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Conventional law firms working to their profession’s prevailing business model — with its various forms of built-in waste — often claim to have a “customer focus”. And the in-house law departments who hire these conventional law firms may make the same claim.

But creating waste — or tolerating that waste by paying the bill for it — is not consistent with any meaningful “customer focus”.

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Most everyone — in any kind of business or nonprofit — says that they work from a “customer focus”.

Recent business management literature is full of articles that tout the primacy of the customer: “6 Ways to Build a Customer-Centric Culture“, Harvard Business Review, October 2, 2018; “Why Your Customers Should be Central to Your Innovation Efforts“, Strategy + Business, August 13, 2019. “Customer Centricity in the Digital Age“, MIT Sloan Management Review, May 30, 2019.

The legal profession is just as outspoken in its claimed embrace of the customer — or, as they like to put it — the “client”: “7 Habits of a Client-Focused Lawyer“, The American Lawyer, August 10, 2018; “8 Ways to Create a More Client-Centric Mindset at Your Law Firm“, JD Supra Perspectives, March 20, 2018; “Keeping a Firm Client-Focused During Changing Times“, Forum (Legal Executive Institute), September 3, 2015.

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My most recent post — about a December 17, 2019 article entitled “10 Ways That Outside Counsel Disguise Overbilling” — cited a case where an expert in auditing law firms’ bills for inaccuracies found this:

“The law firm charged 5.1 hours for work on a confidentiality agreement where opposing counsel had already provided a comprehensive draft agreement for comment and markup … This time is excessive. We propose the charge be reviewed to a total of 2.5 hours: 2.0 for analysis and markup of the draft agreement, and 0.5 for negotiation of points with opposing counsel.”

The legal bill auditor’s point: This law firm charged 5.1 hours times the attorney’s billing rate for a task that should have consumed half of that.

But I saw another point:

What’s any lawyer doing consuming 5.1 hours in creating a confidentiality agreement? Or consuming even half of that?

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5.1 hours might have been justified. I’d need to know more in order to make a definitive judgment.

But.

A lawyer charging a client for 5.1 hours — or even 2.5 hours — to conclude a “confidentiality agreement”, is a big … red … flag.

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“10 Ways That Outside Counsel Disguise Overbilling“. 

Headline of a December 17, 2019 article in Corporate Counsel, a prominent publication directed to in-house lawyers.

Citing the Association of Corporate Counsel’s findings in its “2019 Global Legal Department Benchmarking Report”, the article begins with this statement of fact:

” … Large companies with big legal departments go over budget by about 37% every single year.

“Why do they go over budget? A big reason is overbilling from the outside law firms they hire to do work for them.”

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Cost overruns of that size.

And inaccuracies in charges imposed on clients by people who serve as fiduciaries (attorneys) to the clients harmed by those inaccuracies.

Inaccuracies that advantage those outside firms — not ones that result in under-charges.

How did this become business as usual? How can it be that such overruns and billing inaccuracies are normalized?

What’s so wrong with this area of Legal — outside lawyers’ charges to client companies — that the article’s author, Ryan Loro, can be part of an entire industry — “legal bill auditing” — that checks up on the accuracy of what lawyers bill their clients? And gets paid solely from the excess of what law firms charge over what they agreed to charge (i.e., no net cost to the client)?

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This morning The Boeing Company announced that Dennis Muilenburg had resigned as its Chief Executive Officer.

This follows the loss of 346 lives in two separate crashes in 2018 and 2019, and allegations that Boeing had withheld from FAA regulators, and from airline customers and their pilots — vital information about hazards inherent in the Boeing 737 Max 8’s autopilot system.

This morning’s announcement from Boeing:

“Under the Company’s new leadership, Boeing will operate with a renewed commitment to full transparency, including effective and proactive communication with the FAA, other global regulators and its customers.”

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How to cut legal costs and equip front line employees to avoid basic risks?

  1. Automate as much as possible of the otherwise clumsy, slow, and (traditionally) manual process of creating and negotiating contracts;
  2. Then automate use of those contracts’ terms to execute what you agreed to do for your customers;
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So says Alex Hamilton, describing the gist of his recent speech to a conference about innovation in law practice — specifically about the role of artificial intelligence in companies’ creation and management of contracts.

A former partner at Latham & Watkins’ (2nd highest earning law firm worldwide in 2019 according to The American Lawyer) London office, and co-Chair of its global Technology Transactions Group, Hamilton founded Radiant Law in 2011, a law firm that supports large companies and banks in their major outsourcing and technology contracts, day-to-day commercial contracts, and contract review projects.

Radiant does contract automation in a big way — working with applications like docassemble (a free, open-source systems for guided interviews and document assembly originally created by a lawyer / computer programmer), and Contract Express (Thompson Reuters’ document automation software). Radiant’s mission is to free up businesses from manual drafting and review of masses of agreements by overwhelmed lawyers — replacing that traditional approach with faster, more accurate, and much cheaper contract creation and management.

So Hamilton’s description of the “circus of AI” does not reflect any skepticism about this technology’s potential for improving legal services.

Instead, lawyer and tech pioneer Alex Hamilton argues that his legal profession — my legal profession — is unserious about any meaningful use of AI for the foreseeable future (“AI and Contracting”, December 3, 2019).

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The key to cutting your company’s legal spending is not finding a lawyer who’ll work on-the-cheap.  To cut legal spending (intelligently), pay  – and don’t be afraid to pay well – for the legal help that you need. 

Then ruthlessly avoid paying for what you don’t need.

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The legal profession’s prevailing business model designs its service offerings to defeat this strategy. Most law firms work this way. And the inefficiencies are compounded by the fact that most in-house counsel put up with it.

As a result, and as I described it in my most recent post, attorneys’ conventional service delivery loads up a lot of what you don’t need, to go with what you do need:

  1. Hourly quotas for attorneys encourage more lawyer time per task;
  2. This motivates a proliferation of lawyers on any given task — each lawyer with their own hourly quota; and
  3. This proliferation leads to insertion of recent law graduates alongside fully qualified attorneys to do the routine & repetitive work for which law clerks or paralegals are suited — but billed to clients at several hundred dollars per hour.

And these three waste-embedding traits discourage adoption of any technology that can materially increase the quality or efficiency of the legal tasks being performed. (See my December 13, 2019 post for elaboration on why I qualify this statement with “materially”: Law firms’ bread-and-butter work — what makes them most of their money — tends not to get automated. But there are some pain-in-the-neck legal tasks for which those firms can’t charge much — and, in a growing number of cases, law firms are using AI or other tech innovations to automate these tasks.)

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Axiom Law is a legal service provider whose offering strips away these wasteful add-on’s. And leaves the client company with what it needs: An accomplished, prestigiously pedigreed lawyer, who practices at the highest level of their particular niche.

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Technology that improves the quality and efficiency of legal work will be stymied as long as hourly billing prevails among attorneys. At least that’s my belief.

Why do I say that?

  1. Hourly quotas for attorneys encourage more lawyer time per task;
  2. This motivates a proliferation of lawyers on any given task — each lawyer with their own hourly quota; and
  3. This proliferation leads to insertion of recent law graduates alongside fully qualified attorneys to do the routine & repetitive work for which law clerks or paralegals are suited — but billed to clients at several hundred dollars per hour.

A profession that gets paid more when its work takes longer, that gets paid even better when it assigns more people to do that work, and that charges clients for training its junior personnel — will lose money using a system that improves the quality or efficiency of that work.

Pretty straightforward, I think.

Last week I heard from a couple of others on this.

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On December 6 I attended “Artificial Intelligence in the Enterprise (Legal Services Version)”, sponsored by the Law and Technology Initiative of Northwestern Pritzker School of Law and Northwestern McCormick School of Engineering.

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10 years into my legal career I accepted a corporate client’s offer to run one of its divisions as a general manager. Only by leaving law practice and becoming an executive did I learn how to protect a company from its legal risks.

This protection has two elements:

First Element: Prevent legal problems before they happen — attorneys’ emphasis on fire fighting amounts to bad risk management; and

Second Element: When you fail at the first element, see to it that legal problems are solved with the same high quality and efficiency that you demand in every other corporate function.

Every corporate function other than Legal.

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Lawyers, for the most part, don’t see their jobs this way. Prevention of legal problems receive their lip service; but after-the-fact clean-up takes more time (hours billed) — and so it pays better. And one-off, ad hoc efforts on “bespoke” tasks (each contract is “different”) get their serious time and attention — “boring” process disciplines, not as much.

And when legal problems arise, the profession’s business model offers its own, dysfunctional, “management” methods:

  1. Pricing that’s unpredictable — because it’s based on how long the lawyers decide to take doing their work;
  2. Over-staffing by design — more people billing more hours; and
  3. Assignment of inexperienced attorneys alongside those who actually know what they’re doing.

Meanwhile, these “management” methods stymie adoption of accuracy-improving and labor-saving technology: Systems that remove errors automatically and make workflows more efficient reduce the hours for which attorneys can bill the client.

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So a company needs P&L people to make sure that the job of protecting the company from legal risks gets done right. And that’s because CEOs, CFOs, and other general managers — in my experience — focus more readily on the company’s business goals.

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No sector in 2019 is entirely isolated from the application of scientific knowledge for practical purposes like higher accuracy or greater cost efficiency.

But the legal profession tends to resist such moves when they might result in fewer hours billed by attorneys.

Consider an artificial intelligence company whose founder I met earlier this year:*

His staff lawyers and software engineers collaborate to “teach” an AI-based system in the fact patterns found in selected, high-frequency lawsuit categories.

Like slip-and-fall liability on business premises, or an employment claim for sex discrimination.

They also “train” this AI-based system in the court cases and statutes of the state whose laws will govern the suit.

When one of his client companies / software users is served with a lawsuit — by a document that the legal system calls a “complaint” — they designate local counsel to represent them in the state where suit has been brought. By law, local counsel has to respond with specified documents.

These specified documents consist of tedious replies to alleged facts; point-for-point rebuttals to legal doctrines; and meticulous identification of information and evidence that the lawsuit recipient has the right to demand of the party who brought suit against them.

As any lawyer involved in litigation can tell you from personal experience — myself included — this is “grunt work”.

But it has to be done right. And it has to be done by an attorney.

In the “answer”, you’ve got to avoid making the wrong response to factual allegations. And you can’t afford to miss an “affirmative defense” that might get your client off the hook. Finally, you don’t want to omit anything important from your document demand or other “discovery” requests.

Otherwise, at best, you’ll create unnecessary work, and incur expense, in correcting these errors. At worst — you’ll prejudice your client’s case if the judge refuses to cut you a break and let you correct your mistake.

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This is where this founder’s AI company comes in. 

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