DDo you think about what you are buying when you purchase legal services? Do your lawyers ask you what you are buying? If asked, many clients would respond that they were buying one of the following:

  • Time (the lawyer’s)
  • A work product (e.g. A lease, contract, advice)
  • A legal outcome (e.g. A successful court case, an injunction, an effective contract).

Some more sophisticated purchasers of legal services may answer they are purchasing a solution. The truly enlightened will understand they’re buying both the solution, and the effect of the solution and the experience of obtaining the solution.

In Bill What You’re Worth , David W Cottle repeats a story from a surgeon:

Do you know how long it takes a good surgeon to remove an appendix from first incision to closure? Seven minutes.  If you gave me two hours with anyone smart enough to finish college in five years, I could teach him or her how to remove an appendix.  It’s really very simple.  But do you know how long it would take me to teach that same college graduate what to do if something went wrong while removing that appendix?  Six years of medical training.”

A couple of lessons from this – when purchasing a service, you should be paying for skill rather than time spent.

But even more importantly, you should be focussing on outcomes and the experience, which define value, rather than the mechanics of the task itself.  The value to the patient is the successful removal of the appendix, and resolution of any complications, rather than the time taken.  As someone else put its – you are buying the hole not the drill bits.

Some consultants, when advising about cost management, emphasise the desirability of ensuring that the least expensive fee earners do the greatest proportion of the work.  This can be a false economy – it may be more effective for a skilled and experienced lawyer to undertake the work, providing a better outcome.

You don’t buy drill bits (the service), you buy holes, or the capacity to create holes.  When considering the value of the service, look at what you are actually purchasing.

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I am reading “What Matters Now: How to Win in a World of Relentless Change” by Gary Hamel. He describes an address he gave to Christian church leaders and the factors he identified as reasons for falling congregations. One of these is holding onto legacy beliefs about how to “do Church” including:

  • Church happens in church
  • Church is a lecture, not a conversation
  • Clergy lead while lay people follow.

Hamel notes that there is an adherence to the same “delivery model”, yet that model is one developed by organisations, rather than the Bible.

It strikes me that there are strong analogies with law firms.  Most law firms have the same delivery model and equivalent legacy beliefs:

  • Law happens in a lawyers office – yet look at LegalZoom and the myriad of online legal services available.
  • Law is a lecture not a conversation – clients need to be told what to do. Yet we have had decades of Peter Drucker and others emphasising how clients want a Trusted Advisor who is part of the client’s conversation, rather than preaching to the client.
  • Clergy lead while lay people follow – sadly some lawyer still believe that it is their way or the highway.

In the age of discussions about AI and robot law, perhaps the distinguishing feature for lawyers will be less about innovation than empathy.  Empathy extends to understanding what works for the client and what doesn’t, what type of service delivery helps the client, and most importantly, what it is the client really wants and needs through an understanding of the backstory.

This may mean that the firm needs to have different conversations with the client about how services are delivered in order to provide value, or it may mean that the law firm needs to look at process improvements in order to ensure the price of legal services is proportionate, but at a cost which the firm can bear.

But there is no doubt that the key change in the delivery model is the power of the client, not that lawyer, to determine what it looks like.

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Narrative medicine is gaining a following in medical schools, with Columbia now offering a Masters degree in the subject. Narrative medicine has been described as using “the ability to acknowledge, absorb, interpret, and act on the stories and plights of others” to enable doctors to ellicit, understand, and interpret their patient’s stories about their life as well as their illness. Better listening and interpretative skills will lead to better diagnosis and treatment.

My grandparents would not understand or see the need for the practice. Their family doctor knew the family history and circumstances of every patient simply by being part of the community. Nor did those doctors have the diagnostic tools available today , so were reliant on interpreting not just what the patient was telling them, but what they observed, heard around town and knew of the family history.

My grandfather and father were both lawyers in a provincial town. They both knew more about the circumstances of their clients than their clients ever told them. I’m sure they both knew when to expect a visit from a client because they had already heard about the circumstance leading to the visit, such as a death in the family, business purchase, or recent accident.  Both were David Maister’s Trusted Advisors ever before he coined the term.

I studied medicine for a couple of years before transferring to law and at the time was bemused by the proportion of incredibly smart kids who were studying with me, but were incapable of communicating with the other students.  It was a topic of discussion as to how these students would ever be able to extract a medical history from a patient.

Law schools need to offer something similar.  I have spent more than 25 years dealing with clients with issues about their lawyers, and the vast majority of the time the problem stem from a failure to communicate.  Companies talk about the “Institutional knowledge” – the knowledge of the corporate history which is often given as a reason not to change law firms.  But one of the problems for clients nowadays, where the leveraged model requires delegation and multiple lawyers working on a matter, is that institutional knowledge is not passed on to others in the firm.  The partner knows the history or backstory for the work, but does not pass that onto the more junior lawyer, who then does not have the full context for the advice.

In conducting training in Legal Project Management, one of the aspects we highlight is defining what “done” looks like.  This involves understanding what the client sees as acceptable outcomes, which in turn involves an understanding of the backstory – the reason the work is being undertaken, who the relevant stakeholders are, any relevant “institutional knowledge”, and how the client defines value.  All of these can only be ascertained through narrative listening.  With all the talk of AI reducing legal jobs in the future, perhaps Narrative Law will help create a truly valuable legal role which can only be undertaken by a human?

How do you delegate?
A McDonalds delegator specifies in precise detail what is to be done and how – but not leaving room for the delegatee to take a different (and perhaps better) approach. The delegatee learns little from the exercise. The delegation is micromanaged, and the delegator spends too much time on the task. Therefore the delegation is inefficient.

The Ikea delegator gives instructions which may appear to have been interpreted from another language, and when the delegatee receives the instructions, some key “bits and pieces” may be missing. The delegatee has a general idea of what the end picture should be, but can spend a great deal of time getting to an imperfect result. Given the time involved, the cost of the delegation may be significantly greater if the task had been undertaken only by the delegator. Also, the end result may not be satisfactory and the delegator may spend more time correcting or redoing the task. Again, the delegation is inefficient.

Tips for Effective Delegation

Consider the appropriate person to delegate to.
Except in exceptional circumstances, no more than one level of staff should be involved in the delegation. Avoid the partner delegating to the senior associate who delegates to the 1st year solicitor who delegates to the summer clerk. This results in enormous duplication of effort which cannot be recovered from the client.

Explain how the task fits into the whole picture.
Giving a brief background to the matter puts the
task in context and helps the person being given the task understand what is required.

Explain fully what is required – outcomes and expectations.
If you have a picture in mind of what the outcome will be, explain that. If a research project for example, will the outcome be a 20 page treatise or a 1 page summary? Consider giving guidance on how to do the task, particularly if there is one way which will be significantly more efficient – but don’t micromanage. Set out any deadline, and give pointers to any relevant resources. Most importantly in terms of costs, explain the expected outcome in terms of length of time to be expended, (is this a 5 hour job or a 1 hour job?).

Ask the person being given the task if they understand what they are expected to do.
If necessary, get them to tell you in their own words. Emphasise that they should come back for further direction or with questions if they are not clear about anything.

Give feedback on completion of the task.
This is the only way of ensuring continuing improvement and development.

One of the most common objections I hear as the justification to keep time recording when firm consider value pricing, is that it is impossible to measure employee performance without time records.    The easy response is that time recording only tells me how good the lawyer is at filling in their time records (whether contemporaneously or after the event).  It tells me nothing about the skills and expertise of the lawyer or whether they were working effectively.

Of course, time recording and time billed is a very easy KPI measure, but a forward thinking firm looks to a Balanced Scorecard approach of developing the whole lawyer.

In a value pricing environment the objective is effectiveness.  Peter Drucker described six major factors determining knowledge worker productivity:

  • “Knowledge worker productivity demands that we ask the question: “what is the task?”
  • It demands that we impose responsibility for their productivity on the individual knowledge workers themselves. Knowledge workers have to manage themselves.  They have to have autonomy.
  • Continuing innovation has to be part of the work, the task and the responsibility of knowledge workers. Knowledge work requires continuous learning on the part of the knowledge worker, but equally continuous teaching on the part of knowledge worker.
  • Productivity of the knowledge worker is not – at least not primarily – a matter of the quantity of output. Quality is at least as important.
  • Finally, knowledge worker productivity requires that the knowledge worker is both seen and treated as an “asset” rather than a “cost”. It requires that knowledge workers want to work for the organisation in preference to all other opportunities. “[1]

More insightful and productive key performance measures include:

  • Client feedback from client surveys and end of matter client feedback.
  • Knowledge sharing and development demonstrated by identification of precedent advices and other documents and material which could be utilised as templates, work on developing process workflows, conducting internal knowledge sharing events, attending external seminars and sharing knowledge gained.
  • Client development and marketing – referrals; contribution to marketing efforts such as writing articles, client marketing material, blog posts; conducting seminars; involvement in client marketing events.
  • Achievement of specific skill developments – examples would be achievement of specialist accreditation or completion of a course to develop particular software skills.
  • Effective file management – this is measured by the percentage of times in which there is a blow-out in respect of the expected time frames for completion of phase work. In reviewing this KPI it will be important to take into account whether the blow-out in time is due to matters beyond the control of the lawyer
  • Scoping of work – this is measured by tracking the percentage of matters where the scope of work needs to be varied. Frequent variation of scope indicates that the original scope was inadequate and did not reflect either the client expectations or the likely course the matter will take.
  • Scope creep – this requires a review of the original scope, which should include agreement as to the quality of service, and consideration about whether the lawyer delivered services either at a high quality beyond that required by the client, or services beyond those agreed with the client. It differs from scope creep into the increase of work is undertaken unilaterally by the lawyer and was never required to be undertaken by the client.
  • Percentage of documents requiring revision after settling by partner – this can initially be measured and then targets set to reduce the amount of revision required.
  • Completion of the end of matter reviews (after action reviews) – after action reviews are a powerful means of learning from each matter and sharing institutional knowledge.
  • End of matter team feedback – at the conclusion of the matter feedback should be provided by team members as to the following:
    • Whether there was effective delegation both from the perspective that matters that should have been delegated were delegated, and that the process of delegation provided clear instructions about the nature of the work required, the context for this work, time frames for the completion of work and expectations as to quality and form of the work.
    • Contributions to team ability to meet expected time frames – this involves a review as to whether delays on the part of any team member(s) resulted in other members of the team being unable to complete their tasks in a timely fashion.
    • Quality of the work – whether individual team members complete work at the level of quality expected or whether it became necessary to revise work or repeat work.
    • Quality of communication amongst the team – whether the level of communication between team members enabled the matter to be run effectively. Communications also include communications and any discussions between a team member, client, other lawyer, counsel, witnesses across the team.

[1] Management Challenges for the 21st Century, Drucker, 1999:142

I am a pretty good typist – on my usual keyboard, I average about 65 wpm with few mistakes.  Until about 12 months ago, the lawyers in my office were expected to do much of their own typing, but after a review, we moved to using digital dictation (DragonDictate), with legal assistants formatting and undertaking initial proofing of the dictation.

I know this goes against the trend of reducing the ratio of support staff to lawyers, but I want my lawyers focusing on what they do best, and that is not formatting documents.  Sometimes I wonder how many clients are paying for their lawyers doing work other than the skilled legal work they were trained to do.  I regularly see entries in bills relating to work which you would expect a clerk or paralegal to do.  This ranges from photocopying documents to attending to deliver documents.  These entries are obvious, but for claims for document preparation, how much if any of that time relates to formatting, and slow typing and other work that the traditional secretary used to do?

There is also another area where a client will never know if they are getting value for money.  How skilled are your lawyers in the use of technology?  I recently undertook an audit and concluded that the client had paid over the odds because their lawyers were not learning how to deal with electronic discovery, and they were becoming familiar with the database software being utilised.  Apart from the fact that the lawyers were spending more time than experienced users in locating documents in the database, there is the issue of one client paying for training lawyers who will then use their skills for other lawyers on other matters.

Perhaps you need to follow the lead of D.Casey Flaherty, the corporate counsel at Kia Motors America, who developed a Legal Technology Audit for his external counsel, testing their technology skills.  He has now joined with Boston’s Suffolk University to make the Audit available to clients and lawyers (for a fee), to test technology skills.  Clients can request that their lawyers take the test, and then will be notified of their lawyer’s score. Interesting to see what actions the client takes if the lawyer fails the test.  It’s also a matter of what skills the client considers important for the particular matter.

Of course, the question of whether or not lawyers are focussing on legal work or administrative work really comes into play when the lawyer is charging by the hour, and the client is concerned whether the time spent is fair and reasonable.  It’s far less of an issue with an agreed fee.

Many practitioners who are considering adopting value pricing fear that they will somehow be in breach of the relevant Legal Profession Act or Professional Conduct Rules.  Let’s look at some of the concerns.

 

I have to keep time sheets

There is no provision of the LPA, the new Uniform Law or Professional Conduct Rules which requires a lawyer to keep time sheets.  However, if a lawyer enters into an agreement to charge by reference to time (i.e. hourly billing), then that agreement of itself requires the practitioner to keep records of the time they have spent, in order to discharge their onus to prove the work they have done, and the time spent.

However, if a practitioner agrees a fixed fee with a client, there is no provision that requires that a record of time spent is to be kept.

What is required is that the practitioner be able to prove that the agreed fee is fair and reasonable, and therefore it is important to be able to demonstrate that the client understood the fee that was being proposed, the other pricing options available to the client (e.g hourly billing, scale or Practitioners’ Remuneration Order), and that the fee is fair and reasonable having regard to the work undertaken and the value delivered.

The new Uniform Law supports fixed fees, by providing that prima facie, the fee disclosed in a cost agreement is fair and reasonable.  Further, the Uniform Law requires that a practitioner advise the client of different pricing options, with charging by task or phase given as examples.

 

What if the client asks for an itemised bill?

Again, there is no caselaw or legislative provision which says that, where the charge is by reference to a fixed fee, that an itemised bill has to set out the work undertaken by reference to time.  The caselaw on itemised bills relates to matters where the law firm was charging on an hourly rate basis, or by reference to the scale of costs.  In both of these circumstances, the itemised bill must set out charge made for each separate task, and where the pricing arrangement is time based, the itemised bill must also set out the time spent on each task, because that is the agreement.

If the client asks for an itemised bill, you do have to provide one.  Where you are charging a fixed fee, this means you would provide a bill detailing the work that you did, setting out the documents you prepared (perhaps detailing the various drafts), letters and emails sent and received, telephone calls and other attendances, and any other work. It would be preferable to be able to detail the length of each attendance.

 

What if the retainer is terminated part way through the work?

Your agreement with the client should have clear provisions as to how the price will be calculated if the retainer is terminated prior to the conclusion of the matter.

 

The Courts look at time as the basis of what is fair and reasonable

No they don’t – well not entirely.  The Victorian Costs Court tends to have regard to the relevant scale of costs or Practitioners’ Remuneration Order as a measure of whether a fee is fair and reasonable. At this point, there is no caselaw to give guidance to the Court as to how to assess whether a fixed fee is fair and reasonable. As previously, noted the new Uniform Law provides that the fee disclosed in a cost agreement will, prima facie, be considered to be fair and reasonable.

It is vital that a practitioner be able to demonstrate that the client gave informed agreement to be fee. It would also be preferable to demonstrate how the fee was calculated and whether or not this was explained to the client.

Of course, it’s important to remember that contingency fees are banned in litigious work. In other words, the fee cannot be calculated by reference to the amount recovered or paid in litigation.

 

The Uniform Law and fixed fees

The Uniform Law replaces the Legal Profession Act in regulating the arrangements between lawyers and their clients. Whilst it has been passed by the Victorian Parliament, it will not come into effect until the relevant rules are giving effect to be Uniform Law are finalised. At this stage it is anticipated that it will take effect from 1 July 2015.

There is one provision of the Uniform Law which of itself should give pause to all lawyers and promotes fixed fee value pricing arrangements. Under the Uniform Law, if lawyers fail to comply with the disclosure provisions (including providing accurate estimates of the total legal costs and updating those estimates), the cost agreement will be void.

This is a very good reason to enter into a fixed fee agreement with the client at the outset and therefore not worry about updating any estimates of costs.

How does my client recover party/party costs?

The Federal Court recognises that practitioners may charge on a basis other than time and the scale of costs specifically allows the Court to fix the fees recoverable by one party from another by reference to a non-time based agreement.

In other jurisdictions, the scale of costs include items allowed by reference to time, and other work which is generally calculated by reference to the length and number of documents. These types of scale have been in effect for decades, well before the almost universal adoption by lawyers of time costing.

For those litigators who entered into value pricing arrangements with their clients, the simple solution is to record the length of attendances on file notes. Entering into a value pricing arrangement doesn’t mean that you shouldn’t be keeping file notes to evidence the work undertaken, both from a risk management perspective in the event that there is a dispute with the client about instructions given, or as good practice to ensure the file can be transferred to another solicitor within your practice in the event that you go on holiday, become too busy to continue to conduct the matter of some other reason.

When I ask clients what they want from their lawyer, agile is not a quality that comes to mind.  But what is agile? Agile is defined as mentally quick or alert, nimble.  It means the ability to respond to change.  Don’t you want that from your lawyer?

Agile project management is a form of project management particularly popular with software developers.  Its focus is on flexible, iterative management of projects, and is often used to manage aspects of a much larger project.

The benefits of this iterative style of project management, when applied to legal work, are many.  Legal work, particularly litigation, is subject to outside influences beyond those of a software or construction project.  Lawyers argue that project management techniques cannot be applied to litigation because “litigation is like trying to build a wall, with your opponent (and sometimes the judge) trying to knock it down”.  Agile project management techniques are designed to facilitate change and adapt to these outside influences.

Here is a link to “The Agile Manifesto” developed by a group of software developers.  A couple of the principles ring particularly true for legal work:

  • “Business people and developers must work together daily throughout the project”.

Translated to legal work: Clients and the legal team must work together throughout the matter, with the legal team ensuring the client is part of the project, and the client being prepared to be engaged in the matter.

  • “The most efficient and effective method of conveying information to and within a development team is face-to-face conversation”

The same applies to a legal project – arrange formal team meetings, with agendas and action points, rather than relying on emails, conversations on wikis, and the like.  Many slips ups or redos have occurred as a result of lack of face to face conversations.  And the major benefit of these conversations can be brainstorming and problem solving, finding alternative solutions and approaches, that would never occur through emails.

  • “Simplicity – the art of maximising the amount of work not done – is essential”

Lawyers are taught to seek perfection.   But sometimes good enough is good enough, and we also need to understand everyone has a different view of what is perfect.  Focussing on simplicity – whether it be clarifying the major points in issue, the essential aspects of the contract, or writing an clear advice – is a skill many lawyers never develop.  Watch a great advocate in court – he or she will make the case appear simple by distilling and focussing on the key aspects.

  • “At regular intervals, the team reflects on how to become more effective, then tunes and adjusts it behaviours accordingly”.

This embodies the Japanese principle of Kaizen – the art of continuous improvement by small increments.  Most famously, Toyota adopted Kaizen after World War II to develop a sustainable and competitive automotive business.

How often do you, as client or lawyer, undertake end of matter reviews?  How often do you step back during a matter and look at how it is going, what could be changed to make the conduct of the matter more effective?  At the end of each team meeting, ask your team “What could we be doing or how do we change the way we are now doing things, which would make us more effective on this matter?”  It could be that one team member is creating a blockage by not meeting agreed time frames, maybe we improve delegation to better clarify tasks, maybe the client needs to be more engaged.

As a client, I want an agile lawyer with a responsive, nimble mind, and I want a legal team who is agile and applies agile techniques in legal project management.  As law firm or lawyer, I want to be known for my agility and to adopt the Kaizen principles of continuous improvement.  It will keep me ahead of the pack.

I’ve spent much of this year conducting workshops on Legal Project Management, Estimating Costs and Becoming an Informed Purchaser. One theme from attendees, whether external lawyers, in-house counsel, or other clients, is the difficulty in dealing with a difficult opposing party or lawyer.
Judge Gerald Bruce Lee of the Eastern District of Virginia provides great advice for dealing with that difficult opponent.

“Don’t wrestle with a pig. You’ll get filthy and the pig will love it.”

Judge Lee apparently conducts a vigorous “rocket docket”.  But back to the advice.

Difficult opponents come in many forms –
• The incompetent lawyer who does not know what he/she is doing, causing the good lawyer to do more work to try and solve the lack of action or competency,
• The aggressive lawyer, whose modus operandi is to write frequent and lengthy letters threatening interlocutory applications, about all manner of issues.
• The process driven lawyer, whose automated workflow systems sends reminder letters advising of your obligation to do something days or weeks before the due date, and other process letters which are irrelevant to the particular matter. But when it comes to anything out of the ordinary, the process lawyer has difficulty adjusting to the non standard matter.
• The litigant with the “matter of principle” or whose case is their “cause”.

There are various impacts when a matter involves one of these lawyers. There is a danger of a good lawyer becoming engaged in bun fight which distracts from the main issues, with associated increases in costs and possibly a blow out in duration of the matter.  The problem is how to close down the difficult opponent? If you have a docket judge like Judge Lee, it is easier, but even the most experienced lawyer is sometimes wary of ignoring aggressive correspondence, where there is the threat of an interlocutory application. In many jurisdictions, legislation such as the Civil Procedure Act (Victoria), the overarching obligations in the Federal Court Act, and the like, justify taking a position of non- engagement, and give clear direction to the judiciary to support such positions.

Sometimes its the client who is keen to engage in the fight. It takes confidence and experience to convince a client that it is preferable to take the high ground and simply give the opposing lawyer/party enough rope to hang themselves.

But it’s never the answer to get down in the mud and get dirty.

The UK magazine Legal Week has reported on the review by the gaming group Ladbrokes of its external legal panel. There are a couple of features of the review which merit further consideration. It is clear that one of the objectives was to move the legal panel away from hourly billing to alternative pricing arrangements. This was achieved in three ways:

  1. Ladbrokes required successful tenderers to move away from hourly billing by 1 January 2015, the halfway point of the four-year panel term
  2. Ladbrokes were quite specific about the “granular approach” they required responders to the tender to take, about the nature of the alternative fee arrangements proposed
  3. They focused on the value adds which responders proposed, and developed a “value menu” so that responses could be evaluated against each other.

Ladbrokes have also utilised technology as part of legal spend management, implementing Tymetrix software for billing review and panel appraisal.

The approach demonstrates best practice in legal spend management in a number of ways:

  • The tender itself was very specific about the objectives sought to be achieved.
  • The tender required responders to be very detailed about the alternative pricing arrangements.  By setting a deadline regarding when hourly billing was to cease, it forced responders to put specific proposals. Too often the request for an alternative pricing proposal in a tender is seen as an optional add-on, rather than the principal focus of the tender. Responders often simply indicate that they are happy to discuss alternative pricing arrangements in appropriate circumstances, without putting forward any specific detailed proposals.  Clearly this kind of nonresponse would not have been available to those responding to the Ladbrokes tender. It would have resulted in their tender response being deemed non-compliant.
  • Finally Ladbrokes have taken a holistic approach by utilising sophisticated legal spend management software together with a sophisticated tender. This then enables proactive and positive panel firm management during the life of the tender. One of the failings in legal spend management is the management of panel firms following a successful tender. The tender process itself is simply the first step in an ongoing management process, and there will be little achieved in management of legal spend and outsourcing of legal work if the second and often more crucial part of the process, that is the proactive management and provision of feedback with, is not undertaken.