I have been a renter. I have been an investor in homes. I have been a buyer of homes and I have worked with a builder to design and build a home. Each experience has its pros and cons. The critical thing to making each role a successful one is to decide in advance what role you want to play. The same lesson holds true for operating a business and for operating a law department.
Earlier this year, Vincent Cordo, the Global Sourcing Officer for Shell, and Casey Flaherty, a consultant to law departments, wrote an article for the ACC Docket, Shell Legal—Shadow Billing. Let me begin by disclosing that I have enormous respect for the work Vincent Cordo has done at Shell and that Casey is a friend whose work I also respect greatly. However, respect and friendship do not translate into complete agreement on all issues, and this article presents an area where I disagree. I know Casey won’t be surprised.
If you want to take a vacation, there are a few basic steps.
- Figure out where you are. Travel requires a starting point.
- Figure out where you want to go. Tropical paradise? Check. Ski chalet? Check. Great wall of China? Check.
- Figure out how to get from 1 to 2. Plane? Check. Train? Check. Automobile? Check.
- With figuring complete, move. Move to computer to book travel. Move to airport. And so on.
It’s not a complicated process.
Figuring out how to deal with the massive changes in the legal landscape and the even greater changes that are plainly now coming is not any different, though some might be harder.
- Figure out where you are. What is your firm, really? Are you innovative? Change-resistant? Cutting edge? Wedded to quill pens? It is hard to conduct a candid and honest self-assessment. But it is essential. And if you delude yourself, you’ll find yourself going to O’Hare for your flight when your train leaves from Union Station.
- Figure out where you want to go. What type of business will be successful in 5 years? Don’t look farther ahead. Ten years ago, most of us didn’t have smart phones. Now, does anyone other than my 89 year-old mother not have one? Five years is the right time frame. Will artificial intelligence help LPOs or start-ups capture work you are now doing? Very probably. If so, your leverage model might not be a good thing. Indeed, your whole business model might be a liability. I think you get the point–figuring on where to position your business is a difficult process. But if you don’t engage in it, start getting used to the odor of the trash heap.
- Figure out how to get from 1-2. Very. Detailed. Step. By. Step. Plans. Timelines. Burden yourself with realism. War-game the process. This, too, is a very difficult step. People tend to turn into Pollyanna for this stage. Don’t, unless you really want to go to O’Hare instead of the true departure station.
- With the figuring complete, move. To share a quote on my partner’s wall, “Vision without execution is hallucination.”
Saving your firm for the future is not like taking a vacation, except when it is. But remember the role a travel agent can play in making your vacation successful. The odds are, you will need help going through this process. Ask for it.
I just finished reading Mary Juetten’s post in Above the Law, Time Is The New Black. I was struck by this statement:
“Also, all should reject the value billing theory that recording time is unnecessary.”
Since there are few statements with which I would disagree more, I decided to parse the article and respond to the arguments the author makes in favor of the necessity of timekeeping.
Argument No. 1: “Considering the Big 4 accounting firms track time, BigLaw should pay attention.”
Apparently, we are left to simply accept the notion that the Big 4 do everything precisely the right way. I am not ready to make the blind leap. The leverage model is a dying one. Most of what young lawyers and accountants do day-to-day will be automated in the near future. Indeed, a lot of it already has been. If a machine can do weeks and months of tasks in a milsecond, how is that hourly model working for you then? Beyond that, real businesses don’t sell time—they sell outputs. Law firms provide outputs and that is what clients want to pay for. Deal with it.
Argument No. 2: “Timekeeping is the key to understanding your costs and pricing because human effort is still the law’s largest expense.”
Again, the growing significance makes this statement less than accurate and less true with each passing day. If a law firm invests in technology for the betterment of its clients, it should be able to charge for the value that software provides, not the time it takes for the computer to do a task. The author makes a nifty argument that “Ford knows precisely how much it costs to build my F150 for both materials and labor.” What she ignores is that Ford knows that information before it begins to manufacture the vehicle and if there is a breakdown and the time to complete a vehicle is longer, the price does not increase. Third, there is a discrepancy between using time as an element of “cost” when the resource devoting the time is not paid based on time. A lawyer who works 7 hours to complete a task is rarely paid more than a similar lawyer who takes 6 hours. When that is true, what difference the difference in time make? And what about lawyer who can reuse work? If time plays a role in price, you end up overcharging purchasers of the work-product.
Argument No. 3: “Recording the non-billable or non-client hours can also help evaluate the efficiency of the department or practice administration.”
The time from task assignment to task competition may be a slight indicator of efficiency, but the number of tasks completed over a period of time is a much more important piece of information, as is the number of tasks completed in a given time period to meet required quality standard. Time devoid of quality assessment is just not important.
Argument No. 4: “[T]he hour information will help you identify where attorneys and paralegals might be struggling or have gaps in their training.”
This necessarily implies you have an existing baseline you can use tocompare the hourly total. If you have the baseline, you certainly don’t need to hours for pricing. And do you really think looking at time data is the best way to evaluate productivity? Businesses around the world regularly evaluate productivity of their professional works and they manage to do so without requiring those professionals to keep time. And they have been doing so for decades.
Beyond these arguments, the author wholly ignores the costs incurred by firms in recording and tracking time. Timekeeping also allows firms to default to time as a basis for evaluating and rewarding their lawyers. Not a good thing. But most importantly, all of this focuses on cost of production and not on the clients’ interests in buying. If Ford’s market showed that people did not want to buy F150s and instead wanted a low-priced vehicle, making the cost accounting for the F150 isn’t really worth much. The focus needs to be on the buyer, not the producer.
Lawyers always seem to look to our own profession for reasons to justify the practices we follow. The horizon for such justifications should be our clients, not our competitors. If a firm has clients where the law department professionals track their time and are compensated based on how much time they bill, then maybe the law firm can claim to track their clients as a justification for the focus on time. But if anyone finds a department like that, let me know. I have not heard of a single one in 10 years of practicing without time sheets.