Managing Legal
The Point
From Radiant Law Founder Alex Hamilton’s brief interview video contained within LexisNexis’ lengthy new report, Calling Time on the Billable Hour:
“When we started Radiant, what was absolutely clear to us was that the incentives were all messed up within law firms … If you’ve worked … like I have as a partner of a big law firm, you know that there is a huge amount of silly activities that are not really adding value and are being charged to the client at huge rates.
” … We knew that we had to fix the incentive problem … no hourly billing. What has that meant for us? It’s meant that we are at risk … We’ve had to figure out how to do deals or write business contracts in a way that we’re not constantly losing.
“Because we know the game, the initial estimate is always blown through in the hourly billing world. If you have to live with a fixed price, and really live with a fixed price, then you’ve got to get better at how you do it.”
This Matters to Your Business
“Getting better at how you do it” is precisely what a law firm disincentivizes by pricing its legal work according to how much time they consume in doing it.
Packing waste into those hours billed can assume the form of “silly activities that are not really adding value and are being charged to the client at high rates”, or simply taking unnecessary amounts of time to do work that is actually needed. Either way, hourly billing rewards the law firm financially for squandered effort as long as the time consumed is documented.
By contrast, Radiant Law’s offer of services specified in advance — for a fee that law firm and client company agree in advance — has stimulated Radiant Law to a better performance than running the hourly meter would have enabled: delivery of high-volume contract projects to clients, with around 85% of workflow turned around within half a day of either drafting relevant documents from scratch, or responding to a mark-up.
Because …
As Alex Hamilton puts it, the legal profession clings tightly to its time-based status quo in pricing; stoutly resisting routinized cost-efficiency, process-enabled accuracy, and speed like Radiant’s:
“Traditional law firms aren’t optimized for cooperation, they are optimized for autonomy of partners. Good luck telling them that they all have to work in the same way, a fundamental for doing routine work. Good luck getting them to switch to fixed fee only and ditching time sheets (despite being talked about for decades, can you name one large firm that has done it?).”
Where this leaves the business client and the conventional, hourly billing law firm, again from Alex Hamilton:
“Traditional lawyers at law firms literally have no clue how to make everyday contracting (our specialty) go fast … Traditional law firms are structured for the bespoke [made to order] and are in no rush to do anything … It takes a typical large law firm about two days to complete a conflict check and this can extend to weeks ….”