Legal Decoder
Legal Spend Analysis At Your Fingertips
BACK3.jpg

The In-House Insider

How Do You Price Legal Services With Data? - Case Study

Pricing legal services is an ongoing topic with us. It’s an issue many more firms are starting to address head on to ensure prices are commensurate with costs and clients won’t feel they are being overcharged.

We put together a case study over at High Performance Counsel (link) detailing pricing insights gathered from our data sets using the Pricing Engine. The Pricing Engine analyzes data and categorizes work elements through the billing narrative and applies UTBMS codes (when applicable). Then, the work elements are assigned to branches and sub-branches in Legal Decoder’s proprietary taxonomy. The result is a bottom-up analysis of work elements that can guide pricing strategies and review past performance.

 
arrowup3.png
 

The case study also shows how data analytics can help with your pricing strategies. As competition increases pricing (and cost) management could be the differentiating factor in maintaining or increasing competitiveness.

***Download a PDF version of the case study here.***

If your firm or company is interested in working with Legal Decoder then contact us here.



Legal Decoder and Morae Global Announce Patent Litigation Consortium

Legal Decoder and Morae Global have partnered to launch the Patent Litigation Consortium for corporate legal departments and law firms to understand and better manage the true costs of Patent Litigation. 

What is the Patent Litigation Consortium?  

Members in the consortium provide data for deep analysis and custom reports.  Legal Decoder applies its revolutionary analytics technology, and Morae Global analyzes the information to provide benchmarking with unique, customized insights only available to consortium members.

Members receive customizable electronic benchmark reports covering the entire Patent Litigation lifecycle, gaining unmatched insights into:

  • Who is doing what
  • The true costs of every aspect of their matters
  • How effectively counsel and firms are managing their matters and portfolio

More information for law firms can be downloaded here.

More information for corporate legal departments can be downloaded here.

Contact us directly here.

The 8-Hour Workday

The Law of Diminishing Returns states that if one input in the production of a commodity is increased while all other inputs are fixed, a point will eventually be reached where additions to the input begin to yield smaller returns.  In other words, throwing bodies at a problem doesn’t necessarily increase output and may decrease output.  This law can be applied when attempting to squeeze in more hours to the standard work day.

Corporate law departments are increasingly scrutinizing the amount of time outside counsel bills for tasks and looking for inefficiencies.  Law firms are also analyzing time billed out to ensure they work within client billing guidelines and address any potential issues of fraudulent billing before they reach the client.

Legal Decoder’s Compliance Engine flags timekeepers who bill more than 8 hours per day (aka Hourly Max flag).  The reason behind the Hourly Max flag is a timekeeper’s efficiency level decreases when working in excess of 8 hours per day.  The way this rule works is the Compliance Engine flags all line items that have exceeded a total of 8 hours in a day.  For example, John Smith’s daily time entry for work completed is as follows:
 

 
hourlymax_timeentry.png
 

We analyzed customer data for patterns and trends on all instances where line items were flagged as Hourly Max.  First, we wanted to look to see if there was a trend in how time reporting occurred.  Based on the data the largest spikes and dips occurred in the middle of the month and just a few days before the end of the month.

 
hourlymax_monthavg.png
 

Next, we wanted to see if there was a correlation between word count and hours recorded.  Below is a graph of all line item narratives flagged as Hourly Max.  The trend is the longer the word counts the more time is recorded.  Two reasons are the work being recorded is more complex, thus, takes more time and Block Billing.   Block billing should be avoided as it combines many work tasks into one entry but makes it difficult to discern if bill padding (fraudulent billing) is taking place.

 
hourlymax_allentries.png
 
 
hourlymax_8hour.png
 

Within the data, 8.5% of narratives contain 5 words or less with many of the entries being vague descriptions (e.g. “Reviewed same”, “Teleconference with client”).  The longest line item narrative contained over 650 words.  There were several instances of Hourly Max exceeding 24 hours of work in a single business day. 

You may be asking “Why would I care that a lawyer is working more than 8 hours a day?  That’s what I pay them for.”  Lawyers are humans and humans are not machines.  After a certain amount of time of working, concentration and energy levels decrease.  Being realistic, many people do work more than 8 hours a day on billable and non-billable work while producing quality work products.  Some of our clients are fine with their outside counsel billing more than 8 hours a day especially if it is in preparation of a trial or some other important event.  Yet, for many, “powering through” can result in error-prone work products and remediation of those work products which could lead to inflated costs and decreased effectiveness.

The 2017 Year In Review

This year was a busy year for Legal Decoder.  New customer growth, a pilot program for law firms, and a new product release, the Pricing Engine, were some of the highlights of 2017.  These numbers quantify the year of change and growth for Legal Decoder:

~250,000,000 - Total $ analyzed

306,956 - Line items analyzed

103,136 - Line item narratives containing the word "Review"

8107 - Invoices processed

831 - PDF invoices converted

4 - Different countries where team members and contributors are located

With 2017 in the books we look forward to a bigger and better 2018.  Stay tuned.

 

Block Billing Challenge

The issue of block billing is something law firms and clients have to deal with regularly.  Clients are frustrated when deciphering a blocked bill narrative and have imposed billing guidelines to counteract the challenge.  Law firms need a means by which to unbundle a block bill narrative to gain insights for pricing and legal process management purposes.  Some of our clients have run into block bill narratives on the extreme side and bordering on the unethical.  It's a real challenge for both sides.

We've encountered instances of block billing where the narratives are paragraphs long with hundreds or even thousands of words long.  Our technology has identified block bills where 24+ hours have been charged to a single block billed line item.

The California Bar Association explains block billing as:

"Block billing is the practice of assigning one time charge to multiple separate tasks. An
extreme example would be a fee bill mailed to a client at the end of the case with a single entry for 200 hours for “work on case” without identifying, among other things, the various individual tasks performed, who performed them, and when. A more subtle example would be a 3.6 hour charge for 'review client’s e-mail, retrieve file, call with DR re same, and prepare/send reply.'"
  

Recently, we made some improvements to the core technology (Legal Spend Analyzer) where block narratives are intelligently parsed out from paragraphs into separate line items.  For example, if the narrative below is identified as a block bill then each sentence can be parsed out for further analysis:

"Spoke with client about updated documents.  Draft, review, and exchange emails to colleagues about documentation.  Research motion.  Update J. Smith on patent reports regarding same."

After the system identifies it as a block bill it reads the narrative as 4 separate line items and analyzes each on its own:

blockbill.PNG

In one instance, our technology parsed a 2000 character blocked billed invoice into 28 separate line item parts   Ending the issue of block billing requires a change in habits and culture.  Until then, we will be continually working to improve our products to help our clients and law firms deal with these issues.

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.