Strategic Legal Technology

ALM’s Daily Business Review reported Friday that Greenberg Traurig lays off staff to achieve 4-to-1 attorney-secretary ratio. Firms may find this news startling or old hat. For me, it speaks to the issue of improving law firm service delivery. 

The article notes that with “new technology, fewer paper copies and scheduling software, secretaries are starting to become legal dinosaurs, legal experts say.” It also reports some firms are moving to ratios of 5:1 or 6:1.

When firm management contemplates increasing the secretarial ratio, does it consider the impact on client service? I fear not. Few firms systematically consider what support lawyers need. (See my 2009 post Law Firm Staffing Reference Model.) The right level of support depends on how to provide top clients with the best experience.

My experience suggests that secretarial ratios do indeed need to go up. As firms ratchet back on secretaries, however, they must provide other types of support. For example, I know at least one firm that replaced secretaries with recent college graduates; it found the former had skills more closely aligned with lawyers’ actual support requirements.

More generally, lawyers may need less help with documents but more help understanding their clients’ companies and industries. And they need help setting alternative fees and managing projects. As secretarial counts go down, the headcount of pricing experts, project managers, and business researchers must go up.

Simply following other law firms that make cuts - without thinking through the client experience impact - means firms losing a big opportunity to improve client service. Firms should re-think their service delivery approach. As they consider how to improve client experience, they will likely identify both cost-saving opportunities and areas for new investment.

[Additional notes: For more on secretarial ratios, I want to point out that while technology enables a higher ratio, it is not the only factor. For about a decade, firms have had two other options that support higher ratios. First, smart firms off-load heavy word processing to central word processing staff, either in an owned-and-operated center or with an outsourcing company. My 2008 ALA Legal Management magazine article, Dealing with Documents: The Pros and Cons of Outsourcing, explains the benefits of this approach. And second, creating secretarial teams can help improve utilization and service, as discussed in my 2003 Legal Times article The Future of Legal Secretaries.]

Clients assume lawyers have the right expertise and will deliver good outcomes. For all but a few matters, to keep and win work, firms must create a good client experience by customizing and optimizing service delivery. 

I start with a couple of observations from outside legal about service delivery. I now use Skype for conference calls and join.me for screen sharing. Skype is free and, unlike most audio conference services, shows who is talking - a great feature when on the line with new contacts. Join.me, unlike Webex, offers basic service free and is less of a hassle to set up. Because new these new providers offer better service delivery, they win my business. The lesson? Through better service delivery, new providers gain share of market and share of wallet.

That ideas is now taking hold in the legal market. Only a few firms will continue to win business on the strength of their name. The rest must provide clients with better service delivery to keep and win business. That means understanding client expectations and changing how how lawyers practice and the firm operates, for example, with alternative fee arrangements, process improvement, project management, KM, technology, new approaches to resource allocation, a better approach to staff support, value-add services (e.g., private content), and tailored business intelligence.

Three news items this week drive home this point. The Monday New York Times editorial, The Cautionary Tale of Dewey & LeBoeuf notes that large firms face “more competition from firms abroad and newcomers to legal work", a move of work in-house, and clients who “are increasingly aggressive about keeping fees down and asking firms to share risks”. That BigLaw market pressures make it to the op-ed page of the Times tells us a lot.

Today, Patrick Lamb of Valorem Law, in his New Normal column in the ABA Journal, writes “Skilled judgment must be delivered efficiently. Clients care what service costs—even skilled service. Clients want service to be delivered predictably.” He likens a good lawyer to a symphony conductor who causes “other lawyers and third parties to work efficiently and effectively together to produce results at a cost known to and approved by the client.”

The Times summarizes the pressures and Patrick explains how service delivery can respond to the pressure. But the managing partner of Seyfarth, J. Stephen Poor, in the Monday Times Dealbook Blog post, Re-Engineering the Business of Law, illustrates that making these changes is not so easy. He opens with:

“True long-term success requires businesses to improve continually and reimagine how they operate in the face of changing competition and market forces. Yet this innovative urge, which drives so much of the rest of the American economy, is largely absent from large law firms.”
[The imperative for firms he says is to] “find different paths to deliver value to those who buy our services. Lawyers today should be asking themselves nontraditional questions: how to apply resources more effectively, to shorten cycle time and lower the cost of their work product and other deliverables, while raising the level of service.”

He explains challenges his firm faced in executing their well-publicized process improvement and that marketing is not enough: firms must change how they deliver services.

I agree. One of my current projects is developing a service delivery effectiveness assessment. In doing that, I see that while few metrics or guideposts exist, firms have the opportunity to consider - and adjust - many aspects of how their lawyers practice and how their firms operate as businesses. As Mr. Poor suggests, the path may not always be easy. But the imperative is clear and the pay-offs worth it.

[Link to prior Service Delivery posts.]

This roundup highlights some of my Tweets (@ronfriedmann) in March and April focusing on The New Normal, Legal Process Outsourcing (LPO), and e-discovery. 

 

THE NEW NORMAL

UK @RiverViewLaw offers fixed fees, subscriptions, refunds, #KM bank of 650 docs, consulting to GCs. Interesting #LawFactory  20 Feb

RT @jordan_law21 post - Rebundling the law firm http://lawlks.ca/5eb || helpful way to think about services firms can/should offer  22 Feb

@atlblog: Bingham McCutchen Laysoff Staff http://bit.ly/ylOsdd || with BigLaw overhead/L > $200k, more cuts likely

Legal Week article by / on Simmons & Simmons online legal service http://bit.ly/xp7vWM || @elexica re-launched  8 Mar

Conflicted, and Often Getting a Pass http://nyti.ms/woWtdC || Bob Weber, GC IBM - law firm outside ownership would be worse? Explain.  13 Mar

NYSBA Ethics Opinion 911 (3/14/12) http://bit.ly/GJoLaF || NY lawyers practicing in NY cannot work for firm with non-lawyer owners  21 Mar

Legal Week: Eversheds makes temp lawyer service Agile permanent w 80 lawyers http://bit.ly/GHDRKz || Now at least 3 firms offer temp Ls   23 Mar

RT @pangea3: ACC Census Sees Power, Pay, and Prestige for In-House Counsel http://bit.ly/HwA1aj || and more build than buy   30 Mar

Legal Week: UK Simmons opens lower cost office in Bristol for “high end advice in close co-operation with London” http://bit.ly/HObWxt   3 Apr

Companies Reset Legal Costs http://on.wsj.com/I8UGmG || as more CEOs read about AFA, trend likely to grow even faster  9 Apr

Want quick overview of BigLaw new normal? See today @ValoremLamb http://bit.ly/HvBN8U + @jordan_law21 http://bit.ly/HAMg99  11 Apr

Ethics 20/20 Comm. Suspends Campaign to Draft Proposal on Nonlawyer Ownership of Law Firms @ABAJournal http://bit.ly/IHvXGg || my eyes roll    16 Apr

RT @axiom_law: When the white shoes walk away http://ow.ly/anL1k || scathing Bloomberg article on BigLaw  19 Apr

The Death Spiral of America’s Big Law Firms - The Atlantic http://bit.ly/IDyBd1 || cannibalizing, not innovating (HT @jeffrey_brandt )  20 Apr

Is Your Firm or Legal Department ‘Old Normal’ or ‘New Normal’? See Our Checklist by @PaulLippe http://bit.ly/I9pxRD || Great comparison  24 Apr

“Lower cost structures helped propel two firms onto The Am Law 100″ http://bit.ly/Ix11oj || In New Normal, costs + rates matter   27 Apr

 

LEGAL PROCESS OUTSOURCING

LiveMint / WSJ reports CPA Global LPO headcount in India has dropped b/c demand down, work shifting to US http://bit.ly/wEB2yN  24 Feb

ABA Ethics 20/20 Comm outsourcing report http://bit.ly/wLLiWU || imo, no big changes. Makes clear legal outsourcing is ok subj to rules  29 Feb

NLJ: A Decade of Legal Services Outsourcing http://bit.ly/zcL42q || LPO overview / retrospective by head of Mindcrest   Mar 10

@gnawledge (3 Geeks) post: Managing the Law Firm Risk Role in Outsourcing http://bit.ly/xR5jPB || integrating LPM + LPO to comply w ethics   14 Mar

Lawyers Weekly (Aus.): In-house counsel embrace LPO http://bit.ly/ymk5Iy || Oz is a leading indicator for Anglo legal markets   16 Mar

Press release: Merrill Corporation Adds Legal Process Outsourcing Services in India http://bit.ly/GBAaMu ||  20 Mar

The Lawyer: @Axiom_Law to open Belfast delivery center http://bit.ly/GBxjgG || LPO competition?  20 Mar

@dannyertel post on sourcing and LPO http://bit.ly/I0reg8 #LPO || succinct report on state of market  10 Apr

 

E-DISCOVERY

@RalphLosey explains why lawyers must let go idea of linear document review in #eDiscovery http://bit.ly/xrbyr3 || how long a wait?  12 Mar

Da Silva Moore + Kleen = It’s All About the Math http://bit.ly/HJuie3 || statistics key in #eDiscovery 10 Apr

The Great Ediscovery Shake-up – or is that Shakeout! by @ChristianUncut http://bit.ly/HPOwJs || gr8 recent deal wrap-up / state of market   16 Apr

Last week I co-chaired the Hildebrandt West LegalEd Center CIO Forum in NYC. I report here a few observations from the conference.  

My highlights synthesize and interpret comments from multiple panelists and participants plus a pre-conference survey of priorities:

• Focus on Infrastructure. CIOs spend most of their time on core infrastructure projects, with particular focus on security, document management / search / information governance, Windows 7 and Office 2010 migration, mobility, and virtualization. Many CIOs want to help firms grow the top line but have little bandwidth to do so.
• Mobility and Security. It’s worth calling out mobility, mobile device security, and security as the most challenging problems to solve. This theme came up repeatedly across sessions. The stakes are high and the solutions vary, so I expect this will remain a concern, if not preoccupation, for some time. Audience comments suggest that Good and Mobile Iron are splitting the market for mobile security.
• Information v. Technology. In a discussion about IT organization and the span of control of CIOs, the focus on infrastructure was also apparent. The “I” in CIO means information and, to be sure, some CIOs have library, conflicts, records, and other information functions reporting to them. But many remain focused on technology, not information. And all acknowledged that the information intensive functions of marketing and finance need to remain separate domains. Approaches to providing IT support to these vary though many firms recognize the need for dedicated IT support housed in these departments. One interesting theme that emerged is that IT is typically the only function that regularly operates 24x7, which means IT often ends up fielding support for non-IT functions
• Benchmark Surveys Can Cause CIO Headaches. Most legal market surveys of staff and spending ratios do not accurately reflect any single firm’s IT operations. There has always been a fair bit of variance across firms but two relatively new factors make it that much harder to draw comparisons. First, IT does much heavy lifting to support the frequent changes in contract lawyer headcount. With firms relying increasingly on contract lawyers, typical staffing ratios lose some of their meaning. And second, CIOs voiced concern that survey questions do not distinguish between nor capture total IT spend, both internal and external. I suppose that has always been true but it sounds like more firms are outsourcing more services. As a result of these two factors, CIOs must spend a lot of time explaining to management why their firm seems out of line with survey benchmarks.
• Cloud Computing. I heard very little about about cloud computing - much less than I had expected.

On Thursday I attended the Iron Tech Lawyer Competition at Georgetown Law School. Six student teams presented legal advisory systems they built in a competition that will pit the Georgetown winner against New York Law School winner. It’s great to see an innovative law school class focused on how lawyers can use technology to improve law practice and serve clients more effectively. 

For a mainstream media news report of the competition, see the Nightly Business Report segment (~3 min), Handy Legal Advice, in the Palm of Your Hand.

The competition was planned and hosted by Prof. Tanina Rostain and Prof. Roger Skalbeck in their class Technology, Innovation, and Law Practice: An Experiential Seminar.

Six teams each presented for 10 minutes each and then judges asked each questions for five minutes. The teams built interactive advisory systems using expert system software by Neota Logic. Here are the applications and student teams:

• Business Entity Adviser - Dayo Lesi ‘12 (joint MBA) & Jack Moore ‘12
• Copyright Navigator - Bill Cheng ‘13 & Stacey David ‘12
• Palagora: The Online Marketplace of Legal Vendors - Bob Nichols ‘12 & Seth Shich ‘13
• Protective Orders Made Easy: On the Beat - Automobile Search Warrant Adviser - Claudia Greves ‘13 & Dustin Robinson ‘12
• Same-Sex Marriage Adviser - Brittany Clement ‘12, Hallie Sears ‘12 & Lisa Umans ‘12
• The Citizen Adviser - Konstantinos Rokas ‘12 & Maryam Tabatabai ‘12

The Citizen Adviser won Best Iron Tech Lawyer 2012. The Same Sex Marriage Adviser won Excellence in Design and Copyright Navigator Excellence in Presentation. The judges were:

• Professor Julie Cohen, Georgetown University Law Center
• Professor David Johnson, New York Law School
• Professor Gerry Spann, Georgetown University Law Center
• Ed Walters, Founder and C.E.O Fast Case

It was great to see such nice team work - and impressive student work product. I was struck by how building these apps - and having to present them in a competition - caused the students to use multiple skills: understand client needs, conduct legal research, develop logic to collect and analyze information, design interfaces and polished reports, assess potential business models, and present to peers and experts.

The judges asked questions that revealed, directly or indirectly, some of the issues interactive advisory systems raise. These include the best marketing approaches, the difference between paper guides and software, issues around the real-time mobile delivery of legal advice, how much know-how users need to use an app intelligently, the unauthorized practice of law, and whether such apps will increase or decrease the role and amount of work for lawyers.

Kudos to Georgetown Law, Prof. Rostain, and the student teams for their creativity and hard work. I hope this contest spurs both law schools and practicing lawyers to think harder about how they can deploy technology to serve clients better.

Four mainstream media articles on Wednesday, 18 April 2012, about dynamic sectors of the economy offer potential lessons for BigLaw leaders. 

Sales Are Stagnant, but I.B.M. Earnings Beat Analysts’ Expectations in the New York Times reports that IBM revenues are flat but earnings up because the company is shifting to higher margin business.

Many large law firms also face flat or modest revenue growth. Most firms think the move to higher margin means more bet-the-company work. Yet a better path to margin improvement may lie in doing higher volume work more efficiently. Consider Online Education Venture Lures Cash Infusion and Deals With 5 Top Universities (NYT), which explains that leading universities are investing in online course delivery that will make classes available to thousands of students globally. Universities may be mission-driven but they need to make ends meet so I assume will eventually generate income from extra eyeballs. Premium work at low volume is not always the winning strategy.

Of course, margins are also a function of costs. Warming Up to the Officeless Office in the Wall Street Journal explains that growing numbers of workers no longer even have cubicles. Instead, in “free address” or “non-territorial offices", workers claim a desk or space at a communal table each day. This lowers occupancy and energy costs significantly; it also reduces e-mail traffic and speeds decision making. It might not work for lawyers but with many working virtually anyway, firms can adjust real estate.

Firms can also adjust other costs. They can emulate IBM, which taps” pools of lower-cost skilled workers, especially in India.” Law firms don’t have to go offshore today for lower cost labor - many smaller cities offer lawyers and business support staff at lower cost than major metro areas.

Business - and even education - changes daily. For those of who think BigLaw is not changing enough, a question is whether law firms can’t change faster or simply won’t. Carriers Warn of Crisis in Mobile Spectrum (NYT) illustrates the difference between “can’t” and “won’t", suggesting mobile operators can make do with their current spectrum allocation if only they invested in the right technology.

Law firms can change if they have the will. The tools and the strategies are not that complicated. The only question is how long before “will not” becomes “can”.

Attention innovative law firms, law departments, and legal service providers: get recognition for your innovation - apply for an InnovAction Award. 

The College of Law Practice Management sponsors the InnovAction Award, which honors innovation in law practice management. Innovation can range from technology, to new business models, to marketing campaigns, to creative office design.

Change in the legal marketplace continues to accelerate. If you have developed, for example, a new and better way to serve your clients, a breakthrough way to find new business, new metrics that really change how you manage your business, or a truly innovative way to value and sell your services, you deserve the recognition. Now in its 8th year, the InnovAction Awards conduct a worldwide search for lawyers, law firms, and other providers of legal services who are engaged in extraordinary, game-changing, innovative activities. Applications and more information are available at www.innovactionaward.com.

Here are my personal favorite past winners:

• Berwin Leighton Paisner, LLP (BLP) for Lawyers On Demand (LOD) [2011]
• Pro Bono Net for LawHelp Interactive initiative [2010]
• Mallesons for PeopleFinder [2008]
• Novus Law, LLC for documenting and proceduralizing the e-discovery process [2008]
• DLA Piper for Venture Pipeline [2005]

InnovAction winners present at the College’s annual “Futures” conference, which will be at the end of October this year, at Georgetown Law.

[Disclosure: I am a trustee of COLPM and a co-chair of the 2012 Futures Conference . I have no influence over who wins awards and no financial interest in the outcome. I promote these awards and the College because of my passion to improve law practice and the business of law.]

Does BigLaw have a future? 

Two pieces yesterday remind us that the legal market faces peril and change. Jordan Furlong, in Losing the Confidence Game, points out six trends that threaten lawyers. He concludes by wondering whether lawyers are up to meeting the challenges. Almost as if written in response but simply published the same day, Patrick Lamb of Valorem Law, in the ABA Journal, A ‘Valorem Dozen’: The Ingredients for One New Normal Firm, offers great suggestions on how to do so. His tips include using low cost resources and focusing on outcomes rather than time.

For many reasons, not least that general counsels buying habits change slowly, I see no existential threat to BigLaw. Some firms may fade, some may implode, but others will thrive. Thriving, however, requires thinking and innovating. Some are doing so as these examples and data illustrate:

• I count 10 firms that operate low cost, centralized service centers, some of which provide lawyer support as well as business services. The earliest of these I can identify opened in 2001 - so this is not new.
• About a dozen firms, perhaps more, have industrialized their approach to e-discovery and document review.
• Several firms now take project management seriously. For the latest and a very interesting example, see today’s post by Pam Woldow, A Case Study at the Cutting Edge: Legal Project Management in Australia (about Mallesons).
• Three firms now offer alternative staffing models, arguably competing with staffing agencies. I know of Berwin Leighton Paisner’s Lawyers on Demand, Eversheds Agile, and Fenwick & West’s FLEX. Freshfields had planned to launch an alumni network, Freshworker, but put it on hold according to Legal Week
• About one-half dozen firms have publicly announced partnerships with legal process outsourcing (LPO) companies.
• I understand about a dozen firms now have pricing specialists to deal with alternative fee arrangements.

These make me optimistic that some large law firms will prosper.

My iPad is great but no way can I give up my PC. I long for a device that combines the benefits of both. 

Last December in Tablets versus PCs I wrote that tablet computers do not replace PCs. The iPad is a great way to consume information plus its form-factor and screen paradigm create an experience different than a PC.

I create a lot of content, however, so cannot go for long without the full versions of Word, Excel, PowerPoint, and OneNote. On short trips, where I don’t have time to do more than e-mail anyway, the iPad is fine (with a Bluetooth keyboard). But on most trips, I create enough content that I must bring a PC.

Someday, I hope that compromise won’t be necessary. The Intel-promoted Ultrabook design - a thin, light-weight, fast-starting, and touch screen PC - is a promising if expensive replacement for bigger notebook PCs (see, e.g, this recent Engadget report). But even an Ultrabook running Windows 8 remains fundamentally a PC with some tablet-like features.

It’s great that both the Mac OS and Windows are moving toward touch screen interfaces but that does not make them table substitutes. My ideal machine would be like a super lightweight computer where the screen detaches from the keyboard and, when detached, behaves exactly like a tablet. I might settle for an iPad app the emulates a PC though it would have to support a pointing device other than a finger.

I am co-chairing, with Neeraj Rajpal. Managing Director & Chief Information Officer, Morrison & Foerster LLP, the Hildebrandt West LegalEd Center CIO Forum on April 24, 2012 in NYC. I hope you will consider joining. 

We have several sessions planned:

• Living with Uncertainty: Current State of the Legal Market and Implications for CIOs: The latest Peer Monitor data on legal market demand, productivity, and realization and what it means for CIOs
• Prioritizing in the Attention Economy: Realizing an IT Strategy Within a Complex Firm Environment: An interactive session focused on current IT priorities, based on a participant survey
• Re-Defining the IT Organization to Thrive in the New Legal Landscape: Examines how CIOs should support and interact with other support functions and organizational structures.
• Low Cost Service Centers and Law Firm IT: Understand this latest trend and what it means if your firm takes this path.
• IT Audits: A Client Perspective: When clients come to audit your systems, learn what to do.
• Mobility Strategies and the Future: The latest on strategic thinking and practical considerations for dealing with the proliferation of smart mobile devices.

Click here to download a PDF of the complete agenda.

We have an outstanding faculty lined up for the day: Patrick Archbold - Head of Risk Management Practice, IntApp; Doug Benson - Partner, SB2 Consultants (and former COO, Orrick); Tony Cordeiro - CIO, White & Case; Bob Dolinsky - CIO, Sutherland Asbill & Brennan; Norma Edmiston - CFO, WilmerHale; Sally Gonzalez - Senior Director, HBR Consulting; Gavin Gray - CIO, Perkins Coie; Peter Kaomea - CIO, Sullivan & Cromwell; Peter Lesser - Director of Global Technology, Skadden; Karen Levy - Director of Global Technology, Debevoise & Plimpton; Elizabeth Lilleboe - Consultant, Peer Monitor; James Paterson - Senior Director of Product Line Management, Lexis Nexis; Michelangelo Troisi - Senior Counsel & Director of Litigation and Risk Management, Samsung Electronics America, Inc

If you would like to attend, register here. Use the code 30CIO for 30% discount (good until April 15).

Every organization must decide whether to build or buy what it needs. Corporate law departments today are building more than they did and, when they buy, buying from different sources. Large law firms need to figure out the implications. 

Three blog posts and an article yesterday illustrate the shifts. Until the 1980s, most corporations bought most legal services from law firms. Today, many build instead of buy: the Wall Street Journal blog in In-House Lawyers Gaining the Upper Hand, Says ACC reports on a just-released ACC survey that finds in-house counsel hiring is up and the use of outside counsel down.

When GCs do buy today, their percent of purchases from small law firms is up. Bye-Bye Big Firm in Corporate Consel reports that “corporate lawyers are flocking to small firms.” The article offers anecdote, not data, but I suspect the data would confirm the trend.

And it’s not just small law firms that get more business today. Patrick Lamb, commenting on this article in Disaggregation pushing demise of BigLaw? notes that small firms are only part of the story and that law departments also buy from law firm alternatives such as legal process outsourcers (LPO).

These shifts contribute to the flat demand and price pressure large law firms face. Smart firms will adjust how they operate. Some are already in on the action. The Hildebrandt Blog post Eversheds Pilot Contract Lawyer Service Becomes Permanent reports that UK firm Eversheds’ pilot program of offering contract lawyers is now permanent. It sounds similar to Fenwick’s FLEX and to Berwin Leighton Paisner’s Lawyers on Demand. All three offer more flexible and lower price options to corporate clients.

With all the shifts, large law firms may need to re-think their own build v. buy decisions. Historically, they favored buying. On the lawyer side, they hired associates only. Today, they hire staff attorneys and “buy” (rent) contract lawyers. And some firms continue to experiment with more flexible staffing models such as working with alumni. On the technology side, firms are moving from owning infrastructure to renting it in the cloud or at data centers.

As law firms adjust their service delivery model with legal project management, process improvement, technology, and other tools, they may also need to adjust their staffing approaches, finding ways to buy / rent more than they build.

Paul Lippe, founder and CEO of Legal Onramp and ABA Journal Legal Rebels series contributor, asks a great question: Where Are the Legal Jeremy Lins?. 

He writes in a March 13th article so titled

“How often in law do we look at what really happens with something we do (outcomes), versus how much we do and what other lawyers think? As a result, we have too few Jeremy Lins: too few lawyers who can confound expectations and deliver outcomes rooted in truly superior performance… So we end up with what might be called the Gladwell effect, where reputation drives reputation.”

To overcome this problem, to identify the legal superstars, Paul argues that we need metrics on outcomes. I agree that we need data, not just precedent, not just supposition, not just word of mouth.

Jeff Carr, Vice President, General Counsel & Secretary of FMC Technologies wrote a comment that I like because it expands on the idea of outcomes (reproduced with his permission):

“You know, I almost missed this column because of the title. It’s not that I don’t know about professional or college sports, it’s that I truly don’t care about them. Thankfully, this column was brought to my attention and there is much here to ponder.

As the leader of a legal team that constantly evaluates performance and compensates the players (inside and outside counsel and LPO’s) according to that performance, I humbly think we’re pretty good at this. And I’m just arrogant enough to assert that I think we’ve helped make the lawyers that we work with better lawyers. They are not better lawyers because we’ve somehow made them smarter, or technically better—no—they are better because I think and hope we’ve taught them the keys to outstanding customer service. As Paul points out, that’s all about outcomes—but outcomes are not simply “winning”. Outcomes to us means helping us achieve our objectives (“effectiveness”) while delivering value (“efficiency” and “predictive accuracy”), and while adopting and reflecting our culture. (“communication”, “teamwork”). While we also measure the technical trade-craft of law (“knowledge”), that criteria is actually not as important to us than the others—instead it’s kind of like the entry stakes to being on our legal team. In the somewhat weird parallel universe of lawdom, somehow knowledge is elevated by the practitioner more than customer delight. Hence a world where peer evaluations reign supreme when customer perceptions is really what matters. I’m sure all the folks at Kodak thought physical film would similarly reign supreme—in other words, if your feedback loop of customer value doesn’t really involve customers, you’d better look out for the meteor that’s going to wipe out your business model.

Paul’s right, defining expectations and delivering to those expectations makes for good lawyering. Exceeding those expectations to the delight of the customer is what makes for truly exceptional customer service and therefore outstanding lawyering.

Jeff reinforces my recent posts on improving the client experience at large law firms. I wrote a comment that expands on both Jeff’s and Paul’s points:

“In the world of corporate law departments and large law firms, legal outcomes must be measured relative to a joint assessment of the expected outcome at the matter outset. For example, winning a $100M judgment sounds great unless you had a strong expectation that $500M was far more likely.

Corporate clients must take an evidence-based approach to evaluating law firm results. That means analyzing e-billing data to assess performance cross-sectionally (across firms) and longitudinally (same firm over time). This requires characterizing each matter for difficulty and expected v. actual outcome - a worthwhile exercise to evaluate outcomes.

I’m also with Jeff Carr on his broader view of “outcome”. Along with “legal outputs” such as advice, settlement, judgment, or a contract comes the experience of working with lawyers. The experience includes the overall cost, how closely the cost came to the predicted budget, the efficiency of the work, the quality and frequency of communication, and the transparency of the undertaking. Surveys get at the attributes Jeff describes.

Law firms should collect data to measure the multiple aspects of “service delivery” and the “client experience”. (I wrote a blog post a week ago explaining Why BigLaw Needs a Chief of Client Experience.)

Unless both clients and law firms empirically evaluate outcomes andexperience, we can’t identify the Jeremy Lins among lawyers. We are left simply with “reputation drives reputation.”

Empiricism may, however, not be enough. We also need a change in GC job security and personal-risk assessment: If the GC fears for her job because an outcome is bad and she did not select a white shoe law firm, in spite of the data showing other firms were as good, then all the data in the world won’t make a difference. So the CEO, CFO, and COO have to buy into the evidence-based outcomes approach.”

Last week I wrote that law firms need the equivalent of conductors and composers to orchestrate how they deliver service to clients. The Wired GC’s post yesterday, What if Law Firms Priced Like Apple?, serves as a springboard to extend this thinking. 

His post points out that Apple has a low supply cost, which enables it to offer premium products at highly competitive prices. The analogy for law firms would be “to offer defined services for a lower block rate to their best customers? This could be for off-the-shelf information plucked out of knowledge management systems or owing to enhanced productivity gained from experience managing outsourced work.” The post concludes that high-end law firms might use KM to do some lower-end work for valued clients.

I will take the Apple analogy further to extend my post last week, Optimizing the Law Firm Client Experience. Apple sells not just products but also an experience. The experience includes the Apple Store, the distinctive website, the product packaging (Steve Jobs is the lead on a patent for one package), the integration and similarity across products and services, and the on-going connection via the iTunes stores and application.

Law firms can learn from Apple, as the Wired GC suggests. Clients expect large law firms to deliver excellent legal results. But how many deliver a client experience commensurate with that result. If Apple packed the iPad in a box similar to one of the major PC manufacturers or the iPhone in an impossible-to-open plastic clam shell, those products would just lose some magic. Or what if apps worked like typical desktop productivity suites. We might still get value, but it wouldn’t feel nearly as nice – and you would not be willing to pay as much.

So beyond the lesson the Wired GC takes from Apple about pricing is the Apple lesson about creating a highly desirable experience. Law firms can learn from this. I’m reminded of a story a friend shared recently about a Fortune 50 that dropped one firm in spite of excellent legal results; the in-house lawyers just could no longer put up with cost variances and communications lapses.

Legal results have become table stakes. So BigLaw needs to think about other axes of competition. Large law firms may not be ready to hire a Chief of Client Experience, but putting someone in charge of it could be highly profitable as Apple has shown.

[CREDITS: The idea of experience and how it affects pricing and law firm profits is a meme that has been brewing. Jordan Furlong, in Pricing to the client experience, inspired me to think about client experience as an attribute completely separate from legal results. I have also drawn inspiration from Danny Ertel of Vantage Partners in Fee negotiations part 7: It’s a process; Toby Brown of 3 Geeks in Wise Up Before Value Billing (at Attorney at Work) and The Value in Value Billing for Law Firms (at 3 Geeks); and Paul Lippe in the ABA Journal, What if Someone Could Measure What Lawyers Do?.]

Large law firms can no longer count on profit growth. With demand flat and buyers gaining power, firms must battle for share of market. 

The easiest way to grow market share is winning a bigger share of wallet, that is, the percent of a client’s total legal spend. To do so, law firms must identify top clients and offer them better value.

Identifying “top” clients means more than tallying total client billings. High-revenue clients will make the list but profitability, growth potential, and industry fit with the firm’s strategic focus will influence selection.

Offering more value means improving the service experience. Firms can “play” many instruments: process improvement, project management, deeper business research, better resource selection, sophisticated business intelligence, service level agreements (SLA), client satisfaction surveys, technology to share information and streamline work, alternative fee arrangements (AFA), and knowledge management. The hard part is knowing which to play and how.

Creating an outstanding client experience is like composing and conducting a custom score for each. Today, few firms have composers and conductors to focus on what music each top client likes best. Firms that create and formalize such roles - the ones that play each top client’s favorite music - will win.

The Wall Street Journal reported on Monday in Cut Those Costs! (But Not Tech.) that while most companies still look to reduce costs, many “are boosting IT spending, hoping to get a competitive edge”. Should lawyers and law firms do the same? 

The article reports that corporate CFOs have a reputation “for putting the kibosh on promising projects when times were tough” but that their view has changed. They now “see tech delivering ever-greater competitive advantages.” New investment is flowing to collecting and analyzing Big Data and supporting a range of mobile devices. A 2011 Q3 found that many CFOs plan to boost IT spending by 10% this year “even as their confidence in the economy declined”.

If law firm IT spending is up at many firms, and I’m not sure it is, I suspect the money goes mainly to maintain or upgrade infrastructure. It would interesting to know how many firms invest in technology that could provide competitive differentiation: better business intelligence to support alternative fee arrangements, project management, enterprise search to find useful work product or experienced lawyers, tools to respond RFPs more effectively and quickly, document assembly to speed document drafting, or systems that allowed client self-help.

Of course, it would also be interesting to know how many lawyers actually want tools that change how they practice. In Sympathy For The Attorney today at 3 Geeks, Ryan McClead wonders out loud, using a great personal story, whether lawyers want to change what they do. Partners might support bigger IT investment in back-end systems (e.g., BI or RFP generators) that do not affect how they practice. Be sure to read the Doug Cornelius (Compliance Building blog) comment on this post, pointing out how hard change is.

Without good data all this is ideal speculation. But since I’m speculating, I’ll close with what I think is the key question: do general counsels, who are the clients of BigLaw, think and act more like the partners who serve them or more like the corporate CFOs and CIOs with whom they work daily? How they align likely determines the demands they place on their outside counsel. And that ultimately will drive law firm IT spending decisions.

On Friday, Judge Andrew J. Peck issued an important ruling in Monique Da Silva Moore v. Publicis Groupe & MSL Group, a widely followed discovery dispute about computer assisted document review in discovery. 

Judge Peck held that “computer-assisted review is an acceptable way to search for relevant ESI in appropriate cases”. Matthew Nelson offers a good summary in an e-Discovery 2.0 blog post yesterday, Computer-Assisted Review “Acceptable in Appropriate Cases,” says Judge Peck in new Da Silva Moore eDiscovery Ruling.

The question of humans versus computers in document review is long in the making. For example, my 2007 The Gold Standard for E-Discovery Document Review concluded that “we seem doomed to years of costly litigation and a trickle of published decisions to establish a new standard.” J. Peck’s decision ushers in the dawn of a new day.

To get us to the full light of this new day, consider how cognitive science should inform document review. In his recent book, Thinking, Fast and Slow Nobel Laureate Daniel Kahneman shows that humans are much less rational, accurate, and consistent than we think. Two chapters especially should give skeptics of computer-assisted review pause.

In chapter 21, Kahneman explains that most experts over-rate their ability to assess and predict results. In 60% of some 2oo studies comparing predictions by experts and by simple algorithms, the latter outperform the former. Study topics include medical outcomes, individual economic success, credit risk, and wine prices. In many, “the accuracy of experts was matched or exceeded by a simple algorithm.”

One reason computers do better is that humans try too hard to “think outside the box”. Another is that humans are inconsistent: “When asked to evaluate the same information twice, they frequently give different answers.” Some 40 studies of experts found that they contradict themselves about 20% of the time when presented with the same information.

In chapter 22, Kahneman goes on to ask when we can trust expert intuition. He concludes that “the confidence that people have in their intuitions is not a reliable guide to their validity.” Expert judgment tends only to be valid where (1) the environment is “sufficiently regular to be predictable” and (2) there is an “opportunity to learn these regularities through prolonged practice.” The latter works best when the expert receives immediate feedback on the validity of his judgment.

It’s easy enough to apply these findings to document review. Lawyers have tremendous over-confidence in their intuition and expert ability to designate documents consistently and accurately. Several empirical studies of doc review in litigation confirm that algorithms - “computer assisted review", “technology assisted review", or “predictive coding” - perform better than lawyers. To think otherwise is to give in to all the cognitive biases that Kahneman reveals. As for trusting intuition, given that fact patterns vary hugely across cases, there likely is neither sufficient predictability nor a long enough period for “prolonged practice” to do so.

Many in our profession agree we should rely on a well-designed process supported by algorithms. We reasonably fear, however, having to defend that in front of a judge who does not understand the issue. Judge Peck’s decision opens the door. Daniel Kahneman’s book provides the cognitive science foundation to drive home the point.

Since not everyone reads Twitter, I reproduce here a selection of my recent Tweets. In this edition: Mainstream Media Coverage of BigLaw Market, UK Legal Reform, BigLaw Strategy, Legal Process Outsourcing (LPO), and e-Discovery. 

Mainstream Media Coverage of BigLaw Market

WSJ: Clients + others suing law firms more, drive up malpractice cost http://on.wsj.com/AxhTQO || Will BigLaw seek to cut other overhead? 6 Feb

WSJ: Law Firms Pursue Growth by Poaching in Tough Climate http://on.wsj.com/wTaMBq || Lateral battle detract from strategic differentiation? 1 Feb

The Economist on UK Legal Reform: Psst, wanna buy a law firm? http://econ.st/zXYliK || MSM continuing interest in legal market 28 Jan

WSJ: Stark Choice for Lawyers— Firms Must Merge or Die http://on.wsj.com/wBMhjz || may be true but rationale to merge still questionable imo 20 Jan

The Atlantic: What Do Lawyers and Bankers Have in Common? They Lost Jobs in 2011 http://bit.ly/xUSAw6 || (HT @atlblog @ElieNYC) 11 Jan

Forbes: What Tech-Assisted #eDiscovery Teaches re Role Of Humans http://onforb.es/ziPEws || If MSM is covering… [HT @jfehrman]  9 Jan

UK Legal Reform

BT seeks ABS licence for claims management arm by @LEGALFUTURES http://bit.ly/ydkAZH || convert cost to revenue center 16 Feb

Private equity house takes majority Parabis stake in law firm LBO first- Legalweek http://bit.ly/ydFqW9 || UK legal reform at work 6 Feb

@legalfutures Aus. Slater & Gordon to enter UK market w £54m purchase of Russell Jones & Walker bit.ly/ydl4wV || ABS magic at work 28 Jan

Listed company launches bid for Silverbeck Rymer | The Lawyer http://bit.ly/y8roys || UK legal reform at work. #LawFactory move? 24 Jan

The Lawyer: 65 firms seek SRA approval for ABS conversion http://bit.ly/zEVMhD || UK legal reform now underway 19 Jan

SRA unveils ABS application process as around 15 put in for first licences- Legalweek http://bit.ly/wyBAYr || UK legal reform in action now  Jan 3

BigLaw Strategy

RT @jordan_law21 post: What mergers can’t achieve: http://lawlks.ca/5ay || Many mergers ’solve’ for the wrong problem 14 Feb

@attnyatwork - Enterprising Lawyer Mark Tamminga bit.ly/zEtKqY || Built and operated a #LawFactory. Now: more innovation 4 @Gowlings 25 Jan

RT @attnyatwork: Wise up before value billing by Toby Brown http://bit.ly/zaRGFI || great AFA - pricing advice by @gnawledge 5 Jan

@DannyErtel post re moving from Potemkin to real BigLaw reform. Exellent analysis. bit.ly/yVuQFU || #LawFactory 3 Jan

Legal Process Outsourcing

ALB: Australian firm Corrs lines up LPO relationships with Integreon + Exigent http://bit.ly/xUt3kS || 2nd big Oz firm to announce 10 Feb

Legal Week: UK company requires panel law firms to have access to offshore legal process outsourcing (LPO) 3 Feb

Nixon Peabody selects @Pangea3 as preferred LPO for #eDiscovery doc review http://bit.ly/z90UFW || 1st BigLaw to go public in US I think 31 Jan

Integreon opens first UK LPO base and ramps up temp paralegal service http://bit.ly/y3VeE9 26 Jan

@legalweek Olswang shortlists LPO providers in preparation for new panel bit.ly/xAng2C || will US firms embrace legal outsourcing? 20 Jan

Legal process outsourcer CPA Global being sold to PE Cinvin http://bit.ly/xHNItR #LPO 19 Jan

@DannyErtel post, good read: how law firms should think about an LPO sourcing strategy bit.ly/zOd7vm  17 Jan

Deloitte 5-pg report: The Resurgence of Corporate Legal Process Outsourcing http://bit.ly/wUqOwq || Good overview of LPO benefit for GC  7 Jan

DTI announces law firm business support incl WP, research, F&A. Shared or dedicated model. http://bit.ly/wplzIQ || more legal outsourcing  11 Jan

Credit Suisse Loan Closing Teams Move to @UnitedLex http://bit.ly/zNl6AC || Moving #LawFactory work to better platform 11 Jan

e-Discovery

KPMG The Case for statistical sampling in #eDiscovery. Good overview / arguments 17 Feb

I Want an E-Discovery Lawyer for My E-Discovery Project | The e-Discovery Myth http://bit.ly/y1NxCU || good Dennis Kiker post  13 Feb

RT @complexd: Guidance Software to Acquire CaseCentral - http://bit.ly/xeCqZ7 || more #eDiscovery consolidation / more EDRM per vendor 7 Feb

WSJ blog: When a Company Sounds Suspiciously Like a Law Firm http://on.wsj.com/AlE1It (HT @PosseList) || New DC ethics opinion re… 20 Jan

Recent reports of a mixed profit picture for large law firms is a good reminder that strategy and differentiation now matter. 

Last week the Hildebrandt Institute and the Law Firm Group at Citi Private Bank released their 2012 Client Advisory (PDF). I find most striking the “Widening Dispersion of Performance in the Legal Market,” which two charts illustrate: 2001-2007 Profits Per Equity Partner, Compound Annual Growth Rate and 2007-2010 PPEP CAGR. In the earlier period, all but one firm had positive growth and most clustered between 5% and 15% growth. In the more recent period, profits shrank at many firms and growth rates varied widely (from a low of almost -10% to a high of over 20%). AmLaw 100 performance data for 2011, which is trickling out at law.com, confirms the wide range of results.

Firms consequently can no longer take future success for granted. Jordan Furlong notes in a recent post, The Imaginary Normal, that the possibility of failure is the real normal. He points out that the there was nothing “normal” about ever-rising BigLaw rates and profits.

Where does this leave BigLaw? Large firms can either control costs or increase revenues to improve profits.

Cost Control
Some firms, even very profitable ones, have taken bold moves to control costs. The Hildebrandt-Citi report sums this up nicely:

“growing number of firms to move parts of their support and other functions to lower cost locations. Following the earlier examples of Orrick (in Wheeling), Clifford Chance (in India), and Baker & McKenzie and White & Case (in Manila), we have seen WilmerHale opening facilities in Dayton, Pillsbury opening in Nashville, and Allen & Overy and Herbert Smith both opening and expanding facilities in Belfast. [Such centers start with support functions] but they often quickly grow to include a wide variety of other activities, sometimes including litigation support, basic document drafting, and some legal research.”

I expect this trend to continue, as I suggested in my January Law Practice Today article, The Impact of Legal Process Outsourcing (LPO) You Might Not Have Noticed.

Revenue Growth

Revenue growth today is largely a battle for market share. Winning that means differentiating. Lateral hiring to change the mix of practices is one strategy but has risks. Retired Kirkland & Ellis partner Steven J. Harper blogged last week in The Lateral Bubble that firms may face unexpected troubles with so many lateral hires.

Only so many firms can occupy the uppermost niche. I suspect that some 30+ firms think they are in the top 10. Firms with a realistic self-assessment of their market position likely will promote their legal prowess but differentiate in other ways: via their business practices and business models. This likely means more adoption of and public emphasis on process improvement, project management, automation, knowledge management, collaboration systems, and other tools that (1) enable them to deliver more value and (2) objectively differentiate themselves.

The tough news for some law firm partners may be good news for experienced and innovative law firm managers, whose talents will be in higher demand.

Lawyers are at last working to improve legal processes, that is, how they actually do work. An overlooked process may well be communicating with clients. 

Communication as a process became clear from two recent items I read. Litigation Predictions: Plain Speaking and Clear Thinking by William J. Connolly and Andrew J. Morris in ACC Docket, November 2011 (subscription required), provides practical advice on how lawyers should discuss litigation risks with clients. The authors explain that just saying “you have a 60% percent change of winning” raises three problems. First, unless a client faces multiple similar cases, it’s hard to understand what that single probability measures. Second, this probability - whether or not accompanied by another common measure, expected value - does not communicate the range of possible outcomes. An 80% chance of winning may be irrelevant if there is a 5% chance of a company-killing outcome.

And third, our word choice influences how we think and how we decide. The authors suggest that instead of saying “60%", you say “60 outcomes out of 100″ to emphasize thinking about multiple possibilities. Not long ago, I might have scoffed at that suggestion. But I recently read Thinking, Fast and Slow by Daniel Kahneman. Kahneman, a Nobel Laureate, demonstrates that we are much less rational than we think. One manifestation of our less-than-perfect rationality is that phrasing hugely affects our decisions.

One of his examples looks at two alternate ways to convey data to doctors: (1) 90% who receive this treatment survive OR (2) 10% who receive this treatment die. Doctors’ decisions depend very much on the word formulation even though logically, the two are equivalent. (The book is filled with many such fascinating examples.)

So, where does that leave lawyers? As a profession, we need to re-consider and improve how we communicate legal choices to clients. Even where the client is in-house counsel rather than a lay person, lawyers must understand the communication process and improve it. For now, I can only raise the issue; I cannot offer solutions.

Technology likely will play a big role in improving communication. I am surprised that the ACC article does not mention litigation risk analysis and decision trees as a way to improve communicating about litigation risks. Decision trees can force us to consider systematically all outcomes.

Other tools can help communicate legal choices and decisions more clearly. I am not a Mind Map person but I suspect some would say they help. Other visualization tools exist today or may emerge that would help us improve how we communicate risks, issues, and choices.

Improving communication with clients will benefits lawyers in multiple ways, not least because better communication supports effective alternative fee arrangements. Win-win AFA require joint lawyer-client clarity about the contours of the problem and the range of potential outcomes. Law firm pricing experts already seek good budgeting and project management software. To that wish list, we can add new and better communication tools. Let me know what you find!

Some lawyers still resist legal project management (LPM). An earlier generation thought they could ignore e-mail. I view LPM like e-mail: inevitable for both inside and outside counsel. In this post, I discuss an intriguing LPM tool. 

At Legal Tech last week, I met with executives of ERM Legal Solutions ("ERM LS"), which offers an intriguing LPM tool. The company focuses on the legal market now but has roots in and serves multiple markets. The horizontal focus is good. While lawyers need customized interfaces, which ERM LS offers, they can benefit from and apply project management techniques honed elsewhere.

The company’s software uses either a template or custom-built project plan. To custom-build a plan, lawyers write one using an outline metaphor via an on-screen yellow pad. For each element of the plan, the project manager must specify the appropriate resource (type of timekeeper), estimate the hours required, and spell out the sequence of work. Once that is defined, the system presents each timekeeper with a list of his or her tasks - from that new project as well as from others - in priority order. It also has a dashboard so that the lawyer in charge or project manager can monitor overall progress, including budget versus actual.

Patented algorithms drive resource allocation. As timekeepers indicate they have finished a task and report their hours for it, the system dynamically updates the overall plan. For example, an associate may see several pending tasks from multiple projects on her list. The system shows tasks in priority order and which are ready for action. As other timekeepers finish their work, the priority order of tasks in one or many projects may change.

As important, the system generates alerts for project managers and lawyers in charge to highlight which tasks may be over budget or at risk for going over budget. It also provides an overview of organization-wide resource allocation which is constantly re-prioritized in real time. And finally, law firms can share selected aspects of the plan with their clients through a web based portal.

I am not a professional project manager and I spent only one hour with ERM LS, so the most I can say is that company offers a promising approach. Two large firms - Perkins Coie and Baker Donelson - are considering piloting the software. Additionally, ERM LS tells me that their LegalTech demonstrations have yielded three other large firms eager to explore piloting the software.

Legal project management is not just for law firms. I hope that in-house counsel, who need LPM just as much as law firms do, also consider it. Corporate legal departments can leverage efficiencies with all their outside law firms with this tool.

I have two reservations to share. First, some screens seem too busy, though I suspect that lawyers will either adapt or ERM LS can simplify, consistent with each firm’s preferred user view. And second, lawyers may resist the idea that “the computer tells me what to do” in that the software presents tasks in a suggested order. That, however, is a human problem and one likely true of any good LPM tool. Proper project management means letting the project plan inform lawyers what to do. The system appears to have the flexibility to allow lawyers to change priorities though doing so will ripple through the project plan and all other project plans - as well it should.

LPM is much more a mindset and approach than it is software. But for those with the right mindset and approach, effective software eases the effort. For large law firms and law departments, the market does not offer that many LPM software choices. I am glad to see a promising new one. Comments from anyone who has evaluated it in more detail are, of course welcome.

[Updated (9 Feb 2011): For another review of ERM LS, see Toby Brown’s post 9 Feb 2011 post, A New LPM / AFA Tool on the Market.]