Data is one of the most powerful tools a business can have. In 2019, big data and business data analytics markets brought in around $189 billion globally and are projected to collect $274 billion in annual revenue by 2022. Countless sources, like The Economist, dubbed data the most valuable commodity on the market today.
Despite the widespread applications of big data, a recent survey by RELX group shows that the legal industry continues to lag behind in embracing the power of data analytics in even the most obvious areas of business operations. But why?
“I think the legal field is still in its infancy on analytics and big data…. We’re still trying to figure it out, and there’s still a lot of consternation in some corners about what is analytics? What does it mean to be a lawyer? Lawyers have this idea that, “Well, my brain was trained. My judgment is everything. My personal experience is everything. There is no way a computer could ever do my job.” That’s what they mistake analytics and AI for. A lot of lawyers don’t understand it’s using data to supplement your judgment, your experience, and your decision-making process, and perhaps seeing things that you wouldn’t otherwise see because you have access to data analytics and data expertise A lot of lawyers don’t understand it’s using data to supplement your judgment, your experience and your decision-making process, and perhaps seeing things that you wouldn’t otherwise see because you have access to data analytics and data expertise.”
But the potential of what law firms stand to gain by better-utilizing data does not end with legal practice, or even marketing and client development. Now more than ever, firms are re-evaluating their stance on using big data—especially as hiring managers and AI teams have found a way to use data analytics for hiring new talent.
Using data analytics for hiring, however, is not so simple. Firms want people who are smart, effective, diverse, and who will positively contribute to the culture of the company. Writing computer algorithms to perform all of this analysis is nearly impossible, which is why law firms need to decide what they care about in the hiring process: Is GPA a valuable metric for success? What about the number of prior leadership roles? How are soft skills like adaptability, humility, or teamwork measured? More generally: which attributes of a candidate’s profile correlate to a more successful and valuable associate at the firm?
This starts with investing in a better understanding of the people that most contribute to success and drive a firm’s culture. A study conducted by Gallup shows that engagement is directly correlated to retention rates: the less engaged and happy you are at work, the more likely you are to switch jobs—and fast.
Firms can analyze the factors behind an employee’s decision to leave, like salary, promotion history, or job satisfaction ratings to predict what kind of employee will leave in the future. Better yet, the firm can use data trends to identify managerial mishaps—perhaps data shows that their workers would be much happier if they had a vending machine, brightly colored walls, or a relaxing space with a couch and ping-pong table.
Firms can pinpoint their shortcomings with data analytics and take steps to fix them, which results in happier employees and higher retention rates, ultimately saving big bucks.
Law firms are also under more pressure to hire—and keep—a more diverse pool of talent. In a study conducted by McKinsey & Company, firms who ranked lowest in ethnic diversity were 29% more likely to financially underperform as opposed to their more diverse competitors.
Demographic and socioeconomic background data can be integrated into hiring and vetting algorithms so that firms can ensure they are hiring diverse talent. But as the MIT Technology Review has warned, “With big data comes big responsibilities.” Although there’s limitless potential to harness the power of data for good, it is also important to ensure that data-driven decision-making strategies actually reduce the potential for bias, rather than reinforce it. Firm executives and hiring managers should hold AI teams to diversity standards in order to ensure that they aren’t producing algorithms that introduce additional economic, religious, racial, ethnic, sexuality, or gender bias. They also need to ensure that the data itself is clean and trustworthy, checking if there are ways to scale certain qualitative attributes fairly based on a candidate's race or gender.
In all, the ways that harnessing the power of data could positively impact the legal industry as a whole are infinite. In today’s world, it is likely that the most successful law firms of the future will be the ones that are able to use this power to invest in their most valuable asset: their people.