Legal Technology

How to Succeed in the Modern Legal Market

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SAN FRANCISCO - January 31, 2018

The recently released Georgetown Law and Thomson Reuters Legal Executive Institute 2018 Report on the State of the Legal Market paints a bleak financial picture for firms that remain wedded to business-as-usual strategies. By contrast, "law firms that proactively address the needs of their clients – e.g., by implementing alternative staffing strategies, pursuing flexible pricing models, adopting work process changes, making better use of innovative technologies, and the like – can achieve significant success."¹

For anyone who has been following legal market trends, these conclusions are not new; the pressure on firms to deliver greater efficiency, predictability and cost effectiveness has been intensifying over the past several years. The question is, what concrete steps should firms take to be successful in this evolving legal market?

The answer to this question lies in the Report’s analysis of static and dynamic firms. Dynamic firms are those that fall into the top quartile of performance based on revenue per lawyer, profit, and profit margin. Static firms fall into the bottom quartile.²

The relative success of dynamic law firms is not a function of size, leverage, rate increases, or expense reductions. Instead, the dynamic firms are succeeding by taking a fresh approach to pricing and investing in technology that will help improve their efficiency, profitability, and data analytics. Below are three key takeaways from these firms’ strategies.

1. Focus on Communication, Not Discounts

Dynamic firms had substantially higher billing realization than static firms, meaning they discounted less and had fewer write offs. They also collected their fees more quickly than Static firms. The reason? Dynamic firms had better up-front communication with clients about costs.³

These results reflect a fact that all lawyers know but are not enough are addressing: clients react poorly to bills they did not expect and do not understand. Firms can help solve this communication gap by presenting pricing proposals that are clearly scoped at the outset.

2. Embrace Alternative Fee Arrangements

The percentage of revenue derived from alternative fee arrangements (AFAs) was comparable for both static and dynamic firms. However, their approach to AFAs was very different. 75% of the dynamic firms actively pursued AFAs with their clients, while 70 percent of static firms only offered AFAs reactively, in response to client request.⁴

Successful AFAs involve planning, project management and profitability analyses (which are hard and take time) as well as clear communication with clients about scope, staffing and risk (which can be uncomfortable). It is no surprise that firms willing to tackle these challenges head-on are thriving, while those that take a less systematic approach to AFAs are not.

3. Invest In Technology

Responding to client needs requires investment, and the dynamic firms’ investment in technology outpaced that of static firms by a rate of almost 3:1. Moreover, the dynamic firms’ technology investments are focused on increasing their workflow efficiency and enhancing their ability to analyze data and assess profitability.⁵

Conclusion

Dynamic firms are rising to the top because they are willing to examine their processes, adopt new technology, and change their ways to better meet the demands of their clients. While this has been true for some time, the 2018 Report indicates that the pace of change is accelerating, and the divide between firms that “get it” and those that do not is widening.


  1. Georgetown Law Center for the Study of the Legal Profession and Thomson Reuters Legal Executive Institute and Peer Monitor, 2018 Report on the State of the Legal Market, Jan. 2018, at 17.

  2. Id. (citing Thomson Reuters Legal Executive Institute, 2017 Dynamic Law Firms Study, Nov. 2017). 

  3. Id.

  4. Id.

  5. Id. at 17-18.

What’s Missing In Legal Tech Today? “Budgeting Tools that Transcend Excel”

SAN FRANCISCO - June 16, 2017

At yesterday’s LegalTech conference in San Francisco, Neel Chatterjee of Orrick, Herrington & Sutcliffe (Law 360’s IP Group of the year) was asked what he thinks is missing in legal tech. He responded, “Budgeting tools that transcend Excel.” He went on to discuss how it seems like lawyers are still “sticking a finger in the air” to get budgets and need help finding the right number and adhering to it. “We need tools that mine the firm for analytics” and can tell you things like, “how much does a motion cost?”

Neel’s comments launched the group into a larger discussion of the need for better budgeting by legal vendors because lawyers get blamed for vendors’ cost overruns. Given the amount of time the panel dedicated to this topic, it seems clear there remains plenty of room for innovation — and for tech adoption –in the legal budgeting space.

In addition to being a great trial lawyer, Neel is a straight-shooter and one of the first people I approached when I started doing “proof-of-concept” market research for my company, Digitory Legal. His insights taught me that it was important to create a system that includes costs-per-task because these metrics can help law firms manage their teams to budget and reward efficient lawyers.

Budgeting for Excellence

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SAN FRANCISCO - May 20, 2017

With all the pressure to reduce legal spending, it is easy to lose sight of the importance of excellence in legal practice. Excellent legal service takes time and money to achieve; however, it should not require a blank check. Here are three tips to managing legal costs while leaving room for truly superior legal work.

  1. Task-Based Budget Plan.

    Your budget plan must be flexible enough to allow lawyers to prepare throughly and pursue outside-the-box strategies while still maintaining cost accountability. The key to striking that balance is task-based budgeting.

    While is not possible to predict exactly how a complex litigation will go, it IS possible to map out the tasks involved (interviews, depositions, motion to dismiss, summary judgment, etc.) then provide realistic estimates of how much time a given task should take and which team-members will be involved (partner, associate, paralegal, etc.). Ask your lawyer to provide these task-based metrics at the beginning of the case along with their best estimate of the number of tasks the case will require (number of gigabytes, number of motions, etc.) While the number of tasks will change, keeping within the average cost per task should be something the lawyers can live with.

  2. Collaboration.

    To often, only the relationship partner understands the client’s budget expectations. This is a recipe for disaster.

    Legal teams need to collaborate internally on managing to budget. To do this, all the team members should understand (and, hopefully, agree with) the budget, their role in the case, and the expected hours-per-task. With that knowledge, each attorney on the team can be responsible for meeting the client’s expectations or – if that is not possible – flagging cost overruns before the client receives the bill.

  3. Realism.

    It may be a cliche, but generally you get what you pay for.

    Clients looking for excellent legal work should expect a lot of time will be spent on each task and should leave plenty of room in the budget for analysis/strategy. For example, a former partner of mine once told me he will spend twice as long as his colleagues preparing for oral argument. I have seen him argue motions, and clearly that extra prep time was worth every cent.