I’ve long admired the work of Jordan Furlong, a distinguished Canadian lawyer who analyzes and forecasts changes in the legal services market for law firms and legal organizations.
“Most invoices from law firms aren’t really ‘bills’ — they’re lists of claims against the client made by any lawyer who could find a way to touch the client’s matter for at least six minutes.”
After offering legal services for two or three decades elsewhere in the world — the Big Four accounting firms (PwC — the former Pricewaterhousecoopers, Deloitte, EY — the former Ernst & Young, and KPMG) are now taking tangible steps to move into the U.S. legal industry.
Last Wednesday (June 6) Deloitte UK and the San Francisco-headquartered immigration law firm of Berry Appleman & Leiden LLP (BAL) announced an agreement that gives U.S. businesses market access to Deloitte Global’s immigration legal services worldwide — including the U.S. — while adhering to the traditional rules that have insulated U.S. law firms from Big Four competition.
This comes on the heels of PwC’s formation nine months ago of a new law firm called ILC Legal in Washington, D.C. — the first entry into the U.S. legal market by a Big Four firm (see here).
These initial moves by two of the Big Four could signal a tectonic shift in the competitive landscape for legal services in the U.S.
As prominent legal consultant Bruce MacEwan put it after PwC’s announcement last year:
“[The Big Four] have incredible resources in terms of capital, thousands of high-powered professionals, brand equity, and entrée into every Fortune 1000 board room ….
“If the Big Four want to come at Big Law, they can. And they will be pretty successful.”
In my most recent blog I recounted an interview with BASF Corporation’s General Counsel, Matt Lepore.
In that interview Mr. Lepore described how he went about ditching the arbitrary taxi meter of hourly billing.
And he described how he secured lower costs and client-friendly incentives through alternative fee arrangements.
I invite your attention again to his words — and I emphasize something that Mr. Lepore slipped in at the end of his interview:
“Whether you are Fortune 100, or a small start-up, if you have a legal need that requires outside counsel expertise, and you have some budget assigned to your department, you can use alternative billing. Maybe you won’t define value the same way that BASF, Microsoft, or GSK would, but you certainly don’t need to value the services you need based purely on an attorney’s hourly rate. And, in my view, you will not be getting the most efficient work product if you do.”
I’ve said many times that the legal industry’s business model is based on the sale of attorneys’ hours: The value of lawyers’ work depends on how much time they take to perform a task. This model benefits law firms’ economics but it’s bad for the client. It results in unnecessarily high charges, overstaffing, and incentives to inefficiency (see here, here, and here — among other posts).
The client company has zero price visibility until the work has already been finished.
And — despite much happy-talk about the “death of the billable hour” and “widespread” adoption of alternative fee arrangements [i.e., some arrangement other than the billable hour] — the billable hour is the legal industry’s standard for pricing its work (see here and here).
So … is it practical for a corporate client to ditch this wasteful practice? If so, what does that look like from the client’s perspective?
Zach Abramowitz of the law company Axiom met with Matt Lepore — BASF Corporation’s general counsel — to talk about this.
Yes — but you need to know where to look for the innovation.
And it’s early days.
…
My last post cited the numbers in two recent empirical studies to show that law firms are not innovating (with exceptions distinctly in the minority).
But that doesn’t mean that there is zero innovation in the legal industry.
The best treatment of this issue that I’ve seen came from Mark A. Cohen in an article he wrote for Forbes last year: “‘Legal Innovation’ Is Not An Oxymoron — It’s Farther Along Than You Think”:
Among law firms, the innovations in service delivery needed to help business clients do more to protect themselves from legal risk with less expenditure — just aren’t happening.
So say the numbers in two recent studies.
My own reading of those numbers: Law firms aren’t innovating much in legal service delivery because they don’t want to and don’t see it as all that important.
“On average, lawyers spend 60 per cent of their time drafting documents. If there is a tool that allows them to do that faster and better, then it is an obvious choice.”
Thomson Reuters / Catherine Bamford
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Here’s another post about the promise of Legal Document Automation for both time savings and enhanced accuracy. This one in employment law.
This past Monday Ogletree Deakins — a U.S. law firm known for labor and employment law expertise — rolled out a new software tool for a different set of corporate legal needs: “DIY Arbitration Agreements“.
Their promise: “Generate your [employment arbitration] agreements in Under Five Minutes“.
“On average, lawyers spend 60 per cent of their time drafting documents. If there is a tool that allows them to do that faster and better, then it is an obvious choice.”
Thomson Reuters / Catherine Bamford
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Catherine Bamford is a UK real estate lawyer (solicitor) who entered the legal industry by practicing with one of London’s most prominent law firms (Pinsent Masons LLP).
An assignment to make Pinsent Masons’ real estate practice “more efficient using automation technology” led to her becoming a “legal engineer” — as defined here at page 25:
“An individual with a hybrid skill set that can translate legal knowledge, processes and technology into commercial solutions“.
…
Bamford describes* “Legal Document Automation” by first explaining how the status quo works:
” … Let’s start with the way lawyers currently draft legal documents by taking a real life example.
“A landlord client calls his lawyer and tells her he has found a new tenant for a retail unit. The tenant is going to be carrying out some alterations and also paying a rent deposit.
Prolific reporting on artificial intelligence (AI) applications in business can be intimidating. Especially for those of us who lack hands-on expertise in the use of machines to perform cognitive functions.
For business leaders trying to control corporate legal costs I find that a concrete example can help to by-pass the technical stuff to make the P&L impact clear.
…
Take the real estate sector.
Specifically, consider the management of condominiums*.
We begin with a business problem that confronts all condo managers and their boards. In considering any action — or inaction — they must ascertain: What constraints are imposed by this particular condo’s governing documents?
From GlobeSt.com — a publication for real estate lawyers:
“CHICAGO–A typical client for Nicholas Bartzen, an associate with Levenfeld Pearlstein’s [a law firm] Community Association Group [a group of lawyers within the law firm that focuses on serving a specific kind of business client — condo managements and their boards], would be a condominium representative whose building has anywhere from four to 500 units and whose board has a question that needs to be responded to quickly.
“The answer can most likely be found within the condo’s governing documents but as Bartzen tells GlobeSt.com:
“‘ The way these documents have been written is anything but uniform.'”
Yesterday a prestigious global law firm showcased the baffling combination of brilliant legal expertise and management dysfunction that drives business clients to distraction:
A “2018 Innovation Hours program, which recognizes up to 50 innovation hours toward billable-hour targets for fee earners”.
This announcement expressly recognized that the attorneys involved in this program — “fee earners” it called them — work for clients under “billable-hour targets” imposed on them by the law firm.
And announced — without irony — its use of “billable-hours targets” in aid of “innovation”.
…
That it’s common for law firms to impose hourly quotas on lawyers who do the firm’s work — on pain of career jeopardy if they don’t meet that expectation — isn’t news.
Such quotas are Exhibit A for the proposition that when the legal industry values a lawyer’s work by how long that lawyer takes to do his or her job — the legal industry has pitted the attorney’s interests against those of the client.
Did the attorneys working to an hourly quota really think that their client company’s needs required X hours to perform that task — rather than (say) half that time?
Or were individual lawyers motivated by their respective quotas?
Quotas imposed on them by their law firm?
Managing Legal