For in-house departments, metrics are key to controlling outside counsel spend

Data-driven decisions

None of this is possible without dependable underlying data from a software solution like Legal Tracker that manages e-billing, matter management, and performance analytics — while also empowering legal operations teams to create and report on essential metrics.

The webinar, citing the Thomson Reuters Legal Department Operations Index 2020, notes that the top five target spend metrics used by corporate legal departments comprise the following: 

• total spend by law firm,
• total spend by matter type,
• total spend by practice group,
• total spend by business unit, and
• forecasted versus actual spend.

“I can 100 percent confirm these reports are the most commonly used,” Meghan Fish, Legal Operations Coordinator for Kayak, says during the webinar. “They are a great starting point for conversations with counsel.” These core metrics inform decisions about whether to reallocate work from one firm to another, consolidate work with fewer firms, or shift work to in-house lawyers, Fish explains — in 2020, Kayak began using Legal Tracker to centralise spend analysis across its business units and brands.

While these five metrics are a great starting place, they are not enough for a legal department to become an optimised or predictive operation, however. To reach that level, Stryker digs deeper to assess matter-specific spend, as well as internal spending, in order to gauge the success of their cost control measures. During the height of the pandemic, for example, Stryker asked its law firms to provide discounts of 10 to 20 percent, to focus solely on essential work and to accept slower payment of invoices to help improve the company’s cashflow.

“We report in detail on litigation spend by firm, by hours, and we really look at the trends. We could clearly see the impact those (initiatives) were having on the spend,” Albregts says. Importantly, they also could easily share that information with the Stryker finance department and company leadership.

Fish says Kayak evaluates high-spend matters to identify those in which spending is accelerating or surpassing established budgets. “That has led to big changes — terminating firms that had a really high spend, being able to compare similar firms in particular practice areas,” and switching from one to another when costs justified a change, she says.

Kayak also has automated the review of invoices to find errors, flag those that deviate from billing guidelines, and surface timekeeper rates that were not pre-approved. The software can automatically reduce or reject invoices that violate guidelines. “That has helped to rein in spend,” Fish says. “Some of these things may seem small, but they add up over time as hours pile up.”

Advancing diversity and inclusion

Both Stryker and Kayak analyse outside counsel staffing data and metrics to ensure the law firms they work reflect their companies’ commitment to diversity and inclusion, the legal operations specialists said.

Stryker has added language to its billing guidelines that expresses its commitment to diversity and inclusion and its expectation that the law firms it engages share that commitment, Albregts said. The company details this requirement in its RFPs and captures law firm staffing data in Legal Tracker in order to confirm and enforce those expectations. “That has been an important factor in our sourcing decisions and it has impacted who we’ve selected on RFPs,” he said.

Looking forward

The ability to track sophisticated metrics and conduct deep-dive analyses enables the Kayak law department to be more predictive in budget setting, Fish says, and to rely less on past performance as a baseline for future needs.

At Stryker, the legal department holds quarterly check-ins with the finance department to reconcile spending, address financial challenges as they arise, and identify opportunities to contain costs and improve performance. None of this would be possible without sophisticated, automated financial data management and metrics.

“Going forward, a strategic priority in legal and compliance is innovation — automated workflows and process automation to increase efficiencies for legal ops and for our attorneys,” Albregts says.

For the Kayak law department, Fish states, the future will focus on strict enforcement of billing guidelines, more automated and streamlined workflow processes, expanded use of automated invoice auditing and reduce-or-reject functionality, and the collection of law firm staffing demographics to ensure teams assigned to Kayak matters reflect the company’s commitment to diversity and inclusion.

For both firms, sophisticated metrics provide a clear picture of their law firm spending and a clear path to exemplary cost management and service delivery.