2012 redwood analytics® user conference analysis. insight. action. benchmarking making sense of...

2012 Redwood Analytics® User ConferenceAnalysis. Insight. Action.

BenchmarkingMaking Sense of Market Data

Chris BurgessConsultant, Redwood Analytics

2012 Redwood Analytics® User ConferenceAnalysis. Insight. Action.

Agenda

• The Role of Benchmarking

• Types of Benchmarking

• Lexis Firm Insight

• Q&A

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What is Benchmarking?

Benchmarking is the process of comparing the cost, time or quality of what one organization does against what another organization does.

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Why is Benchmarking Important?

• The legal industry is consolidating and becoming increasingly competitive

• Law firms are being run more like businesses, making more use of financial data and other operating metrics

• A good fact base can help to gain consensus around important decisions

• Benchmarking helps to blend the art and science of running a successful law firm

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The Role of Benchmarking

• Provides the opportunity to truly measure performance: in terms of the outcome in terms of the underlying activities that

drive results

• Benchmarking is diagnostic and leads to day-to-day operational usage

• This is what partners want to know

2012 Redwood Analytics® User ConferenceAnalysis. Insight. Action.

Types of Benchmarking

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Types of Benchmarking

Internal• How do I compare to

myself?• Business intelligence

External• How do I compare to the

market?• Lexis Firm Insight• Benchmarking surveys

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Internal Benchmarking

Internal comparison is a key to identifying opportunities and best practices• Clients / Attorneys / Departments / Everything

Setting firm standards will allow easy identification of opportunities

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Internal Benchmarking

• Discounting• Rates• Inventory

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Internal Benchmarking

Discounts by Department in the Rolling 12 Month Period

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Internal Benchmarking: Partner Rates

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External Benchmarking

Benchmarking must be timely, relevant and reliable

• Normalization of the data

• Definition of terms

Comparing performance against similar firms can indicate areas of opportunity

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External Benchmarking

Good benchmarking should be objective based

Ask: What are my long term goals?

• How do I compare against my competition?

• How do I compare against those I aspire to be like?

• Am I small-law and want to be mid-law? Am I mid-law and want to be large law? Am I big but want to be bigger?

• What actions can I take based upon what I have learned?

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External Benchmarking

Firm-to-firm comparability is a complicated issue

What metrics are comparable?• Hours• Rates• Realizations• Speeds• Leverage

What should you not compare?• Profitability—Cost related items• Dimensional—Geography, Size, Practice

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External Benchmarking: Rates

Example: Rates

• An external benchmarking review of rates can give you an idea of how to price yourself in the market

• Benchmarking is evidence to show what is being charged by similar firms

• It can act as ammunition against those who resist change

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Opportunity Valuation

2012 Redwood Analytics® User ConferenceAnalysis. Insight. Action.

Lexis Firm Insight

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Lexis Firm Insight

• Simplified mapping and interface

• Data pulls directly from participating firms, does not rely on surveys

• Display measures at title, class year and practice group level

• Regions broken down by state and major cities

• Allows for comparison by size and practice group

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Lexis Firm Insight

Client Investment

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Lexis Firm Insight

Partner Hours

Non Partner Hours

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Lexis Firm Insight

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Lexis Firm Insight

How would your firm compare?

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Lexis Firm Insight

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Questions?