2 new tools allow you to compare major firms' billing rates
Call it keeping up with the Joneses (or at least the Jones Days): Two new products provide peeks into the billing rates being charged by major law firms to allow benchmarking of their financial performance.
The first, Peer Monitor from Thomson Reuters, enables large law firms to slice and dice financial data aggregated from other firms so that they can compare their performance against their competitors. Firms can use it to help set billing rates, assess productivity and manage expenses, whether firmwide or for specific practice groups or offices.
The other new product, LexisNexis Counsel Benchmarking, is designed not for law firms but for corporate legal departments. It provides law firm billing data they can use to plan and budget for litigation and to help determine the rates they should pay outside counsel.
DRILLING INTO DATA
As a product, Peer Monitor has existed since 2005. The company (then still called West) launched it as part of its expansion into “business of law” products on the heels of its acquisitions of Hildebrandt International in 2005 and Thomson Elite in 2003. In January, however, Peer Monitor unveiled a major overhaul of its Web platform that provides enhanced analytical tools and new graphical elements for comparing data. It provides metrics on not only billing rates but also on revenue, profitability, accounts receivable, direct expenses and overhead.
Peer Monitor’s data is anonymous, so firms cannot use it to research competitors by name. Even so, users can filter and compare data with a good degree of granularity—down to firm type, office, matter type, timekeeper title and experience level, and year. Thus, a firm could create a comparison for partners in the Los Angeles offices of structured-finance practices at Am Law 100 firms.
The central interface of the new website is called Peer Check. Here, users configure preset peer groups for comparisons or create custom groups. Results can be displayed as spreadsheet pivot tables or in various types of graphs. A firm could compare its billing rates against Am Law 200 firms generally and against custom-configured peer groups. The display could show year-over-year growth and variations in rack rates versus billed and collected rates.
The new website also adds heat maps. These provide at-a-glance analysis of data, enabling firms to see the “hot spots” where they are performing above or below their peers. Using the heat map, a firm could quickly see that something is amiss in its Chicago office, for example, because the map shows that office performing below peers across several key practice areas.
Peer Monitor collects the data directly from the accounting systems of 160 participating law firms, all large law firms, roughly 130 of them based in the United States. Data is collected once a month and held for 39 months.
Users can gain access to Counsel Benchmarking through the Lexis Advance research platform. It provides data on matter costs, hourly rates and alternative fee arrangements. The data is derived from legal invoices processed through LexisNexis’ CounselLink e-billing software.
Corporate counsel can use it to track trends in hourly rates nationwide or to drill down by variables such as law firm size, industry, location, matter type and timekeeper type. The product opens to a snapshot view showing year-over-year billing rate trends across the United States. From there, various options enable users to view data such as:
• Hourly rates charged for specific types of matters, which can be filtered by company size, firm size, location and other parameters.
• Hourly rate comparisons for partners, associates and paralegals.
• Hourly rate trends, filtered by matter, industry or other facets.
• Matter statistics showing data on staffing, duration and breakdowns of expenses versus legal fees.
Lexis recommends that corporate counsel use this together with its Verdict & Settlement Analyzer to evaluate both the likely cost and outcome of a legal matter. Thomson Reuters says it is developing a version of Peer Monitor for medium-size firms of 35-85 lawyers. And as for small firms, they will have to rely on good old-fashioned word of mouth.
This article originally appeared in the May 2014 issue of the ABA Journal with this headline: “Cost Comparisons: Two new tools allow benchmarking billing rates.”