Data-driven decision making in law firms: Driver for growth?

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Last year, Google confirmed that switching the shade of blue used on advertising links in Gmail and Google search earned the company an extra $200m a year in revenue.

How did Google know this? Their advertising revenue data proved it.

Using the method known as A/B user testing, different Google users were shown different versions of the same advert (each with a different shade of blue), and the impact on conversions was measured and compared.

The astonishing impact on revenue of switching the shade of blue was reported in The Guardian last year. The figure came from Google UK’s managing director Dan Cobley, speaking at an event organised by law firm DLA Piper, who positioned the company’s approach to data against the traditional route of the “highest paid person’s opinion”.

Law firms are commercial organisations, just like any other business. There is now a growing understanding that law firm management can learn a great deal from management of businesses in any other sector.

This applies to data-driven decision making, as it does to all business management and decision making processes. There are now vast amounts of data available, and companies in almost every industry are increasingly focused on utilising this data for their competitive advantage.


What is data driven decision making?

Data scientists Foster Provost and Tom Fawcett define data-driven decision making as “the practice of basing decisions on the analysis of data rather than purely on intuition.” You can find more information on this in their recently published article, “Data Science and its Relationship to Big Data and Data-Driven Decision Making.

What data should law firms be focusing on?

I was surprised to read a recent report claiming only 22% of businesses closely align their overall strategy with available data. With so much data available to improve the quality of strategic management decisions, why wouldn’t you use it? Especially if your commercial success depended on it.

Law firms already have access to a wealth of useful data that it would not be too much additional work to hone in on and turn into useful management information.

Much more can be made, for example, of existing financial data in law firms. In a recent interview for Legal Practice Management magazine, I argued that getting more from law firm financial data will become a differentiator for SME legal.

But it’s not just about finances. Law firm practice managers have a wealth of other data sources already available, that can help improve the quality of strategic decisions made about the firm’s future focus and direction.

From our years working with law firms in the delivery of management information systems, we have identified the data sources that can be most beneficial for analysis in terms of identifying opportunities for growth or efficiencies.

These include:

Client Data

Consider: who are our clients and how do we measure their value? Billing, profitability and capital requirement (lockup) are three possibilities.

Then consider: how do we categorise them? Possible measures include industry sector, size, geography, instruction frequency, service (work type).

Staff Data

How do you measure value and performance of our staff? Performance metrics are commonplace, but how about salary benchmarking, client feedback, skills and training records?

Product / Service Data

Products and services can be measured in terms of pricing, competitor pricing, customer feedback and the cost of delivery.  While some services may appear to be most profitable based on revenue alone, this comprehensive approach to analysis may illustrate slim margins and lower profitability after servicing and delivery costs are taken into account.

Supplier data

Everyone knows that cost alone does not give an indication of best value for money. In addition to bottom line costs, consider that suppliers could include sources of business (introducers/referrers), and these can be measured in terms of value (and profitability) of new work.

Of course, data itself does not provide all the answers. In order to be converted to useful management information for law firms, the data needs to be tracked, analysed and presented in a useable manner.

And the value of intelligent human intervention and experience cannot be overstated. This Harvard Business Review article provides an insightful analysis of the qualities required by employees who will be dealing with such data – and how to foster data driven decision-making skills in employees.

I hope this article has shown how data driven decision making can be a useful driver for growth, (rather than a source of despair!), but I’d welcome your comments and feedback on this topic.


Don’t despair! If you’d like to discuss how the data in your practice management system could be converted into useful management information to help your business to grow, contact us today.

You can also ‘tweet me’ your comments at @KatchrData

Blog post by Graham Moore, Managing Director, Katchr

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