3/24/2011

CEOs Pay Careful Attention to Litigation Management Effectiveness

More companies run overall litigation reporting through their claims organization than through legal.

By Staff Report

Sixty-seven percent of CEOs have specifically discussed the effectiveness of their organization's litigation management program, according to a national litigation management study released today by Revere Advisory, Inc. This high-level attention is, in turn, driving an expanded interest in metrics and analytics that allow for clearer measurement of litigation management effectiveness. The study, commissioned by the Council on Litigation Management, is believed to be the largest of its kind to date. Executives from 47 organizations, representing a broad cross-section of the litigation industry, participated.

In looking at how organizations are structuring their internal resources, the study revealed that 36% of respondents reported maintaining a staff counsel operation, with 57% overall reporting through the claims organization, as opposed to legal. The use of staff counsel, as expected, varied by the amount of spending under management. Twenty percent of organizations under $45 million in annual spending used staff counsel, compared to 60% of those with $150 million or more. While the general utilization of staff counsel varied, the study found no correlation in size as to whether staff counsel reported through claims or legal.

When it comes to internal and external initiatives to better manage litigation costs, a focus on the legal invoice remains a dominant area of focus. Alternative fee arrangements (AFAs) and electronic invoicing review software were the most commonly reported internal initiatives, at 71% and 70% respectively. In addition, the study revealed a rapid increase in the creation of preferred or exclusive external litigation service provider relationships. Across a wide-ranging array of services, from court reporting to medical records retrieval services, carriers are increasingly taking a more active role in managing the entire litigation supply chain, taking more control of what have been traditionally law firm decisions.
As litigation program effectiveness becomes a more visible issue, executives are seeking better metrics that help to define program success. Yet 74% of those surveyed rate the quality of their metrics as "fair" or worse, according to the study. Perhaps reflecting some of the data challenges associated with larger enterprises, 83% of those companies that rank their metrics as "effective" are managing $75 million or less in litigation costs. Executives say that they rely on or struggle to identify metrics in five primary categories: inventory, cycle time, cost, quality and predictability.

Participants reported a median annualized return of 175% for their litigation management expenses. However, this return varied significantly by organizational size, with larger companies (those managing over $150 million in annual litigation costs) reporting a financial return 3.5 times greater. In terms of where organizations are having the greatest financial impact, executives were split, with an average allocation of return of 55% on cost containment and 45% on outcome improvement.

The study found that overall litigation costs have remained steady, even for the 40% of the organizations surveyed that decreased in litigation volume. The median volume decrease was 15%. A much smaller group (15%) reported an increase in inventory, with a median increase of 5%. Almost half (45%) reported no change in litigation volume over the past 12 months.

The average annualized legal spending for participants was $153 million; the median legal spending under management was $35 million. The participants overall represented approximately $9 billion in litigation spending under management. Executives responded to 160 questions on issues related to staffing, programs and initiatives, ROI and financial return.

For information about other areas covered by the study, including future trends and influences, or to obtain a copy of the study, please visit www.revereadvisory.com, write to report@revereadvisory.com, or contact the study's authors, Taylor Smith (224-212-0134) or Jeff Scarpitti (610-444-8005).

Revere Advisory, Inc. provides market intelligence, consulting and advisory, and talent acquisition services to litigation management executives in corporations, law firms, and claims organizations.


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