Page 131 - Leaders in Legal Business - PDF - Final 2018
P. 131
As firms absorb how much they need to understand how to price, the value of their data
has grown significantly, as has the value of correlating data from various systems and siloes of
information within a firm. Since the fundamental question both clients and firms need to resolve
is whether it is less costly to go to some form of non-hourly fee or absorb the inevitable
discounting, write-downs, and write-offs, a firm’s ability to pull together its own information
about the time, effort, staffing power, and ancillary costs (such as eDiscovery) of delivering a
matter will inform its pricing.
This is best facilitated by software that reaches across departments and is capable of
correlating and compiling data on what was required to prepare similar, previous matters, and the
historic resolutions of matters in courts or arbitration, and it provides analyses of part discounts
and write-downs. The collected data, properly analyzed, becomes a vital part of informing non-
hourly pricing structures that focus on matter profitability. Modern systems can correlate
massive volumes of data via warehouses and structured tables or cubes, and then leverage this
data to calculate more accurate costs. These can then be modeled alongside appropriate matter
staffing and margin to understand both delivery costs and expected matter profitability. These
types of systems present a significant improvement over “weighing the file” or “back of the
napkin” pricing, and are superior to even complex spreadsheet modeling as relied upon by many
firms today that have yet to implement newer technologies.
Matter-Level Pricing and Scoping
The struggle of scope is the most difficult issue facing the industry. If the matter is not
scoped correctly, the pricing is going to be wrong and jeopardize the partner’s ability to deliver
the matter profitably. The reality is that partners or senior associates who are responsible for
delivering matters are in the best position to scope them.
As the work of pricing teams becomes more sophisticated and accurate, the need to
further develop and standardize different pieces of a matter — phases or tasks — becomes
important for allowing technology to refine the process. Clear and accurate categorization of the
components of a matter to be delivered to a client will inform the pricing of future matters, and
assist firms in presenting transparent, easily understood matter pricing to their clients.
Phase/Task Code
One of the messiest current data problems in the industry concerns inadequate phase and
task codes. The first point of confusion is the meaning of a task code. A task code should be
thought of as a sub-phase. It is not a task. The challenge is that many of the coding standards
have not been updated since they were originally created in the 1990s.
Their original purpose was for e-billing, rather than budget management. As clients
began to use them in their budgeting and monitoring, they also began adding new task codes
(e.g., first-level review in discovery) or rearranged existing codes. The worst outcome was that
some firms used completely unique or one-time codes to act as substitutes for sub-matters,
making standardization impossible.
Another core problem with phase and task codes is how firms implemented them in time
entry. The result was a lack of accuracy. In any data look-up, you want to ideally limit available
choices between four and 10 entries. In many cases, the firm would provide an extensive list of
codes for a lawyer to select, and many times, the lawyer made the wrong choice. The result is
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has grown significantly, as has the value of correlating data from various systems and siloes of
information within a firm. Since the fundamental question both clients and firms need to resolve
is whether it is less costly to go to some form of non-hourly fee or absorb the inevitable
discounting, write-downs, and write-offs, a firm’s ability to pull together its own information
about the time, effort, staffing power, and ancillary costs (such as eDiscovery) of delivering a
matter will inform its pricing.
This is best facilitated by software that reaches across departments and is capable of
correlating and compiling data on what was required to prepare similar, previous matters, and the
historic resolutions of matters in courts or arbitration, and it provides analyses of part discounts
and write-downs. The collected data, properly analyzed, becomes a vital part of informing non-
hourly pricing structures that focus on matter profitability. Modern systems can correlate
massive volumes of data via warehouses and structured tables or cubes, and then leverage this
data to calculate more accurate costs. These can then be modeled alongside appropriate matter
staffing and margin to understand both delivery costs and expected matter profitability. These
types of systems present a significant improvement over “weighing the file” or “back of the
napkin” pricing, and are superior to even complex spreadsheet modeling as relied upon by many
firms today that have yet to implement newer technologies.
Matter-Level Pricing and Scoping
The struggle of scope is the most difficult issue facing the industry. If the matter is not
scoped correctly, the pricing is going to be wrong and jeopardize the partner’s ability to deliver
the matter profitably. The reality is that partners or senior associates who are responsible for
delivering matters are in the best position to scope them.
As the work of pricing teams becomes more sophisticated and accurate, the need to
further develop and standardize different pieces of a matter — phases or tasks — becomes
important for allowing technology to refine the process. Clear and accurate categorization of the
components of a matter to be delivered to a client will inform the pricing of future matters, and
assist firms in presenting transparent, easily understood matter pricing to their clients.
Phase/Task Code
One of the messiest current data problems in the industry concerns inadequate phase and
task codes. The first point of confusion is the meaning of a task code. A task code should be
thought of as a sub-phase. It is not a task. The challenge is that many of the coding standards
have not been updated since they were originally created in the 1990s.
Their original purpose was for e-billing, rather than budget management. As clients
began to use them in their budgeting and monitoring, they also began adding new task codes
(e.g., first-level review in discovery) or rearranged existing codes. The worst outcome was that
some firms used completely unique or one-time codes to act as substitutes for sub-matters,
making standardization impossible.
Another core problem with phase and task codes is how firms implemented them in time
entry. The result was a lack of accuracy. In any data look-up, you want to ideally limit available
choices between four and 10 entries. In many cases, the firm would provide an extensive list of
codes for a lawyer to select, and many times, the lawyer made the wrong choice. The result is
117
