Strategic Legal Technology

In the billable hour world, lawyers have little incentive to be efficient. This could change. Consider Howrey’s change in associate compensation.  

One the one hand, I’ve never believed that many lawyers are intentionally inefficient to rack up hours. On the other hand, billable hour targets or quotas do not create incentives to look for ways to practice more efficiently.

So I was fascinated to read Howrey to Ditch Lockstep Compensation for Merit-Based Model (The Recorder, 6/29/07), which reports that the firm “will introduce a merit-based system of advancement and compensation for associates… writing, deposition, trial practice and client presentation skills will be considered.”

Firms so often focus on their inner workings and don’t consider fully client perceptions. The firm could send a powerful message to clients if it also assesses associate efficiency, particularly use of technology to practice more effectively. For a litigation-focused firm like Howrey, this might include use of such tools as Lexis or West research, work product databases, knowledge management systems, CaseMap, decision trees for risk analysis, spreadsheets for estimating damages, and appropriate selection and use of document review tools for discovery.

If I were a client facing a lawsuit, I would want a great litigator. But also an efficient one.

Legally solid contracts may not be good for the business. 

That’s a conclusion in Best Practices: Assessing And Managing Legal Risk in the June 2007 newsletter of International Association for Contract and Commercial Management. The article cites studies suggesting that well-tuned legal contracts may not be economically logical. For example, “contract terms and procedures have caused resolution of claims against suppliers takes more than 5 times longer in the US OEMs compared with companies like Toyota and Honda.”

It also suggests that technology can help rationalize contract drafting “by enabling consolidation of data and experiences and the ability to make portfolio assessments.” This is another example of “evidence based law,” that is law practice based on empirical data rather than myth.

At minimum, the article raises an interesting question for law departments and firms that have standard contracts, even carefully vetted ones. Are they drafted to optimize business outcomes? And do you have longitudinal data to track outcomes so that you can adjust terms in the future? Contract management systems have many benefits; now add the potential to improve contract terms.

I recently blogged about assessing the ROI of marketing investment in law firms. That posted generated a response distinguishing marketing and lead generation. 

I posted Law Firm Marketing and Technology - Return on Investment (ROI) to the College of Law Practice Management Blog. College Fellow and law firm business development expert Ann Lee Gibson posted a reply response with interesting observations.

I expressed surprise that marketing departments don’t track ROI. Gibson’s reply, More on Law Firm Marketing and ROI - It’s Really about Biz Dev raises good points. She discusses the difference between marketing and business development / lead generation; the money quote:

I’m just saying that the less interesting question to me is, “Why aren’t firms determining their marketing ROI?” and the more interesting question is, “Why aren’t firms actually developing cogent BD [business development] plans with specific and measurable objectives and devoting specific marketing resources (PR campaigns, bespoke seminars, conference appearances, private publications, publications in the legal and other trade presses, etc.) and specific BD resources (for getting-to-know-you visits and needs interviews and pitches and RFP responses) toward those plans, and commit to managing the plan throughout the entire year?”

The distinction between marketing and biz dev / lead generation is big. Law firm CIOs and IT directors need to understand the difference. Ideally, when marketers come knocking on your door, you would steer them toward BD, but that may be more than is possible from the IT side.

Several articles in June cover outsourcing, both in the corporate and legal sectors. My perhaps biased take is that they suggest a continued up tick in legal outsourcing. 

Seven Myths About Outsourcing (Wall Street Journal, 6/16/07, $) reports “companies that think handing off an operation to an overseas provider is easy can get a rude awakening.” To avoid that rude awakening, it reviews seven myths and steps to overcome them:

1. We Can Have It All
2. Outsourcing Services is Like Buying Commodities
3. We Need an Ironclad Contract
4. Contracts Don’t Matter
5. Vendors Are Insurance Companies
6. It’s Not Our Headache Anymore
7. Our First Failure Should Be Our Last Attempt

There’s good advice here for law firms or law departments considering outsourcing.

Karen Asner, the White & Case administrative partner, wrote How Law Firms Can Achieve Optimal Procurement (law.com, 6/20/07). She concludes “Procurement is more than just saving dollars and cents. It is a strategic function that can help each group, and your firm as a whole, work more efficiently to achieve your business objectives.” It’s a good read but I was surprised not see any mention of outsourcing as an element of a procurement strategy.

Meanwhile, British firms seem to view outsourcing as part of their procurement strategy. Another big British law firm recently announced that it is outsourcing IT. Eversheds outsourcing deal to cost cool £27m (Legal Week, 6/6/07) reports that the ” top 10 UK firm will transfer 79 professional staff as part of the deal, which covers various core support functions including the help desk, network, infrastructure teams and its IT training specialists.” The article also reports that Linklaters has outsourced “support and maintenance of the firm’s global data centre and infrastructure.” For details on Eversheds outsourcing, see an Orange Rag blog post. It quotes the IT Director, who says the deal will enable the IT department to “deliver leading-edge business solutions that benefit our people and clients”

With outsourcing virtually old hat in the corporate sector and more and more law firms thinking about procurement, it seems likely that we will see more instances of legal process outsourcing.

Update (10/20/07): It turns out White & Case does outsource. See my post What Direction Legal Outsourcing?

I’ve been writing about working virtually for 3+ years so was excited to see a long article in the Wall Street Journal. 

Working Together…When Apart (WSJ, 6/16/07, $) is a report by Dr. Lynda Gratton, a professor of management at London Business School. She presents her research findings on seven success factors for virtual teams:

1. Invest in an online resource where members can learn quickly about one another.
2. Choose a few team members who already know each other.
3. Identify “boundary spanners” and ensure that they make up at least 15% of the team.
4. Cultivate boundary spanners as a regular part of companywide practices and processes.
5. Break the team’s work up into modules so that progress in one location is not overly dependent on progress in another.
6. Create an online site where a team can collaborate, exchange ideas and inspire one another.
7. Encourage frequent communication. But don’t try to force social gatherings.

I was disappointed. The article implicitly assumes that companies form teams specifically to meet some new and out of the ordinary goal. Few of the suggestions seem to apply to the more ad-hoc teams that a law firm or other professional service organization might assemble where the duration is weeks or months and the team size under 20. Also, the idea of “boundary spanners” is a concept from social network analysis and, absent doing SNA, it’s not clear how a company would identify these people. That said, I am glad that there are academics studying working virtually - I hope they turn their attention to professional services.

Last week I blogged about an LMA law firm marketing technology seminar. I was impressed to learn the technology but surprised that BigLaw does not track marketing return on investment (ROI). 

In the Q&A, I asked if and how the panelists measure the ROI of their marketing. By and large, they agreed that you cannot do so.

This surprised me. Big firms spend 2% of revenue on marketing without knowing the ROI. Yet many firms avoid knowledge management spending, supposedly because they cannot assess ROI. Consistency is the hobgoblin of small minds - or is it just sour grapes?

Tracking ROI, however, is not that hard. At least not for lead generating activities (in contrast to branding). In consulting to vendors, I have seen sophisticated analysis of the cost per qualified lead. Much law firm marketing - sending e-mail updates, hosting seminars or webinars, publishing articles, speaking at conferences, or writing a blog - is ultimately about lead generation.

Managing partners and CMOs should care about the cost per qualified lead. In my presentation Blogging: Why the Fuss?, I set up an analytic framework for comparing lead generating activities. My goal was to encourage firms to compare alternatives, even if measuring precise ROI is not possible. I suspect that if firms systematically assessed their lead generating activities and the results, they would change what they do.

How many search engines does the average law firm need? 

Learn the answer to this question at an upcoming ILTA webinar: Knowledge Management When One Search Is Not Enough: Case Studies in Using Multiple Work Product Retrieval Tools on July 13, 2007 at noon Eastern. From the registration page:

Panelists will discuss the reasons their firms decided to use multiple tools, the process it used to evaluate them and, for those firms that have implemented them, how well each tool has worked in practice. They will also describe the technical, process and cultural conditions they believe may make a firm better suited for a combination of tools and/or for one product as opposed to another. Products covered will be West KM, Real Practice, Recommind, Lexis TotalSearch and LawPort. SharePoint 2007’s touted search capabilities will also be discussed.

Panelists:
Browning Marean, partner, DLA Piper
Ali Shahidi, regional director of information technology, Bingham McCutchen LLP
Clint Moore, manager of KM technologies, Littler Mendelson.
Amy Halverson, manager of litigation KM, Wilson Sonsini Goodrich & Rosati

Law firm marketing has come a long way in a decade. An LMA seminar today made that clear. And it holds some lessons for knowledge management and IT professionals. 

The DC chapter of Legal Marketing Association (LMA) today hosted a seminar, ”Technology Matrix - Building effective knowledge sharing and using it to plan strategy and track ROI.” Panelists were Mark Greene, Chief Marketing Officer, Nixon Peabody LLP; Catherine Bishop, Chief Marketing Officer, Blank Rome LLP; and Steve Bell, Director of Sales, Womble Carlyle, Sandridge & Rice, PLLC.

All three firms have sophisticated IT architectures that integrate multiple systems to support marketing and sales. Some interesting points:

• If firm management does not have a business perspective, marketing will fail
• Use a taxonomy to categorize matters; that’s the basis of all business analysis
• “All data should have its own home” (aka a single authoritative source for all data)
• SharePoint is an excellent platform to deliver disparate data and reports to lawyers and staff
• Business intelligence tools (e.g., Redwood) can provide key data for marketing
• Software, complex as it may be, is the easy part; changing culture and behavior is much harder
• Very few lawyers use CRM
• Contests and competition are an excellent way to motivate lawyers to contribute data to marketing efforts

Lessons for KM: Marketing faces similar issues, from collecting and integrating data to presenting results to changing behavior. If you are not already closely allied with marketing, now is the time to get moving. (Oh, also take note that this event - local to DC - had more attendees than most national KM meetings I have attended.)

Lessons for IT: Marketing is an important IT customer. If you manage technology, part of your job is supporting marketing. If your marketing department is not using modern tools and an integrated approach, offer to help them.

In my next post, more on the return on investment (ROI) of marketing.

Knowledge management in corporate law departments is a glass half-full, glass half-empty situation. 

On the (less than) half-empty side, only 15% of legal departments have “implemented a KM process,” 54% have not, and 31% don’t know. This according to an InsideCounsel magazine poll published in June 2007 (at p. 13). I’m less surprised that only 15% have KM than I am that 31% don’t even know (which I equate to “no"). Contrast this with BigLaw: various surveys show that at least 1/2 and perhaps much more have some KM.

On the half-full side, an excellent feature article in the same issue, Knowledge Management: A Step-by-Step Guide to a Successful KM Initiative (PDF), gives good guidance for successful law department KM. Important steps include specify an objective, gain buy-in, put someone in charge, consult stakeholders, and maintain what you build. Sidebars offer good war stories and other tips. Though targeted at in-house counsel, this is good reading for any legal KM professional.

What’s better, a bigger pie or a bigger slice? 

I am a legal technology consultant by profession but an economist at heart. One reason I did not practice law is a sense that too much is about slicing rather than growing the pie. Legal tech appealed to me because it can grow the pie by shrinking the cost to society of providing legal services.

So I found bemusing The Early Bird Gets the Discount (Corporate Counsel, June 2007). It reports that Circuit City gets a small discount from outside counsel by paying bills early. Not bad but from the bigger economic perspective, it just changes how the pie is sliced.

Meanwhile, Circuit City misses a pie growing opportunity. “When Circuit City’s law department receives an invoice, it is date-stamped by a legal assistant who reviews it line by line to make sure all charges comply with company guidelines.” E-billing should take care of that task, not a person. Granted, e-billing is not free. Properly executed, however, e-billing can help law departments identify low cost law firms, letting the general counsel select the most efficient firms. And that grows the pie. (And relieves a person of a tedious task as well.)

The online legal services market (for interactive legal advice) has been quiet - until now.  

Earlier this decade, many law firms developed and promoted online legal services. To my chagrin (some readers know that I had a personal stake in virtual legal advisors when I worked for Jnana) the level of activity seems to have fallen. So I was pleased to see the news in Legal Week that Allen & Overy has released a new online service called Diligence.

From the Allen & Overy Diligence web page: “diligence is a secure on-line legal risk management resource covering pre-insolvency enforceability issues in connection with trading derivative transactions with different counterparty types on a cross-border basis.” Interestingly, one of the cited benefits is “saves time and money spent on outside counsel or on in-house resources previously devoted to pre-trade analysis.” Here’s one firm not afraid to look the innovator’s dilemma in the eye.

The Legal Week article also reports “The new product will operate alongside A&O’s flagship on-line products, Netalytics and CSAnalytics, which are now generating more than $2m (£1m) [sic] in annual revenue — up from $1.5m (£755,000) [sic] last year.” More on this level of revenue in a future post.

6/9/07 Update: Just came across another new (to me) online legal service: Reed Smith’s Trademark Management Mapping Program, “a proprietary software system that provides a web-enabled “snapshot” of an IP portfolio.”

How should law firms manage e-discovery?  

The Data Boom: Can Law Firms Profit? in LawFirmInc. (May 2007) offers answers to this question, covering economic questions such as whether EDD should be a profit center and how to conduct document reviews.

My favorite excerpt:

“Fenwick and Kirkpatrick & Lockhart Preston Gates Ellis-have adopted polar opposite models. [Fenwick limits] the number of associates needed. Cases in which hundreds of gigabytes of raw data were collected require six to 12 lawyers for review, according to Fenwick’s Brownstone: ‘We apply radical de-duplication and statistical analysis to keep what the reviewers see to the absolute minimum of data.’ Kirkpatrick, on the other hand, staffs no associates on review. Indeed, its document analysis technology group doesn’t even have associates. Instead, the firm draws on a pool of some 200 in-house project attorneys who do nothing but review documents.”

Care to guess which approach is more cost effective? Last time I looked, technology, even expensive tech, costs a lot less than lawyers, even contract lawyers or staff attorneys.

Wherever firms come out on these questions, I suspect more will hire “e-discovery attorneys” or start e-discovery practices. I recently wrote a white paper for Renew Data called 4 Ways an eDiscovery Attorney Can Make Your Firm More Successful (registration required to download). I interviewed several lawyers in this position. The article quotes Thomas Barnett, Special Counsel - Sullivan & Cromwell LLP, Laurie Weiss, Partner - Fulbright & Jaworski LLP, Charles Cohen, Partner - Hughes Hubbard & Reed LLP, and Mira Edelman, Counsel - Hughes Hubbard & Reed LLP.

In this roundup: outsourcing at Orrick and Baker McKenzie, law firm convergence (Marxist conundrum?), and law firms weathering the next recession.  

Outsourcing
Orrick’s Staffing Moves Pay Off – Will Other Firms Follow? (The Recorder, 5/25/07) looks at Orrick and Baker McKenzie’s global service centers in, respectively, Wheeling VW and Manila. Some good data and follow-up reporting on two of the early outsourcing/offshoring movers.

Law Firm Convergence Sows Seeds of Own Destruction
I studied Marxism in college (yes, it’s true) and have a soft spot for arguments that it’s not just capitalism that sows the seeds of its own destruction. Rees Morrison has an excellent blog post, Forces that may slow or reverse the lock-in that converged firms presumably enjoy, that explains why even after a law department converges on a a few firms, the relationship may not endure. This could have implications for CIOs who need to budget for custom technology to serve a big client - make reasonable estimates about the life of the client!

Can Law Firms Resist Recession?
Well-known law firm management consultant Peter Zeughauser has a very good column, Does Your Law Firm Have What It Takes to Be Recession Resistant? in the American Lawyer (May 2007) that explains how law firms can survive and prosper in the next recession. (The last one, 15 years ago, is a distant memory for many.)

Two recent articles by legal technology leaders refresh our memory on the importance of Extranets in client service. 

In Selling Your Law Firm’s Tech (Law Technology News, 6/4/07), Foley & Lardner CIO Douglas Caddell explains the value of technology in client service generally, pointing out that Extranets are valuable but only one example of client-facing technology. He provides guidelines for BigLaw CIOs to market technology internally and externally. For example, he suggests advertising a firm’s tech and indeed I have noticed Foley’s full-page ads in magazines targeting in-house counsel that do just that.

Once you market your Extranet plans, you need to be able to build it! In Extranets 2.0: Using Extranets to Build Client Relationships (Law Technology Today, May 2007) Catalyst Repository founder John Tredennick (also editor of Law Technology Today and the former tech partner / CIO at Holland & Hart) shares his thinking about both high-level Extranet design and tech options for implementing them.

For anyone considering a law firm extranet, both are excellent reading.

Update: 6/12/07 The same issue of Law Technology News, in Upgrading Our Extranet, explains Heller Ehrman’s decision to build its extranet using Microsoft SharePoint.

Many of us already outsource significant aspects of our personal lives, for example, house cleaning, tax prep, yard work, dog walking, and grocery shopping . Next, you may send jobs to offshore personal assistants. 

Connie Crosby over at the blog slaw.ca points to a Toronto Globe and Mail article on personal assistants overseas. Outsourcing Your Life (Wall Street Journal, 6/2/07) reports on this trend in detail as well.

A more in-depth analysis of this trend (and one cited in the WSJ) is available in Person-to-Person Offshoring, an April 2007 white paper by Evalueserve Chairman Alok Aggarwal. In it, he analyzes current business models for personal outsourcing and offshoring, provides examples of markets for this, and provides a snapshot of ten leading services most likely to be offshored.

Implications for lawyers? John Tredennick pointed out in Outsourcing for the Small Law Office: Lessons from “The World is Flat.” (Trial Magazine, Fall 2006) that small law practices have ample opportunities to outsource. The cited items suggest even more options for small firms.

For BigLaw, the institutional implications seem limited. Individual lawyers, however, might find it easier to meet ever-growing billable hour targets if they can outsource even more of their personal life!