What is to be done? From theory to practice in billing for legal services.

Alright, already. We heard you. We know. The new normal is normal. Growth is dead. There’s no going back. Convergence is king. Incentives are misaligned. Clients are cranky. Law firms are ostriches.

But … what do we do now? Sure, the CFO wants legal services to cost less, and will bring in the procurement team to coach or coax or coerce the GC along the right road. The GC wants lower risks, more predictable costs and more business-savvy outcomes. Law firm partners want happy clients, comfortable profits and interesting work.

Hourly billing, it turns out, is not just profitable for law firms, it’s also just plain easy—for clients as well as their law firms.

Lawyers in the firm write down what they did today (these days maybe with help from smart software like IntApp TimeBuilder). Then, at some interval after the work has been completed, computers do arithmetic, electronic bills are fed to the client’s computers (or those of an intermediary like DataCert or Tymetrix), a few conflicts with the company’s billing policies are kicked out, and then lawyers in the GC’s office—who know what they do all day, and did when they were in a law firm themselves—read the firm lawyers’ notes (and the results of the arithmetic) and say, “Yup, that looks about right” or “Nope, that looks high.”

Time-consuming, misaligned and all that. But easy, and familiar to everyone in the business. That’s why it’s so surprisingly durable. After all, the American Bar Association published Beyond the Billable Hour: An Anthology of Alternative Billing Methods in 1989. Our copy on the office shelf is fading and crumbling after 24 years but still legible: today’s ideas were all there then.

So … what is to be done? We all need to learn to do it different. We need to learn how to do the work differently, manage it differently and structure and negotiate different fees—based on agreed and measured value, not on hours. And that we is indeed all—law firms and clients together.

Not familiar, not easy, and in the short run not fun. Like yoga or cross-fit training. But once you get the hang of it, it feels good, improves strength and flexibility, and lengthens lives.

The best way to learn is to do, and the best opportunity to do without risk—that is, to practice in a realistic but not real setting where mistakes don’t cost dollars and everyone’s a novice—is the Legal Services Management Workshop created by the Association of Corporate Counsel (“ACC”), the world’s largest community of in-house counsel, with more than 30,000 members in over 75 countries.

The two-day program is a bit like boot camp—up early in the morning, chalk talks to get things started, field drills under simulated fire with instructors coaching from the sidelines, after-action reviews to assess the results. Let’s not carry the boot camp metaphor too far—the workshop faculty are experienced, smart, Socratic, funny, responsive, patient and practical. No drill sergeant hats.

Indeed, ACC has recruited for the faculty an all-star team of legal services management wizards, from both law firms and law departments: Lisa Damon and Katherine Perrelli of Seyfarth, Bill Garcia of Eagle Key Consulting, Kenneth Grady of Wolverine World Wide, Peter Gutelius of Royal Bank of Canada, Nancy Jessen of Huron, Patrick Lamb of Valorem Law Group, Rob Lipstein and Kathryn Kiermayer of Crowell & Moring.

The first day begins with process improvement and process mapping—how to deconstruct “matters” into steps that can be analyzed, measured, simplified, eliminated, systematized, outsourced, automated. Seyfarth Lean is the model. Next is project management—we have a better process, now how do we assure that everyone is on board and rolling down the right track at the right speed?

On the morning of the second day, there’s a guided tour of value-based fee structures—from flat to contingent—with specific examples and some sharp war stories to illustrate which structure best fits what situation.

At every stage, the workshop participants—drawn equally from law firms and law departments—divide into teams (sounds like business school, right?) and work together on realistic exercises devised by the faculty. The exercises include: creating a process map for an M&A deal; drafting a project charter, budget and detailed project plan for the deal; structuring and negotiating fee arrangements for corporate and litigation matters; and a comprehensive law department cost reduction.

Teams report back to the full crowd on their findings and recommendations, and although no prizes are handed out, there’s a jovial spirit of competition in the room.

After two hard-working days, the novices are now ready to graduate to the real thing. And they have the faculty’s email addresses and phone numbers, so real-time coaching will be at hand when needed.

ACC offers open workshops as well as private workshops for individual law departments and law firms (who will find that inviting clients is a good thing.) Details from Catherine J. Moynihan at ACC.

Why, one might ask, does Neota Logic, a state-of-the-art software company, care about value-based fees?  It’s simple.

We say to law firms, Neota Logic enables you to bill without hours and leverage without associates. We say to general counsel, Neota Logic enables you to reduce risks and improve outcomes without increasing headcount or outside counsel fees.

So when law firms and general counsel still measure value in hours worked rather than value delivered—inputs rather than outputs—they don’t get what Neota Logic can do for them.

However, as they learn to apply value-based fees in traditional legal work, they learn that Neota Logic applications take the next step in driving value—to true automation of routine legal and compliance problems. That’s why we’re a sponsor of the ACC’s Legal Services Management Workshop.

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One Response to What is to be done? From theory to practice in billing for legal services.

  1. Mike Bird says:

    This is important stuff. Taxi meter billing may be easy to manage and administer, but it always leaves the law firm open to the charge that they are incentivised to maximise billable hours as opposed to customer value. It’s a tough nut to crack, but I an heartened by the range of folk being engaged. If, as you say, the workshops can begin by thinking about customer value as the basis of billing, then I would be optimistic about their prospects for genuine innovation. I look forward to seeing what results.

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