In this week's Law Firm Disrupted, we look at what may be considered in other businesses a no-brainer: Budgeting your work.

I'm Roy Strom, the author of this hopefully-not-a-no-brainer newsletter. Let me know what you think here: [email protected].

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The Building Blocks for Better Budgets

Earlier this week, I wrote about a survey that showed clients overwhelmingly do not view their law firms as innovative.

The survey revealed that 96 percent of respondents had seen none, very little or hardly any innovation within their law firm providers. Yikes.

But perhaps that's not much of a surprise. Legal consultancy Altman Weil Inc. has been asking corporate clients every year since 2013 how serious they think law firms are about providing greater value to in-house legal departments. Every year the median response has been the same: 3 out of 10. The average response has actually fallen from 3.6 to 3.2.

This survey is part of what motivated the managing partner of the law firm that commissioned this week's study, Deborah Read at Thompson Hine, to start making changes at her firm.

“These are corporate clients commenting on the service delivery of law firms and ranking the collective responsiveness of large law firms as pretty poor and it's getting worse,” Read said. “Who doesn't respond to that? Who doesn't want satisfied clients or customers? We're in the service business.”

Firms are clearly struggling to respond. Read's answer was, in short, budgets. Thompson Hine has developed a tool called SmartPaTH that is designed to help the firm's lawyers create and share detailed budgets with clients. It might sound simple, but it is hard work, she said.

“I'm talking about behavior change among a group of people who are really smart, really capable and have been really successful,” Read said.

Behavior change is a real issue. Another is data, or the building blocks of a budget.

Law firms have long lacked deep insight into what their lawyers spend time doing during a given matter. And that is crucial when it comes to budgeting.

It is also valuable information to understand if you want to deliver legal services more efficiently. It tells you how much time lawyers spend on tasks that can be augmented by technology or done by lower-cost providers.

“The challenge we always have, as a law firm, is I can tell to a fair degree of certainty how much time [a lawyer] spent on a matter. I can tell you when he spent that time and how much we got paid for the time. But I've really struggled to know what [that lawyer] was doing,” said Stephen Allen, a longtime change agent inside law firms like Berwin Leighton Paisner (soon to be Bryan Cave Leighton Paisner), DLA Piper and, most recently, at Hogan Lovells.

To help figure out what Hogan Lovells lawyers were actually doing, Allen and the firm last year began using a product called Clocktimizer, which I've written about in this space before. Rather than relying on lawyers to enter the correct task codes in their billing system, Clocktimizer pulls and sorts language from the “billing narratives” lawyers write to detail their work.

That is a more accurate representation of a lawyer's work, said Clocktimizer CEO Pieter van der Hoeven, because the typical lawyer tracks about 75 percent of their time against one or two billing codes regardless of what they are doing.

Allen said he often uses Clocktimizer's data as a reference point in discussions with partners whose clients expect a more efficient or cheaper delivery of legal services. In those talks, he starts by asking three questions: What kind of work do you do? What are the impediments to doing that work more effectively? And what is the impact of those impediments?

“It starts a conversation, and in that conversation there are a whole bunch of issues or challenges,” Allen said. “Then you look at those challenges in light of the data. And that is incredibly effective. Too often, we start off either with just the data or just the technology and how we're going to apply it or what it means.”

That should probably be no big surprise, either. Data can be a helpful tool in driving behavioral change among a group of really smart, capable and successful people.

Roy's Hot Corner

In honor of baseball's Opening Day (Go Cubs), today we're introducing a new segment called the Hot Corner: brief interviews with people in the news.

➤ Anything Your Department Can Do, AIG's Can Do Better Brian McGovern was named this month executive director of strategic programs at Mitratech Holdings Inc., an enterprise legal management software company.

When it comes to designing a cutting-edge legal department, few are as experienced as McGovern, who previously served as the chief data officer for legal operations at American International Group Inc.

In that role, he helped the giant insurer save $1.2 billion in legal spending through a better understanding of how and where it spent $2.4 billion a year on legal services.

One of the tools built by McGovern's team was a predictive model to show AIG's in-house lawyers what law firms in certain regions performed best on specific types of cases (mostly insurance claims-related). Those law firms would receive a star or check mark in a system that AIG developed to help in-house lawyers select outside counsel.

“It definitely shifted business,” McGovern said. “What I will say—even though I am the geeky technical data guy—is I do think it doesn't replace human decision-making. We never made it mandatory that you do something [based on the data]. You're hiring somebody to take over something that is vitally important to the company and there are a lot of elements that go into that. We just considered this a tool to help you do that.”

McGovern will help Mitratech clients install or implement similar systems, as well as advise the company on developing its product roadmap.

➤ Help Wanted: Legal Market Change is Driving Biz for HBR Consulting

Nicholas Quil was named CEO last week of HBR Consulting LLC. He takes over for HBR co-founder and former CEO Christopher Petrini-Poli, who will serve as executive chairman of the law firm and legal department consultancy.

The changeover comes during a period of immense growth at HBR, which last year hired 114 employees, a 42 percent increase in head count. If HBR was a law firm, that would be the top growth rate among the Am Law 100.

Quil said there are two main services most in-demand by HBR's clients. One is helping them build a software “wrapper” around their legacy software systems to help clients better gather and analyze their data. Another is providing managed services for law firms or legal departments in the areas of information technology, procurement and traditional legal librarian services.

Overall, Quil said HBR has benefited from its work with both legal departments and law firms. He said he sees a range of viewpoints inside legal departments and law firms on how or whether they need to change the way they work.

“We see there is really two lenses from within the law department,” Quil said. “One that is very focused on driving change and wanting change from their outside counsel. They are involved with the activity around CLOC, legal ops and ACC. So, there is a very progressive side of the law department world. And then you talk to some and they say, 'Well, I'm just not comfortable moving beyond [alternative fee arrangements].' And they're skeptical within the law department.”

That's it for this week. Thanks for reading. Please let me know if the Hot Corner is useful. And you can sign up here for The Law Firm Disrupted.