Liberty Mutual’s Holistic Legal Services Value Measurement Strategy
“In the industry, as well as in many internal legal departments, controlling spend or showing value is talked about on a case-by-case basis. Our approach is unique because we can bring both qualitative and quantitative data together, marry them up, and then showcase the value,” says Kiran Mallavarapu, EVP and senior manager, Legal Strategic Services at Liberty Mutual.
A common scenario challenged the legal team at Liberty Mutual
Determining the value of legal services is a common challenge for legal departments, especially when only anecdotal information and inconsistent data and metrics are available. To combat this common issue, the Legal Strategic Services (LSS) team at Liberty Mutual brought together a collaborative group of attorneys and data analytical professionals to develop and implement a “holistic value measurement strategy.”
The importance of using qualitative and quantitative data to demonstrate value was echoed by Scott Bell, AVP and manager of Outside Counsel Management. “One of the pillars of the legal department is our relentless focus on trying to develop innovative solutions to achieve high-quality, cost-effective legal services that have a greater impact,” says Bell. “Marrying that focus with the subject matter expertise and perspectives of attorneys and analysts allowed us to build a cohesive team and enhance the collaboration needed to take data-driven insights and metrics to a different level.”
A holistic and collaborative approach
This cohesive and collaborative approach better positioned the LSS team to analyze the company’s current outcomes and pricing metrics more fully, as well as the costs associated with legal services to research and develop fee structures, for example. They identified methods to create internal efficiencies, standardized practices, and opportunities which support the business, and deployed them across the nation — considering matter type and complexity as well geographical forces affecting the market.
“At Liberty Mutual, as well as in the legal department, we believe in and foster innovation and participating in smart risk-taking, enabling our teams to leverage tools and technology to solve business-critical problems,” explains Mallavarapu. “We believe in the power of diversity of thought and experiences.” Bringing in the attorneys who work with outside counsel and have experience with litigation, for example, as well as clients and professionals well-versed in data, analytics, and reporting, was a natural way for the company to develop an improved legal value management strategy. “Our strategy is reinforced by collaboration, engagement, and exchange of information with meaningful insights to drive recommendations,” continues Bell. “Once your business partners and the folks within your team see this common goal and what you’re collectively advancing, they get excited about the data. To then be able to have diverse collaborative discussions about how to drive price changes, firm recommendations, and things of that nature in new ways is terrific.”
Successful outcomes
The strategy development included a pilot project to test the new methodology in three states first, allowing for client feedback to further fine-tune processes. These process improvements enabled efficiencies and cost savings. For example, over the last year, the insurance company focused its analysis on the eight US states which drove the highest annual spend across the nation over the previous two years. To meet stakeholder needs, the legal team bolstered core panel readiness and firm composition in three key states by 12.5 percent. Further, within those same states, Liberty Mutual anticipates an 8.7 percent reduction in legal costs. The methodologies deployed by the legal team also resulted in the ability to better predict trends related to spend and overall budget, i.e., the use of alternative fee arrangements (AFAs) in 25 percent of cases referred to outside counsel; as well as decreased negotiation friction and “back and forth” time with legal firms by more than 30 percent. In addition, the team created centralized databases of metrics and data, including the “Universal Value Outcome Dashboard,” and those incorporating market and industry data related to trends and spend, etc. Finally, the Value and Pricing Review Playbook, which allows Liberty Mutual team members to proactively review states and law firms, created an effective way for staff to individually contribute to a process that enables national consistencies.
While establishing this strategy has resulted in many positive outcomes for Liberty Mutual, Mallavarapu is most proud of realizing the cross-collaboration between the attorneys, data analysis, and clients. “Combining their expertise yielded such great insights into our legal spend, as well as to the entire project. For me, it’s more about that human collaboration that resulted in us creating something brand new that benefits the entire organization.” This type of collaboration is something Bell says would not have been feasible when he came to Liberty Mutual in 2008. “Fifteen years ago, talking to attorneys about data-driven insights, metrics, and various measures just didn’t happen,” he explains. Since then, Bell became a manager leading a team of not only attorneys, but of business analysts. “Merging the teams, so that they could learn from each other and advance a vision was really challenging, but very rewarding.”
Is your team facing similar challenges? The solution must support business and client values
“My advice to legal teams is that you must start with a business purpose, a clear business goal. First, understand what the needs of the client are, and then look internally to deliver, but think bold,” says Mallavarapu. The answers to these inquiries will lead to the project that defines and provides customer value. “To ask those questions and then address them boldly,” continues Bell, “you must have team members who are not hesitant to challenge existing methods and approaches; who are open to innovation and different ideas. It’s what's expected of you by your business partners.”
Bell and Mallavarapu agree that the legal team should encourage a forward-looking mindset and greater collaboration within organizations. “As leaders of legal departments, we need to foster innovation and smart risk-taking that enables our teams to solve critical business issues,” Mallavarapu stresses. “With that mindset, the team can develop innovative solutions that provide better insights and drives business outcomes.”