In this week's Law Firm Disrupted, we look at an effort to develop a standard language to describe legal work.

I'm Roy Strom, the author of this weekly briefing on the changing legal market, and you can reach me here or sign up to receive this newsletter here.

Developing a Common Language for Legal Work

I have written in the past about law firms' inability to accurately predict costs for different types of legal work. The lack of rigor around billing codes and task-level cost tracking is a pretty well recognized problem in the industry.

And there are plenty of companies lining up to solve it, including Digitory Legal. The company's founder Catherine Krow told me this week: “Historical legal billing data, at least in its natural state, is pretty close to useless.” She also provided a fun analogy about the trouble of relying on historical billing data to predict future legal work.

“It's like knowing the cost of a house you built, but not knowing what city it's in, how many rooms or square feet it was, and then somebody coded all the plumbing as drywall,” Krow said. “So whatever information you can extract from it is going to be basically wrong.”

This problem understandably can frustrate the average Big Law lawyer who is suddenly being asked to budget legal work. They have been billing their time forever. Why can't these legal operations professionals figure out how much a new case costs?

Toby Brown, chief practice management officer at Perkins Coie, told me he has run into this problem before. Lawyers point to their billing data as a basis for understanding their costs. And then he has to tell them that the industry's task codes do not provide what they sound like they provide: Their firm's historical costs for particular tasks.

“Initially I was like, there is gold in our billing data and all we have to do is figure out how to mine that data and we'll know how to price things and budget things,” Brown said. “And I was repeatedly disappointed. And partners would come to me and say, 'Pull past matters so we can price this.' And now I just say, 'No.'”

Brown has set out to solve this problem at the industry level, working with a large group of interested parties that have formed something called the Standards Advancement for the Legal Industry Alliance, or SALI Alliance. It is an effort to create an industry-wide standard to describe and track legal matters in a way that would allow for easy comparison between law firms and clients. It is a big undertaking, but it is gaining momentum.

The group, backed by the Association of Legal Administrators and Legal Marketing Association includes Perkins Coie, Holland & Knight, Greenberg Traurig and other law firms. Major clients supporting the initiative include Shell, GlaxoSmithKline, Citigroup, Deutsche Bank and more. Legal technology firms including Prosperoware are also part of the effort. Brown said they are hoping to attract more members and interested parties.

That might happen after a meeting next week at Microsoft's New York office, when SALI will discuss its plan to release a draft batch of standards.

What would be the benefit of a standard language to describe legal work?

Brown said for law firms, it would allow them better insight into what they sell, and how they compare to the broader legal market. That would give them better insight into pricing.

For clients, asking for bids on legal work would be a less cumbersome process if everyone understood the matter at the outset and could bid according to that description.

And for technology providers, Brown said a standard description of legal work would be like the introduction of the electrical outlet. Tech platforms wouldn't have to install fully customized systems for every law firm and client that describes its work differently.

“When standards come about is when an industry realizes not having standards is hampering innovation,” Brown said. “Because if everyone is doing things at a bespoke fashion, but they're doing commodity-level things, you can't innovate. Or you won't. Take electrical outlets. If everything had a different shaped plug, people wouldn't use electricity the way they do now. It would be too much of a hassle.”

The idea of a standard way to describe legal work might sound boring. But more people are realizing it is an essential element of not only tracking cost data, but also measuring performance and outcomes.

Once that happens, clients will have ways to judge law firms on things other than the typical prestige and credentials criteria that dominate legal purchasing decisions today. And that would be a true innovation.

Roy's Reading Corner

On Law Firm Structure: Josh Kubicki, a former executive in Seyfarth Shaw's innovation team, wrote an interesting story on Medium this week about some of the fundamentals of what law firms really are. Kubicki writes about how the competing economics of large law firms' various practice groups can bend law firm business models. And ultimately, why firms sometimes must part ways with entire groups. He also writes that equity partners are the most important customers of law firms.

From the story: “The equity partner is a completely separate and unique customer segment for the law firm. When looking at the law firm model through this lens it becomes clear that a multi-practice firm is not a service business at all, it is a platform business that houses a number of service businesses. At its core the typical law firm business model is a platform for shared services. It does have a business model, but it is not about the practice of law. From a purely technical perspective, the law firm is a business designed to house a collection of business models (aka practices). Call it a holding company, a parent with many subsidiaries or a conglomerate. Regardless, the equity partner is the most important customer of a law firm.”

On Innovation: David Parnell writes for The American Lawyer about a poll he conducted of some 175 lawyers about innovation at their firms. I thought the most interesting parts of the survey have to do with how firms reward innovation. For instance, Parnell asked firms to say whether they “have a formal process for recognizing and rewarding innovators.” An astounding 44 percent said, “No.” Only 13 percent said, “Yes.” That needs to change if firms want partners to drive innovation.

Programming Note: Next week, I will be in New York City for ALM's annual LegalWeek conference. On Tuesday, I will be moderating a panel on how clients and law firms can better partner with each other to promote new ways of delivering legal services. These are the people I will be speaking with: Andrew Klein – Founder and Chief Executive Officer – Reynen Court LLC; Mark Smolik – General Counsel Chief Compliance Officer – DHL Supply Chain Americas; Linda Novosel – Chief Innovation & Value Officer – Blank Rome LLP; Deborah Read – Managing Partner – Thompson Hine LLP. Come see us!

That's it for this week! Thanks again for reading, and please feel free to reach out to me at [email protected]. Sign up here to receive The Law Firm Disrupted as a weekly email.