Monday, April 4, 2011

Design and Production—Separate Values

Richard Susskind and others predict the inevitable commoditization of legal services through the twin pressures of automation and competition. I agree in principle. However, I do not see the trend as an across-the-board reduction in value, but rather a process that separates high and lower value activities.

Others, notably Ron Friedmann, Toby Brown and Jordan Furlong, have focused on the difference between types of representation. They distinguish high-value bet the farm situations from low-value factory work. However, in any representation there is some proportion of high value design work and some elements of lower value production activities, even in high risk matters.

In practice today, rates are determined primarily by who does the work rather than the nature of the work. It is true that most deal structuring is performed by higher priced partners and most document drafting is undertaken by somewhat lower cost associates. Nevertheless, each lawyer, across the entire billing rate spectrum, generally charges the same rate for structuring a transaction, drafting a document, or typing an email (Rate ranges are applied at the matter level, not the task level).

More significantly, over time production costs have increased. It is true that transactions have become increasingly more complex, requiring more time to prepare. But if we examine a related profession—architecture—we can see different approaches to cost control and different outcomes where risks are borne either by the profession or the client.


Architecture--75 years ago, when Frank Lloyd Wright designed Falling Water, there was no separation between building design and production of the working drawings.

Design and production was one and the same process. The famous architect oversaw all the details, even designing the tables, chairs and door knobs. And, since the activities were blended, the fee for his services was likely charged at one aggregate rate.


Law--When I first started practice in a venerable London firm of solicitors, I marveled at the ability of the partners to dictate a will and other legal agreements in one session; with corrections only in the form of backing up the tape. Likewise, secretaries typed wills flawlessly. In fact, corrections—in the form of whiteout—were not allowed. The page had to be re-typed.

Structuring the will and producing the document was a single activity. Accordingly, a single blended rate was justified because design and production were combined. Moreover, the entire process was completed in a few hours.

With the introduction of computers, we can now refine our documents through multiple drafts. And, by drawing on available precedent, lengthen our agreements to cover all possible scenarios. Litigation has embraced a scorched earth approach, leaving no stone unturned and every document read; cumulating in today’s electronic discovery, which has massively increased the volume of documents reviewed.

Architecture—In the 1980’s, pressure to control soaring production costs shifted squarely to the profession as fixed fees were introduced and widely applied. Even as buildings became bigger and more complex, the challenge to control costs was born largely by the profession.


Architecture—In architecture today, design and production is automated with sophisticated computer aided design (CAD) software. Powerful technologies, such as Autodesk’s Revit, allow design-and-build to take place simultaneously, and in a relatively short period of time. Building specifications are highly standardized through content services, such as ARCOM’s Master Spec.

Despite heavy automation, friends in architecture practice confirm that fixed fees arrangements sometimes have the effect of decreasing the return on design work. This situation may occur because production tasks must be completed in order to finish the work and submit a bill; and since production runs lean with lower margins, there is frequently pressure to take value from the design tasks—yet design is what distinguishes the project and the firm.

Law—Law operates in a largely unautomated world. Computer assisted drafting has not been broadly implemented. Email and blackberries do not count as automation systems. As a result, lawyers continue to command high rates for drafting, reviewing and editing documents. The act of crafting the deal and drafting the documents is still one-and-the-same process. Moreover, the amount of time spent producing supporting documents and other materials has steadily, and significantly, increased over time, with the full burden of these cost increases borne by clients.

Of course, you can hear the collective chorus pointing out that the “devil is in the details” because the art and soul of lawyering is to handle every consequence no matter how unlikely, because some consequences can be very, very bad. But, I wonder if the same opinion would be voiced if fixed fees became the norm.

Next…True CAD is coming to law. It is a manner of when. The burden to control costs is also shifting to the legal profession, who, like architects, are in a better position to implement technologies and processes to more efficiently manage production tasks because of their professional expertise.

The challenge for law firm leaders is to assess what percentage of their current workload falls into lower value categories and how will this work be handled? Should it be out-sourced or in-sourced? Or, will innovation be lead by emerging law firms, content providers and technology firms?

In the next post, I’ll attempt to define what it takes to develop true CAD for law (at least for transactional practice), and estimate the time needed for its development.

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