After years of sitting quietly listening to the complaints, I’ve finally had enough. Critics of the legal profession and the billable hour speak of all lawyers as if they are identical, mindless billing machines. While many (but not all) of us do account for our time by the billable hour, that does not necessarily mean that all we do is live and breathe solely for the purpose of driving up our hours. Some of us actually have lives outside the office. A few of us even have things in addition to the law that interest us. And many of us still believe that we are members of an honorable profession that serves clients and the public good.
My colleague, Rees Morrison, included in a recent blog post the following assertion by Raymond Bayley that he found curious. For my part, it reminded me of the false conclusions you can reach when you don’t consider all the factors that motivate lawyer action:
…several studies show that lawyers spend more than 20 percent of their time looking for things. If you can bill 400 or more hours annually looking for things, there is no incentive to build a better knowledge management system to eliminate this wasted expense, unless you provide services on a fixed fee basis, as we do at [Mr. Bayley’s firm].
No incentive? What about self-respect?! Even if I could spend 400 hours looking for things (and get paid for the effort), I wouldn’t. Why? Because it’s a colossal waste of my time and my client’s money. Why would I want to spend hour after hour engaged in such soul-sapping activity?
When I plan state of the art law firm knowledge management systems, I’m focused on improving the quality of the services we provide to our clients. I’m also interested in training lawyers and adopting a responsible approach to risk management. Finally, I actually take some satisfaction from the fact that these systems make the lives of the professionals in my firm easier and more productive. The last thing I should be worried about is that efficiency gains will lead to a decrease in billings. Why? Because it is healthier for a firm to generate revenue through efficient, high quality service than by cheap tricks that artificially pump up billable hours at the expense of client satisfaction and lawyer self-respect.
Regardless of whether we provide services on a billable hour, fixed fee or pro bono basis, I’ll still keep looking for ways to improve the quality and efficiency of those services. Why? Because it’s the right thing to do.
As for those nameless lawyers who allegedly spend their lives as mindless billing machines, someone should remind them that it’s not actually about billing clients. It’s really about not wasting your life.
[Photo Credit: Mike Licht]
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Mary -Clearly, Morrison and Bayley over-reached on their conclusion. Lawyers do not want to mindlessly churn out unproductive hours looking for stuff and re-inventing the wheel. The reason that law firms have KM efforts is because they realize the intangible benefits. They also realize that they need to be more efficient if they want to keep increasing and justifying their high hourly billing rates. But the billing by the hour does inhibit a standard ROI calculation on the value of KM. You can't show how it makes more money for the firm. With other billing methods, especially fixed fee, you can show an ROI. Activities in an organization should be governed by more than ROI, because in all areas they are hard to measure. But you need to convince people that making an investment is worth their time. KM is all about making an investment, whether it be an investment of time, an investment in technology or an investment in change. I would like to hear some more thoughts from you on why lawyers and law firms should make the investment and what the returns are on the investment.(I'm also happy to share some of my past stories.)
Thanks for your comment, Doug. I actually think Rees Morrison is more of an innocent bystander in this conversation. He used Bayley's comment as an entry point to wonder whether in-house lawyers were having the same reported problems locating content, and assumed that if they were, there would have been more pressure on them to adopt KM systems. I'm not sure if I agree with the assumption, since I've met lots of lawyers who don't have a good understanding of the range of KM options available to them and, therefore, don't explore effective and inexpensive KM approaches. If you are working in a small law department and assume that KM means buying an expensive application (because that's what a vendor told you), you may not feel like you're in a financial position to pursue it.With respect to ROI, I've always believed that determining the ROI of KM quantitatively is challenging. You have to do a lot of observation and analysis to get to the point when you can prove that Model Document X saved Y amount of time or that some other particular KM project resulted in a specific, identifiable increase in revenue. As much as we all talk about this, I haven't heard of many instances where firms have done the hard work to establish numerical baselines and then rigorously measure the changes. That said, I do believe that establishing KM's ROI qualitatively is possible whether you charge on a billable hour or fixed fee basis. However, this form of ROI analysis requires its own rigor in order to ensure its conclusions are accurate and respected. You've asked whyy lawyers and law firms (and, I would add, law departments) should make the investment in KM. Above all, I believe we have a professional duty to do so. That said, I think this is a question worth exploring in further detail and will try to do so in a future blog post.Thanks as always, Doug, for asking questions that propel the conversation forward, This is one of the best parts of blogging and social media.- Mary
There is more to the ROI calculation than billable time. In principle, KM activities can have an impact on all of the elements of Arendt's RULES maxim (http://www.abanet.org/lpm/lpt/articles/fin08081…).Realisation can be improved by reducing write-offs when billed time is unrecoverable because the fee-earner has plainly reinvented the wheel. (This is linked to your point about fixed fees.)Utilisation can be improved is we use knowledge about the firm's activities to ensure that resourcing is as good as possible. Without that insight, we run the risk of over-provision of fee-earners at the wrong levels.Which links to Leverage, which will change as a result of effective use of knowledge in the firm — work can be done at a more junior level with good KM, so that drives more value from the least expensive people in the firm.Expense control can also be improved by better use of knowledge resources in the support areas of the firm. Just as we need to improve legal knowledge behaviours, so must we ensure that our support colleagues are working as effectively as possible.Work on Speed of reimbursement is a responsibility that typically falls to law firm finance teams, but the tools they use are akin to knowledge tools — they just call them management information systems. The practices that build up around good working capital management are very similar to good knowledge practices. If our partners can get working capital right, they should be able to see how they can use similar skills in improving knowledge capital across the firm.
Mark:Arendt's RULES maxim is a terrifically useful lens through which to viewknowledge management activities at all levels of the law firm. Thanks somuch for adding it to this conversation.- Mary
Mary -Clearly, Morrison and Bayley over-reached on their conclusion. Lawyers do not want to mindlessly churn out unproductive hours looking for stuff and re-inventing the wheel. The reason that law firms have KM efforts is because they realize the intangible benefits. They also realize that they need to be more efficient if they want to keep increasing and justifying their high hourly billing rates. But the billing by the hour does inhibit a standard ROI calculation on the value of KM. You can't show how it makes more money for the firm. With other billing methods, especially fixed fee, you can show an ROI. Activities in an organization should be governed by more than ROI, because in all areas they are hard to measure. But you need to convince people that making an investment is worth their time. KM is all about making an investment, whether it be an investment of time, an investment in technology or an investment in change. I would like to hear some more thoughts from you on why lawyers and law firms should make the investment and what the returns are on the investment.(I'm also happy to share some of my past stories.)
Thanks for your comment, Doug. I actually think Rees Morrison is more of an innocent bystander in this conversation. He used Bayley's comment as an entry point to wonder whether in-house lawyers were having the same reported problems locating content, and assumed that if they were, there would have been more pressure on them to adopt KM systems. I'm not sure if I agree with the assumption, since I've met lots of lawyers who don't have a good understanding of the range of KM options available to them and, therefore, don't explore effective and inexpensive KM approaches. If you are working in a small law department and assume that KM means buying an expensive application (because that's what a vendor told you), you may not feel like you're in a financial position to pursue it.With respect to ROI, I've always believed that determining the ROI of KM quantitatively is challenging. You have to do a lot of observation and analysis to get to the point when you can prove that Model Document X saved Y amount of time or that some other particular KM project resulted in a specific, identifiable increase in revenue. As much as we all talk about this, I haven't heard of many instances where firms have done the hard work to establish numerical baselines and then rigorously measure the changes. That said, I do believe that establishing KM's ROI qualitatively is possible whether you charge on a billable hour or fixed fee basis. However, this form of ROI analysis requires its own rigor in order to ensure its conclusions are accurate and respected. You've asked whyy lawyers and law firms (and, I would add, law departments) should make the investment in KM. Above all, I believe we have a professional duty to do so. That said, I think this is a question worth exploring in further detail and will try to do so in a future blog post.Thanks as always, Doug, for asking questions that propel the conversation forward, This is one of the best parts of blogging and social media.- Mary
There is more to the ROI calculation than billable time. In principle, KM activities can have an impact on all of the elements of Arendt's RULES maxim (http://www.abanet.org/lpm/lpt/articles/fin08081…).Realisation can be improved by reducing write-offs when billed time is unrecoverable because the fee-earner has plainly reinvented the wheel. (This is linked to your point about fixed fees.)Utilisation can be improved is we use knowledge about the firm's activities to ensure that resourcing is as good as possible. Without that insight, we run the risk of over-provision of fee-earners at the wrong levels.Which links to Leverage, which will change as a result of effective use of knowledge in the firm — work can be done at a more junior level with good KM, so that drives more value from the least expensive people in the firm.Expense control can also be improved by better use of knowledge resources in the support areas of the firm. Just as we need to improve legal knowledge behaviours, so must we ensure that our support colleagues are working as effectively as possible.Work on Speed of reimbursement is a responsibility that typically falls to law firm finance teams, but the tools they use are akin to knowledge tools — they just call them management information systems. The practices that build up around good working capital management are very similar to good knowledge practices. If our partners can get working capital right, they should be able to see how they can use similar skills in improving knowledge capital across the firm.
Mark:Arendt's RULES maxim is a terrifically useful lens through which to viewknowledge management activities at all levels of the law firm. Thanks somuch for adding it to this conversation.- Mary