right type of data can tell you, for example, how much work actually costs. This is critical because when you’re costing future jobs for clients, or setting rates, you must be able to accurately predict the actual cost of a job in order to submit a competitive bid and one that you know will bring a profit.
What else does data do? Well for example it can tell you how long jobs take. And it breaks down for you the balance of say partners and associates working on any given matter. This enables you to understand better the blend of skills that will optimize the costing of a file. It helps you schedule the work, and so confidently schedule more. It can help you choose what type of work to bid for. All of which contributes to sound decisions that will underpin your firm’s profitability.
As well as steering the firm away from the risks of under- or over-estimation, data is also about minimizing compliance risks by billing in the right way, at the right time.
It’s about nurturing relationships by presenting clients with detailed, timely and accurate billing which gives them more confidence in the probity of the firm.
It’s about seizing opportunity. It lets you understand the cost of a sale, what you should take on and how. Without good data you can be sending out bad bills and making bad decisions. Good data is powerful and important, which makes it really surprising that so many firms get data wrong.
How firms are making mistakes with data.
“Managers tend to pick a strategy that is the least likely to fail, rather than to pick a strategy that is most efficient,” Michael Lewis – Moneyball.
How do firms get data wrong? To start with, a lot of firms simply fail to recognize the value of good quality data analytics as I’ve just explained it. Data is a powerful tool. It yields information on which to base costings, billings, decisions and relationships. Use it.
Second – and this is critical – firms often don’t recognize that the data they’re using isn’t very good. Remember garbage in leads to garbage out. It’s impossible for poor quality data to generate reliable insights. The information used for analysis needs to be accurate, relevant and timely. All too often it’s not.
For instance in respect of timekeeping data, at Tikit we routinely see attorneys who complete timesheets days or even weeks after the activity they’re recording has happened. It’s not good enough. Things get distorted and missed. The quality of that data is low.
In truth, though, the type of data that firms persist in using is financial data. Indeed it’s very often the only type of data that firms use for strategic decision making. What’s so wrong with that? Well for one thing, it’s historic data. It tells you what happened in the past. Essentially, it’s looking in the rear-view mirror at what’s gone by.
Secondly, it’s data that’s based on outcomes, not inputs. So it can’t provide insights about how the outcomes were achieved. This type of data leads to a harmful fixation on billings, rates and collected realization. The problem with that is that it doesn’t help you understand your costs and how your costs can be rationalized. This can be a very expensive mistake in today’s highly competitive legal climate.
What firms should be doing is righting these wrongs. They need to understand and accept the real value of data analytics. Then they need to take a long hard look at the quality and type of data that informs their decision-making. They need to review and modify the internal processes that lead to inefficiencies. Finally, they need to move towards technologies that will help them gather better, more current, and more accurate data.
What firms can do to acquire this better type of data is going to be the subject of my next blog.
If you would like to know more read Virginio’s other two blogs or join us for a webinar that ILTA have asked us to present on this topic: How to increase law firm revenue and profitability by improving time capture data on the June 6, 2016. Click here for more info and to register your attendance.