Delivering what clients want + getting paid for it (Live from #COLPM Futures)
This is a live blog post from the College of Law Practice Management 2016 Futures Conference (link to PDF of agenda). As a live post, please forgive any typos or misunderstandings of meaning.
This session is How will we better deliver what clients want, and get paid for it? The session will address four question:
- Will the billable hour finally be dead?
- Are lawyers going to get better at getting things done?
- What will client service look like?
- What will clients want and need?
The panelists, each of whom will take the lead role in answering a question, followed by co-panelist comments, are, in respective order:
Director of Legal
& Strategic Pricing
Husch Blackwell LLP
Fireman & Company
Partner and Founder
Wicker Park Group
Chief of Staff and
Director of Legal
Will the billable hour finally be dead (in 2026)?
Kevin Bielawski takes the lead in a 5 minute opener… What event will signal the death? Will we ever see the final bill with billable hours? And when that happens, who will eulogize it?
It will not be dead by 2026. Several drivers, including from both client and firms, will keep it alive. On law firm side, entire financial model depends on billable hours – changing that will be a big effort. On client side, they regularly defer on alternative fee arrangement (AFA) to hours – they are often more comfortable with billable hours. Also, clients have become dependent on billable hours for their metrics (even if this may not be the best approach to measuring what should be measured).
Nat: older partners are still vested in the current model and the junior ones, who are more open-minded about alternatives – but are also less wed to their firms.
Tom: I was at one firm that did away with billable hour targets. But it killed revenue and the firm had to re-institute the targets. If we can’t take associate focus off of billable hours, how will we do it for partners. I’ve seen partners with $30M book of biz who took grief from management for only billing 1100 hours. So the psychology is deeply embedded.
Connie: As client, I disagree. Don’t assume we buy only from law firms. We buy from managed legal services and tech providers. So, to law firms, “go ahead, bill by the hour”, it will have decreasing impact on us. Also, don’t assume clients don’t know how much work should cost. For all but high-touch work (less than 20%), we know what it should cost. So for a relatively small percent of work, we will have to continue to work with the billable hour. We have a “wizard” that we run timekeeper rates, against which we benchmark to database and our own portfolio, and it allows us to choose the fair price and most cost-effective firms. We now offer fixed fees to firms, which often accept. We have engaged Elevate Services to review bills and inform us what a fair rate is. We use this to negotiate rates down. We are moving entire categories of work to new systems, so the change to fixed fees will happen in one fell swoop. So by 2026, 80% of billable hours will be gone.
Are lawyers going to get better at getting things done?
Tom Baldwin: Let’s look at blueprint for working more efficiently, then predict. Firms have a hard time segmenting work into bins. Too many partners think of their work as high stakes when most of it is really routine. We need to segment high stakes, run the company, and routine work, by practice. Firms must analyze hot spots in these segments where the firm is not making a profit (or has bad realization). Once you identify those areas, you can process map the work to inject technology, knowledge management, or other cost-reducing strategies. For this to happen though, there are some key predicates: Partners most be motivated, which means tying their compensation to profits, not billable hours. Absent change in partner comp, we will continue to see only incremental change. Firms still do not reward efficiency, even though clients have the upper hand now. The data bear this out – AFA growth has stabilized. So my prediction: lawyers will get better at how they work but it will be incremental. No evidence of broad sweeping changes.
Connie: law firms are very good at getting things done. But not efficiently. We are moving to organization that get good results efficiently. We are doing this quietly. Article recently found that companies pulled $4B of work back in house (RF: that’s 2 Am Law 10 firms!). Clients are building and working an ecosystem. CLOC incorporated this year and had a conference attended by 500 people from multiple parts of the legal ecosystem. And that ecosystem includes far more than clients and law firms – we are building solutions by bring all players into the same room. We now have initiatives – standards being developed – across the ecosystem. For example, last week a prof at Vanderbilt and someone at GE wanted to created a standard on legal project management. CLOC will serve to connect their initiative to other experts and players in the ecosystem. Eventually, a new standard, built on crowdsourcing, will go up on the CLOC website. This standard on LPM likely to go up in one month. I expect the speed to standardizing to be very rapid.
Nat: clients today tend to work retroactively to look at efficiency. Having the CLOC standards setting will help drive firms to be more proactive in looking for efficiencies. A larger, more organized group of clients is a big change and will help drive law firm change.
What will client service look like?
Nat Slavin: The challenge with client service is that we only know it when we experience it. Few firms establish service standards but few apply it in real life. Compare to consumer experience in restaurants – good service and food generates good referrals and repeat business. A key measure is the Net Promoter Score (created by Fred Reichheld at Bain & Company). When I measure NPS (clients of law firms), it is usually in neutral range. An issue is that firms are retained typically in reaction an event; in these circumstances, it can be hard to deliver good service. It’s a situation where “one size fits one”. Law firms need to be more active, for example, the equivalent of hotel receptionist walking around registration desk, handing you the key, and walking you to the elevators. Service in law firms will improve when compensation is tied to client service scores. Quick service tips: under-promise and over-deliver; ask how you are doing in middle; ask what you most value in our relationship; always be prepared for any client interaction.
Kevin: clients are now sharing service feedback and other data more freely now than in the past.
Nat: defining and delivering set service can avoid a lot of
Connie: by 2026, most legal services will be delivered by players other than law firms. For the 20% of bespoke work we need law firms, we will look for efficient, metrics-driven delivery founded on responsiveness, comprehensive coverage, and deep knowledge of our business.
Tom: what other business asks a key player to be in charge of so many things such as marketing, delivery, client service, and training. But law firms ask law firms expect partners to do all. Law firms must break out these roles.
Connie agrees with Tom that the same is true in-house. Her lawyers now ask other professionals to manage many aspects of relationships so that lawyers can focus on practicing.
What will clients want and need?
Connie Brenton: We will want in 2026 what we want today. We have seen more change in last 18 months than we have in prior decade. So we are now at a tipping point. For a decade, partners were not hearing the messages about efficiency and service – but now they are beginning to hear. So we are seeing change happen faster now than in the past. The fact that we put CLOC together so quickly and have so many volunteers to establish standards is an indicator that we are at the tipping point. The focus on 3 things:
- A fully integrated legal services ecosystem with a single point of purchase. that we now have tech, data, and AI means we have a complex environment. Law firms have been too slow and static in integrating multiple disciplines. We need to become a team of teams. Instead of holding information, all players need to share information. Bespoke legal work must be easily purchased. A “Yelp or Zagat tool” to rate lawyers at granular details – identify crowd source.
- Cost transparency. We know how much cars and computers cost. We need that for legal services. Pricing will be rationalize trough a market.
- Speed will be key. A decade a go, GC was figure head. Today, GC is trusted advisor to CEO. We need to speak language of our internal business clients. Our partners / providers must work like we work. We are a law firm (inside) and know how to use metrics, how to allocate work, how to deliver service. We expect our partners to do the same – and we are willing to pay for it, even at a premium – for the small amount of bespoke hour. But we know that in-house lawyer costs about $100 / hour. So most work has to be delivered at that price point.
Nat: Clients need PowerPoint slides. They have to translate complex legal ideas to short and clear PPT slides. Connie hired Elevate Services to help with this, asking that they hire someone to help with visual display of information.
Connie: states that across the industry, generally speaking, in-house counsel costs about $100/hour. So we are unhappy at law firm rates for all but the bespoke work. Consequently, NetApps will not pay for first year associates.
Shadow Billing: Bill Cobb: was involved in introducing AFA as early as 2000. One GC said, I’ll do it, but only if I get hours streams. Do you see shadow billing requests and how do you deal with it. Kevin says, yes, I regularly see this. Some firms, he says citing me, refuse to provide both. Connie says we ask for both because we struggle to understand how much something costs. As soon as we can identify a “control case” cost, then we can let go of shadow billing. If you understand whey clients want, you can understand wanting both now is a transitional phase in market evolution. Others ask in what other businesses – cars, airline flights – customers ask for cost data. Nat: when I hear requests for shadow billing, it usually seems more about trust than quest for cost data.
Ecosystem: Who will help clients assemble all the ecosystem players (to Connie). Connie said NetApps partnered with Elevate Services to do this. Now, the GC and law department will be the general contractors. We will partner quickly with those players who do best at bundling the legal ecosystem. Turns out that alternative providers are much better at doing this than are law firms.
Fixed Fees: Connie: once we move to fixed fees, we no longer worry about bill review or who works on a matter. Even if we might over pay occasionally, we avoid huge costs of administration to monitor costs. Tom comments that associates may not know about fixed fee or partners may not track the work – so although a fixed fee, inside a law firm, may not change how firms do the work.
Shadow Billing: Pat Lamb comments that this forces everyone to focus on hours over value or on the real cost of production. So why aren’t clients focusing on real cost of production rather than the fiction that hourly bills create. Connie: requires a lot of data collection, cleansing, and analysis. But with this effort, we get to cost over time. Kevin: we regularly look at our actual production costs; many firms have made great strides in understanding their production costs.
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