Tuesday, January 5, 2010

Conference Announcement on Law Firm Evolution; Timely WSJ Article Begging the Question: "Do Lawyers Evolve Sufficiently to Use the Technology Placed at Their Fingertips?"

Posted by Jeff Lipshaw

Carole Silver (Georgetown) passed along an announcement for  “Law Firm Evolution:  Brave New World or Business As Usual.”  The conference will take place at Georgetown Law Center in Washington, beginning with an evening reception on March 21st and running through lunch on March 23rd.  Speakers will include Richard Susskind (author of “The End of Lawyers?” and “The Future of Law”), but more importantly, friends like our own Bill Henderson, David McGowan, Michele Beardslee, co-author Larry Ribstein, and Paul Lippe of Legal OnRamp.  Other notables:  Jeff Lehman, former dean of the Michigan Law School, Cornell president, and current dean of the Peking University School of Transnational Law, David Wilkins, and Aric Press of the American Lawyer.

All of which segues nicely into an article entitled "Using Web Tools to Control Legal Bills; Big Law Firms Turn to Technology to Provide Clients With Real-Time Expenses, Automate Tasks" from the Wall Street Journal this morning which trumpets "new technology" about which I was harping during the law firm beauty contests our staff held for purposes of choosing "preferred providers" back at the beginning of this decade (which began on 1/1/2001 and doesn't end for another year).  Pardon my occasional slip into facetiousness, but what follows ain't a technology issue, except as it relates to the technology extant in the six inches between a lawyer's ears. 

Let me provide some background here.  In 1998, my old law firm, Dykema Gossett PLLC (now Dykema "A Firm Unlike Any Other") installed billing software that allowed any human being (I include lawyers) to open a program in the morning, keep it open, and, without resorting to paper time sheets, memory, Post-It notes, or scrawls on one's body (like that guy in Memento), to record one's billables in, as we have come to say, REAL TIME.  The upshot of this was the potential of fine grapes in/fine wine out:  somebody could actually tell a client in REAL TIME how much a matter was costing. 

Fast forward a couple years to about 2002.  I'm now the general counsel of a public company.  Put aside whether it's a good thing for society - public companies report their earnings every three months, and whether they give "guidance" or not, securities analysts make models in which they predict what those earnings will be.  On the inside, the company knows what those estimates are and, all other things being equal, tries not to rub too many analysts' noses in the dirt by surprising them on the downside.  In short, you can't rule out contingency and surprise, but the whole point of having information available to management about sales, costs, trends, weather, the macro-economy, etc. is to plan for it.

Now consider a law firm managing some major matters for that client.  During the beauty contest, the GC will say:  "Look, I need you to understand how important financial management is, wholly apart from the quality of your work.  X dollars in absolute terms equals Y cents per share, and if you surprise me with bills or accruals in the last month of a quarter or a year that can be X or more, you've actually affected our relationship with our shareholders."  This is because the GC knows how law firm billing cycles work.  Associate Miguel does twelve hours of work on November 3.  This work doesn't get rolled up into a "pre-bill" for review by the relationship partner until some time after the end of the month, say December 8.  The final bill comes out a couple weeks later, say, December 23.  Which means that there's almost a sixty day lag between when the firm does the work creating an accrual, since the company owes the firm for the work, and when the firm finally tells the company how much it owes.  If the company finds out on December 23 that, indeed, the firm ran up multiples of X dollars in the preceding sixty days, the GC finds herself in an extremely uncomfortable conversation with the CEO and CFO, not because the work didn't need to be done, but because the management of the information relating to the work was so badly butchered.

So we manage this, understanding as we do it's partly science and very much art.  Every quarter we hold a reforecast meeting on each legal matter.  In November, we tell the law firm we want an estimate of an accrual through December 31, meaning all the work that has been completed and is waiting to be billed ("WIP") and everything the firm thinks it needs to do through December 31.  The firm says "oh, no problem, we have a system just like the one you used at Dykema A Firm Unlike Any Other."  And the GC says, that's great, do you have a culture in which the lawyers actually put their time in every day so that we get fine grapes in and fine wine out?  And the answer is almost always, despite the slickness of the Power Point, "well, it's hard to get the lawyers to do that."  Garbage in, garbage out.  So the GC pounds his fist on the table and says, "I want to be able to call you at 1:00 p.m. on Friday, and know exactly how much time we've invested in each of our matters through the close of business on Thursday, and I want you to be able to get the report back to me within an hour."  (By the way, this should be music to the managing partners' ears because it means that time gets billed, bills get sent, bills get paid, and partners make money.)

Well, read the WSJ story.  Foley & Lardner can do that now.  Indeed, I shouldn't be facetious.  The firm can look at a matter by activity, suggest it's being handled inefficiently, and recommend alternatives, such as bringing it back in-house.  No doubt the technology is better.  But garbage in/garbage out (or as we used to say, the human interface) is still going to be an issue, and only leadership and culture change that.

P.S.  As long as I'm ranting (albeit with ten fingers on a keyboard that I will post in REAL TIME), I can still remember an old partner, who was OLD circa 1980 or 1981, who produced documents as follows:  he would write them out long hand, then call in his secretary and dictate to her from what he had written.  Then she would go to her IBM Selectric typewriter and type out what he had dictated in OCR (optical scan) format, which was then fed into a mainframe computer, which then turned out a draft, which she reviewed, then sent back for a final, which she then gave to him, which he marked up with a pen, gave it back to her, and so on.  I have to believe the cycle time for the production of a moderate length brief was three weeks.

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