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Comment: Alternative Fee Arrangements and the New Law Era

Billable hours have gone the way of the horse-hair wig. Corporate clients don’t understand why their counsel can’t operate with as much efficiency as any other business, and individuals prefer to buy legal services as a commodity rather than risk a bill that might snowball over months or years. The market demands change, so alternative fee arrangements are the new standard.

by Dan Puterbaugh, Director & Associate General Counsel, Adobe Systems

Historically, efficiency was not a driving need in the legal world. The legal profession always emphasized thoroughness over speed, and the fees supported that approach. Billable hours gave legal professionals the flexibility to spend as much time as needed on a case or a contract without worrying about their firm’s profit. The profit was built in.

But billable hours have gone the way of the horse-hair wig. Corporate clients don’t understand why their counsel can’t operate with as much efficiency as any other business, and individuals prefer to buy legal services as a commodity rather than risk a bill that might snowball over months or years. The market demands change, so alternative fee arrangements are the new standard.

The increasing adoption of alternative fee arrangements means the profit is no longer built in. Law firms have to mine profit now, just like other businesses do – by raising prices, cutting costs, increasing volume, or some combination of these.

Fat Firms are Fading in Favor of Lean Law

According to a survey by Altman Weil, over 90% of law firm leaders say greater efficiency is needed to remain competitive. Yet only 30% say they have made an effort to re-engineer work processes. That means 70% are falling behind, creating a lot of opportunity for more nimble firms.

If you’re one of those nimble firms and are considering a move toward alternative fee arrangements, take a few lessons from agile change management practices:
• Begin your transition with a sprint—a quick project with limited scope
• Focus early sprints on low-risk changes with the potential for high-value results
• Focus early sprints on a small group of workers and roll them out in waves to the rest of the workforce; this provides the chance to learn enough from each iteration to improve the next.

A smart place to initiate change is with your work process technology. Streamlining operations can cut costs and increase volume by reducing the time professionals and their staffs spend on mundane activities. Minimizing the effort put into the mundane frees up resources to do better work and find new business.

Focus on systems that have a legacy or paper backup in case there’s a problem. Your mission-critical core systems can be evaluated later, after you’ve made some mistakes with your early sprints, learned from them, and established a feedback loop to apply your new best practices to bigger projects.

What’s Your Biggest Productivity Pain?

Outmoded document management hurts every aspect of your firm’s health

Think about what holds up productivity in your office. There’s a good chance it’s document management. Whether wood pulp or bits and bytes, the flood of documents slows everyone down.

Here’s why streamlining your document handling practices is a good first project:
• Document handling inefficiencies impact the entire staff’s productivity, from the most senior partner to the temporary staff
• Document handling inefficiencies are costly; improvements here have a significant impact on both the bottom line
• Changes in document handling systems is relatively low risk; systems are already in place to fall back on if the change doesn’t take place smoothly
• A successful document handling process overhaul will garner support from staff for future changes

A Closer Look at Better Document Production Technologies

When selecting a document management solution, take a granular look at what a product can do and how your staff will use it. For example, here’s how a fully-featured solution aligns with the tasks performed by different roles in a typical legal organization.

Document Production Technology Functions at a Glance




Improve Productivity with Templates

Legal organizations struggle to manage high volumes of contracts. For example, the legal team at Adobe creates over 10,000 contracts each year. While this in-house counsel does not charge fees, alternative or otherwise, the lessons of its push to use document production technologies to increase efficiency are relevant to law firms that need to run lean.

To reduce the burden on the legal department and free counsel to focus on business-critical contracts, the company created 300 standard contract templates with electronic signature capabilities. The populated templates automatically convert into password-protected documents that are routed to signers’ inboxes on their desktops or mobile devices. A dashboard shows in real-time who has viewed and signed a contract and where it is in the workflow. Clean copies of signed documents are sent to relevant parties.

The company issues dozens of non-disclosure agreements (NDAs) daily. Formerly, employees had to request an NDA, get it signed, and return it to the legal department, which then had to review it. Now, NDAs are a pre-signed template that individuals can fill in and send without needing to consult the legal department. There’s no risk of documents being modified during the signature cycle, so the legal team no longer must review signed NDAs, further improving productivity.

Another way templates have been used in organizations is to speed procurement processes by training procurement specialists to assess and manage low-risk procurement contracts. The time needed to complete a contract has been reduced by 73 percent.

Set a New Precedent for Your Legal Team’s Success
Law firms that want to keep their shingles swinging need to take a fresh look at their operations to find ways to cut, snip, and streamline without sacrificing quality.

Alternative fee arrangements and drivers like the commoditization of legal services, online practitioners, and evolving client expectations are a perfect storm that is likely to erode the financial wellbeing of firms that don’t proactively seek ways to improve their business operations.

Making organization-wide changes is hard, so start by chipping away at the easy problems. Take a look at inefficiencies like document production processes and overhaul them first. Evaluate results, and then… do it again with another work process system. There are plenty of opportunities to do things more efficiently using up-to-date technology and an open mind.

This is a big job, but it’s not uncharted territory. Businesses have been optimizing operations since businesses existed, and modern practices are based on a vast accumulation of real-world experience and academic study. Law firms that borrow from that well of wisdom can stay competitive in the new business of law.

2 replies on “Comment: Alternative Fee Arrangements and the New Law Era”

Since the only tangible product that lawyers produce is written work, increasing efficiency in preparing documents is critical to the future of every law firm. As noted in the article, form/template building software can be a great way to cut down the time for preparing documents and maybe even improve document quality. But that is not a complete solution–a lot of documents have to be too customized to use templates. Another tool to help lawyers prepare documents would be one that can break existing content into building blocks that can be easily retrieved as needed (e.g., while drafting a document).

Lexprompt WRITE offers this and some other useful features. It is currently in beta testing phase (and has been piloted at AM Law 100 firm); WRITE should be commercially available soon.

Disclaimer: I am a lawyer and one of the owners of Lexprompt.

As a lawyer who began in the practice by dictating to a secretary I have seen the great efficiency that technology has brought to the profession. Forms for commercial leases and similar documents have always been with us. But many documents still require some amount of professional judgement. Many lawyers offer lower prices that are attractive to clients but actually produce inferior documents. We used to strive to be better, not cheaper. I am all for efficiency, but it can be slippery slope.

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