Alternative Billing, Alternative Lawyering

Richard Susskind likes to be provocative.  And, he’s good at it.  After hearing his talk at Harvard’s Berkman Center for Internet & Society, I found my mind churning with ideas of what it might be like if his vision became our reality.  However, I soon felt stymied by the enormity of the challenge of changing our profession’s approach to work and compensation.  And I’m not the only one.  Most law firms have yet to find a comfortable way to determine an alternative billing structure or adopt alternative methods of lawyering. Thankfully, Susskind proposes a solution:  break legal services down into bite-size pieces, analyze them, and then reassemble them in a way that permits alternative lawyering and alternative billing.  Central to this solution is his analysis of legal services, which run the gamut from “bespoke” (i.e., customized, tailor made) to commodity.  Here are the five levels he sees:

  • Bespoke/Customized
  • Standardized
  • Systematized
  • Packaged
  • Commoditized

Most of our firms are awfully good at doing customized work.  Some of our firms have even standardized their work through the creation of checklists and model documents.  A few have attempted systematization through document assembly and automated decision trees.  Even fewer are actually providing packaged online legal services (e.g., Wilson Sonsini’s term sheet generator).  And then, there are the firms that freely admit that their work product is a commodity and act (and bill) accordingly.

Naturally, our billing follows our style of work:  hourly billing is used for bespoke and standardized work, while fixed fee (or alternative) billing is possible with systematized, packaged and commoditized work.  For Susskind, the key is to break down legal services into their component parts and bill each of those parts accordingly.  For example, you may be advising on the world’s most complicated merger, but chances are you won’t be generating a due diligence request list or closing schedule from scratch.  So, what would happen if you billed the parts of the transaction relating to due diligence and closing preparations as if they were systematized, while billing the process of negotiating and drafting the critical sections of the merger agreement as if they were customized?  Suddenly, you’ve expanded the scope of alternative billing and reduced the need (and attendant client relationship risks) of hourly billing.

Now, what if you took each of the components of your transaction, broke them into discrete tasks, and made sure the right people (e.g., legal or lay, working in the office or remotely, employees or subcontractors, etc.) were handling each task using the right tools?  What if, with respect to each component, you searched diligently for ways to provide higher quality work product more efficiently and cheaply by using collaboration and technology?  These steps should result in a cost structure that is substantially reduced and predictable, thereby facilitating alternative billing.

Law firm knowledge managers with practice experience can play an important role in this process.  They can help identify the component tasks, and then find ways to standardize, systematize, package or commoditize as many of those tasks as possible.  They can bring to bear their knowledge of available technology, they can help draft, they can help automate.  Law firm knowledge managers may be the key to solving the alternative billing, alternative lawyering puzzle.  Are you using them?

[Photo Credit:  hto2008]