A final installment in this three-part post.
What’s a practical basis for placing a value on attorneys’ work for the business?
In Part 1 I addressed the legal profession’s prevailing measure of lawyers’ work:
How long did the attorney decide to take doing the job?
Cost-plus. Bill the client company by the hour.
In Part 2 I addressed “data-driven” methods (with at least one present-tense exception that I’ve found, put this under the heading of maybe-in-the-future).
Here in Part 3 I address:
A price agreed in advance — between lawyer and client.
From Fred Bartlit’s April 5, 2010 Orr Distinguished Lecture at the University of Tennessee Law School:
In the early 1980’s Chicago trial lawyer Fred Bartlit was head of litigation at one of Chicago’s finest firms. He’d brought in a client whose big case was keeping 8 partners and 30 associates busy for months. “My partners loved me”, he said.
But Bartlit felt that this firm could deliver more effective legal representation to its clients for less money.
In Part 1 I addressed the need for reliable numbers relating to the value of legal services.
If what gets measured gets managed — and if measuring the wrong thing is worse than measuring nothing at all — then client company executives need a reliable measure of the value of legal services in their budget.
Toting up hours billed gives “certainty” about the method by which attorneys came up with the price that they charge to a client company.
But that total tells us nothing about the actual benefit received by the business.
Hence our consideration of two alternatives: “Data-driven”, and a price agreed in advance.
“Data-driven” calculation of the value of lawyers’ work for client companies.
I refer to “data-driven” in quotes because there’s (a lot) less here than meets the eye when you read legal profession headlines.
In fact, I’ve found just a single instance of data-gathering and analysis as the basis of determining the value of what attorneys do for a company. If I’ve missed something, I invite comment and correction on this point.
This four-part post’s premise:
A company’s “legal” problems are likely to be — in functional terms — business problems that have a legal aspect.
The traditional impulse to call in a licensed attorney from a law firm or in-house counsel department doesn’t always lead client companies to the most practical choice for their needs.
Hence my introduction of “Alternative Legal Services Providers”, or “ALSPs” — and Georgetown Law Center’s recent, authoritative survey, “Alternative Legal Services Providers 2019” — in this four-part post.
Here are four take-aways:
1. In your company, many “legal” problems are more accurately viewed as business challenges that raise legal issues (as Mark Cohen put it).
2. Delivery of many of the legal services that respond to such business-challenges-that-raise-legal-issues now requires process management and technology skills that attorneys mostly lack (again, Mark Cohen).
3. “Legal services & providers of those [legal] services are ever more important — lawyers, however, are not.” (Jeffrey Carr’s tweet last Monday)
For most of the past four or five decades, the phrase “legal services & providers” has meant one of two things:
1. Law firms, and
2. In-house counsel employed by companies as full-time employees.
Until — that is — a few years ago: With the advent of “alternative legal service providers” — or “ALSPs”.
“Alternative” to what? Alternative to law firms and in-house counsel.
Beyond that, the definition is pretty wide-ranging — except that all ALSPs embody the aphorism set forth in this post’s title: “Clients Need Legal Services But Not Necessarily Lawyers”.
I interrupt my four-part post on how a company can achieve higher quality legal services, that are faster, more accurate — and cheaper — by “disaggregating” business challenges that raise legal issues into tasks that (often) someone other than an attorney can do better than a lawyer (“Clients Need Legal Services But Not Necessarily Lawyers”).
I saw the following in this morning’s in-box:
“Want a Market-Sized Bonus? Better be Ready to Bill Your Butt Off at this Biglaw Firm”.
For avoidance of any doubt, this meant that a large and prominent law firm issued new, formal guidelines by which it will now require the lawyers they employ (associates) to charge a quota of specified hours in order to receive a particular bonus. I don’t know if this firm previously had such a quota — though they are common in the legal profession. My point here is simply that hourly billing quotas like these are very much a part of the landscape, and that they’re widely accepted among conventional law firms — and the in-house counsel who hire them.
Regarding this law firm and its employee-lawyers, the article included a chart with two axes.
The vertical axis denoted the “level” of the associate in question. “Level” was expressed in terms of years out of law school. Nothing about demonstrated skill or competence. Just: How long had it been since this employee-lawyer graduated with their J.D.?
The horizontal axis: Increasing dollars of bonus for “1,950 billable hours …”, “2,100 …”, “2,250 …”, and “2,400 …”
Raising the question — as use of the billable hour invariably does:
Was this hour billed for the client’s good? Or for the lawyer’s good?
I always do a double take at such a headline.
Part 1 of this four-part post introduced a February 19, 2019 Forbes article, “Clients Need Legal Services But Not Necessarily Lawyers” — by Mark Cohen, both an accomplished business attorney and former chief executive of his own (non-law firm) business.
Part 1 introduced Cohen’s observations about the process management and technological benefits of “disaggregating” what law firms and in-house departments traditionally have viewed as “legal” tasks. In this connection he wrote about “alternative legal service providers”:
“Law is not solely about lawyers anymore ….”
“Several new-model legal service providers … have replaced law’s brute force, labor intensive lawyer-does-all model with data-driven, customer-centric, automated, corporatized, scalable, collaborative, multi-disciplinary, and well capitalized service models. These providers are often managed by business professionals and entrepreneurs, not licensed attorneys …”
Why this “disaggregation” of “legal tasks” now?
Because, says Cohen:
“‘Legal problems’ have become ‘business challenges that raise legal issues.’ The complexity, speed, and new risk factors impacting business—together with the impact of the global financial crisis, technological advances, and globalization—have changed the legal buy/sell dynamic.
My client was an Amsterdam-based investor who wanted to build an aviation services business in the United States.
As a corporate and commercial lawyer whose practice largely emphasized the transportation sector, I needed to get this client the best advice possible on positioning its new business from a U.S. federal income tax perspective.
This meant choosing between tax attorneys who practiced in a law firm versus tax accountants who practiced in an accounting firm.
Minimizing tax and keeping the IRS off their back was not just a “legal” problem. It was more like a business problem that had a legal aspect.
For their business savvy, tax law expertise, familiarity with how the IRS treats such foreign investors — and a cost advantage — I recommended a regional accounting firm instead of tax attorneys in a law practice.
I ended Part 2 of this three-part post with this:
“Naysayers contend that Big 4 accounting firms cannot enter the U.S. market for legal services due to ‘regs and laws’ the ‘preclude Big 4 entry’.
“Is that really true?”
No, it’s not.
First — Big 4 accounting firms’ entry into the U.S. market for legal services has already begun — as I’ve covered in past posts:
- PwC (Price Waterhouse Coopers) opened a law firm in Washington, D.C. in September 2017.
- Deloitte UK and the San-Francisco-headquartered immigration law firm of Berry, Appleman & Leiden LLP announced an agreement that gives U.S. businesses access to Deloitte Global’s immigration law services worldwide — including in the U.S. — in June 2018.
- EY (Ernst & Young) announced its acquisition of Riverview Law in August 2018 — a UK-based “alternative legal service provider” — what some call a “law company”.
Second, former Am Law 200 partner Stephen Embry makes the case that the above moves are only a part of larger developments across the Big 4 accounting firms that signal their likely entry into the U.S. market for legal services in a big way.
In his article earlier this month, “U.S. Law and the Big Four: Who’s Afraid of the Big Bad Wolf?“, Embry does a deep dive on statements of two lawyers who presented at a recent conference for business lawyers: