Creating a Law Firm Profit Culture

Image [cc] evan p. cordes
One of the biggest question marks in the legal industry is around driving change in law firms. We all know change is needed, but it tends to come very slowly for law firms [insert shocked exclamation here, soaked in sarcasm]. There are a number of classic law firm change methods in use, but none tend to increase the rate of change at a level consistent with change in the real world. I suggest fear as a strong motivator and fear around money as the penultimate motivator.

And this is where profitability comes in.

We've covered the subject of profitability in the past about what it is, but here I want to suggest it as a tool for change. More specifically, law firms should create cultures of profitability in order to drive change.

The Profit Methodology

The first step in creating a profit culture is deciding on a profit methodology. This first step can be the one that brings the entire effort to a grinding halt. Partners can easily see that any profit method will eventually impact them, so they spend hours arguing about what it should or shouldn't be, trying to tilt the model in their favor. This is of course understandable. However, given the proclivity for and skill in arguing lawyers possess, having all of them engage on this at once is what usually kills the plan. In actuality, a given model favoring one partner over another is so minuscule, the arguments are not worth making. But remember our guiding light about fear over money, and you will understand this behavior. So the solution is helping partners understand the low value of arguing and that the real goal is having a method that is not focused on an unachievable, absolute profitability, but instead on one that is instructive for how partners can improve profit.

I won't go into detail here, but there are three basic profit methodologies a firm can utilize:
  1. Contribution Margin, 
  2. Gross Margin, and
  3. Net Margin. 
Each model treats partner compensation in a different way, either treating all as:
  1. a Labor Cost,
  2. All as Profit, or 
  3. has some method for segmenting a portion as cost, leaving the rest designated as profit. 
Which ones firm picks is not as important as just picking one.

Once a firm moves past adopting a methodology, they move on to step two.


In this step it needs to be somebodies job to go around the firm presenting and talking with partners about the profit methodology. Relatively simple presentations showing how the model works for various types of work should be given. And then given again and again and again.

An ideal person for this is a pricing director, since they are in a primary role on this subject and over time will be the person who puts this all into action. Absent that, someone with a finance role will work, provided they present well to partners.

Step two is never done, since partners need to hear this message a few times for it to sink in. And firms are always adding new partners to the roster.


Once we have some reasonable level of understanding, then a deeper education effort should be made. This puts the model into action with partners' own financial information. This can be done with pricing requests or even better, with existing, ongoing matters. As we all know, clients are keen on cutting spend, so many matters have budgets or caps or some other fee deal that require partners to stay on top of fees. This is a great opportunity for them to see profit in action.

Throughout all three steps in this process, firm leadership should be supporting and sharing the message in firm-wide situations and in practice group meetings. In the third step, education can be done in individual partner evaluation situations too.

The Compensation Caution

When a firm pursues this path, they should be prepared for the compensation questions. Once partners figure this all out and understand that the way they price and manage their work drives profit, they will want to know how and if this all will impact their comp. Most firms at this point in time do not factor profitability in to individual comp. Even under this circumstance, it's relatively easy to talk about how a rising tides raises all boats. And that story is going to be a good one to tell throughout this entire journey. The real goal of a culture of profit is not beating up people with marginal numbers. Instead the real goal is driving the whole range up.

Lawyers tend to see things in black-and-white, so they may see any numbers below an average or benchmark as failing. Throughout this culture change effort, you would do well to use the message that the goal is to increase profit across the board. You will have matters with high profit that can be made more profitable with minimal effort. Just because one is above average does not mean one has reached their potential. Of course you will find some work with "negative" profit. Be prepared for that. Firms chose to have a range of practices for many reasons beyond the profit of specific work.

As firms go down this road, it will raise new debates and discussions within the partnership. Firms will face new questions and may not have immediate answers. This is part of the value of creating a culture of profit. These are discussions you need to be having, but have been avoiding. The results will be a financially healthier firm. But a firm will need to be prepared and willing to openly discussing the new issues that come up.

Hit the Road

You may be thinking this road to profit sounds a bit bumpy, and you would be right. However, here's the deal: You have to go down this road. Firms that avoid or delay this quest will be significantly handicapped in this changed, competitive legal market. Long-term, they will likely go under or at a minimum, be marginalized as lower profit firms.

Change is as Change Does

The real power of the profit culture comes in to play in driving change. People love to talk about all of the change that is needed in the legal industry. It's been a while since I heard anyone say AFAs were a passing fad or that clients are going to pull back from discount requests. But even with the need for change being common knowledge, change is coming too slowly.

With a profit culture in place a firm creates a sense of urgency around change. Partners now have a clear reason to adopt change. It will no longer be a theoretical good idea, it will become an obvious, pressing need. Partners will now know what drives better margins and what they need to do to attain them. More importantly, they will know that everyone else also knows this and what their grade is within the partnership. And we know how type-A lawyers are. Having low profit numbers is like getting a C- in a law school class. No lawyer wants that grade, especially when your peers will see it.

So - putting this all together, creating a culture of profit is necessary for law firms that want to thrive or even survive. It will be critical to their ongoing financial success and it will drive the change they desperately need to stay competitive in the market. As an added benefit, it will drive cost savings for clients.

So why aren't all firms doing this?

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Do More Law

This is the (much belated) final talk from the ILTA Session - Legal Technology Innovation - Bolstering and Destroying the Legal Profession. This post is from Noah Waisberg, CEO of Kira Systems.  See other related posts from Michael Mills, Stuart Barr, Joshua Lenon, and myself by following the links on our names.   - Ryan

Law practice today is a land of opportunity. This is due to the combination of

  1. underserved legal consumers, and
  2. technologies and processes that make legal work more efficient, which make serving these consumers possible.

Lawyers who embrace efficiency have the opportunity to do more law for their clients. And make more money in the process.

We lawyers sell to a market that is not getting anywhere close to all the legal services it needs.  Underserved legal consumers fall into three categories:

  1. Access to Justice. People without means to pay premium prices for a lawyer needing access to legal services.
  2. Middle class legal needs. Many decently-well-off people don't spend money on legal services that would help them. How many people use lawyers to resolve their disputes, negotiate their employment contracts or write their wills?
  3. Corporates. Most companies, even the biggest ones, do not obtain anywhere close to all the legal services they need.[1]

This spread between latent demand and supply represents opportunity to sell more. Unfortunately the current techniques for delivering and selling legals services are so expensive and inefficient that these underserved consumers can't or won't pay for them.

On 3Geeks, I shouldn't need to detail ways to practice law more efficiently. There are heaps, some more impactful than others. Processes. Using the right people for specific tasks. Expert systems. Contract analysis software. Machine learning. Collaboration systems. And so much more. With some effort, law firms could do much of their work at higher quality, at significantly lower costs (i.e., 50–75%).

Doing work more efficiently opens up two types of opportunities:

Do More of Current Work. Sure it's possible to steal work from less-efficient competitors, but another interesting possibility is to upsell clients to more work by offering better value. Here's an example from the contract review world I know best. In a typical mid-market M&A deal, with a company getting bought for  $200 million, law firm due diligence contract review would cover 75–200 contracts. But most $200 million companies don't have 200 contracts, they have more like 5,000–10,000. That means counsel reviews under 5% of the target's contracts. Is this limited review because diligence doesn't matter? Well, no: due to the inefficiency of current approaches, even that scoped-down contract review is likely to eat up 30–60% of total legal fees on the project (arguably demonstrating importance).  But a missed restrictive covenant or bad indemnity could be crushing for the buyer, whether it's in the twentieth-most-important contract, or the thousandth.[2] Clients would mitigate more risk if they reviewed more agreements. Why don't they? Well, as above, status quo contract review can cost thousands of dollars per document. What if lawyers pitched clients on reviewing twice the materials for 20% more money than the last review they did for them? Might that be appealing to clients? Would lawyers be able to sell clients on this? Well, selling risk is something successful rainmakers do. What if clients buy this proposition? Can a law firm profitably deliver on 2x the work for 120% of the money? Yes! It's easy to do more efficient due diligence contract review. We have seen Kira’s customers review contracts in 20–90% less time using our contract analysis software, and they tell us they are at least as accurate as without the software; we have started seeing transactional reviews in the tens of thousands of contracts, using our tech to filter where to look. Firms also have lots of opportunity to improve their diligence efficiency through streamlining processes and staffing matters differently (e.g., using less expensive people for parts).

Do New Work. There are lots of opportunities to offer new legal “products” that clients will pay for. Create new options leveraging efficiency to offer clients services they need but currently can't get. Offer your clients a contract management system. Help clients prophylactically determine whether their contracts have FCPA compliance language. Build them a tool that will allow them to evaluate whether their team members are employees or independent contractors. Come up with other useful ideas!

Embrace efficiency to grow the pie and DO MORE LAW! Law today is the land of opportunity, but the opportunity is only there for those who seize it.

[1]    This runs like a #dolesslaw checklist. Options include: Have lawyers go through a company's processes to spot risk. Set up a contract management database listing important dates (term, renewal), price increase calculations, rights, and obligations. Redo contract templates to be simpler to negotiate and use modern drafting language. Ensure legacy contracts meet company standards. In house lawyers at large corporates can tell you about how they are pulling back from using outside law firms but don't have the personnel to meet their legal needs. This is not the behavior of people who think they are getting good value from their current legal spend. This is a contract law heavy list because of what I am most familiar with. Suffice it to say there are a lot more opportunities than these for corporates to spend money on.

[2]    Clients, perhaps rightly, might be willing to take the risk of missing a change of control clause in the thousandth contract, but how about an exclusivity or MFN clause that binds affiliates?

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The Sky is Falling for Law Firms (or Not)

Confirmation bias is a source of comfort. Faced with the choice between changing one's mind and proving there's no need to do so, most of us get busy on the proof. If you have an opinion whether the market for legal services is changing, or not, you can find plenty of ammunition from recent studies, surveys, and headlines.

If you expect that tomorrow will look very much like today, you seem rather safe in betting on the resiliency of the status quo:
Don't Worry, Law Firms, Your Clients Still Want You
The 2015 Am Law 100: Revenues Rising, Profits Popping
Legal Spend Trends: Big Law Billing Rates Rising
Legal Revenue Grows as Elite Law Firms Set the Pace
If you are of the mindset that when an irresistible force meets an immovable object, the irresistible force wins everytime--by eroding the object, at which point its immovability is moot--you can certainly find evidence that the irresistible forces of change continue to assault the immovable legal market:
Wake Up Call: Citi Report Finds Revenue Slowdown
Survey Finds Corporations Looking to Reduce Outside Legal Spending
In-House Lawyers are Reining in Law Firm Spend
Corporate legal departments to give law firms less work in 2016
Spending in Law Departments is Rising, But the Money Isn’t Going to Law Firms
As Part of ‘Pervasive Trend,’ Companies Still Moving Legal Work In-House 
Citi survey finds declining law firm leader confidence 
Firms not responding to digital age, annual snapshot shows
If you dig into these reports, you can come away with any conclusion that fits your priors. If your aim is to reconcile the reports, you face a bit more of a challenge. To me, attitudes seem to have moved a bit more than reality. But the reality has shifted. Law departments are redirecting spend towards internal headcount, technology, and alternative service providers. The incomparable Ken Grady estimates that, in the last three years, companies have pulled over $8 billion of work away from large law firms. That is not an immediate existential threat to a $100+ billion industry. But it is enough to sting, especially if the trend continues its upward trajectory.

Every industry has a KAP Gap--i.e., the gulf between Knowledge, Attitude, and Practice. It is unsurprising that it takes time for shifting attitudes to manifest in practice.

Alternative fee arrangements are an example of a KAP gap in the legal market. The hilarious David Cambria of Archers Daniels Midland compares AFA's to teenage sex--more people are talking about it than doing it, many of those doing it are not doing it well, and the consequences for making a mistake while doing it can be catastrophic. In 2009, 77% of CLO's reported that they used AFA's to control costs. In 2015, that number was down but was still at 60%. Yet, the most recent data I could find puts AFA's at just 7% of total corporate legal spend. The talk around AFA's outstrips the reality of their usage. I don't know what the real figure is, but this comports with David's observation. Toby, likewise, will tell you that corporate clients are forever asking for alternative pricing and then opt for the billable hour with a discount. None of that is a knock on AFA's. Rather, it is an illustration of a KAP gap.

Still, attitudes have shifted. Of the above reports, I will focus primarily on the great surveys from Altman Weil. The Altman Weil surveys are excellent, publicly available, and have been consistent over an extended period of time. First, the Altman Weil Chief Legal Officer survey. In 2005, only 20% of law departments intended to decrease their spending with law firms. In 2010, still in the aftermath of the Great Recession, 30% of law departments intended to decrease their spending with law firms. In 2015, the number had returned to its Great Recession peak of 40% despite the economic recovery. I charted the shift using over a decade of Altman Weil data:

That appears to be more than just a Recession-caused spike. At the same time, even the worst surveys suggest that, at a given point in time, 60% of law departments do not intend to decrease their spend with external counsel. Combine that with the KAP gap, and we are not exactly in the midst of massive disruption.

Still, law departments believe that they are putting a fair amount of pressure on law firms to change:

But law departments don't believe that law firms are actually serious about change:

So why aren't law firms more serious about changing? Fortunately, Altman Weil asked that very question in the 2015 edition of their annual Law Firms in Transition survey. The managing partners responded that clients aren't asking for it:

This finding prompted the redoubtable Bruce McEwan to respond "the rational mind reels. At the very least, one must step back to their very own answers." Bruce was remarking on the fact that the law firm managing partners are, in many ways, more aware of the pressure to change than their law department peers. The managing partners seem to believe that many aspects of the New Normal are here to stay:

And they are more convinced than ever that the pace of change will accelerate:

But--and this is an important but--they believe that they are almost as serious about change as their clients. The biggest gap in comparing the managing partner survey with the CLO survey is the perception as to how serious law firms are about changing. The MP's and CLO's have almost the same view of how serious clients are about change. But MP's are considerably more sanguine about how serious firms are about responding to the challenge of change. That is, there is not much a difference between the client/firm perception of client pressure and the firm perception of their seriousness about responding to the client pressure.

Moreover, the MP's are even more bullish on the adaptability of their partners. Though the below does not exactly scream flexibility, it does suggest that MP's see their partners' adaptability as being in line with the level of client pressure:

Given my priors (having actually worked in a large law firm), I have to agree with Bruce that the rational mind reels. Still, I think you can probably read the data any way you want and then find additional data that supports your position. I hope to offer a slightly different take. I think we remain locked into an uncomfortable equilibrium, in part, because law departments and law firms are having the wrong conversation. I'll explain in my next post.

Casey Flaherty is the founder of Procertas. He is a lawyer, consultant, writer, and speaker focused on achieving the right business outcomes with the right people doing the right work the right way at the right price. Casey created the Service Delivery Review (f.k.a., the Legal Tech Audit), a strategic-sourcing tool that drives deeper supplier relationships by facilitating structured dialogue between law firms and clients. The SDR is premised on rigorous collaboration and the fact that law departments and law firms are not playing a zero sum game--i.e., there is more than enough slack in the legal market for clients to get higher quality work at lower cost while law firms increase profits via improved realizations.
The premise of the Service Delivery Review is that with people and pricing in place, process offers the real levers to drive continuous improvement. Proper collaboration means involving nontraditional stakeholders. A prime example is addressing the need for more training on existing technology. One obstacle is that traditional technology training methods are terribleCompetence-based assessments paired with synchronous, active learning offer a better path forward. Following these principles, Casey created the Legal Technology Assessment platform to reduce total training time, enhance training effectiveness, and deliver benchmarked results.
Connect with Casey on LinkedIn or follow him Twitter (@DCaseyF).

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Observations from the Echo Chamber of Client Development Conferences

Image [cc] Elvin
Let me start off this post by reminding everyone that I am not in Marketing, but I do consider myself aligned with the overall marketing strategies within law firms. Because of this alignment, I attend a number of marketing related conferences and workshops so that I can stay on top of the current issues and trends, and build relationships with the key players in the industry. Over the past few meetings that I've attended, there are some common themes that I am hearing, and am finding a bit disturbing. In a very oversimplified (and amplified) fashion, here's what I've been hearing:

  • Marketers: We've been telling our attorneys this for the past seven... eight... ten years, and they simply don't listen. But, here's what you should keep telling them, because they eventually will have to listen to you.
  • Consultants: By simply getting your attorneys to change the way they conduct their day-to-day activities through (insert buzzword for efficiency, communications, client interaction, etc.), they will become more productive, profitable, and clients will sing their praises.
  • Clients: OMG, I hate my outside counsel because they never listen to me; they never talk to me (other than sending me a bill); they don't understand my work/industry/pressures. We hate the billable hour and want something that's better/predictable/less-costly. We want attorneys to ask us how we think they are doing and get our feedback throughout the matter. 
  • Law Firm Partners: Not present. (probably back in the office, billing their time.)
I am not alone in seeing the problem. Usually, some speaker mid-way through the meeting will even say that we are in an echo chamber, or that we are preaching to the choir. I really don't fault the Marketers or even the Consultants. They will at least go back and keep trying to implement change, and give an honest effort toward hammering the message that clients are not happy and that lawyers need to understand that they can get ahead of the curve and change, or can be left behind. 

The troubling message that I'm hearing is from the client-side. They are mad. Actually, they are disgusted by the arrogance of their outside law firm attorneys. So much so, that I'd say it borders on hate. They hate the law firm lawyers they work with. If you've never watched a General Counsel at a Fortune 500 speak at a marketing/client development conference, you should… it's kind of fascinating to see the obvious dislike that they have for law firm attorneys. 

The biggest missing piece of this puzzle, of course, is the law firm attorney. I know that a marketing conference or workshop is not something that lawyers would or should attend. I'm just not sure that hearing this message second-hand is all that productive either. Somehow, the Marketers need to put these two adversaries in the same room, and have them conduct an honest conversation of what the client needs and wants from their outside counsel, and have the law firm attorneys relay what they are willing to do to meet those needs. Otherwise, we'll all come back to the next conference (Marketers, consultants, and clients) and repeat the message once again. Law firm attorneys... keep on billing, we'll just fill you in later.

One of my favorite sayings is that all problems are communications problems. If one side of the conversation is absent from the conversation, then it really doesn't matter how loud or long you scream. 

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The Delegation Dodge

As mentioned in my last post, law students often respond to their poor scores on a basic Word assessment by explaining to me that they need not need worry about this tech stuff because "that is what secretaries are for." I think this is wrong for a number of reasons, a few of which I outline below:
  • Legal work still entails some drudgery
  • Drudgery is a rite of passage for young lawyers
  • Drudgery increasingly falls on young lawyers as law firms reduce support staff
  • Doing work themselves also plays into lawyers' propensity for autonomy and urgency
  • Delegation remains of critical importance
  • But proper delegation requires proper oversight
  • Proper oversight requires some of level of tech competence in order to:
    • Delegate the right work
    • Delegate to the right people
    • Delegate the right way (i.e., appropriate instructions and expectations)
The Law Factory

Grunt work is a rite of passage for young lawyers toiling in a "law factory." There is even a genre of legal reporting where the lede is the human-interest angle of the author-as-young-attorney laboring through some thankless task. For example, last month's Atlantic article asking the question "Why Are So Many Law Firms Trapped in 1995?" begins:
After I graduated from law school, my first assignment at a large New York law firm was to assist in the discovery phase of a securities case. For 12 hours a day, I sat in a conference room jammed with bankers’ boxes full of documents, reviewing them one page at a time.
On what it is like to be a young lawyer, I can't recommend enough the insightful and empathetic writings of The People's Therapist, an associate turned psychotherapist. He writes of "a sweatshop where the billable hour is all that matters, no one tells anyone anything, and young associates are reduced to a fungible commodity." (see also, here, here, here). For a lighter take, I suggest this parody video of a young lawyer who identifies a typo amidst an endless hell of due diligence and is celebrated as a conquering hero (until he leaves the office and tries to explain this grand feat to a normal human being). It's funny because it's true. It's sad because it's true. It's a core reason that young lawyers are miserable (see here).

The notion that young lawyers are burdened with rote, routine, and repetitive work is not limited to young lawyers. More than 95% of hiring partners believe new attorneys lack key practical skills. The menial tasks young attorneys are consequently given has resulted in more than half of managing partners being able to envision their new hires replaced by Watson-like software in the next 5 to 10 years (much to Ryan's chagrin). Young lawyers consigned to drudgery is so systemic that Vault rates legal employers on whether or not they give new recruits "substantive work."

Everyone knows that young lawyers are handling labor-intensive work that can be augmented (if not completely replaced) by a machine. Except when they don't. Except when someone like me comes along and suggests that lawyers (like staff) should therefore get better at using the basic technology tools of their trade. Then the condescension kicks in, and someone explains to me, "That's what secretaries are for." My agitated interlocutors include law students, who, as I explained last post, when presented empirical evidence of their technological shortcomings explain that this tech stuff is unimportant because the labor-intensive work will be handled by someone else. To that, I respond:

In theory, you will get no objection here (well, a few, that I get to below). For me, law is a team sport where staffing, process, and trust in allied professionals are mission critical. But I have a number of questions about how that theory is actually applied in the vast majority of legal settings.

Missing Delegates

Legal support staff will be heartened to learn that their jobs are secure because lawyers rely on them for all labor-intensive work. But this sentiment will be of little consolation to the thousands who have already lost their livelihood. Lawyers, apparently are using technology instead (see, e.g., here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here). In announcing staff layoffs, the firms release public statements like:
"Advances in technology have resulted in a need for fewer support staff and related services in law firms."
 "Technology has changed the legal industry – the way we work today is very different than the way we worked as recently as five years ago."
"our need for secretaries has been substantially reduced as a result of technology and the work style of our attorneys, who themselves perform a number of functions previously handled by secretaries."
Law firms seem to want it both ways. They lay off support staff because lawyers are using technology and then dismiss the need for lawyers to get technology training because lawyers rely on support staff.

There is less support staff. The support staff that remains prioritizes the work from partners. Both of these realities (less staff, focus on partners' work) are all the more conspicuous during the late nights, early mornings, and long work weekends in which so many lawyers take such perverse pride. Lawyers, especially young lawyers, end up doing much of the labor-intensive work themselves.

Work-Hoarding Lawyers

It has been suggested to me more than once that the post-Recession staff layoffs are evidence of greed. Greed by the partners trying to boost their profits by directing a higher percentage of work to billable resources. Greed by the individual attorneys trying to pad their timesheets. While I can not disprove this hypothesis, avarice is not essential to the explanation. We can take law firms at their word that the lawyers really have changed the way they work due to technology.

Whether or not lawyers are naturally proficient at using computers (the answer is definitely not), the computer-centric model of working is conducive to maintaining independence. The tape from a dictaphone and the handwritten notes on a printed page are intended for someone else. Digitization, however, is meant to empower the user to accomplish tasks themselves. Control is attractive to many lawyers.

In a previous post, I outlined two psychological traits where lawyers most consistently diverge from the general population. High skepticism and low resilience drive a deep statu quo bias and orient lawyers' issue-spotting prowess towards resisting change. The other traits that separate lawyers from the general population: autonomy, sociability, and urgency.

    Autonomy: lawyers prefer to maintain control

    Sociability: lawyers prefer not to interact with others

    Urgency: lawyers want it done now

Sound familiar? Personal computers make it possible for lawyers to work independently, avoid interaction, and ensure their work gets immediate priority. There are many people, some of whom are lawyers, who would rather take ten minutes to do something themselves rather than wait two hours for someone else to get to it--even if takes that other person one minute to complete.

Combine these predilections with a lack of staff support for junior attorneys, and it is fairly easy to envision lawyers' work habits changing over time without reference to any perverse financial incentives.

An Empirical Question

My father was an educated, curious man who also liked to imbibe when the opportunity presented itself. He took great pleasure in sitting at a bar stool and holding forth endlessly on topic after topic (yes, as this blog proves, I am very much his son). I frequently joined him. In the few years before his passing, however, I would often ruin the fun. As soon as his idle speculation entered the realm of fact (e.g., did Marco Polo introduce pasta to Italy after visiting China?), I would pull out my smartphone and let Google resolve the issue (No. That myth started as food-industry propaganda). He never much liked my adherence to the dictum that we are all entitled to our own opinions but not our own facts. His personalized factual universe was so much more congenial.

While there are normative questions to be addressed with respect to delegation (more below), these should not distract from the extant empirical reality. Law firms should have a good sense of who is doing what kind of work. They track time meticulously and have document management systems that can tell them who is spending how much time in which applications. There is no need to speculate.

Indeed, a firm that I profoundly respect not just pulled but published their document management statistics to demonstrate their commitment to data-driven change. The firm found that, consistent with the changes described above, their lawyers' share of the keystrokes in Microsoft Word had increased from 39% to 80% between 2004 and 2014. Over that same period, the top shareholder's share was unchanged. In 2004, the top shareholders accounted for 0% of the keystrokes in Microsoft Word, and, in 2014, the top shareholders accounted for 0% of the keystrokes in Microsoft Word. If the top shareholders had based training priorities on their own lived experience, the firm would have provided no technology training for attorneys. But these were trial lawyers interested in the evidence. They based their training priorities on the data, and their firm is better for it.

But Delegation Is Important

Yes, yes it is. Staffing is part of my Service Delivery Review because I believe that even technologically-enabled lawyers should take a team-based approach to large-scale projects. Delegation may run counter to the lawyer personality profile, but it is an important aspect of proper client service. That said, tech competence is important not only for lawyer-as-doer but also for lawyer-as-delegator. Here's why.

What To Delegate

Delegation has costs, including communications overhead, the attendant dangers of miscommunication, waiting for the work to be returned, review of the returned work, and the opportunity costs of occupying the resource to whom the work is delegated. If technology is used properly, it can reduce work that would take hours down to a matter of seconds and thereby mitigate the need to delegate to a human. That is, it frequently requires less time and effort to delegate to the machine than it does to delegate to a human, as I hope I demonstrate in that video I always use:

Delegating to the machine can be a better option than delegating to a person (who is just going to use the machine). But the machine, like the person, requires proper instruction. Technology training is key to knowing what work to give to the machine and how to instruct the machine in completing the work.

To Whom To Delegate

I advocate for competence-based technology testing and training for lawyers and staff. There is rarely good reason to assume that either has natural facility with basic technology. In fact, one explanation for why some lawyers learn not to delegate is the designated person to whom they are supposed to delegate is spectacularly bad at the delegated tasks.

I've tested lawyers, law students, and staff. Of these, staff has the highest level of variance. Some staff (especially from the ranks of trainers and word processors) are amazing. Perfect accuracy, unparalleled speed. My LTA is a joke to them (one advantage of competence-based testing being that they can prove this quickly and test out of training they do not need). But these superheroes have foils--often, but certainly not always, from the admin ranks--who appear to have almost no clue what they are doing on the most basic functions of the most common desktop software.

I don't need to imagine (because it is my personal story) a young lawyer determining they should just do everything themselves because their support is excruciatingly slow and error prone. Why have your work wait in a queue only to spend more time correcting the returned product than is required to do the work yourself? Staff quality is a key factor in delegation. Training staff is important.

This, of course, is another advantage of competence-based testing. Ascertaining who knows what is great for creating individualized training curricula and raising tech competence, but it is also foundational for team assembly and workflow design. Transparent, objective measurement of proficiency can give lawyers the confidence that the person to whom they are delegating is much better and faster than they are at the task being delegated.

Excel, as always, is my favorite example. I love Excel. I am convinced that Excel is "the most important computer application of all time." As a data-driven, in-house lawyer, I spent more time in Excel -- company financial and performance data -- than I did in Word. But I recognize that my experience is not typical and concede that not every lawyer needs to be an Excel expert. Ubiquitous expertise is not what I asked of my outside firms. Instead, I expected them to (a) have a few, identified Excel experts on their team and (b) a workflow designed to direct spreadsheet-intensive work to those experts.  

How To Delegate

That technology is now part of a lawyer's ethical duty of competence is well-trod ground. (see here, here, and here). Less commented upon (at least in the sources I read) is the interplay between evolving ethical duty of competence and the rules governing delegation. Specifically, Rule 5.1 covers delegation to other attorneys (e.g., from partner to associate), and Rule 5.3 covers delegation to nonlawyers (a term I dislike but that is used in the text of the rule). While "certain tasks are delegable, the lawyer remains responsible for ensuring that those tasks are performed competently, diligently, and otherwise in conformance with the lawyer’s own ethical obligations." Since the lawyer's own ethical obligation of competence encompasses technology, the lawyer cannot avoid that duty by delegating the task to someone else.

Granted, these paired obligations can be challenging to fulfill in highly technical areas. While the facts of the particular were egregious,that lawyers will be sanctioned for relying on vendors during the ediscovery process has some troubling implications. But, fortunately, I do not have to deal with edge cases. When it comes to technology training, I'm primarily focused on the basics, for now.

In this regard, I will forever be in the debt of a commenter who responded to one of the first stories on my testing of outside counsel's tech competence. This commenter has become the posterchild in my discussions of delegation. Because one area of my portfolio included managing a fair amount of small-bore litigation, I would test whether associates and staff could use the automatic Bates-numbering function built into their PDF software. One commenter to the ABA Journal piece that mentioned this was horrified that I expected an exalted J.D. to know such things:
All I am saying is that there is no need to charge a client $250+/hr for me to put page numbers on a stack of documents. I will do the substantive document review, prepare the written responses to the document requests, etc. My secretary or paralegal can do the photocopying and numbering. If a firm has the resources (and I recognize that not all do), I maintain that this would be the proper way to handle such tasks.
All I am saying is that I'm grateful. If I had presented this as a hypothetical, no one would have believed me. The lawyer was so locked into the way things had always been done that the concept of a technology-based solution was outside the realm of comprehension. Commenting on an article referencing the fact that the computer can apply Bates labels in seconds, the lawyer could only envision the laborious manual process and be appalled at the idea that a lawyer might be involved it. God bless the Interwebs!

If a lawyer knows how to use the Bates-label function, the process takes seconds to complete. But even if a lawyer doesn't know how to use the function, the lawyer still needs to have an idea that such a function exists in order to delegate properly. There is a material difference between (i) expecting your secretary or paralegal to return digital documents in a couple of minutes and (ii) accepting scanned images after several hours. Speed and costs are a concern (copies cost and paralegals bill) but so is quality. The manual process introduces hundreds, if not thousands, of opportunities for error (e.g., two pages stuck together) and drastically reduces the quality of the documents (from digital document to scanned image).

I've seen that dynamic over and over again. The attorney not only doesn't know how to complete the project in a few minutes, but also doesn't know that the project can/should be completed in a few minutes. The support person also lacks the requisite training and resorts to the most manual, brute-force approach to getting the work done. How the work actually gets done is frequently far more important than whether or not it is delegatedThe most common examples come from Word (e.g., auto-numbering, cross-references, tables of contents) and PDF (e.g., generation, assembly, footers, redactions). The most spectacular examples come from Excel (e.g., filter, sort, math functions, lookup, pivot tables).

I once encountered a paralegal who was in her second week of trying to reconcile three mammoth spreadsheets. One contained customer reference numbers and customer contact information. A second contained customer reference numbers and customer purchase information, including product serial numbers. A third contained a list of serial numbers of purchased products with respect to which the client needed to contact the customers (think warranty, class actions, recalls, etc.). The paralegal was filling out customer contact information on the third list by (i) using the Find function to locate the serial numbers on second list and (ii) then using the Find function again to locate the related customer ID on the first list. She was doing this for tens of thousands of products and was on pace to take several weeks. In a few minutes, I used Vlookup function to complete the entire project for her and reduce the opportunities for human error by several orders of magnitude. Until I came along, neither she nor the attorney who had delegated the task had any idea that she was doing anything wrong.

I harbor no expectation that everyone in the chain will be fully trained in every aspect of the software. The person actually doing the work should be trained in the relevant labor-saving, quality-improving features. The person overseeing them need not know the specifics; the delegator should have a general sense of what the work requires and how long it should take. A rough idea that the software can do X is a different level of competence than knowing how to make the software do X. But it is still a level above where most lawyers and staff currently operate.


We don't know what we don't know. Yet, everything is obvious once we have the answer. The people in the preceding stories are good for a chuckle if you are familiar with the functionality they aren't. Except it isn't funny. These are real people doing mind numbing and unnecessary work that matters. They are smart, talented, hard working, and well meaning. They just want to do a good job. They have the tools to do a good job. But they don't know how to use those tools. This situation is unfortunate. It is also remediable. This is a problem we can solve in the near term. Part of the solution, however, entails understanding how technological competence intersects with proper delegation.

Lawyers should know how to complete the work they do not delegate. Lawyers should properly oversee the work they do delegate. Staff should know how to properly perform the work delegated. Not everyone needs to be an expert. But almost everyone would be better served by a higher tech baseline.

Casey Flaherty is the founder of Procertas. He is a lawyer, consultant, writer, and speaker focused on achieving the right legal outcomes with the right people doing the right work the right way at the right price. Casey created the Service Delivery Review (f.k.a., the Legal Tech Audit), a strategic-sourcing tool that drives deeper supplier relationships by facilitating structured dialogue between law firms and clients. There is more than enough slack in the legal market for clients to get higher quality work at lower cost while law firms increase profits via improved realizations.
The premise of the Service Delivery Review is that with people and pricing in place, rigorous collaboration on process offers the real levers to drive continuous improvement. Proper collaboration means involving nontraditional stakeholders. A prime example is addressing the need for more training on existing technology. One obstacle is that traditional technology training methods are terribleCompetence-based assessments paired with synchronous, active learning offer a better path forward. Following these principles, Casey created the Legal Technology Assessment platform to reduce total training time, enhance training effectiveness, and deliver benchmarked results.
Connect with Casey on LinkedIn or follow him Twitter (@DCaseyF).

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