How to Use Data Analytics In Law Firms

May 12, 2022

Artificial intelligence
Legal tech
Tips for lawyers

Author: Jeffrey Lau, Data scientist of Trusli

A survey by RELX Group suggests that only 44% of the polled legal senior executives offered employee training on big data. That’s astonishing. The law industry is known to be conservative, while other industries compete to modernize. The law industry must change and adopt new technologies in the digital age. In our recent blog, we offered some tips on assessing the technology state of your law firm. As part of the modernization of law firms, we are diving in-depth into the use of data and analytics in law firms. Analytics could help law firms improve their performance, and increase their bottom line, thus giving them an advantage over other law firms. Here are some tips. 

1. Why do lawyers or law firms need analytics? 

We live in a data-driven world where data is used everywhere, business, healthcare, sports, you name it. Yet, when we hear the word “data,” we rarely connect that to the law industry. It shouldn’t be this way. It is time to change that narrative. Data could highlight and identify issues that we overlook with our naked eyes. With the proper use of analytics, law firms could optimize their performances and help decision-makers plan properly to achieve their goals. In sports, teams use data analytics to build game plans against their opponents and build workout plans to keep their players healthy. Social media also uses analytics to improve users’ experiences. For instance, YouTube uses data analytics to learn the type of videos you like to watch and uses it to recommend you more videos. That’s why you get a particular genre of videos in your recommended videos after watching that genre of videos.

You might wonder, how can analytics help a law firm? 

  • Analytics allows transparency internally and externally
  • Analytics could give you a better understanding of how your team is performing, such as who is performing better or worse than others
  • Analytics could help provide better service and build a stronger relationship between your law firm and clients

With such data, decision-makers at a law firm can take appropriate actions to improve the team’s performance. Analytics could also give you insights into who your clients are, what kind of legal advice they are seeking, who are your most valuable paying clients, etc. Finally, knowing your clients can help improve your client satisfaction.

2. How to measure KPIs?

Before you use any data analytics in your law firm, you must know what you want to measure. Key performance indicators, or KPIs, are metrics that measure a business’s performance over a period of time. KPIs give you insights into the progress your law firm is making towards the specific goals you want to achieve. Good KPIs must be measurable and specific to the questions you might have in certain areas of your law firm. With that being said, the data aren’t useful unless they answer the questions you have about your law firm. 

An example of a KPI that you can use for your law firm is the number of client acquisitions per month. This metric gives you insights into how your firm is performing regarding acquiring new clients. It is measurable and specific to questions such as how many new clients we are getting per month. We will discuss some KPIs that could be useful for your firm in later sections.

3. What are some marketing KPIs to measure?

You might be interested in improving the marketing aspect of your law firm. The following are questions you might have: 

  • What type of marketing does your firm use? “Billboards, Google Ads, TV commercials?” 
  • How much do you spend on each type of marketing? 
  • Which marketing is the most effective in acquiring clients? 
  • How many site visitors are you getting on your firm website?

Here are some metrics you might consider:‍

  • Percentage of clients acquired through TV commercials
  • Cost per client using billboards
  • Email open rate
  • Email click rate‍

By tracking and measuring your law firm's marketing strategies, decision-makers could then decide which marketing to focus on to get more clients. Such metrics could help your law firm save more money while acquiring more clients.

4. What are some clients' KPIs to measure?

Clients are essential to the success of your law firm. You want to know as much about your clients as possible to stay competitive. The following are questions you might have about your clients: 

  • How many clients are you acquiring per certain period of time (day, month, year)? Is there a specific season that is more popular than the others?
  • How much does it cost to acquire a client? 
  • What are your client’s demographics? 
  • Are your clients satisfied? 
  • What kind of legal assistance are your clients seeking? 
  • How long does it take to hear back from clients?
  • How much do your clients pay on average? What’s the “total value” of each client? 

Here are some metrics you might consider:

  • Number of clients acquired in a quarter
  • Cost per client acquisition
  • Average time spent per case
  • Number of cases resolved
  • Percentage of clients seeking business legal advice
  • Average response time per client

You can’t have a successful business if you don’t know much about your clients. By using analytics, you know exactly who your clients are and how to provide them with better services. 

5. What are some team’s performance KPIs to measure?

Now that you know more about your clients, you should know more about your team as well. The following are questions you might have about your team: 

  • What are the numbers of billable hours? 
  • How many lawyers do you have in certain legal categories, and do you need more in certain categories?
  • Do you need more paralegals? 
  • What is the utilization rate per lawyer?
  • What is the total value created per lawyer on a per month, per quarter, per year basis? 
  • How long does it take for a lawyer to finish a certain type of case? 

Here are some metrics you might consider:

  • Number of billable hours compared to the number of unbillable hours
  • The ratio of business inquiries compared to business lawyers
  • The average number of paralegals per case
  • Average utilization rate per lawyer

How much time are you spending on tedious manual work when you could be assisting more clients? Are you calculating billable hours? If so, what tools are you using? These are the questions you might have but can’t answer without the use of analytics. Improving the efficiency of your firm could solve clients’ legal problems faster, which could get you more clients. If you’re not tracking your metrics, we are here to help. At Trusli, our team is building legal practice management software with machine learning to automate your workflow. Sign up now and save the tedious work for us, so you can focus your time on helping clients.

6. How to interpret data?

Now you have the data and have done some analysis on the data, but how do you interpret the data? You have all these numbers, and now you need to draw meaningful conclusions about the specific questions you’ve set. To make sense of the data, you need to understand your law firm and its operation. Without the background knowledge, you wouldn’t be able to understand the change in performance of your firm reflected by those numbers. If you saw an increase in the number of clients this month compared to the previous month, can you explain the increase in that number? Could it be a fluke, or did you or your colleagues do something different that could explain that increase in the number of clients this month? If you saw a trend of increasing marketing spending, do you have an explanation for that? 

As a data scientist, I like to use graphs to help me understand the data. For instance, if I am trying to see the trend of client growth, I would use a line chart. Line charts are great at showing trends; the connection between dots of each data point really expresses the change in the y values (number of clients) over the x-axis (time).

trend of client growth graph
(Disclaimer: this data is only for educational purposes)

If I am trying to compare the number of lawyers across the different legal fields, I would use a bar chart. Bar charts are great at comparing values. I would have the number of lawyers as the y-axis and the legal fields as the x-axis. Each bar represents the value attribute in the vertical position. 

number of lawyers across the different legal fields bar chart
(Disclaimer: this data is only for educational purposes)

Sometimes, it might be useful to combine two different charts. A combo chart perfectly highlights the differences between the two metrics. For instance, a bar and line chart can show the client conversion rate from site visitors. You can use the line to represent the trend of site visitors and use the bars to represent the number of clients over time. A client conversion rate chart could be more powerful than just having a chart of client acquisition because the conversion rate chart also gives you insights into how well the site is performing at acquiring new clients.

client conversion rate combined chart
(Disclaimer: this data is only for educational purposes)

7. Conclusion

The law industry has been slow to incorporate technology, and law firms are missing out on what data, in particular, has to offer. With the use of data and analytics, law firms could understand their businesses more in-depth and optimize their performances. However, you must have measurable goals to use data analytics to help your law firm. Data analytics helps track your firm's progress toward its goals. Some of the KPIs that your law firm could benefit from are the clients’ KPIs, marketing KPIs, team’s KPIs, etc. These KPIs can give you insights into the performance of your law firm and help you and other decision-makers make informed decisions to improve your business. 

Data is just a bunch of useless numbers if you can’t make sense of it, so it’s equally important to interpret the data. First, you need a good understanding of how your law firm operates to draw meaningful conclusions from the numbers. Second, you can incorporate graphs to help you interpret data. Graphs such as line charts can help you see trends and comparisons that raw numbers can’t. Lastly, you need a good pipeline to set up the data. A good pipeline can ensure that the data you track and store is accurate and secure. If you are having trouble setting up the data or have any questions about incorporating data in your law firm, feel free to contact us at Trusli for a free consultation.

How to Use Data Analytics In Law Firms Infographic
How to Use Data Analytics In Law Firms