How much is it going to cost us?

That’s the question that faces general counsel (GCs) when meeting with their CFOs. The message to today’s GC is clear: It’s no longer sufficient to be a great corporate lawyer; it’s now a job requirement to be an effective business manager who can also communicate the value of his or her legal department to the company.

Unfortunately, many GCs feel ill-equipped for this challenge. They know they should manage by facts–rather than gut instincts–but they don’t know if they have the right facts, or the ability to mine and aggregate those facts, at their fingertips.

GCs empowered by analytics are better equipped to respond to these types of questions from the CFO. When properly analyzed, data about past legal matters and data from across the legal industry as a whole can arm GCs with the information they need to more accurately predict their legal spend and build trust and respect with their CFOs.

Legal analytics answer a few basic questions, including:

  • How long should this kind of matter (lawsuit, joint venture, etc.) take to resolve?
  • How much will this kind of matter cost us to resolve?
  • What are the signals that a specific matter has strayed outside the bounds of predictable norms in terms of time and expense?

The key is not only estimating the cost of a matter but assessing the potential range of costs along with the drivers of that variability. This information brings real value to the company.

Mining legal data using powerful analytics

How can corporate legal professionals extract this type of information? Start with your corporate software systems that generate data about billing, matter management and accounts payable (A/P). Once the data has been aggregated, it can be analyzed for specific characteristics.

Through this analysis, GCs can discover:

  • How much matters typically cost through each point of their lifecycle
  • Where each matter is within its lifecycle
  • Whether the matter has shown any early indications that it is going to deviate from a normal matter of that nature
  • The expected total cost for handling a matter and the expected costs through the current fiscal year

For instance, imagine a matter that has been active for 16 months, such as a complex employment litigation case. The employment in-house counsel looks at the information from other employment litigation cases and sees that they typically last 27 months. The next step is to compare this matter to 75 other employment litigation cases over the last four years. The comparison may show that in month six, costs spiked well above the average for this type of work, and then continued to be above average. By looking into the activities in month six, the in-house attorney can figure out what drove up those costs.

This approach to business intelligence is invaluable for forecasting legal costs in two ways. First, general counsel can forecast and budget more accurately for the rest of the year with this information as a benchmark. Second, corporate counsel have the opportunity to better manage similar matters going forward by analyzing what drove up legal costs in month six.

Access to legal analytics also creates a stronger and more informed dialogue between a corporate counsel and the law firm handling the matter. Imagine how powerful it would be for the lawyer who owns this matter to bring the “similar matter” averages to the law firm and discuss whether so many depositions were really needed or why a specific partner was doing so much work. Using facts to guide this conversation changes the dynamic entirely.

Lastly, the aggregation of data for similar matters provides a baseline for early case assessment when new legal matters arise.

Going back to that uncomfortable conversation between the CFO and GC, what if the GC had the power to respond with facts about the most likely cost to handle matters of this nature, both within the organization and at other organizations?

This is the type of information that transforms relationships between executives and builds credibility for the GC. The GC now comes to the table as a key player who predicts, manages and balances costs and risk for the broader organization.