Money, Technology

Should Attorneys Care About Data Analytics?

Yes – if they want to make more money and have a more successful practice.

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big data center with serversIn some respects, the business of being an attorney has not changed much in the last century. Attorneys still focus on giving advice to clients and helping clients to navigate the court system. In other respects however, the practice of law is more in flux than it has ever been.

The traditional practice of law is being altered by tools from e-discovery packages to software that prebuilds business legal filings, private company stock offerings, prenuptial agreements, and numerous other specialized documents. Today’s lawyer should be able to continue to add value for clients despite these new software products. But that is not enough. The modern attorney needs to be able to use at least basic data to help clients.

Here is a simple example. It is incredibly difficult to determine the potential cost of either litigating or defending a lawsuit even if one makes assumptions about whether a case will go to trial or settle. The fact is that an individual considering bringing a suit really has no idea if a case will cost $15,000, $50,000, or $100,000 to bring to completion. Instead, clients generally write a retainer check, and then sit back and wait.

It does not have to be this way.

Data analytics can easily be harnessed to give clients a sense for what their costs are under certain assumptions – and that’s very useful for an attorney in selling their services. Imagine being able to tell a prospective client, Mr. Smith – given the type of case we are dealing with, if this case goes all the way to trial, based on historical data, we can be 95% confident legal fees will cost between $73,000 and $77,000. If the case is settled before trial, legal fees are 95% likely to range from $32,000 to $41,000.

Attorneys are frequently hesitant to give specific estimates of cost for obvious reasons. Statistical analysis has a way of dealing with that by telling the client the probability that case costs will fall into a particular range.  Even a simple average case cost by type of case offers some certainty and comfort to a  client facing a bill of unknown size.

The data to do this type of analysis already exists, but even if an attorney only has access to limited data, this type of analysis is not particularly time-consuming to do. In fact, attorneys can easily gather data on a wide range of case outcomes through their own personal experience and through publicly available resources. Data availability is not the issue.

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Instead the problem is that many attorneys are either not familiar with this type of analytics work, or they do not see the value in it. The first issue can be solved, but the second issue requires a change of mindset.

Whatever one may think of the value of Big Data, economic studies have consistently and conclusively found that customers are more likely to buy a product when they know what the price of the product is. Data analytics can help give greater certainty to prospective clients, and hence drive more business to the firm.

To answer the question that we started with then – should attorneys care about data analytics? The answer is a resounding Yes – but only if they want to make more money and have a more successful practice.

Earlier: Data Analytics For Lawyers
What Data Analytics Can And Cannot Do
An Important New Tool For Litigators In Federal Court

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Michael McDonald is an assistant professor of finance at Fairfield University in Connecticut. He holds a PhD in finance. Michael consults extensively with organizations ranging from Fortune 500 companies to start-up businesses on financial matters through Morning Investments Consulting. Michael has served as an expert witness in legal disputes, and is an arbitrator with the Financial Industry National Regulatory Authority (FINRA). Michael can be reached at [email protected].

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