Demonstrating ROI for In-House Legal Teams: Three Simple Calculations

Demonstrating ROI for In-House Legal Teams: Three Simple Calculations

If you don’t measure it, you can’t manage it, as the saying goes. But we’d add another clause to that phrase—you can’t take credit for it. Today, innovative corporate legal teams are constantly looking at ways to do more with less, to reshape their approach to traditional processes and move from the “department of no” to the “department of yes—and!”

When it comes to litigation, investigations, and discovery, that means in-housing more work to drive down costs and make better decisions. But if you’re not measuring the ROI, or return on investment, of your approach, your successes might go unnoticed and opportunities for improvement could easily be overlooked.

To help in-house legal teams measure the ROI of their approach to discovery, we’ve laid out three simple calculations for determining ROI in terms of both cost and time:

  • Calculating ROI for data reductions
  • Calculating ROI for processing improvements
  • Calculating ROI across matters annually

These, of course, aren’t the only calculations you can use, and they can be made more or less complex depending on your needs and metrics—but they’re certainly a good place to start. Whether you’re evaluating the costs and benefits of new approach, reporting on internal performance, or looking to expand your team, these calculations can be a powerful, persuasive tool.

Calculating Savings Through Data Reductions

Document review is the most expensive part of the discovery process, by far. So anything you can do to reduce your document corpus can have a significant impact on the overall cost of a matter. Use the calculation below to see how data reduction through deduplication, culling and ECA can yield significant savings.

ROI calculations for data reduction in eDiscovery

First, estimate your outside counsel document review rate. If you have historical data, that’s great! Go ahead and use that. If not, industry estimates are fine. Depending on who you ask, a typical reviewer can get through 25 to 50 documents an hour. For the sample calculations here, we’ll assume we have a pretty speedy review team and go with 50 docs per hour.

You’ll also need to estimate the hourly cost of your outside reviewers. Again, using your own historical data is best, but there are also industry averages available. The typical U.S. law firm bills attorney time at $250 an hour, according to Clio’s 2019 Legal Trends Report. Rates for document review attorneys can be as low as $40 to $50 an hour, though. We’ll go with the most conservative number here, $40 per hour.

Finally, determine your data reduction rates. There are two factors that go into this calculation:

Deduplication Rate:

The percentage of duplicates removed from your document corpus. After all, there’s no need to pay reviewers to look at the same email twice.

In Logikcull, your documents are automatically deduped during processing. (Don’t worry, nothing is deleted, they’re just hidden from the review pool. You can easily show duplicates again with the click of a button, if you want to.) When processing is completed, you’ll automatically be emailed a report showing the percentage of dupes detected. If you’re a Logikcull customer, look at these notices to get your average deduplication rate.

If you’re not, we’ve found that 43% is a typical deduplication rate among corporate customers. Yep, nearly half of all documents involved in discovery are duplicates—meaning that deduplication alone can quickly reduce the number of documents needing review by huge margins.

For some in-house teams, simply deduping docs and inviting outside counsel in to review them is enough. Others go further with additional document reduction through culling filters and early case assessment.

Culling and ECA:

The percentage of documents removed from the deduped document corpus through initial filtering, such as narrowing your documents by date range, document type, custodians, and keyword search.

Applying these culling techniques can radically reduce the number of documents requiring outside counsel review. For legal teams that embrace in-house early case assessment, culling and ECA can reduce the remaining document corpus by 55%. We’ll use that number here, though you can always run a test project to get your own estimate.

Running the Numbers

So let’s see how these calculations work out for a typical case involving 50 GBs of data, or about 210,000 documents. As mentioned above, we’ll be using the following estimates here:

  • 50 docs/hour review rate
  • $40/hour review cost
  • 43% deduplication rate
  • 55% culling and ECA rate

Here, 210,000 documents reviewed through eyes-on, linear review would take 4200 hours of review time. At $40 an hour, that’s a total review cost of $168,000. By reducing the documents requiring outside review through deduplication, culling, and ECA, the number of review hours has dropped to 1077.3, at a cost of $43,092.

That’s a savings of $124,908.

ROI calculation for data reduction in hypothetical eDiscovery matter

If you’re not handling the initial culling and ECA process in house, you can still see significant savings through in-house deduplication alone. Let’s run those numbers with just a 43% dedupe rate for our data reduction and no reduction through culling and ECA.

Doing so leaves us with 2394 hours of review. At $40 an hour, that’s $95,760 to manually review every one of the deduped docs. That’s a savings of $72,240 through deduplication alone.

Graph showing ROI from data reduction in a single eDiscovery matter

“But,” you say, “that’s savings, not ROI.” Fair enough. To get the actual return on investment, you’ll need to subtract the cost of your solution from those savings. For Logikcull users, those numbers will include per-GB processing at upload and monthly per-project charges. For pay-as-you-go Logikcull Pro accounts, that’s $1750 for an ECA process of two months, leaving our example matter with a final ROI of $123,158. For deduplication alone, the ROI would be $70,740.

For in-house legal teams looking to do more with less, that’s a pretty impressive return on investment.

Determining Time Savings From Processing Improvements

Of course, money matters, but eliminating downtime and freeing up your teams to accomplish more can also be incredibly important. Indeed, many in-house teams cite a lack of bandwidth as their primary impediment to handling more work in house.

ROI calculations for processing time savings

Using the calculations above, we can see how cloud-based data processing can lead to dramatic time savings.

First, you’ll need to determine the average time spent on data processing for a typical matter. In Logikcull, the average project is processed in about half an hour—33 minutes, to be exact, so we’ll use that number here. If you’re a Logikcull customer, you can check your processing reports for exact processing times (as well as estimated times savings).

Then, you’ll need to find the time spent on the process you have replaced or are planning on replacing. So, for example, if you previously shipped data out to vendors who took two days to receive and process your data, put down 48 hours. That’s the number we’ll be using here.

Here we go:

Time Savings from Processing Improvements

In terms of ROI calculation, that’s about as simple as they get.

Calculating ROI Across Matters Annually

Our numbers so far have all been tied to single matters. But if you want to look at your ROI more expansively, determining your annual ROI isn’t difficult, either. Simply calculate your average matter volume over a year, then multiply it by your typical per-matter ROI. You can do this for data reduction, time savings, or any other ROI metric you’re using.

Here’s how that looks:

(We know, litigation is unpredictable and the needs of particular matters can vary widely. But, taking a look at the past year—or better, five years—can give you a fair estimate to base your calculations off.)

If we run those numbers using our estimates above and assume an annual docket of 10 cases involving discovery, here’s how the numbers work out:

For legal teams looking to compare themselves against internal and industry benchmarks, and to measure the impact of their approach to discovery and investigations, these simple calculations can be incredibly powerful tools.

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