Articles Posted in How Lawyers Deliver Their Services to Business

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Competition creates the value that the customer gets. There’s no substitute for it.

Take a look at this morning’s Wall Street Journal (subscription required):

“Charles Schwab, Fidelity Escalate Brokerage Price War”.

Featuring a picture’s-worth-a-thousand-words chart showing Schwab’s average commission per trade going from $12 in 2015 down to a little more than $7 — along with similar moves over the same time frame by TD Ameritrade and E*Trade.

Here’s the kicker:

“Schwab kicked off the latest round of price cuts with an announcement Tuesday morning that it would double the number of ETFs [exchange-traded funds] that can be bought and sold at no cost on its platform. Fidelity followed within the hour saying its platform would likewise expand its commission-free lineup to include more than 500 ETFs.”

“Fidelity followed within the hour.”

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Not so the marketplace for lawyers’ services to companies.

I am not saying that you should pick lawyers based on price. Picking the “low cost provider” when choosing your company’s lawyers is dumb.

What I am saying:

A company should be able to expect that its outside lawyers will compete based on non-price terms of service that meet basic management disciplines that owners and managers require in every other part of the business — other than legal. 

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Charles Dickens’ A Tale of Two Cities famously begins:

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness ….”

On one hand, the legal profession’s hourly billing-based business model rules the day in most law firms. And company law departments that resist this are so rare they make headlines.

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Business people care about results.

That was the biggest lesson I learned upon crossing to the client side of the lawyer / client table.

After spending a decade as a practicing attorney.

Kind of a “duh” factor for my friends who’d lived and died by the P&L all their careers.

But for a lawyer whose career had been devoted to the analytical preoccupations and time-honored how-to methodologies that occupy 99.9% of a lawyer’s education and daily focus — it was a revelation.

Until I’d shouldered executive responsibilities, I was tone-deaf to what business “results” actually were.

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Because he began his career in software engineering, Jason Barnwell, Microsoft’s Assistant General Counsel – Legal Business, Operations and Strategy — appears to have launched his professional life with a focus on “results” akin to that of a general manager.

So — as a software engineer — it was only natural that he offered to write computer script that would enable one individual to complete all of a document creation-and-collation task to which his law firm had assigned six team members.

Just as naturally Barnwell’s law firm employers — practicing under the legal profession’s hourly billing business model — found a way to stretch out their document creation-and-collation task to six people. Presumably charging for the time of all six people — performing manually what Barnwell’s computer scripting would have automated.

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Part 1 of this three-part post described software engineer-turned-attorney Jason Barnwell’s introduction — two months into his first law job after graduating from USC Law School — to the legal profession’s idea of “productivity”.

As the junior lawyer on a deal team, he offered to automate the process of creating and collating the shareholder consents necessary to close an M&A transaction by “some basic scripting”. As he put it in an article published earlier this week: “I was still an adequate software engineer back then”.

My guess is that his skills were in fact more than “adequate” — with four years of software engineering experience in the Bay Area — and a mechanical engineering degree from MIT.

Anyway, Jason Barnwell reasoned that reducing the individual bodies required for this paper shuffling from six down to one would be a good thing. Ditto the fact that the five team members thus freed up would be able to, “focus on other aspects of the transaction rather than walking laps in an ozone filled copy room”.

He was rebuffed — without explanation. Pressing for an explanation he was again rebuffed. Undeterred, Mr. Barnwell resolved to “revisit this for the next M&A deal”.

He remained undeterred until six weeks later:

“I saw the itemized bill for the transaction … There was a line item for my contribution. My hours worked multiplied by my billable rate. My client paid a lot for me to make copies“.

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The legal profession matter-of-factly defines “productivity” as the number of hours an attorney billed the client and then got paid for.

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This is a tale of two definitions. Two definitions of what “productivity” means in the delivery of legal services to a company.

It’s about an MIT-trained software engineer named Jason Barnwell who worked in one of the country’s major corporate law firms right out of USC Law School.

The tale begins two months into his first job with a nationally prominent corporate law firm.

Spoiler alert: In Part 2 we learn that Jason Barnwell later became — and is now — Assistant General Counsel – Legal Business, Operations & Strategy at Microsoft.

But I’m getting ahead of the story.

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Jason Barnwell had been, “staffed as the junior-most associate on an M&A deal advising our client as they sold their business”. He was “naïve” enough — his word — to believe that automating a process in which the law firm deployed six associates and paralegals to photocopy and collate voluminous shareholder consent documents would improve the team’s productivity.

Not to mention, deliver better service to the client.

By writing some basic computer script that was part of his software engineer skill set, Mr. Barnwell’s automation solution would enable one individual to prepare all of these necessary transaction packages — thus freeing up the remaining five team members to do the other tasks needed to close the deal.

For Jason Barnwell — veteran of 4 years of software engineering — getting more done, with fewer resources, in less time, and with fewer mistakes — that all seemed fairly “productive”.

But Jason Barnwell — newly minted attorney with a mere 2 months of corporate law practice — was about to learn that his new profession had a different definition of “productivity” than what he’d been taught at MIT.

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In the Financial Times article which concludes with the above statement, English lawyer David Allen Green reminds the reader that the value of legal work depends on quality — not quantity:

“… To assess the value of legal advice purely on the basis of cost or volume of output is a mistake. The most valuable legal advice can be succinct, the most effective legal letter can be one page long. What businesses are paying for is expertise and security. The point of legal advice for a business is to ensure that the right protections are in place and that risks are well managed. The problem with expertise and security is that they are hard to calculate by reference to the size of outputs.”

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In business getting “results” is basically a management question.

So is getting artificial intelligence (AI) or any other tech innovation right.

But it’s vital to begin with a management approach that can achieve those results — only thereafter does it make any sense to pick AI or any other tech innovation to reach them.

As Aileen Leventon — counselor to the legal industry and practicing attorney — put it:

“Tech is easy. Figuring out what really matters is hard.”

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Part 1 and Part 2 of this three-part series describe the views of Dr. Richard Susskind — Scottish lawyer and Oxford PhD in computer science — on how AI can get the “results” business people need from their lawyers and other professionals — faster, cheaper, and more accurately.

Before I had read Dr. Susskind’s essay (British Academy Review’s Autumn 2018 edition), I viewed him as the leading thinker in the world on “how information technology and the Internet can improve lawyers’ effectiveness on behalf of business clients”.

But in light of his essay cited above, as covered in Parts 1 and 2, it would be more accurate to describe the aim of Dr. Susskind’s work a little differently:

Not: “How information technology and the Internet can improve lawyers’ effectiveness on behalf of business clients”. 

But instead: How information technology and the Internet can improve the “results” — or the “outcomes” — that business clients want in their legal affairs.

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In Part 1 of this three-part series, I wrote that business people care about results.

And that 99.9% of a lawyer’s education and focus are devoted to analytical preoccupations and time-honored how-to methodologies — “lawyer tasks” — not so much to the results their clients really care about.

Lawyers are focused on the “how” of their professional skill sets to such as extent that it obscures the “why” of their clients’ desired business outcomes.

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Also in Part 1, I introduced Dr. Richard Susskind’s thinking on how artificial intelligence (AI) could bypass attorneys’ obsession with those “lawyer tasks” — to target results instead — what he calls “outcome-thinking”.

Here’s Dr. Susskind’s diagnosis of attorneys’ obsession with their “lawyer tasks”:

“… This kind of task-based thought is deeply flawed. Think about legal work. Commentators and practitioners often insist that much of the work of lawyers is beyond the reach of technology. They will suggest, for example, and not unreasonably, that the work of court lawyers cannot be replaced by machines. How on earth could a robot appear as an advocate before a judge? The answer, of course, is that we are light years from this happening. But the story doesn’t end here, because these traditionalists are asking and answering the wrong the question. Mistakenly, they are focusing on current ways of working rather than on whether the outcomes that court lawyers deliver might be achieved in very different ways.”

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Business people care about results.

That was the biggest lesson I learned upon crossing to the client side of the lawyer / client table.

After spending a decade as a practicing attorney.

Kind of a “duh” factor for my friends who’ve lived and died by the P&L all their careers.

But for a lawyer whose career had been devoted to the analytical preoccupations and time-honored how-to methodologies that occupy 99.9% of a lawyer’s education and daily focus — it was a revelation.

Until I shouldered executive responsibilities, I was tone-deaf to what business “results” actually were.

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How to get the results-oriented legal services that business clients need — if their attorneys can’t seem to see beyond their “lawyer tasks”?

This is where Dr. Richard Susskind‘s recent insights — and artificial intelligence (AI) — might help. Susskind is a British lawyer and computer expert.  His work emphasizes the ways in which information technology and the Internet can improve lawyers’ effectiveness on behalf of business clients.

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One of this blog’s goals is to help business owners and managers understand why their lawyers act the way they do.

My question in this two-part series: Why don’t more law firms treat the businesses that pay their bills like customers?

In my post a week ago I quoted Forbes’ legal commentator Mark Cohen:

“There is unambiguous evidence of a significant and persistent disconnect between law firms and their clients. Only 25% of corporate legal buyers said they would recommend their ‘go-to’ law firm.”

A business owner or manager might ask: Why can’t law firms treat my business with the same care and attention with which Southwest Airlines, Starbucks, the Cleveland Clinic — or my local dry cleaners — treats me?

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Law firms are rarely managed the way that you run your business. To move toward a relationship with them that better serves your interests, it would help to understand how certain perverse incentives in the law firm world work.

The way law firms handle internal issues — like the two addressed below — creates perverse incentives. And those perverse incentives make law firm leadership more responsive to its partners — its owners — than to the organizations who pay their fees.

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