Articles Posted in Billable Hour

My last post was discouraging:

“Business Leaders Need to Drive Better Legal Pricing and Services Delivery Because Lawyers Won’t or Can’t”.

Discouraging, but proven.

Among law firms:

  • 69% of leaders surveyed said that, “partners resist most change efforts”, and
  • 59% gave this reason: “We are not feeling enough economic pain to motivate significant change.”

And among in-house law departments:

“Altman Weil found that 55% of Chief Legal Officers believe that they do not have enough buying power to negotiate more effectively. Some 51% also say that law firms are resisting discounting. Interestingly, 30% of the CLOs do not want to damage good relationships with external counsel by asking for greater discounts.”

But it’s not all gloom.

Some outlier firms and individuals in the legal industry understand that client companies need to do more with less in managing their legal affairs. And they’ve been taking decisive action to that end.

Continue reading

The message of this blog, and what I do for my clients, is based on a single guiding conviction:

American businesses large and small pay increasing (never decreasing) legal costs – and miss opportunities to prevent liability before it happens.

Because owners and executives let the legal industry and its business model call the shots on pay, work flows, and personnel. They let law firm and in-house attorneys make decisions in these areas that no general manager would tolerate anywhere else in the business.

Meanwhile, demands of the litigation and regulatory environments proliferate.

It’s not as though no one agrees with this view.

In fact, this view is the staple of lawyers’ conferences (for instance, here, here, and here) and publications (for instance here, here, and here).

The words are the staple … that is.

Any constructive action in response not so much.

On the law firm side, the most recent Altman Weil survey of law firm leaders reported: “In 69% of law firms, partners resist most change efforts”.

69% of law firms.

Continue reading

Lola v. Skadden, Arps arose from a lawsuit in which a plaintiff demanded massive disclosures of documents of a specified description. This meant that the defendant had to review thousands of documents to respond.

David Lola was a licensed lawyer hired on contract by the law firm Skadden Arps to perform those document reviews.

Later, Mr. Lola sued Skadden Arps for overtime pay. Skadden Arps contended that the relevant statute — the Fair Labor Standards Act — precluded overtime pay because the work consisted of “the practice of law”.

The prestigious Federal Court of Appeals for the Second Circuit refused to throw out the suit:

“The gravamen of [the attorney’s] complaint is that he performed document review under such tight constraints that he exercised no legal judgment whatsoever — he alleges that he used criteria developed by others to simply sort documents into different categories ….

“A fair reading of the complaint in the light most favorable to [the attorney] is that he provided services that a machine could have provided ….”

Continue reading

I’ve long admired the work of Jordan Furlong, a distinguished Canadian lawyer who analyzes and forecasts changes in the legal services market for law firms and legal organizations.

His twitter post yesterday:

“Most invoices from law firms aren’t really ‘bills’ — they’re lists of claims against the client made by any lawyer who could find a way to touch the client’s matter for at least six minutes.”

In my most recent blog I recounted an interview with BASF Corporation’s General Counsel, Matt Lepore.

In that interview Mr. Lepore described how he went about ditching the arbitrary taxi meter of hourly billing.

And he described how he secured lower costs and client-friendly incentives through alternative fee arrangements.

I invite your attention again to his words — and I emphasize something that Mr. Lepore slipped in at the end of his interview:

“Whether you are Fortune 100, or a small start-up, if you have a legal need that requires outside counsel expertise, and you have some budget assigned to your department, you can use alternative billing. Maybe you won’t define value the same way that BASF, Microsoft, or GSK would, but you certainly don’t need to value the services you need based purely on an attorney’s hourly rate. And, in my view, you will not be getting the most efficient work product if you do.”

Continue reading

I’ve said many times that the legal industry’s business model is based on the sale of attorneys’ hours: The value of lawyers’ work depends on how much time they take to perform a task. This model benefits law firms’ economics but it’s bad for the client. It results in unnecessarily high charges, overstaffing, and incentives to inefficiency (see here, here, and here — among other posts).

The client company has zero price visibility until the work has already been finished.

And — despite much happy-talk about the “death of the billable hour” and “widespread” adoption of alternative fee arrangements [i.e., some arrangement other than the billable hour] — the billable hour is the legal industry’s standard for pricing its work (see here and here).

So … is it practical for a corporate client to ditch this wasteful practice? If so, what does that look like from the client’s perspective?

Zach Abramowitz of the law company Axiom met with Matt Lepore — BASF Corporation’s general counsel — to talk about this.

Continue reading

Last week — when I read that its General Counsel Jeffrey Carr was calling the shots for the law function in targeting 50% savings in Univar’s legal spend — I took notice.

I believe that the single most important success factor in the ElevateNext / Elevate Services / Univar collaboration is that the client’s law function is being led by a business guy — not someone whose perspective is confined to practicing law.

I write Part III of this series from a strong personal viewpoint. My  comments here are based on observations over the years about how companies are well served — or badly served — by their lawyers.

Besides reading what’s in the media and press releases, I have no special knowledge about this particular venture (though I have met and spoken with some of the participants in the past — long before this announcement was made).

Following my own experiences as a practicing lawyer and later as an executive (see more here), I’ve concluded that attorneys are good at deploying technical legal expertise, but that they are unskilled in managing people, poor at cost control, and are either uninterested or undisciplined about proactive liability prevention.

This was not always my view. As a practicing lawyer I never questioned the way that lawyers in law firms and in-house conduct companies’ legal affairs.

Then I accepted a corporate client’s invitation to run one of its divisions.

Continue reading

The bold collaboration I described in Part I of this series among Univar’s General Counsel Jeffrey Carr, the law firm ElevateNext, and law company Elevate Services is just the latest chapter in legal innovation for each of them.

Their respective lengthy and successful records of accomplishment in legal innovation are important.

As with most other things in life, it’s more instructive to watch what folks have actually done than listen to what they say.

The law firm:

Nicole Auerbach and Patrick Lamb are founders of the new law firm announced in connection with this collaboration: ElevateNext.

Auerbach and Lamb co-founded Valorem Law Group, LLP, a litigation boutique which since 2008 has pioneered something that lots of law firms tout but that few actually implement: Alternative legal fees — they don’t bill their clients by the hour.

Lawyers’ ability to tell clients in advance what they can expect from those lawyers — and then stand behind their commitments commercially — is an underdeveloped skill in the legal industry.

Continue reading

My post two days ago cited an American Bar Association ABA Journal article published just this week about what lawyers want to sell to business: Billable hours. It described the latest and most advanced software for, “ensuring that you capture — and charge for — all of your billable time.”

In the legal industry, using software to “capture — and charge for — all of your billable time” amounts to a tech “innovation”. 

Apparently. 

But there was another development this week.

Announcement of a “moonshot” designed to reduce by 50% the $10.5 million legal spend of a Fortune 500 corporation.

This ambitious effort is a collaboration among (1) a business client in the Fortune 500, (2) a law firm, and (3) something called a “law company”:

Continue reading

Just yesterday the American Bar Association’s ABA Journal posted — under the category “Legal Technology” — an article that described and evaluated some of the latest and most advanced software for the following task performed by attorneys:

“These mobile time-tracking tools make it possible to track your time and enter it contemporaneously, ensuring that you capture — and charge for — all of your billable time.”

You read that correctly: Applications designed to “capture — and charge for — all of your billable time” are an important part of what’s considered “legal technology”.