Managing Legal
In the Financial Times article which concludes with the above statement, English lawyer David Allen Green reminds the reader that the value of legal work depends on quality — not quantity:
“… To assess the value of legal advice purely on the basis of cost or volume of output is a mistake. The most valuable legal advice can be succinct, the most effective legal letter can be one page long. What businesses are paying for is expertise and security. The point of legal advice for a business is to ensure that the right protections are in place and that risks are well managed. The problem with expertise and security is that they are hard to calculate by reference to the size of outputs.”
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Having stated that the value of legal advice shouldn’t be based on “cost or volume of output“, Mr. Green criticizes the legal profession’s lawyers’ business model. It often does not make sense, he says, to value an attorney’s services according to how long that attorney decides to take in performing a specific task:
“Some lawyers insist they should be paid by the hour. This can make sense in certain situations where the time a task can take is not certain … Often, however, there is no adequate reason for the hourly rate; it simply suits the law firm. Just as a carpenter would quote on the price for a chair regardless of the hours it will take, so an experienced lawyer should be able to quote a set fee for drafting a legal instrument or providing an opinion. Few things are genuinely so uncertain that an estimate is not possible, even if that estimate needs variation later.”
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Mr. Green then argues that clarity of thought — on the client’s part and on the lawyers’ — is the key to managing legal costs:
“The best way for a business to manage legal costs is to be clear what it wants from lawyers and to force them to be clear about what they offer.”
Mr. Green then identifies three ways in which the rethinking of legal work can lead to lower legal costs:
(1) Use of technology, (2) “a change in [lawyers’] attitude [about how they do their work]”, and (3) going directly to the individual attorney you need rather than letting a law firm (over)staff your matter.
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Use of technology
“Technology can make a difference to legal costs. Most undertakings — especially processes — can often be cheaper or better controlled. Automation can make expensive exercises such as due diligence and discovery less time-consuming and labor-intensive. Sharing documents and editing in real time can mean limiting the lucrative pantomime of lawyers swapping versions, deleting what the other side has suggested and so on as time runs down ….”
Change in [lawyers’] attitude [about how they do their work]
“… To manage legal costs directly needs a change in attitude as well as new hardware or software. Take, for example, obtaining legal advice on whether a proposed commercial course of action is permitted and how any risks can be minimized. Unclear instructions can lead to extensive advice packed with disclaimers and provisos. Maybe the costs have risen because lawyers keep seeking clarification and information to understand exactly what they are being asked.
“Or take transactional work, where lawyers on both sides of a deal negotiate and then provide a suite of contractual documentation for an asset purchase or share acquisition. Costs in high-value transactions can escalate rapidly, with both sets of lawyers repeatedly sending each other amendments and revised drafts that are of marginal, if any, consequence to the deal.
“It is almost as if such deals were a scheme for lawyers to charge as much as possible.”
Going directly to the individual attorney you need rather than letting a law firm (over)staff your matter
“… There is no need for businesses to go along with the old methods of law firm partnerships. For discrete pieces of work, a company can engage individual lawyers at a far cheaper rate than the partner of a top law firm, who would usually delegate the task anyway.”
To multiply (lawyers’) “bodies” thrown at projects, the legal profession’s business model inserts apprentice-type junior lawyers alongside attorneys who actually know what they’re doing.
Mr. Green’s point: Get the lawyer you want and need — and be vigilant against duplication of effort.