When was the last time something absolutely floored you?
Was it something obvious or unexpected? Perhaps both?
Last evening I found myself struggling to find words when a friend explained their new legal tech startup.
Legal tech (or legal anything for that matter) is rarely shocking.
This product though…
They’ve built a system which helps law firms ‘overcome’ E-bill solutions, modifying invoices so that they appear more palatable to E-bill algorithms.
We see this in other industries of course. Technology used against technology.
A big part of finance is built around creating algorithms that take advantage of other, less advanced, algorithms.
You might think I’m being overly dramatic but let me explain.
With an E-bill system, a law firm submits their invoices and if any line items fall outside their clients billing guidelines they’re automatically rejected.
The law firm can argue that the deletions weren’t fair but in practice they often just take the reduced invoice and move on.
Unsurprisingly this normally results in ‘savings’ to clients of 5% and 20%.
It’s a zero sum game. The gain to the client is a direct loss to the firm.
What’s the issue with this you might ask? Firms should stick to the guidelines they’ve agreed to!
The problem is that a hard and fast guideline often misses the reality of service delivery.
One common guideline is that a single fee earner shouldn’t work more than 6 hours a day on a matter. The theory is that there are diminishing returns to further work and that ‘non-client’ tasks take up the balance of the working day anyway.
Anyone who’s ever worked on a high intensity matter knows that this is patently ridiculous.
A recent conversation we had with a provider from a large international firm:
I worked for a client who emailed me at all hours and expected responses in short order.
I put in a bill for 9 hours on a particular day and it was automatically rejected.
A bit miffed (who wouldn’t be?), I spent an hour and a half documenting each time I had responded to the client’s direct requests.
The review revealed that I had spent closer to 12 hours on the day in question.
The client saw the analysis and agreed that the original bill was more than fair.
When I spoke to my billing team they said they would have to raise an ‘exceptions’ invoice which would then need to be approved by the client, a process that in their experience could take weeks.
Given the size of the invoice, the delay didn’t make sense and we gave up.
Of course it’s a horror story. It’s also not at all uncommon.
So back to my friend’s startup.
It’s a product for law firms which reviews invoices for those clients using e-billing and suggests modifications to ensure that they get through without challenge.
If the time card says that 9 hours of work were done on a matter in a given day perhaps the fee earner meant to say that it was actually done over two days, 3 hours one day and 6 the next doesn’t raise any objections from a system based on black and white rules.
I don’t know how someone didn’t think of it before.
It’s legal tech being used to blunt other legal tech.
It feels a bit wrong though, like those employing it are being disingenuous.
The argument back, of course, is that clients aren’t’ quibbling over the number of hours spent. They’re rejecting them because of when they occurred. The blind rejection of line items in that context also somehow doesn’t feel right.
Having thought about it, I’m left thoroughly unsatisfied.
Both are in the wrong, in different ways.
It feels uncomfortable because the problem both sides are trying to address isn’t the right one.
Let’s reorient and understand what both sides want.
Organizations want lower costs for legal outcomes. Law firms want to get paid fairly for their efforts and in line with their people costs.
The existing framework and tools result in a zero-sum outcome where savings for one results in loss for the other.
Why don’t we try a different approach?
One that gets to a value enhancing outcome for all?
Imagine this:
The client pays a fixed fee for a given outcome. No need to negotiate or pick apart bills afterwards as it’s all agreed up front.
The law firm makes money on some matters, loses money on others. It’s pricing will get better as it learns about the staffing required to deliver the objective.
The client asks for a 5% reduction in fees for delivering this particular outcome in each subsequent year.
The law firm agrees, it’s actually becoming more profitable as it’s costs are reducing by 10% per annum because of standardization, technology and being embedded with the client.
Isn’t that a more productive, profitable relationship?
It isn’t hard to get here but it does require a shift in philosophy.
Away from price and towards value.
Measuring value is harder than just focusing on price, but with the right systems, and yes, legal tech, it’s not a hard job.
We’re not worried about someone inventing a system to counteract Alacrity.
When everyone wins, there’s no need to invest in the failure of others.
Cold war, no more,
Christopher Thurn
Founder – Alacrity Law
