Graeme Johnston / 10 March 2023
The cartoon is English and almost two hundred years old. It dates from just before the start of several decades of radical changes in English law and court procedure. The artist dreams of sweeping away, among other things, the incomprehensible ‘Special Pleaders & their wigs also’ together with ‘Delays in Chancery.’ Much changed in the English legal system in the rest of the nineteenth century, and most people would say it was for the better. There have also been some incremental changes in the twentieth and twenty-first centuries, but the conduct of legal work is still widely regarded as too slow, obscure and expensive. The explosion of legal and legally-relevant complexity coupled with the standard, related systems of time recording and time-based billing are often identified as contributing to this.
The previous four posts explored the history and current status of these time-handling systems in England & Wales and in the United States, and the forces which sustain or disrupt them. This fifth and final post sketches out some scenarios for how things might develop over the next decade or two.
Let’s start with four simple approaches.
Approach 1: legal services as standard-priced matters
This approach involves pricing a matter with a meaningful outcome (e.g. completion of a transaction or case) at a non-time-based standard price which depends on its nature e.g. selling a house, handling a court case.
The price may take account of value (e.g. a % of value of transaction, or some more complex formula) and of average time required for such a matter (or component of a matter). But it isn’t varied by reference to actual time spent on this matter.
For this to be profitable and sustainable, it will likely require ongoing investment in process, automation, risk assessment and product management – the last of these focusing on things like usability and value. Or, if not, something will have to give e.g. by externalising the cost on to society or on to future managers/shareholders (e.g. by accepting more risk) or to workers (e.g. getting junior barristers to work certain criminal legal aid hearings at loss-making rates as a rite of passage and source of experience). Which may, in the end, be a sustainability problem – as well as, obviously, an ethical one.
Approach 1 lends itself not to measuring billable time per unit of time (e.g. billable hours per day or year), but to measuring some other output (e.g. smallish cases or transactions, or documents) per unit of time.
Some may still argue for granular, user-certified time recording for its original purpose (to identify how people are spending their time) but in my view this is likely to be outweighed, save perhaps in very low-trust or low-tech operations, by its considerable costs.
Approach 2: legal services as bespoke-fixed-price packages
This approach makes similar assumptions to approach 1, but for more complex matters on which the human time required will vary quite widely depending on the particular circumstances, but where it is still feasible to control it.
It involves an increased capability to identify patterns, predict requirements and improve ways of working that will apply across more complex, unpredictable matters.
Some versions of this may see more benefit from granular time-recording, though this may diminish longer term as predictability increases.
Approach 3: legal services as better-controlled time-priced packages
This approach involves accepting that complex work sometimes requires a highly agile approach to deal with things that are entirely unpredictable, but with an improved process so that those paying are better able to limit its cost.
Approach 3 favours time recording in order to put some cost on effort and thus seek to control it, and charge for it.
Approach 4: legal services as less-controlled time-priced packages
This approach involves continuation of the current problematic elements of time recording and time-based billing. Work is constrained more by the assumed willingness and ability to pay than by anything else.
Realistic outcomes
The reality is that these four approaches are with us already. And to be clear – there are various types of approach which blur the lines between these four basic types; and a particular matter may involve more than one approach. But to think clearly, let’s stick with the basic four for now.
The big question, of course, is how the mix will change across different types of work and time.
I don’t have a crystal ball but I would offer the following propositions:
a. Where technology permits, and value-per-matter is limited, I expect we’ll see much more of 1. There will be limited disruption of time-billers, but I suspect that the effect will be most important in opening up access to law-related help for those who don’t currently have it, rather than in disrupting existing legal services. Which is fine. A win-win.
b. Maybe over time we will see more of approach 1 (or more disintermediation of lawyers/private legal services) as a result of changes in law (e.g. the definitions of crimes and the means by which they are detected) and practices (e.g. in the format of contracts) though I suspect this may be slower than some assume, for a variety of reasons (culture, human rights, complexity).
c. This sort of fixed-price standardised service may in some contexts tend towards monopolistic situations, though we’re not there in most contexts yet (a special exception not driven by the usual market factors being criminal legal aid). This could become a little dangerous if particular ‘legal solutions’ become so widely embedded that it’s difficult to enforce against their users. Think about what’s happened with questionable data protection solutions and imagine that more generally.
d. At the other end of the spectrum, irrespective of technology, I expect we’ll continue to see approach 4 in ‘bet the farm’ situations for large organisations and wealthy individuals. It really is remarkable how complexity and cost can expand in an effort to obtain some kind of edge – even when this may seem irrational or disproportionate, the cost may still be worthwhile for those with very large resources. An issue there, in my view, is whether legal systems will restrict those with such resources from using the legal system to oppress those who do not. Equality of arms as judges sometimes say. Analogous to the notion of equity in modern DEI terminology (obviously not to be confused with equity in the highly technical sense familiar to lawyers in common law systems!)
e. The most interesting and potentially fruitful approaches, in my view, for changing how current time-billed legal work is done, are approaches 2 and 3. I say this because my impression is that most of the work currently billed for by time, at least in England & Wales, is more amenable to this than to approach 1.
f. They require broadly similar set-ups, including a more considered approach to systems, process and data. The difference between 2 and 3 is about the nature of particular matters, rather than anything deeper.
g. So. The $64,000 question. The migration from approach 4 to approaches 2 and 3 has been a bit slower than many expected a few decades ago. Will that remain so? What might change it? As with point c, I think it comes down to human incentives and resources. The capability to get there exists already in principle, the questions are whether
- buyers (agency problems and all) are smart, secure and motivated enough (e.g. by budget reductions) to push for better (rather than getting distracted with haggling on hourly rates, shadow billings and RFP processes which are divorced from reality)
- sellers are entrepreneurial and motivated enough, and have sufficient vision and leadership skills, to make the transition
h. Environmental factors that I think will help with g. include fewer transactions of the sort that keep lawyers over-busy, demographic change and demand from workers for more predictable hours.
i. Irrespective of that, though, firms lower down the pecking order are already improving their approaches out of necessity and competing very effectively for talent. To the disappointment of many, their ability to challenge for the larger transactions and cases still seems limited by factors that are perhaps not entirely rational (brand, CYA). But over time things are slowly changing.
j. I think the direction of travel is already away from approach 4 towards 2 and 3 and likely to become stronger in the current rather difficult economic environment. And England and Wales will probably move faster than the United States: first because there has already been more change in recent decades, which lays the foundations of more change, and secondly because the economic prognosis for E&W seems more challenging over the next few years.
k. The kinds of organisations which thrive in this environment needn’t be very different from today in their huge diversity of shape, size and niche – the diseconomies of scale for law firms will still be real and I don’t envisage listed law companies or an ‘Amazon of law’ being serious challengers for approaches 2, 3 or indeed 4. Smaller organisations may find it easier to make the changes necessary, whereas larger ones will be better able to afford specialist staff. Effective software isn’t that expensive these days, and it’s possible to make the changes incrementally with a proper direction and plan.
l. As regards granular time recording itself, I see that as likely to fade for organisations focusing on approach 1 and, over time, approach 2. But I suspect it will retain a place for organisations following approaches 3 and 4, though its efficiency will improve (e.g. tying it more to activity expressed as structured data, rather than the ‘1990s’ approach of high-level codes coupled with hand-written narratives and applying NLP to the latter).
m. In short: unless able to rely on your individual brilliance, it would be a good idea, in order to do well in the changing legal services world, to consider investing above all in how your work is done and its ongoing improvement. And perhaps consider whether the investment can be financed by spending less on some things which may be less valued by clients these days – I’ll leave you to work that out.
n. Finally, and taking this in a slightly different direction, I’m looking forward to seeing whether the increasing level of discussion of lawyers’ tendency to over-work, with bad consequences for their health, will result in more change, which will also affect the environment mentioned above. Some lawyers and law firms seem already to be working this out rather well, but in others there appears to be a risk of the non-over-workers being second class citizens in terms of work and prospects. It strikes me that showing leadership in this area will be important. Perhaps that, and the market, will resolve it more generally. If not, I’ll be intrigued to see if regulators in E&W or the state bars in the US will look at whether something should be done to limit the working hours of lawyers, for their protection and that of their clients and the public. I noted in a previous post that there had been some early explorations in both countries. Both already limit hours for certain other professions and employees.
That brings this series of posts to an end, though I will certainly return to related issues in future writing. Thanks for reading: comments and suggestions very welcome.
Notes:
1. Image: The March of Intellect by Robert Seymour, 1828. Public domain image from Wikimedia Commons here. The background is worth reading about, for example on Wikipedia or in this piece by Mike Ashley on the British Library site.
2. As in the other five posts in this series, the title of this one is taken from a soliloquy in Macbeth.