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At a conceptual level, no one refutes the need for and the value of tech for business operation. Not only is it proven, the changing dynamics of the workforce, digital global ecosystems, and the constant barrage of disrupting technologies makes its adoption indisputable in business.
At the same time however, when sanctioning budget for new technology, business leaders want to know the tangible contribution that the new solution will make to the organisation. And rightly so, a healthy bottom-line is key to thriving. But determining that compelling yet realistically achievable ROI figure is often difficult – especially when it comes to quantifying nebulous concepts such as efficiency gains, increased productivity, better time utilisation, employee job satisfaction, and so forth.
One of the biggest reasons for the difficulty is that commonly there isn’t a benchmark in the organisation to peg ‘what constitutes success or a good ROI’ against. Aside from the difficulty element, a straightforward ‘£X thousand investment should yield Y% ROI’ is perhaps a rather simplistic, old-school, and even naïve approach to determining technology success. Organisations need to evaluate ROI more meaningfully so that the changes technology drives are sustained, and directly support the high level, strategic business objectives of the business – be they pertaining to improving law firm culture, attracting and retaining talent, supporting data-driven decision-making, driving continuous improvement, or any other.
Strategic outcome-focussed ROI
Today, in the legal world, it is well acknowledged that technology or the lack of, is increasingly among the top reasons why lawyers may join or depart an organisation. So, let’s say attracting and retaining talent is a key strategic goal of an organisation. Speak to any executive head and they’ll tell you that replacing a talented employee is a costly event, never mind the cost of the disruption to the business the departure causes.
So, in this fictional scenario, the organisation decides to eliminate 25% of the low-level work that lawyers do daily through automation so that they can focus on meaningful, high-level work – in turn leading to better job satisfaction, and retention.
The organisation identifies contract management as being among the key areas where lawyers spend the most time on low-level administrative activity, and so focusses the technology project on delivering automation whereby employees can self-serve standard supplier-related contracts of values of under half a million pounds, based on standard templates. Contracts that fall outside of the normal parameters and those that require specialist legal advice and clauses, are the only agreements that are required to go through the legal department.
In this illustration, the ROI comes from knowledge retention on account of reduced lawyer turnover, motivated and satisfied lawyers and employees due to more efficient and smoother processes, recruitment cost saving, and so forth. How are these determined? Through pre and post automation reporting by using the right data points – number of years lawyers stay with the organisation, time taken to finalise standard contracts, number of self-serve contracts generated by individuals, and such.
Furthermore, there’s the ‘perception of ROI’ that is equally important. When technology takes away the drudgery of doing business, for both lawyers and clients, by simplifying daily tasks – reducing the cycles it takes to finalising documents or easing collaboration internally as well as externally with clients and partners – the emotional impact of this kind of cost-benefit is significant and shouldn’t be ignored. In fact, it can be tracked, weighted and tied to industry customer satisfaction scores and standards.
Financial value-led ROI
Even for solution implementations, organisations can adopt a more strategic approach. A 35-lawyer legal department is adopting a document comparison solution. Prior to implementation, the department determines that junior lawyers typically compare 10, 20-page documents in a week, taking them three minutes per page. A rough calculation based on the average salary of junior lawyers, shows that the cost works out to £X thousand for these 10 documents. Similar estimates are determined for other lawyers based on their seniority. Cumulatively, across the 35 lawyers, the annual cost works out at £Y hundred thousand, for document comparison alone.
Now the annual subscription of the document comparison solution is £40,000. Post the solution’s implementation, the time spent by lawyers is reduced to one minute per page. Applying the same salary estimates, the legal department instantly sees the cost saving (which is potentially significantly more than the £40,000 solution cost) because of the efficiency gains made through adoption of the document comparison tool.
Similar approaches can be taken to track and quantify the impact the technology is having on the speed of response to clients, agility to develop new services or then reducing the sales cycles for quicker revenue fruition.
ROI benchmarks for future projects
In essence, a strategic approach to forecasting and determining ROI delivers tangible value to the business. Additionally, determining and monitoring the most appropriate data points for monitoring and tracking – before embarking on a new project – provides the ability for comparison. And in doing so, the organisation then has benchmarks for future projects too.
Most vitally though, to truly ensure that ROI from technology is always optimal, organisations will do well to continuously monitor those data parameters. This will allow it to make incremental gains by continually and consistently modifying processes and better applying the solutions that are already deployed. This represents the most astute, thought-out and long-term approach to ensuring the highest possible ROI from technology investments.