Generating Maximum Case Value Using the Pareto Principle With Dustin DeVaughn

You may have heard of the Pareto Principle — also known as the 80/20 rule. But do you know how to utilize this principle to generate maximum value for your business?

At its core, the Pareto Principle is about identifying an entity’s best assets and using them to create maximum value. The rule states that 80% of your results are attributed to 20% of your causes. In regard to law firms, this means that typically, 80% of your revenue comes from the top 20% of your cases.

So what steps should you take to apply the Pareto Principle in your business? In Dustin DeVaughn’s law firm, they apply the principle to many areas, including wealth management, personal finance, sales, customer service, and business decisions. After filtering out the top 20% of cases that generate the most revenue, Dustin and his team were able to decide where to put the majority of their money and keep expenses low on the other 80% of cases.

Think of it this way: if you’re winning $1,000 for a client, you don’t want to pay $500 on top-tier resources. But with a high-value client, you could spend $5,000 on resources that result in a $100,000 win.

However, there are some common misconceptions you should avoid. The 80/20 rule does not mean that you should focus all of your attention on the top 20% of clients. You want to ensure that resources are dispersed fairly and make sense for the value level of each case. When you do so, all cases and clients benefit because you’re being smart about how you disperse your dollars.

Listen to this episode of The Judd Shaw Way Podcast with Judd Shaw featuring Dustin DeVaughn, Partner at DeVaughn James Injury Lawyers. Together, they discuss how to apply the Pareto Principle to your business, how it can create maximum value, and the benefits it can bring to your firm across departments and cases.

In this episode:

[1:12] Judd Shaw introduces his guest, Dustin DeVaughn, and today’s topic: the importance of a Pareto analysis
[2:27] What is the Pareto Principle (the 80/20 rule), and why is it important?
[4:47] Prioritizing high-value cases
[7:17] Misconceptions law firms should avoid regarding the Pareto Principle
[10:44] Dustin goes through his process of utilizing the Pareto analysis and improving the firm’s profitability
[15:44] How smaller cases benefit from the 80/20 rule
[18:32] Why it’s important to sit down with clients and learn from them
[19:58] Dustin details the history of DeVaughn James Injury Lawyers — and what they’re currently doing in the community
[24:14] Dustin dishes fun facts on his firm partners, Cody and Richard

Transcript:

Hi everyone. I’m Judd Shaw, host of The Judd Shaw Way Podcast. This podcast season’s 10 episodes focuses on delivering an excellent customer experience. Many people consider themselves entrepreneurs. I like to consider myself an intra-preneur, understanding that really great client experience starts with how our company treats our clients.

I’m hosting industry experts providing proven customer service pointers, as well as some secret insight tips to creating unforgettable wow moments for your customers. That also starts with being able to set up a company to be able to deliver that excellent service. Today’s topic is the importance of a Pareto analysis, whereas many industries refer to it as the 80/20 rule.

I’ve asked Dustin DeVaughn to help me understand it. He is partner of DeVaughn James Injury Attorneys, Kansas’ largest personal injury law firm. They have three great locations around Kansas, including East Wichita, West Wichita, and a newest office located in Topeka, Kansas. These guys know it, they got it. They do it really well, and I hope you enjoy the discussion.

I’m here with my guest, Dustin DeVaughn. Welcome, Dustin.

Hey, thank you so much, Judd. I really appreciate you having me. Tell you what, I looked at your past speakers in your previous podcast, and I was wowed. You had some of the industry’s greatest, Arnie Malham, Micki Love, Chad Dudley, Bill Biggs. They taught us everything that we know and so very impressed with who you’ve had speak before.

Well, I appreciate it. I hope all the listeners continue to find that same experience right here with you, Dustin, coming up on the end there and wrapping it up for us to put it all together. Tell me, there’s this idea of this 80/20 rule, or as we call it in our legal industry, the Pareto analysis, why is this even important? What is it?

Tell you what, so the Pareto principle itself tells us that 80% of the results are attributed 20% of the costs, and at its core principle the 80/20 rules is about identifying an entity’s best assets and using them to create maximum value. It goes back, it was developed by a business scholar named Joseph Juran, and it was named after an economist named Vilfredo Pareto.

Pareto had noticed that 20% of his pea pods had produced 80% of his peas. He expanded that principle to macroeconomics by showing that 80% of the wealth in Italy was owned by 20% of the population. We now use that Pareto principle in many applications, wealth management, personal finance, sales, customer service, business decisions. Our law firm uses it and has successfully implemented it to create value for our clients, and hence, value for our law firm.

Really, I love the history behind it, and thank you for that. It really explains how it’s led up to it. I know that you are very involved, part of your position as partner of the firm, with your high value cases. I know that you’ve created a high value team. I’ve had the great pleasure being out in Kansas, not only at your home, thank you for your hospitality. Your family is beautiful and amazing, but also the pleasure being able to sit and observe you lead the high value team. Is that part and plays into the 80/20 rule?

Oh, absolutely. Remember, a key tenant of this Pareto principle is that you prioritize the 20% of the factors that will produce the best results. What we’ve done at our law firm, and this was something that was taught to us by some of your previous speakers, Chad Dudley, for example, what we did was we ranked our cases by value, not only value, but also available limits.

What we found out is that the top 20% of our cases, where there were sufficient limits, were cases that we believed had a value of over a $100,000. What we did once we ranked those, we concentrated our efforts, our best attorneys, our best case managers, and are spending the most time on that 20% of those cases that we believe will produce 80% of our revenue. Doing that improves results, which then provides excellent customer service because you’ve got happy customers.

It’s almost impossible to take a $1000 case and create a whole bunch of extra value on a thousand dollars case. However, if you take a good attorney, a good case manager, you focus your resources on that bigger case, you can take a $200,000 case and turn it into a $300,000 case or a million dollar case, and turn it into a $3 million case. That’s what we’ve done with what we call our maximum value team.

We spend more time on these cases and put all of our significant resource in these top 20% of the cases, and the proof is in the pudding. Looking at our results when we first started doing this, we started doing this in 2019. Our average fee has gone up from 11,500 to almost $19,000 on our cases as a whole. That’s not just our maximum value team cases.

Wow, wow.

At any given time right now, our firm’s got about 1400 cases. This is just concentrating on those top 20%, so the top 380 cases in our firm.

Now, I want to also mention to all the listeners who may hear, well, why isn’t my case, it’s not as valuable, as important to the firm? I want to suggest, at least my experience of being out at DeVaughn James is that, one, the first thing is no client is more important than any other client. I found that your approach to client service, the kind of things that you do for every single client, the $1000 case and the million dollar case get the same touches.

They’re getting constant phone calls. They’re getting case video updates, they’re getting automated status. They’re getting dedicated people to speak to, and so what is important is not to lose sight on the fact that the client service, the customer service, or the quality of that lessens just because the case is not worth as much as a different case.

On top of that, your firm then has been able to provide the same quality client experience to everybody. You increase the value of your bigger cases, which directly affect the impact on that client. I would also suggest that by hyper focus on that high value, you then also put a downward pressure on lesser value cases in terms of your time on desk.

You recognize that these cases shouldn’t linger, they shouldn’t be spending so much time in there. They don’t have to. As a result of it, those cases actually move faster, also, therefore, providing a direct positive result to the client.

Absolutely. You couldn’t have said it better. That’s one of the shortcomings of this Pareto principle, is that just because you’re focusing a lot of your resources on that top 20% of the cases does not mean that the other 80% are not of value. Every client is extremely important, and we do put in the appropriate time and resources to properly handle every one of those. But what I’m trying to get at is the way to value is by putting the more significant resources in those top 20% of the cases.

Sure. That’s the benefit to the company and not many firms, such as yours, have gotten it so well that they can hit each three factors. You guys are just crushing it there. I’ve seen also the cases. Now that you parcel those high value cases, you’re looking at those 20 percenters, but what happens is those other ones float to the surface to say, what are we doing about these?

What you’re doing is you’re always putting a concentration to say, “We shouldn’t be spending all of these resources on those cases.” If we are, we’re almost doing a disservice to the client, because we may be dragging the case on the case may be lingering on. We may be over-treating it. We may be over valuating, over whatever, and therefore, sometimes these cases then just sit. Instead of saying, the high value cases are getting your high value team and these other cases we expect to move.

Absolutely. Sometime putting in too much resources in a case drives the value down, because the expenses go up.

Exactly. That affects the client because those expenses are coming out of the client’s pocket. Tell me, Dustin, I’m sure you’re gearing up for 2022, probably like me already starting to do some strategic planning sessions, some conversations with your partners on your budget and your numbers and talking to your team on your key performance indicators. How often do you do a Pareto principle analysis?

Glad you asked. We just spent the entire afternoon yesterday working on our strategic plan and our budget for 2022. We used it even just yesterday, trying to figure out how to even build these cases even better. We also used a Pareto principle on figuring out how to improve the customer experience by figuring out where the 20% of the issues were causing 80% of the problems with respect to customer experience.

We figured out it was within returning phone calls. We figured out that there was 20% of our employees causing 80% of the problems. We’re focusing on remedying that and implementing new policies and procedures just so that we can give our clients that best customer experience.

Isn’t that interesting that now, as you briefly talked in the history of the purpose of that analysis, is not only to increase the value or the bottom line for the company, but also to get those bottlenecks, those issues, to come to the surface and identify them. You’re applying this 80/20 rule to also not only look at how to generate more value out of every case, but also where those bottlenecks, where those problems exist in those other cases.

Absolutely. We found that principle to apply in so many different aspects, even problem clients who are creating 80% of our problems. There’s 20% of our clients creating 80% of the problems, and we found that rule applicable in many different situations.

Can you walk me through applying this analysis to maybe the bottom line or how does another firm listening to this somewhere around the country. They want to go back to their firm and say, “You know what? I want to look at this. I want to try to identify whether we are applying the 20 to 80 or 80 to 20.”

That’s perfect. The answer to improving a law firm’s profitability, what we found is using this Pareto principle, identifying your top 20% of your cases that should be producing 80% of your revenue and focusing your time and attention on those top 20%. Would you like for me to tell you what we do and how we do it, or is that getting too much in the weeds?

I would love it. That’d be great.

Obviously, there’s three battlegrounds in every case, there’s liability, causation and damages. What we found is the way, the single best to increase value on any top case is by experting up. Experts aren’t cheap, but in these top 20% of the cases, it’s worthwhile to obtain these experts. You’ll get your money back a hundred fold.

What we do with respect to liability is we have an investigator go out and personally interview every single witness that we can identify. We get every single 911 call that was made. There’s many witnesses that never even make it into the accident report that we’ve been able to build cases that otherwise were not even in existence.

We obtain Axon video from every police officer that was at the scene, dash cam video from every police vehicle that was at the scene. We have that investigator go by all adjacent businesses and get any potential surveillance video. You can’t do these things on the two, five, $10,000 motor vehicle case. It’s just, it’s economically prohibitive to do that on every case.

You can and should be doing this on these maximum value cases. We have the investigators come back and work with the attorneys. We prepare proposed affidavits. We go out and individually meet with these witnesses once our investigators identified them, work with these witnesses on affidavits on how they best advocate honestly for our client’s position.

You can work with these affidavits and they work. They pin the witness down and the insurance adjuster just buys it. We also, on damages, get professional photographs in every maximum value team case. A picture’s worth a million words. A professional photographer can honestly take a photograph, but use the right lighting, the right focus, enhance the injuries of these clients. You’re not doing anything dishonest. You’re just putting a focus on the injury instead of trying to take it out of focus.

We have biographies prepared of every maximum value team client. Having a good writer go in and meet with the client at their houses, learning their stories, what they could do before that they can’t do now. Meeting with the family members on how this has affected their life. It sells the case when we provide this to the liability adjusters. You can’t do that on every case.

What else do we do? We spend more individual time with each client. We touch a maximum value team client at least every 30 days. We try to personally meet with them at least every 60 days, so that we can be with them, understand what they’re going through. In that one-on-one interaction, you’ll find stuff out that you would never would’ve known had you not taken the time to do it.

You can’t do that that often on every motor vehicle collision case, it’s time prohibitive. You can and should be doing this on these maximum value team cases. That’s what we found drives the needle.

Wow. That’s really so helpful and looking that, and you can break some of these points down even for further explanation. For instance, what I’m hearing as, when you correctly apply an 80/20 rule, you look at a case and you’re saying it’s a thousand, $2,000, $5,000 case.

In that case, although we would love Sports Illustrated cover, National Geographic quality photography on every case, it’s okay that the client used their iPhone, took some pictures of the property damage, established that there was damage, shows the damage, whether it’s clear or not. It is the actual, as you said, the photo speaks for itself. You can turn that over and that costs the client nothing. You can still get the good solid result for that client using that photo.

As opposed to a case that may be a high value case, where that pro photo comes in and they’re really getting the quality of light. They’re making sure that every dent, every stitch, every scar is highlighted to what you would see with your naked eye if that adjuster was meeting your client in person, which they don’t. By applying that rule, what you’re doing is you’re helping the clients on the smaller value cases, because you’re not using their own money to get a pro photographer.

If you had pay $500 and you get the client a thousand dollars, it much would rather have had the opportunity to use their cell phone. Whereas a high value, you move the needle now, you spend $5,000 on pro photo and that results in a $100,000 additional money. Because now the scar is really highlighted on how extreme it is on this young girl who’s now you may not see it on the cheek, but with the right lighting and the right turn, you see exactly what she sees every morning in looking in the mirror and every night when she’s taking off her makeup.

You’re using the money there to increase the value. Both your smaller value cases benefit because you’re maximizing the money you put in their pocket by not wasting money that you’ve recognized would increase the case. But there is no other money to be available, either policy limits or whatever the case may be, or damages.

Whereas on the high value, you now say, “We’ve applied this rule. We know it’s high value. It’s on my high value team. We’re going to spend the money on these cases.” Interestingly that 80/20 rule shows that by going on that approach, equally, the small value and the high value get the intrinsic value.

Absolutely. There’s also a secondary value to these younger or middle-aged attorneys that have some experience. When they come in and work a high value case with Judd Shaw, they’re learning so much about liability experts or medical experts or life care planners, professional photographers. They’re able to then use that experience that they’ve developed with you on these high value cases. They’re able to take that and then use that and apply that on these lower value cases.

I’m wondering, now that I’m thinking and hearing it, it’s almost like I know the principle, we do it part of our strategic planning session. I have to tell you, thank you so much, Dustin, because I haven’t even thought of it in the way you’ve done it. You just have it down. What I’m thinking is, I wonder if you could see a correlation using that same formula on expenses paid to a case.

Oh, absolutely. We keep meticulous track of our key performance indicators. One of them is client expenses. Our maximum value team expenses on average are probably $15,000 per case, on average, and that’s across those 380 cases I was talking about. Our average expense on our full library of cases, when we got 1400 cases, is about 350 bucks. That shows you the disparity expenses, just because we’re trying to build these bigger ones up so much.

Again, that’s equally beneficial to all of your clients across the board, because if you can keep it downward pressure on expenses and not waste dollars where they’re unnecessarily needing to be spent, you’re benefiting those clients because you haven’t taken that money out of their settlement to reimburse those costs, wasted costs that they shouldn’t have had to eat. But on the other side, on the high exposure, you recognize we have enough meat on that bone, it’s worth spending that. Instead of $350 to get the 2000, we’re going to spend 15,000 to get the 400,000.

Yep. You hit it right on the head.

Really cool. Let me ask you, there was one comment you made about sitting down with the clients, and sometimes the storytelling part of it and learning from your clients. Aside from the 80/20 rule, that’s a really great way flush out non-economic damages as well, isn’t it?

Absolutely. Tell you what, the greatest lesson I learned was figuring out when I sit down in their own environment, in their own house, can understand how they’ve had to modify things just to do activities of daily living, or have access to family members there that can say, “They’re not even telling half the story. This is the hell that they’ve had it gone through because of the injuries they sustain in this collision.” Having access to their environment and getting to talk with them individually is money well spent.

Now, I try to build a company for scale. I’d love to serve the most part of our community possible. Do you have part of that analysis, particularly when we’re talking about high value, as part of a process, for instance, those cases get X, Y, Z? They’ll get a life care, they’ll get an expert, they get a witness, and so each case has sort of a checklist to ensure that those cases are being worked up the same way.

Yes and no. It takes two things to make a case, as you well know, it takes the damages, but also takes the liability limits. Once we figure what we need to have to trigger the full policy limits that are available, that’s typically the measuring point. We use that to figure out what we need to weaponize for.

What do I have to spend to get the max dollars for the client? Tell me, Dustin, tell me a little history about DeVaughn James and a little about the firm.

Sure. We started off just Richard and I and another attorney who is now our partner, Cody Claassen. There was three of us. We started off in the basement of my house in January 2012, January 1st, 2012. We’ll celebrate 10 years. In the last 10 years, we’ve gone from three attorneys and two team members to 24 attorneys and 78 team members. Our revenue goal in 2000, let’s see, ’12, was 1.5 million and a revenue goal for 2022 is going to be 22 million.

That’s amazing. Wow. Amazing. What do you attribute to grow to, Dustin?

Policies and procedures, following the legends in the industry, such as yourself and Arnie Malham, Micki Love, Chad Dudley, the speakers on your podcast. We never invented the wheel. We listened to the people who knew what they were doing, and we were good implementers. That’s been the secret of our success is doing what works in other markets that you’re not competing against.

I think you’re being modest, but I appreciate that. I also think that there has to do with a lot about what your firm does for the community. You guys give back as much as you get. Tell me about some of the things that DeVaughn James does with the community.

We have four different programs, and we’ve geared them up with the four different news stations here. We have a program through the Fox affiliate, where we donate to a volunteer of the week. They put the volunteer on the news, and we give them money through that.

We celebrate a veteran every week through the NBC affiliate, and they tell the story of the veteran. We give them $500 to do something nice for themselves and thank them for their service. The stories that news reporters put on those veterans are amazing.

Through the ABC affiliate, we donate $500 every week to a different non-for-profit. ABC puts them on the TV, where there’s publicity, the money for these charities follows. Through the CBS affiliate, we do, what’s called a helping hand. It’s somebody in the community that been confronted with a horrible situation and simply needs help, and the new story on that brings awareness to them and typically more community help. It’s something that we’ve really enjoyed doing.

I think between your amazing process and systems on how you move these cases, the excellent client service and the types of things that you just discussed, giving back to the community, certainly lead to that amazing growth from that basement office to… I’ve been there and it is an impressive office.

I personally follow you guys on D-E-V-J-A-M Wins, which is at your IG tagline, that’s DevJamWins, so anybody want to follow that. They post a ton of their community stuff that they’re giving back, all things you did, really exciting. I’m certainly going to rip off and duplicate most of those at some point. The other thing I wanted to ask is, how does somebody reach you that needs help?

Anybody in the state can call all eights, 888-8888. We love to help them if they need help.

I’m so jealous of that number.

Hey, we love The Judd Shaw Way, keep it up.

Dustin, what kind of cases are you taking right now?

Any type of personal injury, so automobile, premise liability. We don’t do any type of medical malpractice, but we can put you in the hands of an attorney that specializes in that if you need that type of help.

What’s the number somebody would reach for, other than 888, is there other ways? Do you have online, tag, anything else?

You bet. Online, the website’s DeVaughnJames.com, and those are probably the two easiest ways.

I can’t thank you enough for putting this all together. It’s perfect timing for me because like many companies around the country, November is a time to start to focus on their next year, their annual review of what happened, the current year, and where they want to set up. Applying these rules is really going to make a difference.

Dustin, I always try to ask something about your partner that we wouldn’t have otherwise learned. We’re going to catch either Cody or Richard and put them on the spot too one day. So, tell us something that nobody would know about, other than you, for Richard and Cody, that we can all take to the grave.

So on Cody, believe it or not, he had a cameo appear in the movie Seabiscuit. That’s the best I can come up with.

A great family man, he’s got a buddy. He’s got a couple kids. How many kids does Cody have?

He’s got six kids, and rumor has it, possibly a seventh.

Well, we’re rooted for him. Congratulations. Wow. That’s some family. What about Richard?

Richard, just a solid guy. Tell you what, I’m seven years older than him, and he’s my mentor. Not only religiously, but with respect to the practice of business and the practice of law, one of the best trial attorneys I’ve ever met and solid gold. It’s weird when your two mentors are one guy who’s seven years younger than another guy who’s 14 years younger.

You’re the middle brother.

I am.

Dustin, thank you so much are taking the time today to speak with us and be on the podcast. It’s amazing. I really appreciate it, as always, and I loved seeing you. I think two weeks ago, we ran into each other in Nashville, Tennessee, at an event. I certainly want to come out to Kansas next year, and hopefully, we can host you here in New Jersey when you have some time.

I would love that. Thank you so much, Judd.

You’re very welcome. As always, you can reach me with any questions or feedback, any type, I love hearing the feedback from your first class experience and how you address it with your company or any questions, you can reach me at podcast@JuddShawInjuryLaw.com, and always, if you want, be sure to request some swag in your email and we’re happy to send you some merch from our law firm. Thanks again for listening to the Judd Shaw Way.

🎙️ Featured Guest 🎙️

Name: Dustin DeVaughn

Short Bio: Dustin DeVaughn is a Partner at DeVaughn James Injury Lawyers. From 2009 to 2019, he was named as one of the “Top 100 Trial Lawyers” by the American Trial Lawyers Association and as a “Super Lawyer” since 2009 by the Missouri & Kansas Super Lawyers magazine. Dustin has an unprecedented jury trial record and a history of multi-million dollar jury verdicts.

Company: DeVaughn James Injury Lawyers

Connect: Website

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Generating Maximum Case Value Using the Pareto Principle With Dustin DeVaughn

In this episode:

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🎙️ Featured Guest 🎙️

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