hen Reese Arrowsmith decided to track Lincoln Financial Group's total legal spend, he launched a covert operation. Organizations haven't historically worked to track settlement costs and measure results from firm to firm, and many lawyers — inside and out — still default to the notion that measuring a win is too unwieldy, too complicated, and too dependent on the notion that "every matter is too special" to measure.
Arrowsmith, vice president, head of operations, teamed with two colleagues — one focused on data and analytics and the other an IT expert — to measure multiple dollar flows for every outside law firm and matter.
"Generally, 'outcome' can be difficult to measure," Arrowsmith says. "It's too complex in corporate litigation to say somebody won or lost for us; there are too many nuances. That's probably why nobody tackles it."
The trio tracked repetition and constancy among cases and "sliced and diced" the numbers, creating scatter charts and bar graphs, to see what they could uncover. They broke down their research into buckets — from average, minimum and maximum outside counsel rates; average, minimum and maximum settlements; geographical impact; total cost of a case; to groups of matters handled by different firms to see if they could determine which firms delivered better results overall.
"The report of average spend per firm didn't tell enough," Arrowsmith explains of the process. "And, it could be misleading. Once we learned how to weigh the numbers, we saw different firms giving us different cost results."
Lincoln Financial VP Reese Arrowsmith
They also worked on defining and measuring wins.
"Legal ops has focused the last two to three years on outside counsel spend, but that is just a fraction of total legal costs," Arrowsmith says. "Often the largest cost comes at settlement. Why would we continue to use a firm that doesn't get us the best settlement? Even if the firm spend is low or their hourly rates are low, why use that firm?"
Armed with clear and concise data, Arrowsmith presented his research to others within his law department – where he experienced initial pushback stemming from concern that the data would prove inaccurate or not useful, he says.
Lincoln Financial Executive Vice President and General Counsel Adam Ciongoli didn't need persuading, however, and after a brief "no-brainer" conversation, Arrowsmith was given the green light to continue his work.
"Sometimes I go down rabbit holes," Arrowsmith says of his legal ops role, which he's held since 2011 — and followed nearly 15 years of experience as a legal consultant. "This one turned out not to be, which I expected."
“Why would we continue to use a firm that doesn't get us the best settlement? Even if the firm spend is low or their hourly rates are low, why use that firm?”
Six months into the project, Arrowsmith has shared his preliminary measurement methods with one law firm partner — and received a lukewarm response. However, Arrowsmith counters that metrics and analytics will only make good partnerships between in-house lawyers and their law firms even stronger.
"To prove our hypothesis, we are being very strategic. We are starting with one matter type which is fairly repetitive," Arrowsmith says. "We are not firing firms or moving existing cases from one firm to another."
But, his team does plan to better strategize the placement of matters among law firms.
"We're trying to be methodical and not change too much at one time," he adds. Small changes — such as bidding more cases to firms that have achieved better results (by Arrowsmith's newly developed standards) to see if the previously calculated average spends hold — will allow him to determine if success is circumstantial or specific to the strategic practices of a particular outside firm.
Arrowsmith is also determined to bring his legal ops cohorts on board with better analytics, and hopeful that the practices of Lincoln Financial can be applied across more law departments. To that end, he's asked the same questions of audience members at three big legal industry events this year — including the inaugural ACC Legal Ops annual conference this past June: Who is tracking win rates? Who is tracking the total cost (settlement plus outside counsel fees) of their legal spend by firm?
Silence, followed by a few head turns to see if any lone hands were raised, has greeted him every time — but his efforts remain undeterred.
"I'm really focused on this now," Arrowsmith says. "I'm trying to turn legal spend metrics into simple math equations. These metrics won't apply to every matter, but this is a great start." Arrowsmith wants to prove that any legal department can apply the same approach to a subset of matters to measure success, and ultimately, drive the total cost of legal down. This is just one more way the legal department is adding value and better managing the company's resources.
Reese Arrowsmith is VP, head of operations at Lincoln Financial Group. He spent eight years implementing legal matter management systems, three years consulting for corporate legal departments, and has been head of operations at Lincoln for the past four years. Arrowsmith assisted dozens of Fortune 200 legal departments with system implementations, organizational improvements and cost savings initiatives before going in-house at Lincoln. You can see the presentation in which he participated on "Running the Law Departments Like a Business" at the ACC Legal Ops kick-off conference on the Program Materials page.
This article was originally published in the ACC Legal Ops Observer, a newsletter for members of the ACC Legal Operation section. ACC thanks the Novus Law LLC Client Solutions team for contributing this article and producing the newsletter.