In early May, I flew to London to talk to European lawyers about physics. I’ll admit that my TED-style talk at Buying Legal, the 2017 European legal procurement conference, wasn’t really focused on the physical sciences. But I did open my presentation (which you can watch here) with a reference to physics that helped me explain why data is vitally important to legal departments. Data is a versatile tool that helps legal departments improve their law firm collaboration, control costs, and increase efficiency.
Newton and Einstein
As I said to my audience at the conference, at some point during our school days we all learned Newton’s equation F=MA. This basic formula says that the force acting on an object is equivalent to the object’s mass multiplied by its acceleration. In other words, if you kick a ball hard, it will go flying off at a high speed. Give that same ball a gentle nudge with your foot and it will barely move. The problem, though, is that the formula is wrong.
Sure, it’s a model that works fine when things are moving slowly enough, but when you are going very fast or dealing with things that are very big, the model breaks down. That’s when you need Special Relativity, Einstein’s innovation that is exact enough to describe how things really work at any speed or size. The corporate legal world operates on a similar principle: When a legal department is small enough, approximations are probably fine. But when an organization grows to a large or global level and legal spend accelerates, operating efficiently requires real, correct data on which to base decisions. Luckily, there is a tool that can help.
Wolters Kluwer ELM Solutions has been publishing the Real Rate Report for six years. While we have competitors who also publish reports on legal rates, they use survey-based marketplace models that draw conclusions from far less data. Thanks to our LegalVIEW® database, which is the world’s largest source of legal performance data, we have access to a staggering amount of detailed legal spend data from actual billed, validated and paid invoices. This year’s report is based on about $20 billion in legal spend, about $2 billion of which comes from Europe. U.S. companies adopted the e-billing systems that capture this data earlier, but the last few years have seen increases in our European data set, so we expect that European amount to be even higher for future reports.
Global Differences or Converging Trends?
The current amount of reporting data from Europe does give us enough information to make meaningful high-level comparisons between U.S. and European rates. For example, over the last three years, U.S. rates have increased by about 10%. But over the same period, we see U.K. rates remaining largely flat.
Meanwhile, rates in Continental Europe have been decreasing by roughly the same amount that they have increased in the U.S. And as of last year’s report, they seem to have landed in about the same place. We will continue to watch these developments to determine whether the trend toward a global flattening of rates continues.
The Value of Specificity
By collecting and analyzing granular elements of invoice data, we create expected rates that are very accurate even when drilling into specific parameters such as industries, lines of business, years of experience of the attorney, firm size and more. Because of this level of detail and accuracy, our rate data provides a foundation for clients’ proactive cost control measures. For example, although the average rates in the U.S. have risen, Real Rate Report clients have been able to use the data to negotiate better rates and relationships, create more efficient staffing models, and set up smarter AFAs – all because they are well informed about the fair value of various types of work and who does it.
Access to the real market value of the specific legal services you are buying is an integral component of managing legal costs and working with outside counsel firms to help increase the value they deliver. With the right tools, these improvements are entirely within reach – it’s hardly rocket science.
To get started using invoice data in your legal management processes, request your free Rates Benchmark Report to compare European rate information across practice areas and locations.