Effective deployment of new IT can boost law firm productivity – but measuring the potential gains is complex.
A few months ago, the Financial Times reported that professional services were at the heart of the UK productivity problem. It quoted the Law Society’s head of City and international Stephen Denyer as blaming this partly on lawyers’ involvement in ‘non-billable’ activities.
However, it appears that certain non-billable activities help to boost business development, client satisfaction and profit margins. After all, while law firm productivity has fallen year on year, overall profitability has increased.
Traditionally, productivity is defined as output per worker, per hour. However, although this measure could be applied to volume legal services, complex corporate and commercial work, and litigation, cannot easily be measured in numbers of cases handled or fee-earner hours. That is because the output (outcome) is qualitative as well as quantitative. Using revenue per lawyer (RPL) as a productivity metric would automatically determine that partners with the highest charge-out rates are the most productive.
As this would depend on the context – a partner might win a big case or complete an important deal and therefore be more productive than a team of associates – RPL is surely an insufficient metric. The various indicators suggest a productivity formula based on tasks completed, task significance and outcome, time (that is, the time it takes to deliver a service and the timeliness of delivery) and profit/cost/revenue.
As Einstein said, however, not everything that counts can be counted. At a strategic level, law firm productivity means bringing together expertise, know-how and operational resources, and delivering them in the way that best meets client requirements. This will vary depending on the client/instruction. David Pester is managing partner of national commercial firm TLT, which advises businesses on strategically important large-scale projects as well as handling their day-to-day legal affairs.
‘Productivity is about efficiency and profitability,’ he explains. ‘We can’t separate profitability from the way we deliver services and win market share. As TLT has grown, we’ve increased the depth of our expertise in our key sectors and the size of the projects we deal with. The danger is to focus productivity efforts on improving existing processes rather than developing appropriate resourcing models and technology to maximise our potential in a competitive market.’
TLT was established in 2000 as a challenger brand to traditional law firms. Pester applies a consultancy approach to legal services delivery based on Professor Richard Susskind’s disaggregated resourcing model. ‘Productivity is about assembling the right resource and expertise, and identifying and applying the right delivery model for each project while remaining profitable,’ Pester says.
This means applying a combination of in-depth expertise and agile resourcing that may involve collaboration, or scaling up services while managing clients’ expectations in terms of service delivery. TLT’s resourcing model was borne out of the opportunity to work on large-scale projects, particularly in real estate and litigation, and recognition of the shifting dynamic between in-house legal departments and external advisers.
But some things that count can be counted and firms are raising more money than ever to fund expansion and invest in technology that boosts efficiency and productivity.
Document automation speeds up routine processes, enabling firms to deliver legal advice faster and more efficiently. Thus firms are enabled to charge fixed fees to maintain profit margins and client satisfaction. This requirement is recognised by vendors such as Thomson Reuters, which this month acquired Business Integrity, whose primary product is document automation software ContractExpress.
David Halliwell is director of knowledge, risk and legal services at Pinsent Masons, which won multiple accolades at the FT Innovative Lawyers awards, including most innovative law firm of the year. He explains that 40% of the firm’s work is fixed-fee. ‘Our big fixed-fee, sole-provider relationships make productivity essential to maintaining profitability,’ Halliwell says.
‘The incentive to be efficient grows directly in proportion to the amount of fixed-fee work we do, and we use technology to enhance efficiency and productivity. We have used ContractExpress DealBuilder to automate over 500 documents, saving lawyers 12,000 hours a year. Productivity is about delivering fixed-fee legal services profitably, and the speedy delivery of deal documents directly benefits clients in terms of speed to market and generating revenue out of assets more quickly.’
Halliwell highlights the dichotomy within the law firm model: lawyers are encouraged to be efficient, but their productivity is still measured in chargeable hours. Pinsent Masons considers the cost of delivery when taking on instructions, and clients appreciate this commerciality. The firm has also considered the time/productivity dilemma in its new bonus scheme, which rewards two elements: hard work in terms of hours; and finding innovative ways to deliver extra client service.
Duncan Eadie, IT director and partner at Foot Anstey, agrees that law firm productivity means delivering efficiency and value – Foot Anstey provides business-critical advice to corporate and commercial clients. ‘The output is legal advice, which is only of value if it is relevant, timely and delivered efficiently and cost-effectively,’ he says.
In terms of technology, Eadie has focused on facilitating mobile access, and delivering IT support for flexible and remote working and collaboration. ‘Law firms need consistent processes and tools that help teams to work together and deliver the best advice to their clients,’ he says. Eadie’s team includes business analysts and technologists who work closely with practice groups and deal teams, which often include lawyers from across the firm’s six offices, to develop processes and workflows that help them work productively.
Foot Anstey was shortlisted in the FT Innovative Lawyers awards for innovation in use of technology for its digital conveyancing tool, which received top score for impact (on the business). This involved using Thomson Reuters Elite matter management software MatterSphere to re-engineer processes and create multiple workflows. Eadie illustrates how relatively small changes can substantially boost productivity and value. For example, the digital conveyancing tool reduced the time required to generate a letter from 90 seconds to two seconds. This does not sound significant until you factor in that the firm produces more than 80,000 letters a year.
As Eadie observes, law firms are borrowing productivity and efficiency techniques from other industries, notably manufacturing, banking and retail, that involve measuring performance and adapting processes and working practices to eliminate waste. This has led to an increased focus on management information (MI) analysis.
Neil Richardson is group IT director at Fairpoint Group, a financial services organisation which invested in the legal sector by acquiring Simpson Millar, Foster & Partners and Colemans-ctts. Fairpoint is introducing more business discipline and process to the group’s legal operations by implementing QlikView MI technology, which includes updated reporting metrics and performance scorecards including product-level utilisation and margins. Although he is impressed by the latest Microsoft-based legal-specific practice management platforms, Richardson envisages investing in mainstream productivity tools such as Business Objects and IBM Cognos.
BLM and Addleshaw Goddard recently deployed BOARD business intelligence and corporate performance management platform. BOARD offers deeper financial analysis than most law firm practice management systems by integrating budgeting, planning and forecasting with reporting analytics. Other non-legal-specific tools help law firm clients expedite their legal issues and reduce costs. For example, Linklaters recently introduced e-signature offering DocuSign, which enables documents to be securely signed online, meaning that deals and contracts can be finalised without the physical presence of signatories of all parties.
Artificial Intelligence (AI) is this year’s hot topic, with mainstream media focusing on which of our jobs are likely to be ‘taken by robots’. In legal IT, too, automation is giving way to artificial intelligence. Berwin Leighton Paisner used RAVN’s AI engine to create ‘Lonald’, an AI program that reads documents at lightning speed, extracts the relevant information for real estate cases, checks and validates the details with external databases and presents them in a spreadsheet.
Matthew Whalley, head of Legal Risk Consultancy, explains that once the program has been trained to identify and work with specific variables, it can complete two weeks’ work in around two seconds. That makes Lonald over 12 million times quicker than an associate doing the task manually. Obviously the savings are diluted as Lonald’s work is only part of a bigger process.
By doing simple tasks inhumanly fast, Lonald improves the efficiency and productivity of every process it is involved in. Interestingly, BLP associates who were previously tasked with checking and validating property data needed no convincing to work with Lonald, even though the BBC reported AI as a threat to their jobs. This was because it made them more productive and freed up their time for more interesting and value-added work. If lawyers – or anyone, really – recognises the positive impact on their job that technology can have, it needs no evangelising. In fact, it was the associates that gave Lonald its name.
Another AI vendor, Neota Logic, has partnered with Littler Mendelson to create ComplianceHR, an intelligent software platform that answers employment law questions, such as whether an individual should be considered as an employee or an independent contractor. The response would depend on the nature of the work and the geographical location. This is not a simple workflow because it uses multiple variables to determine its response. It can also be used to identify and reduce bias in employment decisions. Here, AI is going beyond efficiency and productivity to address an important issue in employment law and business generally – equality and diversity.
September’s Women in Technology debate at Goodman Derrick flagged up this issue as an important factor in the technology sector’s gender imbalance. This raises the encouraging possibility that although technology may replace some roles in law firms, it might also help to address the diversity issues that continue to hold back the technology and legal sectors.