Managing Legal
The Point
A surgeon friend of mine once explained to me how her profession’s CPT Codes describe specific medical procedures in a way that’s commonly accepted across the medical industry. For each such procedure a fixed fee is charged — regardless of the time consumed or complications encountered in performance of the task.
Though there is a noble effort underway toward a legal industry counterpart to medicine’s CPT Codes, don’t expect its widespread adoption any time soon.
Why not? Because the fixed fees those codes make possible in medicine undercut attorneys’ billable hours business model.
This Matters to Your Business
Standards Advancement for the Legal Industry, or the SALI Alliance, has been described as a crowdsourced effort to categorize legal work on a similarly consistent basis to medicine’s CPT Codes. And it is hoped to provide a commonly accepted basis for charging fixed fees for that legal work. But it’s still early days.
Right now it’s virtually impossible to get a verifiable comparison between the price of Law Firm A and the price of Law Firm B in advance of an actual engagement to conduct a specific kind of transaction. Or to represent a business in a specific kind of litigation.
First, for all but the small fraction of such engagements performed under alternative fee arrangements, upfront pricing is precluded by use of the billable hour as the primary measure. No one knows the actual price until after the work is done — not before.
But, second, there’s no industry-wide categorization of such tasks. This is the focus of the SALI Alliance’s efforts. The SALI Alliance’s collaborating members have created a common set of codes called the Legal Matter Specification Standard (LMSS). Legal operations executive Adam Stock writes: “The LMSS enables law firms and clients to better understand business processes and have a more informed, consistent dialogue with each other about delivery and pricing of legal services.” He likens LMSS to an SKU: “In the same way a stock keeping unit (SKU) identifies a product across systems, SALI LMSS codes provide a defined way for clients to identify services to purchase.” But this effort faces stiff headwinds among attorneys.
Because …
Jae Um, who I view as one of the half dozen top authorities in legal services delivery, puts it this way:
“What is sorely needed in the legal industry is some level of standardization in the service catalog, deployed in tractable codesets …. SALI are working on this and their work is very promising. The optimist in me believes this will happen in time, but the realist in me knows it will be a long, long time (perhaps in a galaxy far, far away) … financial systems implementations and codeset normalization remain among the most painful and politically costly exercises for law departments and law firms alike.”
In my experience as a business executive, and as a practicing lawyer, I’ve found law firms cagey about pricing — and corporate law departments reluctant to press for apples-to-apples clarity when it comes to task standardization. Not to mention the impediment of the billable hour.