1. Legal Evolution – mastering change and disruption
A couple of weeks ago, Malcolm Pearson, the editor of Tech4Law asked me to share some of my observations and experiences gained over the past 20 years in the legal profession in regular short posts, which I happily accepted. So, here is my disclaimer, the package insert if you like: Shared insights and views may be occasionally provocative and hopefully always thought-provoking. I am non-partisan to any stakeholder in the legal profession, be it in-house legal, advocates, private practice or the regulator, large or small organisations. However, my viewpoint will always be that of a potential client.
Nothing pleases people more than to go on thinking what they have always thought, and at the same time imagine that they are thinking something new and daring:
it combines the advantage of security and the delight of adventure.
Why the title “Legal Evolution”? In 2013, Richard Susskind published his famous book “Tomorrow’s Lawyers” [Oxford University Press, 2013, 180 pages]. His introduction compellingly summarises the massive paradigm shift we are finding ourselves in these days [p. xiii]: “Tomorrow’s legal world, as predicted and described here, bears little resemblance to that of the past. Legal institutions and lawyers are at a crossroads…and are poised to change more radically over the next two decades than they have over the last two centuries. If you are a young lawyer, this revolution will happen on your watch.” Technology advancements (“legal tech”), more sophisticated buyers and consumers of legal services, introduction of management and project practices (“business of law”) and legal sector regulation (“unbundling”) – we witness an unprecedented and rapid evolution of legal services affecting both, provision and consumption of such services. This is clearly pushing us out of our comfort zone.
My key interest is in exploring the client-lawyer-relationship in the new era of law. Understanding this critical link better will allow us to identify appropriate technologies, processes and practices and extract more value from legal services. We cannot change the future, but we certainly can prepare for it!
1.2. Beyond absolute legal fees
A few weeks ago, I was invited to sit on a panel on legal fees, convened by the Tiyani Majoko, Director at Lawgistics. The panellists included in-house counsel, advocates, representatives from alternative legal service providers and the South African Law Reform Commission (SALRC). The emotionally charged but quite considerate debate that unfolded during the two hours clearly affirmed the urgent necessity to engage in a dialogue in relation to the rapid paradigm shift in legal service delivery.
Although any discussion related to the Legal Practice Act will almost inevitably shift towards Section 35 (please prove me wrong), pricing is just one small aspect of the bigger story of change in the profession. What does it mean to our “Access to Justice” objective? How will it affect professional regulation? Will business models change? Many questions immediately arouse from the simply debate on legal fees.
The Legal Practice Act does neither really differentiate between private or corporate clients nor pays a lot of attention to the type of matter, be it litigious or non-litigious. This may be owed to the fact that the underlying core belief is that legal fees are in general prohibitively high and exclude a number of citizens from actively pursuing their constitutionally guaranteed rights.
The discussion needs to move beyond the one-dimensional “legal service are too expensive” and look at the underlying mechanisms of the legal sector.
1.3. The relationship between value and the input/output ratio
I suggest to shed some light at the current debate from a very different angle: does it really matter whether a service should cost 10 Rand or 1,000 Rand if the client at the end of the day will not receive “value for money”?
In this context, we should consider two principles:
Firstly, “value”, according to Oxford Dictionary, is “the regard that something is held to deserve; the importance, worth, or usefulness of something”. Furthermore, “the worth of something compared to the price paid or asked for it“.
Secondly, a service is determined to be productive if the ratio of input and output is greater than 1, which means the output is higher than the input. What is the „output“ of legal advice? It is client value. So, the real issue is actually the comparison of input and output. But why is this so difficult and lends itself to numerous frustrations on both sides?
The providers of legal services have always planned, measured and sold legal advice according to inputs, primarily measured in hours. In most cases based on my experience, the hourly fee is – if somewhat not derived from a “me too” exercise – based on an assumption of total costs (variable and fixed costs) plus a certain profit margin divided by the number of hours potentially worked and paid in a year. This highly unsophisticated approach is called “cost+” approach as it may not even be reflective of the actual costs per matter but that is a discussion for another post.
In return, clients look at quoted and billed fees from an output perspective. To them, it is all about how they perceive the brand/image and the service benefits they have experienced (which may differ substantially from what the law firm delivers). The combination of brand/image and service benefits constitutes “value”, which is highly subjective and linked to the client’s situational context. The latter encompasses several motifs, any legal service provider should be aware of:
- Speed of resolution – what is the (perceived) sense of urgency?
- Type of outcome – is it a “bet the company” or just an “off the shelf” matter?
- Budget availability – when and under which conditions is a budget for legal advice accessible?
- Predictability – how relevant is degree of a predictable outcome?
- Certainty – is the process to handle a matter pre-determined?
- Novelty – has this type of a matter any precedents?
The motifs are summarised best by three very fundamental questions – explicitly or more often implicitly – asked by every client:
- Is it easy to work with him/her (comfort driven by process)?
- Is he/she interested in my situation and listens to me (interest expressed by empathy)?
- Is he/she seeking to solve my issue (relevance illustrated by solution)?
1.4. The lawyer’s dilemma – Why does it take this long? Why does she cost this much?
The trivial expression “perception is reality” poses a real and often terrifying challenge to any lawyer and advocate. How does one explain why it took 40 hours to complete the drafting of a supply contract at an hourly rate of R2,500? Apart from the fact that South Africa is only about to embrace Legal Project Management as a means to apply project management principles and practices to legal matters in order to identify process efficiencies, how much do legal advisors know about the value perception of their clients? They never needed to reflect about it as the South African legal market (and its neighbourhood on the continent and across the globe) has not worked like that until now.
Likewise, clients have not really bothered to offer a value definition themselves until most recently. Pressure from other business departments (finance, procurement, etc.) has significantly changed the picture as, for instance, legal in-house departments, are now asked to “do more for less“ and “to demonstrate value“. Economic circumstances in SA add to the new situation. However, anecdotal evidence tells us that even when clients push for discounts, most of them will struggle to quantify the real value to them.
How much is a contract worth that never sees the light of a board room again versus the one that has changed the face of the company and avoided a massive litigation following the final closing of the merger transaction? How much is the settlement with your life partner in divorce proceedings worth? How do you quantify “peace of mind“? How reputational damage or protection?
In practical terms, neither lawyers nor clients really know the value of the lawyers’ work. So, is all lost?
1.5. Listening, listening, listening
Has anyone found the Holy Grail of client relationship management? Not yet I suppose but there is a dominant strategy that has been identified by many legal service providers: proactive conversations with clients to comprehensively explore their needs and situations before delving into the technical details of a matter. In Legal Project Management, we call it “Scoping” and it involves:
- identifying what the legal matter is to encompass and what it is to accomplish (definition of success), the latter being very important as a point of reference;
- describing the matter’s scope in a specific and realistic manner, divisible into discrete tasks (pre-requisite for further planning and execution);
- addressing exclusions to manage client expectations; and
- reflecting alignment with the client’s objectives.
Capturing the insights and agreed procedures in writing and sharing them with stakeholders (appropriately communicated) allows to build a foundation for future dialogues during and after the matter. Lawyers are obliged to ask clients regularly whether they have met expectations and what could be improved. Add empathy and processes to acknowledge a client’s preferences with respect to working style, communication type and frequency, etc and a technical advice will be elevated to a solution and experience, which is literally valued by clients.
Furthermore, it is all about developing a degree of trust in the other’s good faith, something which can be effectively achieved by open and structured communication. We will re-visit this aspect as well as the entire planning phase of a legal matter in one of the following Legal Evolution posts.
So, are you the only one enhancing your communication with clients? In Altman Weil’s global survey of law firms, 83.1% of respondents indicated they are „proactively initiating conversations about pricing/budgets to better understand what individual clients want“ (Altman Weil Flash Survey 2019, p. 9). It appears many colleagues have understood the sign of the times.