Actionable Cost Data: What It Is And Why You Want It
Actionable data can help law firms understand what matters cost and create accurate forecasts and well-scoped fixed fee arrangements.
Everyone has heard the saying, “Data is the new oil.” But does that saying hold true in law, or is the promise of data-driven decision-making in our industry just more marketing hype?
To explore this question, I sat down with Catherine Krow, the Founder and CEO of Digitory Legal. Digitory is an award-winning cost analytics platform that brings data-driven pricing and cost management to law. Catherine — a former Orrick litigation partner and self-professed data geek — founded Digitory because she believes “nothing moves the needle in our industry faster or more effectively than actionable data.”
What is “actionable” cost data?
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Actionable data is data that delivers decision-grade insight. According to Catherine, in the billing context, that means cost data with four key attributes: (1) granular enough to reveal scope and unit costs for each task, (2) well-labeled, (3) accurately and consistently coded, and (4) connected to context. “It is the ‘why’ behind the numbers,” she says.
She explains, “Actionable cost data can reveal the value, or lack of it, within legal spend, pinpoint opportunities for process improvement, and improve communication around expectations and costs. It also can help law firms and in-house counsel predict the price of complex work with an unprecedented level of precision.”
How do you get it?
Catherine explains, “Harnessing the power of data in law usually requires some process change because data management practices in the legal industry — particularly around billing data — historically have not been very rigorous. This has created an industry-wide legacy of what I call data debt: we’ve got a lot of it, but it actually doesn’t tell you anything.”
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That’s the bad news. The good news is technology can transform dirty billing data into actionable insight if the appropriate foundation has been laid. Catherine continues, “That foundation depends on the quality of the time narratives in the bills, not the accuracy of the attorney coding, which will always be wrong.” She continues, “Even if a legal department is not ready for a serious data initiative now, having bills with detailed time narratives will set the stage for success in the future. Legal departments can build this foundation by adding and enforcing vagueness rules in your outside counsel guidelines.”
Why do you want it?
Catherine explains that the three primary reasons are money, cost predictability, and diversity.
According to Catherine “For corporate legal departments, actionable data can uncover 20-35 percent of unnecessary spend. Conversely, it can help inside counsel identify and reward firms that run matters well. Moreover, that which gets measured gets managed.” This is a huge benefit for legal departments and for law firms working with fixed fee arrangements, which can become unprofitable very quickly if the cost data is not actively measured and managed.
She continues, “Budget-to-actual is the number one key performance indicator for legal operations, and accurate budgets and fixed fees provide the predictability they crave. Actionable data can help law firms understand what matters cost and why to create accurate forecasts and well-scoped fixed fee arrangements.”
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Most importantly for us as an industry, actionable data can take diversity initiatives to the next level. “Because billing data is poorly coded and structured, it provides no meaningful information about what diverse attorneys are actually doing,” she says. Catherine continues, “With actionable data, clients and law firms can see if the diverse lawyers are getting the same career-advancing opportunities as the non-diverse lawyers. When you see it, you can fix it — preferably before those diverse attorneys walk out the door.”
What are your experiences with data? I would love to hear your insights and questions for Catherine. I enjoyed her insights and unique perspective as a former Biglaw partner and may interview her about other aspects of data and legal practice in the future. What would you like to learn?
Olga V. Mack is the CEO of Parley Pro, a next-generation contract management company that has pioneered online negotiation technology. Olga embraces legal innovation and had dedicated her career to improving and shaping the future of law. She is convinced that the legal profession will emerge even stronger, more resilient, and more inclusive than before by embracing technology. Olga is also an award-winning general counsel, operations professional, startup advisor, public speaker, adjunct professor, and entrepreneur. Olga founded the Women Serve on Boards movement that advocates for women to participate on corporate boards of Fortune 500 companies. Olga also co-founded SunLaw, an organization dedicated to preparing women in-house attorneys to become general counsels and legal leaders, and WISE to help female law firm partners become rainmakers. She authored Get on Board: Earning Your Ticket to a Corporate Board Seat and Fundamentals of Smart Contract Security. You can email Olga at olga@olgamack.com or follow her on Twitter @olgavmack.
