Two Plymouth State University professors in the US believe they have come up with an approach that will help companies to head off litigation before disputes take place. Using text data extraction and statistical analysis based on publicly made comments from employees, Chantalle Forgues (pictured), associate professor of business law, and Daniel Lee, professor of economics, have shown they can detect patterns that reveal the propensity for companies to get into trouble.
Sounds intriguing, but how did they approach this? The duo explained that just as preventative care medicine looks to reduce negative outcomes and costs for patients, legal risk analytics can work in the same way.
Forgues and Lee used reviews on Indeed.com, a job hunting and employee review website, ‘identifying words that predicted an increase or decrease in law suits against healthcare companies over 10 years’.
Some of the evidence that their system works included findings that:
- ‘A healthcare company with an ostensibly ‘bad manager’ is predicted to have nearly 100 more lawsuits over ten years than a company without a ‘bad manager’.
- Those with reviews mentioning ‘teammates’ are predicted to have nearly 600 fewer lawsuits over ten years.
- Companies that offer employee stock options are predicted to have 135 fewer lawsuits over ten years, while 401k retirement contributions do not have any impact on the number of lawsuits.’
What this seems to suggest is that well-managed companies that give their employees good remuneration and build a team culture generally – based on their sample of data – see less law suits. However, is this a surprise? And, is this something where ‘prediction’ is really the right word?
Litigation management is an interesting area, and there is clearly merit here nevertheless, especially in the ability to gather hard data on company culture vs the number of law suits.
Perhaps the greatest value here is that with more data – probably several years more data – and further modelling, they’ll be able to come up with some metrics that can act as specific risk benchmarks, i.e. once a company reaches X on their ‘risk scale’ they need to really go and talk to the HR team, or bring in HR consultants, to help them deal with the culture problem. That could be a very useful outcome from this.
Their university is certainly excited. In a statement Plymouth University said: ‘Forgues’ and Lee’s research illustrates how legal risk analytics could be used at large firms to identify specific factors that put organisations at litigation risk, helping them anticipate and even preempt certain lawsuits.’
‘Data analytics will eventually transform the legal industry. It will help companies improve their operations by preempting a certain number of lawsuits and making litigation more effective, streamlining the process with fewer motions and more informed negotiations,’ Forgues added.
While Lee concluded: ‘The data from our analysis of employee reviews could be used to advise healthcare companies as they make new hires and focus on internal culture and employee benefits.’
What do you think?