Yogi Berra said, “Baseball is ninety percent mental and the other half physical.” His numbers are off, but his on-field stats, glove, and immense popularity landed him in Cooperstown, a place that enshrines baseball greats based upon metrics. Ever wonder why law—a trillion dollar global industry purportedly grounded in evidence, proof, and fact—is so remarkably devoid of meaningful metrics for performance and results?
Baseball Is Well Into Its Second Generation of Metrics
Baseball is a numbers game. There’s a metric for almost everything. Measures of individual performance—home runs, runs batted in, batting average, earned run average, etc.– have been around for more than a century. During the past few decades, a more advanced statistical arsenal—often referred to as Sabermetrics—has been used to evaluate players’ impact upon team results. The purpose is to advance an objective knowledge of baseball and to provide a more reliable measure of player value. So, for example, on-base plus slugging (OPS) and wins above replacement (WAR ) have become key player metrics. Players with high WAR are prized because of their individual prowess and its impact on outcome. And while kids can still debate which of two players is better (Mantle or Mays in my day) and a measure of subjectivity remains, there is a plethora of objective data to support one’s preference.
Billy Beane, the cerebral General Manager of the small-market, low-budget Oakland A’s, championed a new, data-driven paradigm for building rosters. He relied on metrics to identify undervalued talent, enabling him to assemble winning teams with low payrolls. His method helped dispel the myth that teams win with big payrolls. His metric driven approach came to be known as “Moneyball,” and it is applied inside and outside of baseball. Why not in the legal industry?
Imagine if the legal industry had metrics enabling buyers to retain legal talent based upon objective criteria—relevant experience, skills, outcomes, peer and client evaluations, etc. These metrics could be pared with price to identify the appropriate cost: value blend for the individual matter or portfolio. This is critical because different matters have different value for clients.
Pedigree and Profit-Per-Partner Are Law’s Incumbent Metrics
Legal providers and consumers have historically relied on pedigree—not metrics–to identify quality. And pedigree (law school, firm, partnership) creates “reputation.” Likewise, the reputation of a law firm often derives from founders or a few key partners, a form of “excellence by association.” There is a conspicuous absence of objective measures for evaluating individual lawyers or firms. And while firms do use data for management, it is typically confined to internal financial metrics, not client helpful ones.
Profit-per-partner (PPP) is the seminal metric of law firms, enabling them to retain star partners and to attract rainmaker laterals. But PPP has no bearing upon the quality of a particular partner or firm; the value or efficiency of service; results; or client satisfaction. PPP is a measure of equity partner profitability. Period.
Law also lacks generally accepted quality standards (though some are applied to service providers). It would be easy enough to establish such standards and to maintain data that would be useful on the buy and supply sides. And while some lawyers might bristle at a data driven approach to evaluation, it’s the norm in many other industries. Example: five years ago I decided to have Lasik eye surgery. Naturally, I asked around for some recommendations. But I also studied the data: specialized training; how many procedures the doctor had conducted; outcomes; peer reviews; patient reviews; etc. Why should a legal buyer not have access to the same information?
Legal Delivery In The Age of Big Data
The legal industry is behind the curve in utilizing technology and formulating meaningful quality and cost metrics, but that’s changing. Early legal software applications involved internal accounting functions, enabling users to track time, billing, realization, and other financial data. Clients also used cost tracking data but there were no generally accepted, objective quality standards or metrics that measured outcomes.
Disaggregation of high-volume/low-value work (e.g. document review, regulatory updates, research) spawned tech and process savvy legal service companies. These companies applied a business rigor to legal delivery and introduced metrics for efficiency, accuracy, outcome, client satisfaction, and performance by individuals and teams. This is a paradigm shift for legal delivery, one that presages more widespread reliance on data driven metrics. And while some would say this is more easily achieved for repetitive tasks, there’s no reason why high value functions cannot be benchmarked, too.
Some companies are doing just that. AIG, the world’s largest legal consumer with an annual spend of approximately $2B, created a legal operations team to mine its data to reduce legal spend and improve results. After successfully tackling the challenge internally, The Legal Operations Company was spun off as a separate business entity to advise external corporate clients how to reduce legal spend and improve results. This enables buyers to make more informed retention decisions that are based upon objective criteria, not hearsay.
Legalist, a litigation finance startup is another example of a data driven legal service provider. Its founders, two Harvard undergraduates, mined 17 years of case data—more than 15 million cases in 10 states– to predict case outcomes for small and mid-sized business litigation. Litigation financing, a fast-growing legal cottage industry, is in the business of fronting capital to fund litigation. It is a business where, obviously, due diligence is pivotal. Legalist is the first commercial litigation funder to use applied artificial intelligence to evaluate litigation claim value. Curiously, other established litigation funding companies utilize technology but rely principally upon former litigators from pedigreed firms to do the vetting. Surely, there is a role for lawyers and machines here; however, data is a key piece of evidence in building a buy-sell-settle decision. And when legal buyers and counsel are armed with the data at the outset of a matter, litigation and lost opportunity costs can be reduced drastically.
In a world where everything from hospitals to hotels have readily accessible rathers based upon multiple performance, cost, and value criteria, why not expect the same in the legal services industry? It’s time for accepted quality standards to be established and for more robust cost/performance/value metrics to become industry standard. “Caveat emptor” should not apply to legal buyers.
To paraphrase Yogi, “Legal evaluations should be ninety percent objective and the other half subjective.”
This post was originally published on Forbes.com