- Corporate law functions perennially experience chronic shortfalls between the capabilities they have and the capabilities they need. Absent an unlimited budget that can simply add lawyers in response to each new legal and regulatory demand, Legal must increase its compliance capabilities at-scale just to keep up.
- In a recent series (Parts I, II, III, and IV) I explained that process-based systems are necessary to achieve such at-scale increases in Legal’s compliance capabilities. Again, just adding lawyers is not sustainable.
- But the legal profession’s still-dominant billable hour business model impedes Legal’s adoption of the modern automated systems needed to scale Legal’s capabilities.
This Matters to Your Business
Last week Jason Barnwell, Microsoft’s General Manager for Digital Transformation of Corporate, External, and Legal Affairs, described a request he made to a law firm — in essence: Tell us the legal or regulatory rules to embed into the system’s software to avoid violations in that system’s automatic performance of its “process work”.
Barnwell, who became a USC-trained lawyer after a career as an MIT-trained software engineer, understands both the legal requirements and the technology / process requirements involved.
“Wanted to automate a business process. Needed an API [application programming interface].
“Legacy [law] firm declined. Not aligned with their model.”
What’s going on here? Why would any law firm reject out of hand an invitation from the likes of Microsoft to perform such sophisticated, prestigious work? And why reject the no-doubt generous fees that go with it?
Here’s the practical reason: Given the billable hour’s dominance as a business model, the typical law firm wants their own lawyers — not a modern automated system — to do the recurring, routine “process work” related to their client’s legal or regulatory compliance.
Law firms understand that maximizing their time charged to the client — versus increasing Legal’s capability at-scale — are mutually inconsistent goals.
I invite the reader’s attention to two key lessons from Mr. Barnwell’s remarks:
First, the billable hour business model prioritizes fee maximization over the client’s interest.
A well-designed API for a specific compliance task not only would save money for Microsoft in the situation described. It would offer greater speed and greater accuracy than even the most proficient individual attorneys could provide manually for the routine, recurring tasks involved.
Nevertheless, most law firms are unapologetic about forgoing economy, speed and accuracy for the client, and, instead, optimize “performance” as defined by their business model: more hours billed to the client.
Second, “process work” carried out manually by lawyers takes particular advantage of the billable hour model’s “associate leverage” strategy: law firms deploy recent law graduates, for hundreds of dollars per hour, to recurring, routine tasks simple enough that software could do them.
As the legal and regulatory system’s demands on Microsoft skyrocket, Jason Barnwell is known for relentless innovation in meeting those demands at lower cost, with greater speed, and with more accuracy. He’s unlikely to be stymied by this one law firm’s resistance.
Part II of this three-part series describes an outlier U.S. law firm expressly designed to provide corporate clients the “process work” that enables an at-scale response to sky-rocketing demands. It offers licensed legal services (like a traditional law firm), integrated with software, data analysis, and business process expertise (like an “alternative legal services provider” or a “law company”): Elevate Services.
Part III describes another such law firm: Axiom Law.