Outside counsel guidelines have become increasingly complex, requiring companies to pay special attention to both details and trends in billing. Our editors sat down with Linda Hovanec and Matt Kivlin of Wolters Kluwer’s ELM Solutions, to talk about building a strong spend management program and how artificial intelligence can help identify irregularities and errors in billing, and therefore increase efficiencies within legal spend management. Their remarks have been edited for length and style.
Legal spend management is a widely used term by both inside and outside counsel, and other players within the industry. Specifically, what does legal spend management encompass?
Matt Kivlin: Legal spend management is about helping corporate legal departments better understand, manage and control their costs. At Wolters Kluwer’s ELM Solutions, we think that really starts with efficiencies, providing an easy way to help corporate legal departments streamline the invoicing process from submission through review and ultimately through to payment processing. If you look at this space historically, it really started with an emphasis on e-billing, helping companies move away from paper invoicing with a particular emphasis on ensuring that outside counsel invoices are compliant with their particular billing guidelines. Now, wrapped around this process are key workflows, things that help you better support other spend activities such as managing rates and defining and tracking budgets.
One thing that we feel very strongly about is that efficiencies are just the beginning, and legal spend management is really a catalyst for something equally important – and that’s visibility. By having a system-driven approach, companies can get a deeper level of insight into their spend, and these are insights that can inform smarter decision-making, including more intelligent cost forecasting, more informed decisions about managing your panels and other aspects of your legal operations.
What is the foundation of a good legal spend management approach for an established legal department?
Kivlin: When we look at the foundation, we think it really starts with invoice submission, extending to analysis of those invoices, and then ultimately the review. The approach has to start by being comprehensive. It needs to systematically identify the myriad of potential compliance issues that may exist with the invoicing. But it is equally important that it has to be easy, and it has to be integrated into your everyday workflow. Building on that, on top of invoicing, the approach then needs to extend to other supporting functions – things like budgeting, outside counsel rate management and/or panel management. And let’s not forget that there’s another set of parties in this process, and that’s outside counsel. So the solution has to make it easy not just for the legal department, but also for the outside firms so they can collaborate, they can exchange information, they can join in shared workflows, and then ultimately work together to drive the best outcome.
Linda Hovanec: Another component that’s really critical to building a good foundation is integrating your business intelligence. E-billing generates a lot of valuable data that you want to be capturing and analyzing to drive better decisions, better strategies, and an understanding of where your legal spend is going and how it’s trending over time. Integrating business intelligence information into the day-to-day operations will give you insights into how to reduce costs and ultimately improve performance across the law department.
What are the next steps for a department that has met those basic spend management needs and would like to achieve even better value from their legal spend?
Hovanec: To take it to the next level, companies can start comparing internal data with industry benchmarks in order to identify additional opportunities for savings. We have a report that we publish annually, the Real Rate Report, with actual anonymized legal billing data. It’s broken out by practice area, by geography, and even by details like years of experience. So companies can use this to determine how firms are performing against the market in terms of the value they deliver.
Also, establishing dashboards and analytics that can provide companies with both high-level performance information for reporting up to senior management, as well as detailed information – which matters or team members are meeting expectations and which may need some attention. One of the most valuable investments you can make is in a professional invoice review service, in particular our LegalVIEW BillAnalyzer service, which combines machine learning technology with our expert invoice reviewers.
Within the industry, we’re hearing a lot about machine learning and artificial intelligence, which I understand fuels the LegalVIEW BillAnalyzer service. Can you tell us more about that platform?
Hovanec: There definitely is a lot of hype around artificial intelligence and machine learning. Our LegalVIEW BillAnalyzer actually delivers tangible results to our clients with the help of machine learning. It’s really well-suited to e-billing and spend management because machine learning works best with large amounts of data, which it uses to continuously learn and get smarter. Because BillAnalyzer leverages our LegalVIEW database, which has over $100 billion in invoice legal data, it’s pretty smart.
The way it works is that BillAnalyzer’s AI analyzes incoming invoice line items and then compares them against the billing guidelines. It determines which are most likely to require an adjustment, and then our billing analysts take over. These are legal professionals with expertise in billing analysis. The machine learning helps our experts prioritize where they should be reviewing potential issues or non-compliance in invoicing. From there, our experts will identify possible adjustments.
This creates an opportunity for greater communication with outside counsel. We offer the outside counsel the ability to address any non-compliance issues. It’s fair. Then, if appropriate, they will re-adjust that invoice. It’s just a really principled process with good communication that continuously improves the firms’ billing performance. We’re improving compliance and in many cases saving millions of dollars for our clients in legal spend – sometimes even millions each month.
As we head into the new year, what advice would you offer to general counsel or legal operations managers who want to improve their legal spend programs?
Kivlin: We’d suggest a few things. First, don’t let your data go to waste. If you capture and analyze your data carefully, it’s going to point you in the right direction and it will help you improve your overall results. Also, involve your law firms. They’re a key part to your mutual success. Share your goals with them, most importantly, so they know what “good” looks like in your eyes. This will help them better meet your expectations and ensure that you mutually get to that right balance between costs and the best outcome. Then, when it comes to using data and analytics to improve performance, focus. For example, if you want to improve budgeting, make that a focus and put a program around it. Or if you want to improve how you are managing your panels, use spend data to build a program for that. Then, whatever your goal is, communicate it well and measure your results often.