As the billable hour is set to become a distant memory, how can lawyers optimise their time and expertise with the support of technology?
It is a new reality: the billable hour is a fading standard in the law profession, as clients increasingly question the model as inefficient and inappropriate. Instead, alternative fee arrangements (AFA) and hybrid billing are becoming standard in transactions. According to a study conducted by security specialist Drooms1 , new billing models have a considerable impact on the legal profession in that practitioners sense an increasing financial pressure upon their work. The demand for more efficiency in the profession increases.
According to the study, the estimated savings resulting from more efficient transaction processes could reach 1 Billion Euros in the real estate industry alone. Lawyers that adopt flexible billing have a competitive advantage against those still using the billable hour. According to the 2015 Alternative Fee Arrangements Report, “AFAs have increased dramatically since 2008-2009, growing from around 5% of total revenue at the world’s largest firms to an estimated 22% in 2015”. The study reports the experiences of the some of the largest international law firms.
Supporters of the billable hour will say that the longer the hours spent on a deal, the more the chances of success. Detractors argue that the billable hour hides at least two major flaws, i.e. unpredictability regarding the final costs and overall inefficiency in timekeeping – and therefore invoicing.
Time is money, says the old adage. And modern lawyers want to benefit from the freedom provided by technology
Followers of the AFA model prefer to combine several pricing solutions according to the nature of the transaction. Examples of alternative pricing models are fee-capping, volume billing, value-based billing, fixed pricing, blended rates and risk-reward billing. The advantage is a certain transparency in predicting costs. However, the legal professionals interviewed by Drooms imply that flat billing requires more efficiency and time-saving in order to become a sustainable model especially with regard to uses of the data room.
Much of legal work takes place within a data room, where a big amount of lawyers’ work consist of uploading, finding and reviewing thousands of pages. Data room users such as legal professional often do not get involved with the selection of which technology to use. Direct engagement with the client in such questions would help them to provide a better service and again be more competitive. It is crucial to be informed of which data room provider has been chosen for a particular transaction – or even trying to influence the choice itself.
Paying particular attention to the following aspects produces clear benefits:
- The uploading of documents is a matter of few minutes.
- Being able to visualize the entire document page by page at a glance.
- Having a clear index, possibly standardized.
- A structured but intuitive Q&A process.
Those simple aspects improve efficiency within the transaction greatly. Thirty-six percent of the study’s respondents complain that deals slow down because of missing documents. A clear index prevent users from forgetting critical documents.
Twenty-six percent spend too much time looking for documents without finding them, because the data room is not structured enough. All agreed on that the Q&A process needs to have a clear layout and offer the possibility of prioritizing questions.
Time is money, says the old adage. And modern lawyers want to benefit from the freedom provided by technology. They want to optimize their time, work efficiently and are definitely less willing to collapse after 15 hours in front of their monitor with bloodshed eyes. They want to open a bottle of Dom Perignon at the end of the day and enjoy the view on the City.
For more information about the Expo Real Report 2015: