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Legal Decoder Blog

Metrics And Managing

Recently, there was a piece about what lawyers do with their time on an average day and the average amount of time a lawyer spends on billable hours is 2.3 hours per day (roughly 30% of her/his workday).  The rest of the time is spent on other tasks like administrative work or business development.  We performed an analysis of billing data using our Compliance Engine to give a picture about what lawyers/timekeepers do when they bill.

Long story short: Lawyers are busy.  They just aren't always busy with your matter.

If someone were to mandate that everyone increase their billable output by 2x each day based only on the statistic of 2.3 hours without any other data points then other important tasks (business development) will fall on the list of priorities.  This creates a domino effect which would probably lead to some unhappy employees and lost business.  It is important to drill deeper into your data for more context and a more complete picture to determine if that decision is the right one.

It also reminds me of the misquoted Edward Deming line: "You can't manage what you can't measure."  What he actually said was you shouldn't run a company or organization purely on statistics alone.  Both quotes contain good advice.  Data and metrics are important pieces of your decision-making arsenal.  Use them to prove or disprove your conclusion.  Ultimately, using that data to make the right decision for your clients and workforce is what really matters.

 

Security Is Everyone's Job

It seems as though each week a new security disaster or more bad news on a previous one is reported.   We take security seriously and think about how we can reduce our attack surface.  Our customers trust us with their data and we never want to break that trust.  As we are rebuilding our technology backend (more on that in the near future) we are baking in security through each step of the development process.  Security can't just be inserted wherever you want; it has to begin at the start.

At times, the security measures we have taken inconvenience our customers (and us) but it's a tradeoff we can live with.  

Security is everyone's job.

BlogJason Chisecurity, breach
A Look Into The Data

Recently, we took a look at a data set to get an idea of who did what, how long, and how much using the Compliance Engine.  The Compliance Engine "flagged" line items that triggered rules from 3 different categories: Billing Hygiene, Workflow Efficiency, and Staffing.  The flags are based on data analysis, industry benchmarks and generally accepted guidelines.

The Data Set

The data set consisted of 90+ law firms where partners and associates/senior associates consisted the majority of position as expected.  The high percentage of partners and associates also correlated to the majority of fees billed by those positions.

 
Timekeeper Positions

Timekeeper Positions

 

 

 
Total Fees by Position

Total Fees by Position

 

Below is a look at how firms performed on the total number of flags vs total spend (what was billed out).  

 
total_spend_flag.png
 

Insights

First, we wanted to see the most common flags analyzed by the Compliance Engine.  Most of the flags fell under the category of Workflow Efficiency (e.g. Increment Billing, Chipping, Office Communication) with the exception of Round Hour and Vague Entries.  

 
flags_total_each.PNG
 

Increment Billing, the most common flag from the data set, are tasks recorded in multiple time entries usually in small increments.  Common activities include "Review" and "Prepare."  

The Skills Mismatch – Overqualified flag is applied to an activity that falls below a timekeeper’s experience level.    For example, a partner working on a draft memo for 3 hours would be considered a skills mismatch and, possibly, incur a higher cost to a client.  This is a trickier flag because some of our clients approve of Partners performing drafting activities or reviewing files despite the Compliance Engine flagging those activities.

Next, we wanted to know what the most common activities were.  The three most common activities across all matters in the data set involved "Review", "Analysis", and "Preparation".

 
Total Hours for Common Activities Across All Positions

Total Hours for Common Activities Across All Positions

 

“Preparation” activities averaged 2.2 hours across all positions while “analysis” activities averaged 1.89 hours and “Review” averaged 1.58 hours.  These activities encompassed various stages and cycles of a matter.

 
average_hour_activity.png
 

Some other insights we gathered from the data:

  • 30% of senior timekeeper entries (partner, senior counsel, etc.) involve an internal office conference.  Internal office conferences can include meetings and teleconferences with colleagues or other staff members.

  • 20% of all line item entries involved e-mail communication and 11% of the e-mail communications were flagged for Communication Inspecificity.  Communication Inspecificity is when outside counsel's time entries regarding electronic or telephonic communications do not identify the subject matter of the communication. 

  • Over 30% of Skills Mismatch – Overqualified flags involved “review” activities with 60% of the flags attributed to timekeepers with the title of “Partner.”  

These are just some of the insights we can surface from your legal billing data.  Quantifying work that has been performed paints a clearer picture and help inform future performance.  Our technology can help law departments and law firms make informed decisions through data analysis.  If you think we can help you with your legal spend and billing data please contact us at info@legaldecoder.com or go here.

The Billable Hour

The debate about whether the billable hour is an outdated unit of measurement has been discussed and still continues. More law departments are exploring options to implement alternative fee arrangements (AFA) with their outside counsel.  Microsoft wants 90 percent of its legal work performed under AFAs and 30 percent of respondents in Deloitte's Future Trends for Legal Services mentioned fixed or capped fees regarding purchasing legal services.

But the billable hour continues to be the standard because it is quantifiable and ingrained in the culture of the legal industry.  Despite all the complaints the billable hour is still the most predictable way to gauge the value and effectiveness of certain practices such as litigation.  There are risks that come with an AFA/fixed fee arrangement to both the law department and the law firm.  Firms may incur a loss if they don't budget properly and law departments may overpay when it could have been cheaper to pay by the hour.  AFAs have a place and will continue to become more commonplace particularly with more predictable matters.

Despite the disdain of the billable hour by many people it doesn't seem like it will be replaced anytime soon.  Yes, the billable hour can lead to unethical billing practices but that doesn't mean a new blanket solution is necessary.  Using a combination of technology and relevant metrics to analyze cost, value, and efficiency of services purchased or provided is a better solution before making a decision.

Law Firm Technology Use On The Rise

Legaltech News post an article about law firm technology used to increase efficiency and automate repetitive tasks.  When law firms were surveyed they stated which technologies they felt were the most effective:

"When asked what technologies provide the "greatest overall effectiveness," two-thirds of law firms picked document management, while around half chose financial planning tools. Slightly under half also chose business intelligence tools (49 percent), and matter management and case management platforms (47 percent), while 37 percent cited project management platforms."

Law firms also stated the invoice process was something they spent too much time on:

"One area that the survey found to be problematic for law firms was invoice management. Forty-four percent of respondents said they "almost always" or "often" spent too much time on invoicing, while 49 percent said this only happened "sometimes.

Specifically, 65 percent of respondents said it takes them at least over one week to publish an invoice. Among law firm respondents with over 200 attorneys in-house (45 out of the 112 respondents), that number rises to 76 percent. Among all respondents, 7 percent take longer than three weeks to publish an invoice.

Much of this delay may come from the manual workflows through which law firms have to organize, classify and submit their invoices. "You have a lot of different people physically touching [an invoice] before it gets out the door," Cartrett said. "So that will slow down the process."

People, processes, and technology will continue to evolve within law firms and corporate law departments.

Automation

This week, DoNotPay, a site that helps people with legal issues ranging from fighting parking tickets to helping with asylum applications announced it has added 1,000 chatbots to assist with a wider range of legal forms.  For those unfamiliar with the chatbot it is simply a program that helps a person using dialogue and conversation to accomplish a tasks like customer service.  Chatbots are also used in digital assistants like Siri and in major messaging platforms (Facebook, WeChat).

While Legal Decoder doesn't compete in the same market as DoNotPay it is part of the same movement of creating legal technology products that automate tasks to help customers with decision-making.  Even though DoNotPay claims to be "the world's first robot lawyer" it isn't a lawyer and A.I. isn't replacing lawyers right now.  There is still a need for lawyers to provide guidance to clients or in-house counsel to manage the legal matters of a company.  Technology won't replace these people but it can help make them more effective at their jobs.  These technologies, including ours, provide to the user with more information and insight by doing the heavy lifting in the background through automation.

Technological innovation isn't going away in the legal industry.  Law firms and corporate legal departments are adopting technologies to help automate tasks such as matter management and billing review.  LegalZoom and Cooley created products where anyone at any time can generate a legal document for a matter.  More and more technology will be introduced into the legal market.  It's just a matter of figuring out which one works for you.

Friday Reading List

Each morning I compile a list of articles to read throughout the day or save to Instapaper to read later.  Here's a list of interesting articles for some Friday reading: 

A Growing Uneasiness Between Firms And Clients

Recently, there have been articles discussing the shift to alternative fee arrangements (AFAs) and whether law firms are too quick to comply with client demands regarding billing practices.  In an industry where firms have thrived on the billing hour this shift can be worrying to law firm leaders.  You can read about it here, here, and here.

The legal industry is changing with technology presenting new solutions to help law firms and corporate legal departments stay competitive.  Yes, clients are demanding more transparency and efficiency from their outside counsel.  There will be more AFAs but the billing hour isn't going away anytime soon.  We believe these market disruptions aren't problems but opportunities to add value and develop differentiation amongst the competition whether you are the law firm or client/company.

This quote best sums up how we think law firms and corporate legal organizations should tackle the changing market landscape:

"These leaders don’t shy away from market problems. They pursue the best solutions to better continue navigating their firms and law departments with fearlessness, confidence, and security."

Legal Decoder Will Be At The ACC Legal Operations Conference (June 4-6)

Legal Decoder will be attending and presenting at this year's Association of Corporate Counsel (ACC) Legal Operations Conference in Chicago from June 4-6.  Joe Tiano will be presenting Legal Decoder's technology at the "Shark Tank: External Spend Data Analytics" event.  Please stop by and say "hi" if you are at the conference.

For more information on the conference go here.

LEGAL SPEND COMPLIANCE PART 2

Understanding your legal spend data is a concept the legal industry has just begun to embrace.  The previous post in this 2-part primer on legal spend compliance discussed billing hygiene and what constitutes good billing hygiene.  This post will discuss Workflow Efficiency and Staffing

Workflow Efficiency means tasks are done in a manner that doesn’t add unnecessary steps and time.  Legal Decoder’s technology analyzes line items and uses benchmarks to determine if Workflow Efficiency can improve.

Office Communication

A Workflow Efficiency issue we often see is excessive Office Communication from timekeepers.  This can include phone calls, teleconferences, meetings, and conversations.  The main reason why excessive communication is a problem is that the true costs and time to complete a task are inflated making it difficult to assess the actual value of the work.

Here are some examples of excess Office Communication:

(For Matter XYZ)

“04/17/2016 – Update retention applications for counsel, administrative agent, and operational advisor re updated case information (0.7); review all current conflicts spreadsheets and related schedules in connection with counsel retention application (2.2)”; confer with M. Ellis re logistics(.1); revise motion (0.5)”

“04/19/2016 – Update motions for interim compensation and ordinary course professionals (0.8); and confer with M. Ellis re same (0.2).”

The narrative part in question is “confer with M. Ellis.”  If the timekeeper truly does require constant communication, why does the client have to take on the burden of those costs?  Without seeing the entire body of narratives, it seems innocuous but it can be a signal to the client AND law firm that work is not done efficiently or a timekeeper requires constant guidance to complete a task.

Chipping

Chipping means adding excessive, small increments of time to a task.  This can occur with senior and junior timekeepers.  An example of Chipping:

“8/31/2016 – Attention to RN plan settlement. (0.1)”

“9/1/2016 – Attention to RN plan settlement issues. (0.1)”

“9/2/2016 – Attention to RN plan settlement issues. (0.1)”

 It’s clear the timekeeper is just adding small increments of time to bill out.  The narrative doesn’t mention what actual work has been done, either.  We’ve seen cases of Chipping where phone calls were charged .1 hours across several matters once a week.  In cases like that there needs to be discussions between the client and law firm.

STAFFING

Finding the right mix of staff can complete tasks and move matters forward.  The incorrect mix of people can result on work being dragged out, high costs, or both.

First Year

Line items are flagged with First Year flags when recent law graduates work on tasks at a less efficient level compared to more senior lawyers.  

“Update and circulate updated draft of equity trading order (0.8).”

“Update Notice of Commencement per T. Young’s comments (0.5); review petition information (0.3)”

Both examples above are easy to gloss over but upon closer look it probably doesn’t take nearly an hour to update and send out a draft trading order.  Someone more senior may be able to do the work more efficiently over the course of a matter but the cost may be higher.  Being able to surface these insights from data can help you determine which option is appropriate.  

Skills Mismatch – Overqualified

When timekeepers work on tasks below their skill level their line items are flagged with Skills Mismatch – Overqualified.  The line item below was billed from a law partner:

“Review/revise discovery letter (1.0); confer with client re presentation and other miscellaneous issues (0.5)”

Revising a letter and providing comments to a draft might be better assigned to a junior timekeeper with a lower cost.  When senior-level lawyers are doing work well below their level it inflates the total legal costs and may keep the senior-level lawyers away from tasks requiring strategic direction or subject matter expertise.

Workflow Efficiency and Staffing are two drivers of cost in legal spend.  Both can seem subjective and difficult to quantify.   Legal Decoder’s technology uses benchmarks to determine whether work is done efficiently with the right people.  Corporate law departments and firms can use the data analysis to ensure billing guidelines are met and timekeepers are compliant which can help maintain the relationship with the client.

Jason Chi
LEGAL SPEND COMPLIANCE PART 1

Being able to understand your data is key to moving forward in a changing legal industry.  Corporate law departments want to know how analytics can be used to help with decision-making and finding value.  Law firms and bill examiners want a solution to ensure billing compliance and get paid faster.  Finding a place to start and make sense of it all can be a challenge by itself.   

Not to worry.  For those who aren’t familiar with Legal Decoder's Legal Spend Analysis technology we have put together a 2-part primer to help take the first step in understanding your data.  Legal Decoder’s Compliance Engine analyzes line items on billing hygiene, workflow efficiency, and staffing.  This post will discuss Billing Hygiene.  The next post will cover Workflow Efficiency and Staffing

Block Billing

Good Billing Hygiene isn’t just inputting time and a short (or very long) description of the work done.  It means line item narratives are descriptive yet succinct to maintain good Billing Hygiene.  One of the most common issues we see is Block Billing.  Here’s an example of Block Billing:

“Review and final comments to plan; disclosure statement and final revisions to approval motion and instructions regarding filing and service; numerous conversations with co-counsel regarding solicitation issues.”

Here is another example of Block Billing:

“Review, analyze case law re confirmation issues (2.3); review, revise summary of same (.4); draft analysis of same (.4); correspond with R. Miller, C. Person, R. Smits, re same (.4); review, analyze precedent re same (.4); review, analyze confirmation timeline issues (.1); review, revise pleading re same (.2); correspond with F. Gore, A. Luck, C. Pagano, re issues re same (.3); correspond and conference with R. Mathis re same (.2); correspond and conference with P. George, J. Teague, M. Turner, N. McMillan, Company re ERISA meetings (.3); review and analyze issues re same (.4); conferences with T. Hilton re plan issues (.3).”

It’s easy to see what makes up Block Billing.  Too many narratives combined into one narrative.  Each mini-narrative doesn’t fully describe the work or the context of the work.  As with the second example, there are 10 narratives crammed into one narrative which makes it difficult to understand the work done.

Here is an example of a well-written narrative:

“Review and analysis of discovery requests directed at debtors regarding events leading to the Ch. 11 and post-petition operation of the debtors.”

The description of the work is succinct and, on its own, the context of the work can be traced to the matter.  Well-written narratives provide a complete picture of the work that has been done for the client and allows firms to track/manage matters appropriately.

Vague Entries

Another common Billing Hygiene issue we see are Vague Entries and they are exactly what they sound like: Entries with vague descriptions of work.

Here are some examples of Vague Entries:

“Further email updates”

“Emails re same”

Vague Entries don’t provide description or traceability to the work.  A few Vague Entries might be acceptable but when it is habitual it becomes a problem for the timekeeper, law firm, and client.  The client doesn’t know what work has been completed and what it is paying for.  The law firm doesn’t have the ability to map the work performed to the matter.  And it looks bad for the firm and the client because neither party can justify the work that was done.

Communication Inspecificity

Lastly, we see a lot of issues regarding Communication Inspecificity which just means the timekeeper didn’t properly identify the party he/she was in communication with.  Here’s an example of Communication Inspecificity:

“Participate in committee conference call.”

Not only does the timekeeper not specify who she/he was in communication with but the entry is also vague.  A better narrative could’ve been “Participated in committee conference call regarding SmithCo appeal with General Counsel.”

The ability to analyze, quantify, and collect valuable information from your legal spend data can unlock untapped value.  New insights can lead to better decisions and strategies.  Both the client and firm can better manage work-related matters, budgets, and costs using information drawn from data.  The legal industry is moving towards a data-driven model where surfacing information from data is the difference between adapting to the changing times or staying the same and watching the competition move forward.

For part 2 of this primer click here

The New Legaldecoder.com!

Welcome to the new Legaldecoder.com!  We've redesigned the site from front to back and moved the site to a new system.  Check back regularly for blog posts and news updates on our blog "The In-House Insider."

If you want to sign up for our newsletter you can sign up on our site here.    

 

LEGAL DECODER CEO JOE TIANO DISCUSSES LEGAL OPS AND DATA-DRIVEN LAW WITH HIGH PERFORMANCE COUNSEL

https://highperformancecounsel.com/legal-decoder-ceo-joe-tiano-talks-legal-ops-data-driven-law-high-performance-counsel-fearlesslaw/

Who are you and what is your role?

I am the Founder and CEO of Legal Decoder.

After practicing law for nearly 20 years, I withdrew from the partnership at Pillsbury Winthrop Shaw Pittman LLP to take on a new challenge. Our mission at Legal Decoder is to help legal ops professionals and law firm leverage technology and data to drive better predictability, efficiency and value when it comes to legal services.   My role is to work with legal industry leaders to understand their challenges and goals and develop smart technology that helps to achieve their goals.

What do you think will be the single most defining feature of the next 1-5 years in law? And then, same question – but over the next decade?

The most defining feature will be the reaction of law firms whose lawyers are being asked by clients to change behaviors. Clients are looking to their law firms for more than legal services as they have been delivered over the past 70 years.   Clients expect law firms to utilize technology, leverage data, create new service delivery models and expand core competency to include things like project management and process mapping. Change is difficult but law firms must react with a sense of urgency to client demands and sell what clients want to buy.

In ten years, many of the baby boomers presumably will have retired so the industry is really going to be shaped by millennials. Millennials are a tech savvy generation so it’ll be interesting to see how they approach the rigors of the legal industry.

Artificial Intelligence (AI) is touted as a game-changer for law. What do you think?

AI will not replace lawyers but will augment how they practice.  Technology simply cannot do aspects of what lawyers do.  AI cannot reason by analogy like lawyers do.   Software cannot account for precedential value, from a business perspective, of taking one course of legal action as oppose to another.  Technology has its limitations.  Lawyers who embrace technology and data analytics to augment their practice and inform their advice will have a competitive advantage

Cybersecurity is often quoted as being both the next greatest risk and also the greatest revenue opportunity for legal services providers. What are your thoughts?

The risk of security and data breaches is undeniable. Notwithstanding, the levels and quality of protective measures, through encryption, password protection, network security monitor and so on continue to advance counteracting the threats. LegalTech solutions providers, legal ops experts and IT professionals are smart and take data security very seriously which means that security levels and preventative measures will become even more effective.

Is Automation a “silver bullet” for law – or is law more complicated than other sectors?

Automation is a silver bullet when it comes to standardization and processing speed. Technology can augment judgment and experience, but it’s not a viable substitute.   For example, our technology can help a lawyer develop a strategy around how many key witness depositions to take in a current case by evaluating how many key witness depositions have been taken in previous cases and correlating that data to outcome.   In some respects, historical data is a quasi-surrogate for a lawyer’s experience.  Someone needs to understand the data, however, and that’s where a lawyer fits in.   His or her judgment is not replaced by a machine.

There is much more data available for both lawyers and their clients? Is more better – or just more?

If data is recent and intelligently structured to align with how lawyers work, more data is better. The challenge faced by many legal operations professionals and law firms is that the data is inconsistently categorized, mis-tagged and poorly structured.  Our technology transforms raw data into refined information upon which legal industry leaders can make decisions.

We see a push for greater “value” and “innovation” in both legal products and price levels, structures? Is there more to value than the price tag these days?

To me, value has three components none of which considers the price tag.   The first component is outcome – clients want a favorable outcome or, at least, an acceptable outcome.   Second, clients want that outcome with a minimal amount of internal friction or burden.   Third, clients expect that outside counsel deliver the outcome with efficiency. If those components are present, law firms will get paid because they delivered value.

There’s a growing trend toward litigation funding and other forms of legal financing. What are your thoughts on that?

If litigation funding affords access to the justice system to people whose legitimate interests otherwise would not be represented, that advances the cause of justice. Given the financing and underwriting slant of litigation funding organizations, I suspect they’ll be early adopters when it comes to using data and metrics to assess litigation strategy and projected outcomes.

We see more pricing data and a push for greater transparency in legal procurement. What do you see as the implications of this?

This question goes to the heart of why Legal Decoder exists.   The biggest challenge in the legal industry is pricing uncertainty.  It’s a real problem and a real big problem.  Every year the legal industry is plagued by $60 BILLION of pricing uncertainty, waste and inefficiency.   $60 billion is up for grabs as between clients and their law firms.  Because of innovations in the legal industry and other competitive forces, clients don’t REALLY know what they should be paying outside counsel and law firms don’t REALLY know what they should be charging clients.   This is the problem Legal Decoder solves.   Our software analyzes legal spend data and granularly pinpoints precise tasks handled by legal professionals – like drafting a 10-K or reviewing a motion to quash or analyzing a Phase I environmental assessment – and identifies the level of legal professional who should handle the task and how long the task should take.   Some things can never be “priced” for lack of a better word, but 70% of what lawyers do falls into patterns that can be evaluated and statistically validated.  Our software helps legal industry leaders, both law firms and clients, more accurately and predictably price and economically evaluate legal services.   Both clients and law firms want better predictability, visibility, efficiency and value when it comes to legal services and Legal Decoder’s software provides the data and benchmarking capability to drive those results.

What’s the one shift or change you think will catch the industry un-prepared in the next decade – whether good, bad or downright ugly?

The best legal industry leaders, whether law firm leaders, CLOs or Legal Ops professionals, are already thinking ten years down the road.   These are ultra-smart people who are at the cutting edge of change and innovation in terms of technology, data analytics, alternative service delivery models and so forth.   While nobody has a crystal ball, change in the legal industry is usually not seismic but instead evolutionary so the best and brightest in the legal industry are unlikely to be caught unprepared.

Legal Decoder: Thought Leadership Articles (Indexed)

Many legal industry leaders have kindly expressed that they have enjoyed reading my/Legal Decoder’s thought leadership pieces which can be found on my LinkedIn page and on Legal Decoder’s Blog. Several colleagues in the industry also have asked for a categorical listing of my posts by subject matter with a hyperlink to help cull through the morass of thought leadership pieces available online today. If you click or ctrl + click on the title, you’ll arrive at the desired post:

LEGAL INDUSTRY PERSPECTIVES

LAW FIRM STRATEGY

 LAW DEPARTMENT OPERATIONS AND MANAGEMENT

LAW DEPARTMENT STRATEGIC GOALS AND INITIATIVES

DATA ANALYTICS AND LEGAL TECHNOLOGY

BILLING ARRANGEMENTS, RATES, BUDGETING AND OUTSIDE COUNSEL COST MANAGEMENT

OUTSIDE COUNSEL SELECTION AND EVALUATION

MANAGEMENT OF OUTSIDE COUNSEL

How Lawyers Demonstrate Their Value: A Proposed Analytic Framework

"Value" has been a recurring theme in the legal industry where lawyers, whether in law firms or in-house, are now asked to explain, differentiate and quantify the value of their advice and services.

Defining the “value” of legal services is complex. Indeed, when developing “value-based” fee arrangements, offering “value-added” services or creating incentive-based/outcome based engagements, the concept of value is nebulous, variable and amorphous, leaving clients and their lawyers with a moving target against which to assess the value of legal services. Asking any legal professional to explain, quantify or differentiate his or her value without context, metrics or even a baseline analytic framework is a fool’s errand and, basically, unfair.

Read the rest of the article:

https://www.linkedin.com/pulse/how-lawyers-demonstrate-value-proposed-analytic-framework-tiano

BlogJoe Tianovalue, analytics
Artificial intelligence disrupting the business of law

The Financial Times has a writeup on how technology, specifically AI, is beginning to change the legal industry.  The article talks about how routine work and high-value work will be replaced or aided by artificial intelligence.  It also discusses how outside players from startups to traditional consulting firms (i.e. PwC) are offering legal services.

We see the legal industry ready to take the first steps to embracing technology to help businesses and law firms.  Check out the article.  It's worth a read.

https://www.ft.com/content/5d96dd72-83eb-11e6-8897-2359a58ac7a5