In the current buyer’s market, it’s more essential than ever that law firms differentiate when it comes to client service. One of the key ways this can be done is through the implementation of technologies that monitor progress and budgets, improve your knowledge management system, use predictive coding to review documents, help you better manage projects or provide e-learning, and/or allow clients to “self-help” on tasks traditionally executed by their lawyers. Of course, all these investments come with a cost, and as the executive leader in your firm it’s up to you and your technology leader to determine if the return on investment is worth it.
In a September 2015 Thomson Reuters Peer Monitor survey, data was collected on specific operational changes that law firms had made in response to client demands for efficiency, predictability, and cost effectiveness. That data was then measured against the overall financial performance of the firm. According to the 2016 Report on the State of the Legal Market, “The analysis showed that, while lower-tier firms had not implemented any changes with significantly more frequency than the upper-tier firms, the firms with better overall financial performance had outpaced the lower-tier firms in several important categories, including [technology.]” The study suggests that investing in technology and other operational changes in order to meet client demands resulted in better financial performance for the law firms that made those changes.
The ability to make a strong business case for legal technology investments is a key skill for technology leaders. But that’s only half the equation—as the executive leader, you also need to know what questions to ask in order to get at the less tangible aspects of ROI. Here are a few questions to get you started:
1. What can we use to measure quantitative ROI?
The nature of quantitative ROI is that it is fairly straightforward to measure, as long as you know the formula. In asking this question, you’re essentially assessing whether or not your CIO is taking ROI seriously. If they can tell you they’ll be measuring it based on the cost of the investment over the monetary value of the benefits during the number of years they believe the technology will be effective, taking into consideration the probability of success, then you’re probably being pitched an investment with good quantitative ROI. If they can “show their work” quantitatively, you can be assured that you have a technology leader who has the best interests of the law firm in mind and has thoughtfully considered the return on investment before coming to you with the request.
2. How will we measure qualitative ROI?
Qualitative or soft ROI are the benefits of technology that can be more challenging to quantify but have high impact on your law firm. They can include:
- Improving operations
- Boosting employee morale
- Enhancing employee retention
- Serving as a recruiting tool
- Making your attorneys or IT team more effective
- Enhancing your customer or client experience
- Making you more competitive in the marketplace
The more boxes you check when running through the list, the better ROI you’re likely to get from the technology investment. However, if your CIO is claiming the technology will benefit one or more of these areas, it’s a good idea to ask them how they plan on measuring that benefit. How will effectiveness be measured? How will the client experience be improved, and is there a way to prove it via surveys or other methods? What is the data or evidence your CIO is using to assert that these qualitative measurements of ROI will likely be achieved through this technology investment?
3. How much time will it save us?
As the executive leader of a law firm, we know you’ll never underestimate the value of time. A technology might be able to make your files more accessible or increase download speeds from the cloud. It could protect you from server downtime or help your litigation support team search files faster. Whatever the technology implementation may be, asking your technology leader how much time it will save your lawyers or other team members is a great way to identify ROI upfront. For best practice, actually measure the time savings of the technology investment. That way, if a partner or member from the executive committee questions the value of that technology, you and your technology leader have data to back you up.
4. How much money will it save us?
Of equal importance is whether or not it will save your law firm money, and if so, when. Technology always costs money, especially if you are doing a firm-wide implementation. You’ll want to know the cost versus benefit upfront, but you’re also asking your technology leader if it will save the firm money in the long term, and if so, how much money over how long of a term. With efficiency at top value at law firms, time is money for your lawyers, so be sure to include any time they save in your cost analysis.
5. When would you anticipate seeing ROI? or How long can I expect it to be before we see ROI on this technology?
Some ROI might be evident immediately, but most often it will take some time before the effects of the technology implementation are realized. Asking this question simply gets you and your technology leader on the same page and may give you an outline of the project timeline as well. By gaining at least a vague picture of the kind of ROI your technology leader expects, you are able to make a more informed decision. Agreeing on a timeline for results has the added of benefit of being able to set expectations for the whole executive committee, and if necessary, gives you a message to communicate to lawyers who might complain that it seems like a waste of money.
6. What’s the risk associated with this technology implementation?
Any new technology comes with some amount of risk associated with it, but planning well can significantly help mitigate the risk. If you’re hit with a crisis unexpectedly, you’ll lose dollars and time trying to fix it. Asking this question helps you be aware of the risks up front and plan for ways to avoid them. It also provides you with an appropriate counterbalance to the benefits of the suggested technology investment, which you can calculate into your ROI analysis.
7. Are there other technology investments that are a higher priority?
While this question doesn’t have direct bearing on ROI, technology moves at such a fast pace that it’s important to evaluate which technologies need to be implemented when. Most likely your technology leader has a whole string of technologies they want to implement, with strong cases for the benefits of each for the law firm. A good technology leader will be able to prioritize effectively to make the most of your resources. Hearing about the other technologies on the docket also helps you speak to the priorities of the law firm, if your technology leader has not already been a part of those discussions.
Whether your technology leader is pitching an investment in AI, security, or knowledge management, their ability to explain the value of the proposed technology is essential. Asking these tangible questions about the return on investment is your first step toward your decision on implementing a new technology for your firm. With these 7 questions in mind, you’re bound to make the right choice, and because you’re meeting client demand, you’ll benefit from the efficiency, cost savings, and soft ROI that legal technology can bring to your law firm.
If you’d like more advice on analyzing the ROI of technology or are looking for a new CIO, CKO, or IT Director to join your team, contact us today.
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