Key Metric #2: Law Firm Staffing: How to Create Staffing Discipline At Your Outside Firms

As the market for legal services continues to change and law firms push to increase billings, savvy in-house counsel and legal operations professionals are increasingly turning to data analytics to control costs. 
As part of our continuing series on the key legal metrics that every well-run legal department should monitor, we are discussing matter staffing.  
As savvy in-house counsel and legal operations professionals know, matter staffing has a far bigger impact on legal costs than old-fashioned approaches such as obtaining hourly rate “discounts” from your firms. This follows because more timekeepers on matters are associated with more unnecessary hours.
The importance of having an actionable plan on monitoring and controlling staffing has intensified due to the business pressures on firms and the pressure to staff timekeepers on matters. For client after client, Bodhala has found systematic differences in how law firms and individual partners staff legal matters across similar practice areas. Bodhala has also found that by measuring variation in staffing among similar matters, legal departments can drive their legal providers to be more efficient.

Although measuring law firm staffing can result in tremendous savings, many Bodhala clients struggle to determine which law firms are overstaffing their matters.  In order to control and measure staffing, Bodhala recommends taking two important steps: (1) implementing a staffing policy and (2) using analytics to continually monitor how your firms are staffing your matters.  Frequently, Bodhala clients find that particular firms or partners are responsible for a disproportionate amount of overstaffing and will improve if they know they are being monitored.
Step 1: Seize Control by Implementing a Staffing Policy
As an initial matter, Bodhala recommends implementing billing guidelines that require your law firms to provide you with staffing updates.  These guidelines can take multiple forms, depending on your culture.  For example, at the more restrictive end, you can require that your law firms seek pre-approval before adding any additional attorney timekeepers to your legal matters.  However, to the extent your culture is such that a more relaxed policy is appropriate, you can implement a requirement that your law firms provide a weekly update on how your matters are staffed, including a written explanation for any recent staffing additions.  As many Bodhala clients have found, requiring outside law firms to provide updates on staffing has a strong prophylactic effect, as law firms know you are monitoring them and know they need to justify each additional timekeeper.   
Step 2: Measure Staffing and Provide Feedback
In order to ensure that your outside law firms are not staffing unnecessary timekeepers on your matters, Bodhala recommends utilizing data analytics to measure staffing.  If data analytics are implemented properly, in-house attorneys or legal operations professionals should be able to measure staffing behavior by (1) individual law firm, (2) individual matter, (3) legal practice area/matter type and (4) individual lead partner.  By looking at this data, systematic differences in how similar matters are handled become apparent.
For example, an in-house attorney should be able to filter their data to measure the staffing of matters in their individual practice areas, such as M&A or real estate and compare the various firms they use in this practice area.  Likewise, in-house attorneys should be able to measure the staffing tendencies of individual partners within law firms who control staffing decisions on their matters.  
When examining staffing, a properly implemented data analytics platform should not only track the number of partners and associates staffed on a matter, but the percentage of work various attorneys are performing.  Indeed, a truly well-implemented system should track the percentage of work allocated to various types of associates (junior, midlevel and senior) to ensure a proper allocation of work.  

In addition, a properly implemented analytics system should allow attorneys to filter out outlier matters, law firms and practice areas to run real-time “what-if” queries, instead of having to wait days to test each hypothesis.  For instance, if a company completes a large merger that required the work of dozens of attorneys, in-house attorneys should be able to filter this matter out of their queries that seek to track law firm staffing so that it does not skew the data.  Similarly, in-house attorneys or legal operations managers should be able to filter out law firms that handle large matter or practice areas that require large staffing (e.g., M&A or securities litigation).

Finally, a state of the art analytics program will report staffing levels back to law firms over time and across providers who handle similar matters. Providing quantitative feedback to law firms gives both the client and the provider a quantitative point of reference to have a discussion on how to perform work better.
At Bodhala, we find that once in-house counsel and legal operations professionals have a well-implemented data analytics platform, they are able to quickly identify staffing inefficiencies at their law firms.  When in-house counsel are able to point out these inefficiencies to their outside firms, they realize significant savings by eliminating unnecessary timekeepers from their matters.

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