Insights and updates
from MinuteBox
Walk into any law firm, from small solo practitioners to the global behemoths and the one thing they all have in common is paper. Paper is synonymous with legal work. From single sheets strewn across desks to boxes filled with old documents, minute books covering up entire walls to fresh reams neatly stored under photocopy machines, paper is everywhere. Seemingly, the more paper lying around, the busier the law firm.
But in reality, paper is more of a burden than an asset. Paper takes up space, and space has a price. Holding on to paper documents on behalf of clients often costs law firms more money than they think. A square foot in downtown Toronto can range anywhere from $35-$65. Minute books and closing binders are great examples of unnecessary, burdensome and costly paper storage.
Paper documentation is also inefficient. Sheets always need to be printed and often get lost. One sheet is negligible, but producing thousands of sheets daily adds-up. This is exactly the sort of thing clients are pressuring law firms to strike from their bills.
Moving forward, try and use less paper. Test and utilize the many available tools and technologies. Simple.
But what about the documents already printed, those large binders stuffed with documents? Law firms, either internally or with the help of third parties, have begun scanning mountains of paper documents and transferring electronic versions to internal servers or cloud-based systems. While not a bad starting point, the value-added is minimal. Digitizing every document to sit in a computer file is no different from cleaning your house by moving all the clutter from the living room to the dining room. The mess still exists in a big way and absent an organization structure, there is no added efficiency.
Before you start digitizing, here are a few pieces of advice:
- Plan Before You Scan: Map out how you will access the documented information. Which platform will you be using and where will the information be stored? How will users interact with the platform? Have you canvassed users (lawyers, clerks, clients etc…) on their preferences for accessing the information?
- Scanning Can be Pricy and Tedious, But Necessary: Scanning a single document is easy. Scanning hundreds of thousands of documents is not. Hiring third party scanning professionals who have experience digitizing the materials is a worthwhile investment. For added security, always use third parties who will work on-site.
- Utilize and Optimize the Data: Don’t just store the information, use it. Artificial intelligence systems can parse out information from the scanned documents. Most law firms are unaware of the treasure trove of information they are sitting on, which can be optimized for everything from document automation to predicting negotiation outcomes.
Given the methodic progress of large Canadian (law) firms (“LCFs”) in adapting to ever increasing client demands, it is clear a new approach is necessary in order to fulfill clients’ legal needs at a sustainable price point.
One potential solution is the adoption of the lean startup model, a process coined in 2008 and followed primarily by fast-moving technology startups.
The lean startup model is centered around the three-step feedback loop: 1) build a minimum viable product (“MVP”); 2) measure the results of the product; and 3) learn from the obtained results. The speed at which a company repeatedly drives through the feedback loop often helps address product faults while developing a marketable product.
MVPs are typically crude, likely performing only a fraction of the final product’s functions. An MVP is a great testing ground for gaining information, getting the product into customers’ hands, reducing wasted production hours and creating a base for future products. The idea is to keep developing and modifying the product through constant testing and implementation of user feedback. In other words, have the user tell you what to create, not the other way around.
LCFs pride themselves on being “partners” with their clients, able to provide outstanding legal service derived from a true understanding of clients’ business needs. But the connection between long term clients and LCFs is eroding; clients will go to whoever can offer them practical legal service at an affordable price. The partnership needs to be strengthened.
One answer is for LCFs to leverage the partnerships with clients to develop something mutually beneficial. When LCFs try and develop efficiency systems (new technologies or processes for the delivery of legal services) the process is time consuming and tedious. Products, once developed, tested, and rolled out to clients, are near final. Aside from the cost of development, newly introduced efficiency systems may not address the specific needs of the client because clients are rarely involved in the development process. Clients may not like, want or need an LCF efficiency system. Why not include clients in every stage of development, as they are the ultimate beneficiaries?
This is where the lean startup model and LCFs can mesh. Clients should be brought in to brainstorm and repeatedly test the new efficiency systems from the MVP to the final product. Feedback should be provided to the firm in real time, and modifications to the efficiency system should be implemented based on the client’s feedback. Partnership requires parties to work together to create something of mutual benefit.
The benefits from such a collaborative system are threefold. First, the speed at which LCFs introduce new efficiency systems is increased. Second, LCFs may discover quickly during the feedback loop cycle that what was initially thought to be the solution may actually not be, and the efficiency system can and should be modified, thereby reducing risk and minimizing the chance of failure. Finally, it strengthens the partnership between the client and the firm, not the client and individual lawyers.
Golf is unforgiving. An arching 300-yard drive in the middle of the fairway and a 1-inch tap-in putt are both counted as single strokes on the scorecard. Regardless of the majesty of long shots, however, the value returned from a long hit is identical to the short chips and putts on the green. Wouldn’t it make sense then to spend just as much time perfecting our short game as we do our long drives? It’s no wonder handicaps stay high!
Legal service follows the same principle. Like a long drive, legal expertise does not in and of itself ensure success. The packaging of legal services is becoming increasingly important, arguably more important, than subject matter expertise. Increased industry competition resulting from the availability of new technologies enables more lawyers to provide high level legal services to clients. As a result, to ensure continued success, 21st century law firms must not only find ways of distinguishing themselves from the competition, but also ensure services are delivered in the most efficient ways possible.
The Short Game is Where You Score
Approach shots, chip shots and putting are the most value-added shots in golf; that’s where you score. Similarly, effective request for proposal (“RFPs”) departments, practical innovation and pricing methods are increasingly becoming key enablers of law firm success.
Approach Shots – RFPs and Procurement
Approach shots, ideally from the fairway (usually behind a tree in my case) can put you close to the green. Successfully responding to RFPs and procuring work from clients are necessary for firms to maintain consistent cash flow. Every RFP should be uniquely tailored to each client for each matter. Customization, genuine adaptability and communication between the firm and client are key. Law firms should be candid in their ability to provide exactly what the client wants, both commoditized and value-added work. Acquiring a new matter from a client requires a deep understanding of a client’s legal and business concerns. This understanding, coupled with good service, make it easier to secure repeated client work in the future.
Chip Shots – Innovation
Chip shots are those short range golf shots taken in close proximity to the green. Chip shots can make a good golfer look great and help rescue a hack golfer from a potentially high score. Innovation, as the chip shots of legal service, means different things to different people when it comes to law firms. At its core, innovation is simply a deviation from the status quo, or as Deloitte Australia’s Chief Edge Officer Peter Williams puts it, “innovation is about trying new ideas”. How we embrace change, however, can shape results. The speed with which we try new things and learn from our mistakes can help create a culture of free flowing ideas.
At the outset, innovations should be slight and subtle. Pick small legal projects with easy victories. Grabbing low hanging fruit can help increase the resolve within a law firm to tackle larger innovative undertakings. It is far easier to identify specific problems that need fixing than to conclude that everything is broken and must be rebuilt.
Putting – Pricing
Long drives are worthless if a golfer four-putts every hole. Similarly, law has no value if the services are not properly priced. Effective pricing does not mean picking a round number based on average totals billed and paid by clients in the past for similar work. Instead effective pricing requires an in-depth understanding of costs and inputs.
Law firms must understand the costs associated with servicing a client matter in order to understand profitability. How much time are lawyers actually spending on a client matter, including write-down and write-offs? Firms that continue to charge by the hour should calculate the realized amount against all hours actually spent on a file, not just those that were billed to the client. Knowing the requisite profitability yield per matter against fixed costs can help shape how much firms can or should charge. Gather your data; learn from your data; respect your data; and learn how to incorporate data results into service delivery. Doing so can help bring consistency and predictability for both law firms and their clients.
There’s a reason why no winner of the annual World Long Drive Championship has ever had a successful career on the PGA Tour. They lack the finesse of a well-rounded professional golfer. Successful law firms, whose talented lawyers have long sharpened their legal expertise and knowledge, must now master the more subtle elements of effective legal service in order to remain relevant in the changing marketplace.
Rewards programs have become a staple of the credit card industry, offering everything from airline miles to cash back. Regardless of the gimmick, however, their purpose is clear: to encourage repeated use. The more you use it, the more you get back in return.
Sounds simple enough, right? But can such a simple concept translate to the world of large Canadian law firms? Given the changing legal landscape in Canada, large firms must find creative ways of retaining clients. The downside of losing a large client is greater today than ever before, as the marketplace for large clients in Canada is stagnant. Clearly clients have the power in this relationship. But surely more can be done to ensure continued loyalty between clients and large law firms.
While rewards programs can vary, here are two possible options for large firms. The first is the “buy today, save tomorrow” option, a variation on volume discounts. In any given year, for every additional piece of legal service a big law firm provides for a client, an additional percentage is taken from the costs of the total bill, up to a maximum percentage. For example, assume a Canadian bank wants to issue bonds. The firm will complete the service for X dollars. The next matter given to the firm from the Canadian bank will be charged at a rate of X-5% for example (X now being the cost of the new matter, not the bond issuance). A third matter would be X-10%, up until a maximum of say 25%. Some form of price predictability is created, allowing a client to more easily budget and allocate funds for their legal costs. Clients should also have the flexibility to decide on which matters they save, so they can get the greatest price reduction on the most expensive matters.
Some rules and parameters for the buy today, save tomorrow model obviously need to be set, including perhaps a minimum price on matters to receive the discount. But with a long term focus on client retention and a steady (if not increasing) stream of work in the future, a short term client pricing advantage is acceptable.
A second rewards option would be to allow clients to accumulate points which can be redeemed as price reductions in the future. Much like a credit card, a law firm can develop a formula that for every $1,000 spent by the client on services provided by the firm, the firm will award the client X points (at a conversion rate to be determined by the parties). The points can then be redeemed for price reductions on future matters.
Client loyalty has all but faded from the law firm/client relationship. The mindset is “what can you do for me today”? The law firm rewards program answers that question with “not only can we provide quality legal service today, but in so doing we can save you lots of money tomorrow”.
