I had the pleasure of keynoting a recent conference sponsored by LexisNexis. During a panel discussion among practitioners, technology consultant and myself, the topic of the cost of new technology was discussed. One of the suggestions I made was that the successful law firm of the future will use technology to create and enhance its effort at knowledge management. The firm that is able to retrieve its pre-existing knowledge and use it again will be more efficient, reduce its costs and therefore provide excellent results for clients at a lower price.
Then, the question arises: Who owns the knowledge, who owns the forms, the precedent knowledge? Does the client who paid for it own it? Does the law firm own it? Or does the lawyer who created it own it? This becomes more important in an age of greater lateral movement.
Some clients have as a condition of engagement that they (the client) own the intellectual property … and that the law firm must share it with other law firms who handle the client’s affairs (e.g., product liability litigation) in other parts of the country.
Do you have a firm policy on this? What do you do concerning your intellectual property when a lawyer leaves your firm? Is your policy different when the lawyer is a partner as contrasted to when the lawyer is an associate?
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Today, I talked with a solicitor from London who is studying knowledge management and its implementation in UK firms to increase profits. Since much of their work is based on fixed fees, any improvement in efficiency will go directly to the bottom line.
They even employ a group of lawyers whose primary function is to improve their knowledge base, organize it and make it more searchable, all with the view to reduce the time needed to create documents for a new transaction and increase the margins of profit. These lawyers do not engage with clients; their focus is on the infrastructure of the firm and its improvement.
Since her firm (she says most are like hers) uses only the fixed fee billing model, there is no focus on the billable hour; this, then, allows the focus to be on efficiency. Thus far, American law firms do not use this model much … and thus their focus on cost cutting today is primarily because of the decrease in demand they’ve experienced from the crises of their clients. That is a far cry, however, from having a focus on efficiency … Cost cutting and efficiency are not necessarily the same.
An interesting contrast presented today by the solicitor: Increased profit by increased efficiency under a fixed fee engagement agreement. While the American law firm model is increased profit by incresing the hourly billing rate. As clients begin to revolt at annual price increases, American law firms will need to look at alternative fee arrangements to keep clients … then, their focus might turn to efficiencies in the delivery of those services.
My wife is fond of say, "there is no free lunch." The fixed fee approach is not necesarrily a panacea for profitability. With a fixed fee, there is the inevitable pressure to reduce that fee and squeeze the firm’s profit margins. It’s an easier target than is the billable hour (where the number of hours can be fudged without much challenge). But, that’s another story for another day.
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