“A lawyer’s time is the only commodity that we have to sell”

Earlier today I listened to a podcast on respected legal technologist expert/journalist/speaker Ari Kaplan’s Reinventing Professionals from May 2, 2019 in which he spoke with Josh Taylor, an attorney and the lead content strategist at Smokeball, a practice management software platform that started out life here in Australia and now appears to be mainly located in Chicago (although retains a presence in Sydney and Melbourne).

The first seven minutes (out of nine) I was entertained and thought were good.  But two minutes and twelve seconds from the end Ari throws out his last question (my transcript follows so sorry for any errors) to Josh:

Where do you see the use of technology in solo practices and small firms headed?

And Josh responds:

One thing that we struggle with so much, and I have saved it to the end here Ari instead of mentioning it as a pain-point upfront, the main part of the small law practice that we see people failing at day after day is accurately tracking their time and either on the the extreme cheating a client by over estimating, which is very rare, more likely and more often we see small law firms cheating themselves by under valuing every minute they have; when I go around speaking to bar associations around the country I always say “you know a lawyer’s time is the only commodity that we have to sell, we don’t make a thousand widgets in a minute that we can then sell for the same price, we have minutes in a day that is the only thing that we can sell out to our clients” because we cannot double bill people so to value and track time accurately I think is where legal tech is going to start leading the way…

Leaving aside the whole time-based billing versus value-based billing discussion, even if you only believe in time-based billing (cost-plus or however that looks) and never want to entertain the notion of any kind of alternative pricing method, to say:

a lawyer’s time is the only commodity that we have to sell

is so far removed from reality it’s not funny.

What a lawyer’s ‘commodity’ is, is the knowledge they have acquired, the experience they acquired to be able to apply that knowledge to the situation their client is facing, and the insight to do this in a valuable and respectable way.

Regardless of how you bill – as a lawyer that is the only commodity you have to sell.

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An OmniFocus subscription – a great example of ‘charm pricing’?

Not familiar with the term ‘charm pricing’? – neither was I until I started taking the issue of pricing seriously, but at it’s core is something we (tender and pitch professionals) see daily,  the psychological effect of reducing the the left digit(s) by one so that “0” and “00” becomes “9” and “99” – i.e. $150.00 becomes either $149 or $149.99.

Why is it important?

Check out these two subscription options…

Screen Shot 2019-05-20 at 8.47.23 pm

…and let me know which you would have gone with.

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Presence of mind, not being present in the flesh

‘presenteeism’: (noun) the practice of being present at one’s place of work for more hours than is required, especially as a manifestation of insecurity about one’s job.

Ask any lawyer if they have stayed behind at work when they weren’t needed, whether or not that’s a a manifestation of their job insecurity – and it almost is, and I’d bet all could tell you a great tale.

Mine..

I was leaving the office and put on my jacket and my partner – seeing me do this – asked if I was cold.

So, the realisation that ‘presenteeism’ exists as a problem is no secret (‘It’s a waste’: Law firms plagued by ‘presenteeism’ culture and graduate ‘sweatshops’ by Michael Pelly in the Australian Financial Review [published on Feb 22, 2019] and ‘4,200’ – why it’s a prize not worth winning on this blog highlight this issue); but what really grab my attention was an excellent article in this week’s The Economist (‘Bartleby – The joy of absence‘).

The Economist article talks to two things that really resonate with me with regard to the futility of presenteeism in the legal profession – especially as we move forward.

The first speaks to the way we were (and some would argue still are):

Jack Ma, the founder of Alibaba, the Chinese e-commerce group, recently praised the 996 model, where employees work from 9am to 9pm, six days a week, as a “great opportunity”.

The second includes what is probably year-to-date one of my favourite lines (and the title of this post):

Turning an office into a prison, with inmates allowed home for the evenings, does nothing for creativity that is increasingly demanded of office workers as routine tasks are automated. To be productive you need presence of mind, not being present in the flesh.

As always though, interested in your thoughts/views/feedback.

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Would you use an unlicensed or unqualified legal advisor?

Last Friday’s (April 26) The Soul of Enterprise Free Rider Friday podcast (Millionaires, Marxists, and Minimum Wage) with Ron Baker and Ed Kless, included a ‘stack’ (their term not mine) by Ed on the news that “Kim Kardashian Is Right: Lawyers Shouldn’t Have to Attend Law School”. As someone who knows absolutely nothing about the Kardashian family (nor wishes to), not much in that – apart from the comment that Ed and Ron go on to make in respect of Episode #225 of their series of podcasts in relation to “occupational licensure”.

In short Ron and Ed talk about the fact that there are some jobs around the world where you need a ‘licence to practice’ – examples: a barber (hat tip to Ron’s Dad there), an accountant, and even a lawyer.

On the back of the Kim Kardashian issue, Ed and Ron then go on to ask this question:

If you know someone isn’t qualified (e.g., don’t have a law degree) or isn’t licensed (e.g. have a practising certificate), should you still be able/allowed to ask them for professional advice – provided that you sign a waiver/agreement/whatever stating that you know that persons isn’t qualified or licensed to provide the requested advice?

Never, no way, stupid idea.

And I would agree with you.

But wait, we’re all adults here and should be allowed to determine our own future and make our own decisions.

Exhibit A: this is an excerpt from the British Government’s website (April 2017) in relation to obtaining legal advice in Thailand:-

“There is no restriction on any Thai national , with or without a law degree [bolded and underlined for emphasis by me], to offer you legal advice.”

Now Thailand is a civil law jurisdiction with a codified law, but still…

…leaving aside the whole issue of how stupid you may or may not need to be take legal advice from a non-licensed, non-qualifed expert (bought a pre-pack will lately?) – here’s a precedent.

There are “lawyers” who advise “on the law” who are not educationally qualified (as opposed to possibly life) or institutionally licensed.

Interesting as that all is though, that’s Thailand – hardly the US, UK or Australia.

Well hang on a second…

Listening to Ed and Ron’s podcasts there are States in the US where you can now obtain ‘legal’ advice from someone who isn’t qualified or licensed, provided that you sign a waiver saying that you knew this to be the case.

And, in my view the following comment from legalfutures.com – reporting on The UK Legal Services Consumer Research Report 2019 yesterday:-

A smaller majority (58%) would be prepared to use freelance solicitors, due to arrive this November with other Solicitors Regulation Authority rule changes, if they could save money on fees.

means they are not a long way behind.

As always though, interested in your thoughts/views/feedback.

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* if I have misrepresented or misunderstood my take-outs from Ed and Ron’s podcast, then I apologise to them.

 

 

Are law firm structures moving from ‘pyramids’ to ‘rockets’?

The graph below, from slide 19 of the latest Investec ‘LegalTech & NewLaw update’ (April 2019), caught my attention last week:

rockets

Until reading Investec‘s report I had heard of law firms moving away from the ‘pyramid structure’ to both ‘inverse pyramid structures’ and ‘diamond structures‘ post the GFC in 2008, I had also read/heard of Peter Connor’s excellent ‘The T-shaped In-house Lawyer™’, but I had never heard of a ‘rocket‘ structure.

And you know what, I like it. Well worth some further thought.

Your thoughts – have you seen something like this before?

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‘4,200’ – why it’s a prize not worth winning

Overnight, Australian time, the annual AM Law 100 report for 2019 was published by the American Lawyer.

A fascinating, if not relatively meaningless (with a caveat to follow), look at how the other half live, one insight from this year’s publication worth taking a closer look at is the ever egotistical champion of the industry – the lawyer with the highest number of billable hours.

And this year’s winner comes from the firm of Fox Rothschild (moment of honesty, never heard of them before today) with, wait for it,

bh

While the individual lawyer is not named, nor their rank, let’s put this under the microscope for a second. That’s:

…4,200 (billable hours) in a year / 365 days in a year (2018 wasn’t a leap year) = 11.5 hours of billable time a day (no write offs or, in parlance, ‘time leakage’)…

…every day…

…without a break – for holiday or for sickness…

…billable

…for 365 consecutive days…

…including Christmas Day.

So what does this really mean?

Whenever I’m asked what this really means I always refer people to the excellent Yale school publication – ‘The Truth About the Billable Hour‘.

In that publication a number of different variations are set out, but in order to ‘bill’ 2201 hours, you need to have been “at work” 3058 hours. By their own admission, this doesn’t account for “personal calls at work, training/observing, talking with coworkers, a longer lunch (to exercise or shop perhaps), a family funeral, pro bono work (if not treated as billable hours), serving on a Bar committee, writing an article for the bar journal, or interviewing an applicant.”

– and yet here we are talking about 4,200 billable hours!

So why does this even matter?

Why asking someone to work 2,000 billable hours a year will kill their spirit‘ is by a long way the most read post on my blog. And yet here we are talking more than double this amount.

So I have a few questions:

  • if you are the supervising partner of a lawyer that has billed 4,200 hours a year, do you have a duty of care to ensure that lawyer is mentally okay?
  • if you are the managing partner of a fee earner that has billed 4,200 hours a year, do you have a fiduciary duty to ensure the mental wellbeing of that lawyer?
  • and, most importantly, as a client: do you really want someone who is working 11.5 hours a day, every day, without a break, working on your file (because I know my answer this question)?

As always though, interested in your thoughts/views/feedback.

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Report: 45% of Australian GCs are forecasting a decrease in their 2019 legal spend – How is this going to be achieved?

The State of Australian Corporate Law Departments Report 2019 – a joint publication between Thomson Reuters and Acritas – was published earlier this month. With more than 2,000 telephone interviews conducted and 73 interviews with Senior Legal Counsel based in Australia taking place, the sample for this report is robust. And while the usual rhetoric around “more for less” is reflected throughout the Report, one of the standouts is that Australian GCs are forecasting 45% projected budget cuts (over 2018 we have to assume):-

budget cuts

To put that into context, that almost twice the global average.

In a time when we have Royal Commissions being announced almost weekly, and compliance issues are on the front pages of the papers daily, you have to wonder where and how these savings are going to be achieved.

As to the ‘where’, given how much ‘top-end’ reputational compliance work that’s happening in Australia at the moment, and how little cost savings can be made from the margins in low-end commoditised work, you’d have to assume the most likely area will be in the mid-level contract drafting/negotiation/management space [the space in which about 30 out of the top 40 firms in Australia play].

As to the ‘how’, having read the Report my take is that Australian GCs will look to achieve this through:

  • innovation
  • panels, and
  • the elephant in the room

Innovation

‘Innovation’ has been a buzzword in the Australian legal world for over a decade. And, as one of the first jurisdictions to legislation the incorporation of law firms, to many outside Australia our system has been one of envy.

But when you ask Australian GCs to rate the innovation of Australian law firms, only 35% feel they’re working with service providers they find modern and innovative.

innovation

From where I sit this means that 65% of Australian GCs don’t think you’re really doing all that much in the innovation space!

Legal Panels

Led by procurement, the dreaded ‘legal panel’s’ stated aim is to achieve:

  • cost efficiencies and predictability
  • relationship building (de facto another way of cost savings)
  • less administrative burden
  • quality [of work]
  • responsiveness
  • access to experts, and
  • value adds on offer

All great and noble aims if you are looking for a 45% cost saving year-on-year – until you take a closer look at the reality:-

panels

This chart is from the ‘GC Thought Leaders Experiment‘ and it clearly indicates that having a panel in place isn’t saving you anything! Add to that lateral hire movement over the past 5 years, and I very much doubt any of the metrics of having a panel are being met.

It’s worth noting here that swimming against the tide of rationalising panels to fragment legal spend is A Verona Dorch – Peabody’s Energy’s Chief Legal Officer who stated (on the issue of appointing panels) that:

Expanding the pool allowed me to insert a few more midsize and non-money center firms than I otherwise could have. And that’s been incredibly helpful—just a few months in, I’m noticing that those firms are extra eager to impress and put forth their top talent.

So maybe, just maybe, if you get it right there is something to be said for legal panels – only not in the form we currently have them.

The elephant in the room

And so we come to the elephant in the room, where a lot of these savings are likely to be found:

40% of Australian in-house buyers of legal services have used alternative legal service providers (“ALSP”) for support on legal matters, and over half of those who used an ALSP did so as they felt it was a more affordable option.

Private practice we are on notice.

As always though, interested in your thoughts/views/feedback.

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