Leadership in the Law: Technology: Friend, Enemy or Frenemy?

Willingly or unwillingly, lawyers simply must overcome their resistance to the adoption of tools and technology in the legal practice. There are a number of new and updated tools available to practicing lawyers that improve efficiency by automating routine tasks. However, for partners nervous about lost income due to such efficiencies, there are several new tools that offer the compensating virtue of helping lawyers to improve their ability to practice law, target the right clients, communicate more effectively with co-counsel and clients, and improve profits even in the face of reduced fees.

As we briefly tour some of these new offerings, keep in mind that this column is agnostic and does not endorse any one provider. In most categories, there are two or more providers offering similar products or services. Your mileage may vary based on your firm's needs and practice dynamics.

Big Data to Improve Litigation Strategy

The book and movie “Moneyball” created a wave of activity within the sports field to make better decisions based on accumulated data rather than relying on conventional wisdom. This same approach is increasingly being applied to litigation strategy. “Venue shopping” is the familiar tactic of selecting a jurisdiction known to be friendly to your client's position. But imagine the possibilities available to a lawyer who knows, for example, a particular judge's tendency to rule on a motion for summary judgment or the likelihood of your adversary's counsel pursuing trial over settlement.

Traditionally, such inside knowledge takes years to accumulate, and resides in the heads of veteran lawyers or local counsel. But now new tools are available that collect and synthesize such trends across multiple jurisdictions, providing lawyers with insights that may provide an advantage. Case Outcomes, offered by Thomson Reuters, is one such example of “big data” applied to a legal practice. Says Amy Hrehovcik, New York-based business development manager, “It's like breaking down film of an opponent in basketball. If you know your opponent prefers to drive left, you overplay that side and push him right. Lawyers can adjust litigation strategy based on studying the tendencies of opposing counsel and even judges, and offer more informed advice to clients.”

Strategic Pricing

One oft-described challenge with billing by the hour is its emphasis on the mechanics of “production” rather than the value to the client, which creates the perverse incentive of rewarding inefficiency. To draw an exaggerated comparison, it's like setting the price of an automobile based on how many parts were used in its assembly, with no penalty to the production line for wasting parts through inefficient assembly, and with no regard for what the consumer believes is a fair price. When inevitably the consumer demands a lower price, the manufacturer is forced to offer discounts and suffer diluted profits, even as the inefficient assembly continues.

In the legal marketplace, clients' demand for lower and more predictable fees has forced law firms to adjust their approach to pricing. Progressive law firms are mining their own time and billing systems to identify which tasks are typically associated with matters and then identifying historical billing rates for these tasks. Such an effort allows partners, with assistance from finance and business development professionals, to combine tasks into different combinations based on the nature of the client's fact pattern to create baseline matter budgets.

Most of the industry's standard time and billing systems have the capability to generate such reports, though doing so may require some configuration. Partners reviewing such historical billing records tend to gain a new appreciation for the utility of standard billing task codes, viewing them more as tools to improve law firm profitability than as annoyances demanded by unsympathetic clients or firm administrators.

Pricing Based on Perceived Value

An evident failing of matter budgets based solely on billing history is the lack of client input. While a partner may have generated X fees for such an engagement in the past, there's no certainty that clients will continue to pay the same rate going forward. There are several new tools to help clients benchmark their legal spend against peers and competitors, and these tools can also benefit law firms looking for a reality check on their own proposed budgets. TyMetrix, the electronic billing powerhouse, offers a free downloadable iPhone app called RateDriver. It provides simple billing rate lookups by region, industry, position (e.g., partner or associate) and practice ' removing the information asymmetry ' or unequal access to pricing data ' that can frustrate clients and law firm competitors alike.

Taking this concept to another level is a new TyMetrix offering, MatterAnalyzer', that can provide law firms with such benchmarking data in real time, including total matter-based fees, average hourly rates, which type of time-keeper typically conducts specific tasks, and how long each matter and task tends to take. According to Dave Gorman, Director of Business Development for TyMetrix Legal Analytics, “Law firm partners and CFOs have no reason to feel disadvantaged when pricing legal matters, as they now have access to the same insightful analytics and data their clients use to evaluate the value outside counsel provides.”

Pricing Is Only the Beginning

Some law firms employ rigorous procedures before establishing and approving alternative fee arrangements, but then allow the matters to proceed as if it's business as usual, leading in many cases to timekeepers billing significantly more time than the client has agreed to pay. It's a mathematical certainty that law firms offering discounts without also addressing the cost of service delivery will impair profits. So, savvy firms employ legal project management (LPM) techniques to ensure that matters are handled consistently with the agreed-upon budgets. Thomson Reuters Engage is the dominant player in the LPM space, but upstart ERM Legal Solutions' new offering, Lean4LegalPM', benefits from several years of law firms stretching the boundaries of project management.

As Larry Bridgesmith, lawyer and ERM's Chief Relationship Officer, says, “The key to project management adoption is to provide tools that fit within busy lawyers' existing workflows, rather than try to completely reinvent the way they practice law.”

The field of law firm competitive intelligence has come a long way since its entry into the mainstream a decade ago. Then, simply monitoring docket filings to alert clients of impending litigation was considered cutting edge. Now, many firms have entire CI teams focused on gathering insights about clients, markets and trends that will help position its partners as thought leaders and trusted advisers. The sheer volume of information sources to monitor makes this a daunting task, and nearly impossible to do effectively manually. ?Stuart Goodman, Senior Vice President of Manzama, a web-based “listening platform,” reports that its users have access to over 50,000 unique sources every day, including traditional news sources as well as numerous social media sources. “Staying abreast of industry issues is critical for partners who wish to be proactive counselors to their clients, and much like Wall Street, gaining a competitive edge means synthesizing voluminous raw intelligence more effectively than anyone else and then promptly acting on it.” Gone are the days where binders full of “clients in the news” clips and foot-high stacks of “go-to-lunch” prospect dossiers were considered state of the art.

Technology Is Not the Complete Answer

A word of caution: Many law firms invest in technology in the hope that having advanced tools will change lawyer behavior. In reality, partners don't like to leave their comfort zones. If lawyers don't embrace strategic pricing, or proactively counsel clients, or rely on detailed matter budgets, it's typically not because of the lack of tools. It's more likely the byproduct of a long career of reacting to constant client demand, an approach that tends to inhibit innovation. But lawyers who are adaptable, willing to try new things in order to win or keep valued clients, and who embrace even arduous manual approaches to the topics above, can benefit greatly from the novel new tools available in the market.

Timothy B. Corcoran, a member of this newsletter's Board of Editors, authors the Corcoran's Business of Law blog. He advises law firm leaders on strategy, business process improvement, legal project management and business development. Reach him at [email protected]. Phone: 609-557-7311.'

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A long-time conundrum for law firm partners has been whether to embrace tools and technology that improve efficiency, when doing so has the tendency to dilute revenues. Said another way, if a partner's income is primarily based on billing for time, then any tools that reduce the time needed to complete a billable task will reduce the partner's earnings.'

There are multiple problems with this thinking: for one, clients expect that experienced lawyers will, over time, pursue efficiencies that will lower legal fees. Secondly, anyone not living under a rock knows that clients are already pushing back on fees in all practices, so the default stance of “do nothing and make the same income” has given way to “do nothing and accelerate the pace at which clients will push back on fees.” And finally, can any competent professional in any field realistically assert to her clients that tools and technology to drive efficiencies are a bad idea?

New Tools

Willingly or unwillingly, lawyers simply must overcome their resistance to the adoption of tools and technology in the legal practice. There are a number of new and updated tools available to practicing lawyers that improve efficiency by automating routine tasks. However, for partners nervous about lost income due to such efficiencies, there are several new tools that offer the compensating virtue of helping lawyers to improve their ability to practice law, target the right clients, communicate more effectively with co-counsel and clients, and improve profits even in the face of reduced fees.

As we briefly tour some of these new offerings, keep in mind that this column is agnostic and does not endorse any one provider. In most categories, there are two or more providers offering similar products or services. Your mileage may vary based on your firm's needs and practice dynamics.

Big Data to Improve Litigation Strategy

The book and movie “Moneyball” created a wave of activity within the sports field to make better decisions based on accumulated data rather than relying on conventional wisdom. This same approach is increasingly being applied to litigation strategy. “Venue shopping” is the familiar tactic of selecting a jurisdiction known to be friendly to your client's position. But imagine the possibilities available to a lawyer who knows, for example, a particular judge's tendency to rule on a motion for summary judgment or the likelihood of your adversary's counsel pursuing trial over settlement.

Traditionally, such inside knowledge takes years to accumulate, and resides in the heads of veteran lawyers or local counsel. But now new tools are available that collect and synthesize such trends across multiple jurisdictions, providing lawyers with insights that may provide an advantage. Case Outcomes, offered by Thomson Reuters, is one such example of “big data” applied to a legal practice. Says Amy Hrehovcik, New York-based business development manager, “It's like breaking down film of an opponent in basketball. If you know your opponent prefers to drive left, you overplay that side and push him right. Lawyers can adjust litigation strategy based on studying the tendencies of opposing counsel and even judges, and offer more informed advice to clients.”

Strategic Pricing

One oft-described challenge with billing by the hour is its emphasis on the mechanics of “production” rather than the value to the client, which creates the perverse incentive of rewarding inefficiency. To draw an exaggerated comparison, it's like setting the price of an automobile based on how many parts were used in its assembly, with no penalty to the production line for wasting parts through inefficient assembly, and with no regard for what the consumer believes is a fair price. When inevitably the consumer demands a lower price, the manufacturer is forced to offer discounts and suffer diluted profits, even as the inefficient assembly continues.

In the legal marketplace, clients' demand for lower and more predictable fees has forced law firms to adjust their approach to pricing. Progressive law firms are mining their own time and billing systems to identify which tasks are typically associated with matters and then identifying historical billing rates for these tasks. Such an effort allows partners, with assistance from finance and business development professionals, to combine tasks into different combinations based on the nature of the client's fact pattern to create baseline matter budgets.

Most of the industry's standard time and billing systems have the capability to generate such reports, though doing so may require some configuration. Partners reviewing such historical billing records tend to gain a new appreciation for the utility of standard billing task codes, viewing them more as tools to improve law firm profitability than as annoyances demanded by unsympathetic clients or firm administrators.

Pricing Based on Perceived Value

An evident failing of matter budgets based solely on billing history is the lack of client input. While a partner may have generated X fees for such an engagement in the past, there's no certainty that clients will continue to pay the same rate going forward. There are several new tools to help clients benchmark their legal spend against peers and competitors, and these tools can also benefit law firms looking for a reality check on their own proposed budgets. TyMetrix, the electronic billing powerhouse, offers a free downloadable iPhone app called RateDriver. It provides simple billing rate lookups by region, industry, position (e.g., partner or associate) and practice ' removing the information asymmetry ' or unequal access to pricing data ' that can frustrate clients and law firm competitors alike.

Taking this concept to another level is a new TyMetrix offering, MatterAnalyzer', that can provide law firms with such benchmarking data in real time, including total matter-based fees, average hourly rates, which type of time-keeper typically conducts specific tasks, and how long each matter and task tends to take. According to Dave Gorman, Director of Business Development for TyMetrix Legal Analytics, “Law firm partners and CFOs have no reason to feel disadvantaged when pricing legal matters, as they now have access to the same insightful analytics and data their clients use to evaluate the value outside counsel provides.”

Pricing Is Only the Beginning

Some law firms employ rigorous procedures before establishing and approving alternative fee arrangements, but then allow the matters to proceed as if it's business as usual, leading in many cases to timekeepers billing significantly more time than the client has agreed to pay. It's a mathematical certainty that law firms offering discounts without also addressing the cost of service delivery will impair profits. So, savvy firms employ legal project management (LPM) techniques to ensure that matters are handled consistently with the agreed-upon budgets. Thomson Reuters Engage is the dominant player in the LPM space, but upstart ERM Legal Solutions' new offering, Lean4LegalPM', benefits from several years of law firms stretching the boundaries of project management.

As Larry Bridgesmith, lawyer and ERM's Chief Relationship Officer, says, “The key to project management adoption is to provide tools that fit within busy lawyers' existing workflows, rather than try to completely reinvent the way they practice law.”

The field of law firm competitive intelligence has come a long way since its entry into the mainstream a decade ago. Then, simply monitoring docket filings to alert clients of impending litigation was considered cutting edge. Now, many firms have entire CI teams focused on gathering insights about clients, markets and trends that will help position its partners as thought leaders and trusted advisers. The sheer volume of information sources to monitor makes this a daunting task, and nearly impossible to do effectively manually. ?Stuart Goodman, Senior Vice President of Manzama, a web-based “listening platform,” reports that its users have access to over 50,000 unique sources every day, including traditional news sources as well as numerous social media sources. “Staying abreast of industry issues is critical for partners who wish to be proactive counselors to their clients, and much like Wall Street, gaining a competitive edge means synthesizing voluminous raw intelligence more effectively than anyone else and then promptly acting on it.” Gone are the days where binders full of “clients in the news” clips and foot-high stacks of “go-to-lunch” prospect dossiers were considered state of the art.

Technology Is Not the Complete Answer

A word of caution: Many law firms invest in technology in the hope that having advanced tools will change lawyer behavior. In reality, partners don't like to leave their comfort zones. If lawyers don't embrace strategic pricing, or proactively counsel clients, or rely on detailed matter budgets, it's typically not because of the lack of tools. It's more likely the byproduct of a long career of reacting to constant client demand, an approach that tends to inhibit innovation. But lawyers who are adaptable, willing to try new things in order to win or keep valued clients, and who embrace even arduous manual approaches to the topics above, can benefit greatly from the novel new tools available in the market.

Timothy B. Corcoran, a member of this newsletter's Board of Editors, authors the Corcoran's Business of Law blog. He advises law firm leaders on strategy, business process improvement, legal project management and business development. Reach him at [email protected]. Phone: 609-557-7311.'

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