Law firms are increasingly trying to run themselves like businesses, with a closer eye on the bottom line. But to do that, firms need access to accurate financial information on the marketplace–often hard to come by in the privileged legal world.
“Law firms have traditionally not been the most transparent of businesses,” says Allison Guidette, senior director of West’s Business of Law Division. “A lot of [law firm executives] come from the business world, and they must be stunned by the dearth of data.”
Now technology companies are pushing business intelligence software that analyzes internal information about law firms as well as public information about other firms and companies. Among those with offerings are legal giants LexisNexis and Thomson’s West and outsiders such as Redwood Software.
Allison Nussbaum, director of business development at Boston-based Goodwin Procter, is using analytical software to study the firm’s business. “We’re definitely trying to be more sales-oriented,” she says. “Most lawyers don’t see past their own practice area. We’re trying to see the big picture to understand how to market ourselves.”
Digging up Details
Combining information found in court dockets, news reports, securities filings and other resources into a single interface is something both the Westlaw and Lexis databases do. “I can conceive of somebody doing the same things maybe with the help of a small army of interns,” says Mason White, vice president of LexisNexis’ Market Intelligence, a software product.
Analytical software allows law firms to create detailed reports about clients, potential clients or opponents in a lawsuit. Firms checking out a potential client, for example, can look at its litigation history, including how often it settles and the size of its settlements.
“The knock on a typical law firm is that client development consists of random acts of golf and lunch,” says White. “That’s not necessarily wrong; lawyers should be meeting with clients and prospects. But these should be targeted acts of golf and lunch.”
The most radical approach is West’s PeerMonitor, which will allow law firms to see not only how their business is doing, but also how other law firms are doing. The idea is for law firms to give West access to the firms’ back-end financial computer systems and allow west to slice and dice the data. The information appears anonymously, so a firm can see how well it is doing in relative terms but can’t see which other firms are on the list.
West requires at least five firms in a region to participate so it won’t be obvious whose data is whose. And its guidelines protect against anyone looking at the data other than PeerMonitor customers. The data is encrypted and stripped of identifying details when transmitted, so even if someone can intercept and decode it, no one can tell which law firm supplied it.
Each PeerMonitor subscription allows 25 users to analyze data for one peer group, consisting of national or local competing firms.
However, a fixation on the bottom line is not always healthy for a professional service firm, which relies on personal relationships. Law firms need different data than a typical business, since they are more focused on productivity metrics, have equity partners instead of shareholders, and are divided by practice areas.
Still, Nussbaum, who uses Market Intelligence, the software from LexisNexis, says she believes analytical software is necessary if a firm is looking for ways to grow its business. By tying together research, customer relationship management software and financial information, she looks for opportunities that might otherwise be missed. “If there’s a big bank client and we’ve only done investment work with them, but I can see they’ve hired a chief privacy officer, it’s probably a good time to approach them about privacy-related work,” she says.
“Now we can see more opportunities and see how to approach them.”