Articles Posted in How Lawyers Deliver Their Services to Business

In the Financial Times article which concludes with the above statement, English lawyer David Allen Green reminds the reader that the value of legal work depends on quality — not quantity:

“… To assess the value of legal advice purely on the basis of cost or volume of output is a mistake. The most valuable legal advice can be succinct, the most effective legal letter can be one page long. What businesses are paying for is expertise and security. The point of legal advice for a business is to ensure that the right protections are in place and that risks are well managed. The problem with expertise and security is that they are hard to calculate by reference to the size of outputs.”

In business getting “results” is basically a management question.

So is getting artificial intelligence (AI) or any other tech innovation right.

But it’s vital to begin with a management approach that can achieve those results — only thereafter does it make any sense to pick AI or any other tech innovation to reach them.

As Aileen Leventon — counselor to the legal industry and practicing attorney — put it:

“Tech is easy. Figuring out what really matters is hard.”

Part 1 and Part 2 of this three-part series describe the views of Dr. Richard Susskind — Scottish lawyer and Oxford PhD in computer science — on how AI can get the “results” business people need from their lawyers and other professionals — faster, cheaper, and more accurately.

Before I had read Dr. Susskind’s essay (British Academy Review’s Autumn 2018 edition), I viewed him as the leading thinker in the world on “how information technology and the Internet can improve lawyers’ effectiveness on behalf of business clients”.

But in light of his essay cited above, as covered in Parts 1 and 2, it would be more accurate to describe the aim of Dr. Susskind’s work a little differently:

Not: “How information technology and the Internet can improve lawyers’ effectiveness on behalf of business clients”. 

But instead: How information technology and the Internet can improve the “results” — or the “outcomes” — that business clients want in their legal affairs.

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In Part 1 of this three-part series, I wrote that business people care about results.

And that 99.9% of a lawyer’s education and focus are devoted to analytical preoccupations and time-honored how-to methodologies — “lawyer tasks” — not so much to the results their clients really care about.

Lawyers are focused on the “how” of their professional skill sets to such as extent that it obscures the “why” of their clients’ desired business outcomes.

Also in Part 1, I introduced Dr. Richard Susskind’s thinking on how artificial intelligence (AI) could bypass attorneys’ obsession with those “lawyer tasks” — to target results instead — what he calls “outcome-thinking”.

Here’s Dr. Susskind’s diagnosis of attorneys’ obsession with their “lawyer tasks”:

“… This kind of task-based thought is deeply flawed. Think about legal work. Commentators and practitioners often insist that much of the work of lawyers is beyond the reach of technology. They will suggest, for example, and not unreasonably, that the work of court lawyers cannot be replaced by machines. How on earth could a robot appear as an advocate before a judge? The answer, of course, is that we are light years from this happening. But the story doesn’t end here, because these traditionalists are asking and answering the wrong the question. Mistakenly, they are focusing on current ways of working rather than on whether the outcomes that court lawyers deliver might be achieved in very different ways.”

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Business people care about results.

That was the biggest lesson I learned upon crossing to the client side of the lawyer / client table.

After spending a decade as a practicing attorney.

Kind of a “duh” factor for my friends who’ve lived and died by the P&L all their careers.

But for a lawyer whose career had been devoted to the analytical preoccupations and time-honored how-to methodologies that occupy 99.9% of a lawyer’s education and daily focus — it was a revelation.

Until I shouldered executive responsibilities, I was tone-deaf to what business “results” actually were.

… 

How to get the results-oriented legal services that business clients need — if their attorneys can’t seem to see beyond their “lawyer tasks”?

This is where Dr. Richard Susskind‘s recent insights — and artificial intelligence (AI) — might help. Susskind is a British lawyer and computer expert.  His work emphasizes the ways in which information technology and the Internet can improve lawyers’ effectiveness on behalf of business clients.

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One of this blog’s goals is to help business owners and managers understand why their lawyers act the way they do.

My question in this two-part series: Why don’t more law firms treat the businesses that pay their bills like customers?

In my post a week ago I quoted Forbes’ legal commentator Mark Cohen:

“There is unambiguous evidence of a significant and persistent disconnect between law firms and their clients. Only 25% of corporate legal buyers said they would recommend their ‘go-to’ law firm.”

A business owner or manager might ask: Why can’t law firms treat my business with the same care and attention with which Southwest Airlines, Starbucks, the Cleveland Clinic — or my local dry cleaners — treats me?

Law firms are rarely managed the way that you run your business. To move toward a relationship with them that better serves your interests, it would help to understand how certain perverse incentives in the law firm world work.

The way law firms handle internal issues — like the two addressed below — creates perverse incentives. And those perverse incentives make law firm leadership more responsive to its partners — its owners — than to the organizations who pay their fees.

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In posing the above question last Monday, lawyer and law firm consultant Bruce MacEwen quoted Peter Drucker:

“There is only one valid definition of a business purpose: to create a customer.”

Having consulted to law firms on their business strategies — MacEwen argued that law firms’ “real clients” too often consist of the lawyers who own those firms — and not the organizations who pay those law firms their fees:

“… The firm exists to serve the preferences of its lawyers.”

… 

In asking if a law firm really focuses on your business as its true customer — as its client — let’s start by looking at a high-sophistication, high-consequence professional services organization that truly focuses on its customers — its clients.

I describe the following with my wife’s permission.

His alert reading of a routine blood test prompted my wife’s internist to identify a specific parathyroid disorder.

He suggested three medical centers for the required surgery: The two most prominent university health systems in Chicago — and Tampa General Hospital.

Frequency of the required surgery:

  • For each of the two university health systems — fewer than 10 per month.
  • For Tampa General Hospital / Norman Parathyroid Center — 170 to 180 per month.  

We bought plane tickets for Tampa.

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My most recent post introduced an explanation for the question posed above:

The legal profession is an industry managed by committee. There are no outside boards of directors to step in with an “outside view” when things aren’t working. 

Law firms are run by — and answerable to — no one other than their own lawyers. The law firm alumni who populate in-house counsel departments have never known any other approach — so they’re usually OK with this.

Of course, a corporation’s senior officers can express displeasure with their attorneys inside and outside of the business. But — with good reason — they are wary of stepping in and second-guessing lawyers steeped in legal rules and institutions of which those senior officers have only a modest understanding.

Free of an “outside view” whose forceful application might bring about necessary changes — business attorneys persist in a status quo of mediocre service delivery — as noted in the most recent post:

“There is unambiguous evidence of a significant and persistent disconnect between law firms and their clients. Only 25% of corporate legal buyers said they would recommend their ‘go-to’ law firm.”

But this “outside view” is what empowers human institutions to make painful-but-necessary changes when their outside environment threatens their effectiveness.

Early this year I posted about Andy Grove of Intel:

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On my drive to the office yesterday, I learned that the Chicago Blackhawks had fired Joel Quenneville, their head coach.

Three Stanley Cups, second winningest among 38 head coaches since its 1926 founding, best playoff record in club history. Replaced by 33-year-old Jeremy Colliton — former NHL and AHL star — current head coach of the Rockford IceHogs.

Lots of chatter over the merits. Great move. Terrible move.

But there’s no question about exactly who it was who’d made that decision: Not “Coach Q” himself.

Someone saw a problem with the team’s status quo — and made a decisive move in response.

Last month GE ousted John Flannery as its CEO due to missed profit and cash targets.

And they replaced him with an executive from outside the company — a move not seen at GE for decades — if ever.

As with the Chicago Blackhawks, Mr. Flannery did not oust himself. GE’s board did that.

Someone saw a problem with the company’s status quo — and made a decisive move in response.

When the men and women at the top of an organization see something wrong with the way that it’s coping with external realities — like customer satisfaction or shareholder support — they tend to make decisive moves like the Blackhawks or GE.

Law firms don’t respond that way.  

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This last of three posts about a 54-page opinion in which U.S. Bankruptcy Court for the Central District of Illinois Judge Mary Gorman explained her reduction of a nationally prominent law firm’s $1.8 million fee down to $670,000 offers a case study of the billable hour’s perverse incentives.

Today I address a case-study-within-a-case-study — a bill for $270,000 within the $1.8 million total sought by the law firm. Judge Gorman considered the wisdom of a law firm’s decision to pursue multiple litigations that — she believed — offered better odds to the lawyers of getting their hours paid than it offered to the client of getting recovery that would exceed those lawyers’ fees.

Judge Gorman’s case-study-within-a-case-study illustrates a critical drawback to use of the billable hour to price attorneys’ work:

Even when the client loses, the lawyers win. 

Except in the unlikely event that the hourly bill is submitted for approval by someone with the legal sophistication — and firmness — of a reviewer like Judge Gorman, who cuts that $270,000 bill down to $80,748. But I’m getting ahead of the story.

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The 54-page opinion in which U.S. Bankruptcy Court for the Central District of Illinois Judge Mary Gorman explained her reduction of a nationally prominent law firm’s $1.8 million fee down to $670,000 offers a case study of the billable hour’s perverse incentives.

Under “General Mistakes and Carelessness”, the Judge detailed important errors in the Law Firm’s fee statement.

Those errors show two consequences of using the billable hour to price lawyers’ services:

First, the “rack-em-up” focus on maximizing hours billed gives lawyers incentive to — knowingly or not — charge clients more than the work calls for.

Second, in the attempt to maximize those hours billed, attorneys can easily — intentionally or otherwise — obscure from the client’s view who-did-what-for-how-much.

Four points among several Judge Gorman made here:

1. She called out the Law Firm for charging $234,450.50 for work they’d, “either not included in the billing invoices or … never actually earned”. After specific cuts, the Judge reduced the remainder of the $1.8 million requested by 20%. 

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