By Bo Yancey, VP, Data and Analytics, Wilson Allen
Part three in a six-part series on developing a successful client-centric culture and how to address the resulting operational implications.
Analytics is no longer an exotic concept in business. It’s become a core part of business management and decision support. A firm’s capability and ability to integrate analytics with its core processes can offer advantages ranging from insight into the root causes of performance to competitive advantages based on forward indicators. These are all necessary components to developing a more client-centric mindset.
Law firms and professional services organizations have certainly invested in analytics, particularly at the large end of the market. Things are still very much “underway,” but significant progress in both thinking and execution has occurred, as new technologies have been made available along with different ways of thinking about performance and value.
Where we were
As recently as five years ago, analytics was almost wholly the purview of Business Intelligence implementations, which were essentially views into firms’ finance systems, with few integrations or applications beyond operational and profitability analysis. While this, in and of itself, was a huge step forward from the mountains of paper reports that preceded it, the implementations were really not much more than a reorganization of the data within the practice management systems (PMS) for a better and easier understanding of fundamental processes.
Over time, the beginning of true analytics began to emerge within these BI implementations—forward-looking predictors of collections, billings and client engagement, as well as profitability from various lenses (work, bill, collect). And this certainly was a step forward. However, things were still siloed, basically within the data contained in the PMS.
Where we’re going
The introduction of new technologies and an increased ability to integrate from various systems have opened up both new questions and an improved ability to answer and address older questions with greater depth. The data contained within firms’ intake systems, customer relationship management (CRM) systems, HR, and marketing analytics systems, to name some, has opened the world significantly to firm-based analytics from what was once the purview of finance alone.
Firms have begun to understand the opportunities that these new technologies and approaches have afforded them and started to attempt to answer questions in a concrete fashion that formerly were only discussed abstractly:
- What is the impact on the profitability of non-standard intake concessions?
- What clients and matters are the most likely to attrite or to grow?
- What is the impact on client attrition where clients have a high, medium, or low rating of the firm or its services?
- Where do campaigns have the most impact? The least? On production, billings, and profitability?
- Where are firms over and underperforming concerning diversity metrics, and how does this impact client attrition? How will it in the future?
How to get there
Firms are now well aware of what they can do and what their peer firms are attempting to do. Typically, they have resources with both the technical ability and business acumen to formulate approaches that should be successful. However, success has not been quickly attained, despite all of the required resources being seemingly available. Here are three areas of focus required to formulate an actionable analytics capability:
1. Begin with attainable goals and discrete objectives: Start to answer simpler yet new questions, first. Some examples would be “what is the impact on client acquisition by practice or lawyer from a marketing campaign?” Or, “Is there a relationship between client retention and the usage of information from CRM analytics such as cross-sell, client trends analysis, or other client-based attributes?”. Such questions would typically only require 2 to 3 data sources and could be pulled together rather quickly.Ultimately, the world will open up, but starting small in terms of goals and scope will allow this new practice to grow and build value relatively quickly.
2. Separate analytics from management and financial reporting: Analytics is a discipline unto itself, and its metrics are often derivative of “core metrics.” To that end, the firm should understand that analytics is not and should not be another reconciliation exercise and that directionally correct indicators, and the ability to act on them, is the important piece, as opposed to researching small discrepancies across systems.
3. Embed right–time information into the firm’s operations: As analytics solutions grow, the need to deliver information to users who can act on it becomes critical. As discussed here, analytics is not the same as reporting or even static analysis. It is a living, breathing thing that should be understood to be consistently producing new information. To that end, a reliable delivery system such as dashboards and alerts, along with understanding what the underlying metrics mean, what actions are available, and the impact of those actions, is critical.
Analytics as a discipline has come a long way in the business and practice of law, but it also has a long way to go. As firms begin to truly “compete on analytics,” there will be clear winners among those who prioritize and establish the teams, and most importantly, integrate those teams into the firm’s operations compared with those who don’t.
Wilson Allen has spent a great deal of time thinking about the questions, opportunities, and execution strategies and is poised to help firms wherever they stand on the analytics maturity model—from beginning to formulate the first questions, integrating and delivering well-formed analytics into the firm’s overall operations.
One of the challenges that firms face in implementing some of the things we have talked about in this series, is that the remuneration model that the firm has actively discourages the behaviors that are necessary. In the next blog, Rethinking Partner Compensation: The Role of Value Creation, we will look in more detail at that and offer alternative, more client-centric approaches to remuneration.