Strategic Legal Technology

Law Technology News (1 August 2011) carries four related articles about recent e-discovery certification developments. For those interested in the topic, this is essential reading. 

The lead article by well-know e-discovery expert Patrick Oot, E-Discovery Certification: Sham Exams?, questions the value of certifications; the related articles are:

• Chere Estrin - The Organization of Legal Professionals, an overview of OLP, an e-discovery certification body, by LTN editor Monica Bay
• Hard Sell? Be all you can be: Become a certified e-discovery professional today!, a look at ACEDS, an e-discovery certification body, by Albert Barsocchini
• Ralph Losey -E-Discovery Team Training, an overview of Mr. Losey’s training course by LTN editor Monica Bay

I am a member of the Board of Governors of the Organization of Legal Professionals, so arguably I have “skin in the game.” While some of the articles’ language and headlines inflame, on balance, they present the issues fairly.

I accepted the invitation to the Board of OLP a couple of years ago because (1) I believed the legal market needed more and better e-discovery professionals and (2) thought that certification would help meet that need and encourage training. I know that “certification” in the legal market has long been a loaded topic. For example, when I managed legal technology at two large firms, I found that some of the best staff had virtually no formal IT training or certifications. And some of the worst had extensive formal training and certifications.

The lesson I draw is that the market should assess the value of certification (and, for that matter, any particular training program). If training and certification providers accurately represent their offerings and disclose relevant information, then test-takers, course-takers, and employers can decide on the merits. Like most decisions in life, outcomes are not guaranteed. Taking an e-discovery class or sitting for a certification may or may not enhance careers. I don’t see how this differs from any investment anyone makes in any type of education or certificate. And that’s why I think the market needs to decide the right answer.

Beyond that general statement, I comment on a single element only. One can read portions of these articles as impugning the motives of some of the players. On that, I share Ralph Losey’s view that “Everyone I know in this field means well, even those, who unlike me, operate their programs as a business, in some cases a big business. What is wrong with free enterprise?”

I recently asked here how large law firms should define “good client service”. Subsequently, I posed this question at a meeting of several experienced BigLaw professionals. 

All of us - lawyer, librarian, marketer, IT, KM professional, practice manager - struggled to define good client service. In a flat legal market, the large firm that successfully delivers “good service” can likely win share. So perhaps it’s time for BigLaw to ask what clients what they really want. (If I’ve missed an accepted, quantifiable definition of good service, let me know.)

In our meeting, all of us agreed that regular client communication is a key element of good service. I proposed a thought experiment. Use firm systems- e-mail, individual lawyer calendars, CRM, and the VOIP phone system - to measure the amount of communication between relationship partners and clients. I suggested that firms could set communication “service levels”. For example, million dollar a month clients might warrant two calls per month while 2 calls per year might suffice for the $20k/month client.

Whatever the number, the point is to define prospectively the right amount of communication, measure it objectively, and take corrective action if it falls short of the service level. Management would, at minimum, talk to partners who fell short. Everyone was visibly uncomfortable with that idea.

That reaction is understandable; BigLaw dislikes Big Brother. That mindset, however, stems from a fundamental problem: partnerships are closer to a collection of solos than to an integrated, single entity. In the latter, why would anyone flinch at the idea that management tracks performance and provides feedback when it falls short?

The more general point is that once we define elements of “good service", we can come up with metrics to track it. Legal technology will support some metrics, surveys others. This is not rocket science. Rather, it’s a matter of motivation and some thinking.

Maybe lawyers - inside and outside - avoid defining good service because “be careful what you ask for lest you get it”. Specifying good service means clients need to say in advance what they want and how they will measure it. Outside counsel then needs to deliver. Both seem uncomfortable about being pinned down. And that’s too bad - it may explain the disconnect many surveys show between corporate law departments and BigLaw.

I just had a “Eureka” moment that touches on two of my favorite themes: things digital and change management. 

For years, I have used a white noise machine as a sleep aid. At home, I actually use - gasp - an old-fashioned motor-driven, adjustable plastic cylinder device that sounds like a fan. When I travel, I use hotel A/C units. But they are not a reliable sound source and friends’ or vacation rental homes often don’t have them.

So I decided to buy a portable, electronic white noise machine - it looks like an old-fashioned transistor radio. After it arrived and I unpacked it, I started thinking how that was one more item to pack. Oh well I thought. Then, an hour later, it suddenly occurred to me that once I dispense with a motor, noise is just code plus a speaker. Well, a smartphone runs code and has a speaker built in.

So I went to the App Store (yes, I do have an iPhone). Moments later my downloaded white noise app was offering me 40 sounds, alarms, a big digital clock, and other handy features.

So the white noise machine goes back to the store. And I sit here humbled that buying an app did not come to mind immediately.

I draw three lessons. First, the longer I own a smart phone, the more uses I discover for it. Second, anything that can become digital will and it will, if not today, eventually be available on a smart phone. Third, even though I consider myself forward thinking, I had locked myself into an old paradigm of dedicated, function-specific devices.

And fourth, I am now pondering if there are any hidden lessons. Does my aha moment suggest anything that would facilitate change management when working with lawyers. I wish I could say that simply answering “what’s in the change for me” question would sway people. It often does not. So I will sit here and ponder some more.

Legal knowledge management professionals frequently discuss Alternative Fee Arrangements (AFA). The discussion typically focuses on why and how AFA should be good for KM. But absent appropriate internal allocation of fees, I am not so sure that is true. 

This post is a work in progress; I am “thinking out loud” about how law firms and KM professionals should view pricing as more work moves to AFA. My concern is that BigLaw thinking seems to translate AFA to hourly rate equivalents. That mentality could eventually undermine KM efforts…

Hourly rates have never closely reflected costs. The average cost of an associate hour is high but the marginal cost is almost zero. That is another way of saying law firms are a high fixed cost business: occupancy, staff support, malpractice coverage, IT, and especially associate salaries are all, in the short term, fixed costs.

Other high fixed-cost businesses use variable pricing to generate more revenue and profit. Airlines use yield management. Electric utilities use time-of-day or demand-based rates (where technology and regulations so allow). Even consumer electronics makers do so: older models stay in production but are sold at a lower price. While that strategy may take advantage of price elasticity, it also helps recoup the very high fixed research and development cost of developing any new product and the relatively low marginal cost of producing an extra unit. All need to consider carefully how fixed and variable “factor inputs” contribute to their final product or service.

In addition to lawyer salaries, offices, and staff, law firms have another high, fixed cost: accumulated lawyer experience and work product. Because firm management tends to translate all fees into hourly rate equivalents, I believe they undervalue the high fixed cost of experience and work product. Consequently, firms likely “give away” prior work product and undervalue the one or two hours of rare expertise that ‘cracks the case’ (and that KM enables finding). If true, then doing so may, over time, undervalue the fruits of KM. Anything that is undervalued risks underinvestment.

In the age of AFA, we can reasonably argue that some portion of AFA should be allocated to cover KM costs. To be sure, this will benefit KM professionals. But it also will benefit law firms and partner profits. Unless law firm internal allocation of fees to “factor inputs” accurately reflects costs, firms will over-invest in some resources and under-invest in others. That would not be good for KM.

Do large law firms provide quality service? 

The answer depends on what we mean by quality and the metrics we choose. A threshold question is whether to consider the quality of substantive legal advice. Even if that were the only metric, the question remains difficult: outcome relative to what? Clients may have a strong or a weak position, so outcomes have to be measured relative to some reasonable prospective standard.

Of course, service is more than just about outcomes. Some clients might even take outcome off the table, viewing legal advice quality as a given. Instead, they might focus on all other elements of their interaction with BigLaw. But which ones? And what metrics?

Two recent items got me thinking about this. Martin Collins, legal head of Bloom Energy, writes in Helping in-house and outside counsel work better together ("Avoiding Mistakes” in print edition) in Inside Counsel (July 2011), of his frustration asking outside counsel to answer five enumerated questions and not receiving five distinct answers or answer yes-no questions and not getting back a yes or no.

Separately, an AmLaw Daily blog post, Survey: Half of Law Firms Don’t Seek Client Feedback (28 June 2011) reports only 48% of firms “formally solicit client critiques and just one-third communicate the feedback to lawyers”. In most markets, customer opinion counts a lot in evaluating service quality. The fact that not even half of firms surveyed ask clients their opinion speaks volumes.

So how do we answer whether BigLaw provides quality service? My view is that we need an open source, group effort to answer it. To start the process, I have created a Google document with a short outline and a few instructions. Click here to access it. Anyone can edit it. With sufficient participation, this could become a wiki but I want to start with minimal overhead and see how many participate.