If your firm is serious about pricing and legal project management, this new series will help you scale up your initiatives
By Pieter van der Hoeven.
Since the advent of UTBMS codes, the legal industry has sought to streamline and clarify billing data. Unfortunately, task codes throw up many of the same problems as the systems they were designed to replace. Their shortcomings lead law firms to make choices based on inaccurate data. Worse still, they waste hours of legal professionals' valuable time. Rather than pivot (again!) to a brand new system, we should be looking to implement analytics which work with existing data streams: timecard narratives.
Phase and task codes are ubiquitous in the legal world. Their arrival in the 1990s came in answer to a growing billing crisis. The ‘black box’ invoice approach of the preceding years became untenable as clients demanded to know what they were being billed for. Accordingly accusations of improper billing, became a motivating factor for the creation of transparent invoicing systems. It was hoped that by codifying work into neat ‘baskets’, it would be easy to identify what activities had been completed. Unfortunately, this theory has failed to live up to reality.
Phase and task codes have expanded far beyond their humble beginnings. In addition to the UTBMS system, many firms and clients have developed their own in-house frameworks. Different practice groups now often use different sets of codes. Combine that with our inherent desire to just write our time as quickly as possible (who among us hasn’t used L100 because it was the first option of the dropdown?) and we begin to see the problem that arises. The solution? To exploit something we already do as lawyers on a daily basis: write good timecard narratives.
You are not a robot, so don’t do a robot’s job
Human beings make errors when performing repetitive tasks. We are also highly susceptible to boredom. For repetitive tasks like time tracking (which few perceive as having innate value) this leads to cutting corners. When faced with the variety of options, most lawyers will apply a more general code rather than take time to find a very specific one. If indeed an appropriately specific one applies. This leads to problems for firms further downstream.
Anecdotally, some lawyers guess as much as 80% of codes are inaccurately applied. It is safe to say that code-based data is not to be relied upon. Unfortunately, it happens to form the basis of most fee arrangements and LPM efforts. It should go without saying that a fee arrangement based on incorrect data, is a fee arrangement that will cause trouble later on. It is estimated that law firms lose upwards of 25BN USD each year to write-offs.
This inaccuracy may put firms off fixed fees, which in turn can make winning new clients difficult. As the industry pushes towards increasing transparency, failing to risk share with clients can lead you to lose business. Altman Weil’s 2020 report indicated that 7 in 10 firms have seen clients move work in house. In short: poor data entry, leads to poor data quality, leads to poor decisions, leads to losing clients.
You are less productive when you switch tasks There is a second, hidden cost to task code based time recording. Research shows that when we switch between different types of tasks, it takes considerably longer for our brains to manage that change. Lawyers (and most human beings) are generally pretty used to describing our activities in words. However, we are less accustomed to codifying our activities against lists. It’s why it's generally best to have a small group of options on a drop down list. Switching between writing and box ticking takes longer than switching between two writing tasks.
For this very reason, codes are designed in a way which we find harder to process. It’s a minor difference over a single time card. However, taken as an industry, it has huge implications. How much time (and accuracy) are law firms losing to the application of time codes? How can we design a system which goes hand in hand with how humans are optimised to perform tasks?
We already have the solution
During my time as a lawyer, I was painfully aware of the difficulties posed by phase and task codes. The use of codes was doubly frustrating given the need to write a narrative describing your activities alongside the code. It created double the work for no gain, as narratives weren’t a recognised data stream. However, writing a narrative was generally a more accurate description of how I had used my time. It is an activity we are familiar with, rather than translating actions into a series of symbols and letters with vague descriptions.
This observation is true of most of the legal industry. It is far quicker and easier to write ‘drafting SPA’, than to find that code (if it exists), or to think which code would be most applicable; especially when you’re busy. However, until the advent of natural language processing (NLP), this data was unusable. NLP is able to read and analyse our more accurate narratives, in order to identify activities. The increasing sophistication of NLP means that multiple activities can be identified in one piece of text, with relative weighting based on word associations. Narratives then, not codes, are the best way to understand who is doing what, when, where, and at what cost in your firm.
A tried and tested solution
“Eugenia [Director of Pricing and Practice Management, Perkins Coie] realized that assigning phase and task codes is often an inaccurate way of categorizing activities on a matter. In many cases, they are not applied at all. With Clocktimizer’s unique natural language processing technology to read narratives, Eugenia and her team have been able to create more accurate fee quotes. By letting the platform automatically read and categorize data, the pricing team has been able to save time and gain a clearer oversight of the data needed to make good pricing decisions throughout the matter lifecycle.” Perkins Coie customer success story, Clocktimizer
The solution, clearly, is one recognised by our own customers at Clocktimizer. For this very reason, Clocktimizer chooses to identify activities based on narratives, not codes. Their increased accuracy, and reduced complexity, make them the best possible data stream for building fee quotes, managing budgets and streamlining processes.
Importantly, relying on narratives reduces the administrative burden currently placed on lawyers. Narratives are already part and parcel of time recording. They require no extra input, no additional system, and result in less time spent switching between task ‘types’. This leaves more time for lawyers to focus on their core role, and in doing so offers LPM and pricing teams a more stable foundation for their analytics.
Out with the old, in with the old
Task codes are usually implemented with a noble purpose. To increase transparency in a low impact way. Unfortunately, they are often designed without sufficient appreciation of how humans work. The codes themselves can be too vague, or too specific to be truly helpful.
If there are too many of them, how is a human brain going to pick the correct one? If there are too few, you are likely to fail to generate enough granularity for good data insights. As a result, firms are left with bad data, which impacts their long term profitability and client retention.
Rather than invest another five or ten years in developing a new solution, the legal industry should embrace the one they already have. Timecard narratives. As I have seen first hand at Clocktimizer, narrative led analytics are the single easiest way to improve decision making at all levels in a firm. Not only that, but they are optimised for the ways humans best record and process data.
About the Author Pieter van der Hoeven, a former M&A lawyer
with 15 years of experience in the legal industry, is the co-founder and CEO of Clocktimizer. Clocktimizer is an award-winning legal technology company that helps law firms to understand who is doing what, when, where, and at what cost. Global 100, Am Law 100, and Am Law 200 law firms use Clocktimizer to make data-driven decisions around matter management, budgeting, and pricing.
Before starting Clocktimizer in 2014, Pieter was an M&A lawyer at DLA Piper and earned his MBA from Rotterdam School of Management and IE Business School. Pieter can be contacted at firstname.lastname@example.org