Quantifying value through time codes

Last November, Matthew Whalley posted on the LinkedIn discussion group Knowledge Management for Legal Professionals a presentation he authored with Ian Rodwell entitled “Valuing Value-Add,” in which they compare the respective perceptions of clients and lawyers of the “value-added” services lawyers provide their clients. Among the observations Whalley and Rodwell draw are, first, the divergence between clients and their lawyers with respect to the efficiencies generated for clients by “value-added” services (lawyers believed the potential efficiencies to be much greater than the clients) and, second, the need for a better understanding by lawyers of the value of the services they deliver outside legal advice.

Although their presentation addresses the client/lawyer relationship, the questions it raises could just as easily be put to the relationship between knowledge management lawyers and their law firms. Could it be we overestimate the efficiencies knowledge management provides for our firms? Does the time saving generated by our models and precedents really justify the resources allocated to creating these documents? Would it not be more efficient to spend our time developing a technological platform that would enable the lawyers to access their favourite model more quickly? In other words, maybe getting our lawyers to the knowledge they need is more valuable than generating it.

Whalley and Rodwell’s presentation raises excellent questions it does not purport to answer. Instead, it calls for a next step to be the compilation of “robust empirical data about the cost provisions of certain services and the likely return on investment.” In other words: better metrics.

The call for better metrics is by no means novel. I have even heard general counsel of a large corporation claim to have asked his team to shift its focus away from RFPs and alternative fee arrangements in the coming years to concentrate on pressing outside legal counsel for better statistics on what they do.

Better metrics, however, are only possible if we can agree on what we are measuring and if we measure it consistently. This brings me to the topic of task codes and their utility. What I mean by task codes is the process whereby lawyers enter their time using a specific code that corresponds to a particular step in a transaction or litigation file. For a billing lawyer, this means breaking down what they do into “work packages,” assigning a specific code to each package, and using this code when entering time so as to ultimately be able to measure the time and resources required to complete each package. For a knowledge management lawyer, this means applying the same methodology to our various projects, be it designing an intranet, drafting a model document, or piloting new software.

Coded time entries is a project that brings together at least three law firm support departments, two of which (practice management and business development) frequently suffer from a lack of empirical data. The first is practice support. Coding our time enables us to map our processes with some precision with a view to improving them. For example, it lets us generate data that reveals where bottlenecks occur in our files and should spark a discussion on how these can be resolved and production improved for the next time. Has too much time been spent drafting documents? In which case, is a better model required? In the context of knowledge management, have we over-researched a clause or under-piloted a project?

The second function of coded time entries concerns finance. These entries provide lawyers and finance with some insight into the actual cost of each step in a transaction, thereby making alternative fee proposals less of a guessing game and budgets more accurate and easier to adhere to. It also provides a more credible explanation when overruns occur since lawyers can point to specific steps in a transaction that did not go according to plan and therefore cost more than was originally anticipated.

The third function of coded time entries is business development. A lawyer who codes her time should be able to answer the question, “What is it that you actually do?” Frequently in-house counsel are not certain of every step in a transaction or of the time and expertise required. Being able to provide this contributes to building the transparent trust relationship general counsel and lawyers claim to want. In a knowledge management context, lawyers who code their time can respond accurately to questions concerning how our time is being spent and provide precise estimates for resources required to undertake a new project. In short, it helps us manage expectations.

But if coded time entries are such a good idea, and if large commercial clients are asking their lawyers to use codes, why are law firms so reluctant to adopt them?

It might be because few of us relish the task of entering time to begin with — it is just another non-billable thing to do at the end of a day/week/month. It could also be that clicking another box in our time-keeping software is an additional hassle to remember when doing a job we don’t want to do to begin with. I believe, however, the greatest challenge to the use of task codes stems from the codes themselves. If we take the uniform task-based management codes that seem to have been programmed into our time-keeping software, they are a poor reflection of our work — especially transactional work. This leaves the challenge of developing appropriate codes up to law firms, or practice groups, or individuals. As each of us works differently, we are back to the original problem of agreeing on how and what to measure and then measuring it consistently so as to provide a common basis for comparison. Law firms, therefore, face a conundrum. Do they wait until task codes have been improved before rendering them mandatory or do they develop their own codes at least for the sake of internal hygiene?

Needless to say, I support the second option. Until a comprehensive set of meaningful codes can be agreed upon, a simple numbering system reflecting the steps in a transaction (for example: 1 – negotiation, 2 – drafting, 3 – closing documents, 4 – post closing) would help generate the information required to improve processes, establish a better understanding of the costs required in running a file, and provide basic information to a client inquiring about the steps in a transaction. This information, in turn, could be used to help us bridge the gap between a lawyer’s and a client’s perception of value!

Danielle Olofsson is a knowledge management lawyer at FMC LLP in charge of civil law. She has practised law in Montreal, Paris, and Stockholm and is a member of the Quebec and Paris bar associations. She can be reached at [email protected].

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