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Kia Motors Tests Outside Counsel Tech Skills, Part II

By D. Casey Flaherty

Editor’s note: This is part two of a two-part follow-up to “Tech Drive,” which reported on Kia Motors America audits to assess the technology skills of its outside counsel.

The technology audit I developed to assess prospective outside counsel for Kia Motors is far from perfect. It is unorthodox and, as applied, is uncomfortable for those law firms competing for Kia Motors’ business. At the least, the audit raises a number of questions and presumptions that need to be addressed.

Do you really believe that being good at Excel, Word, etc. is the same as being a good lawyer?

No. Then again, I am not mentally equipped to debate the metaphysics of ‘lawyering’ as Platonic form. I am, however, familiar with law firm bills. Many commonly billed tasks, true lawyering or not, heavily rely on the programs and processes I audit. If my company can be billed for it, I feel entitled to audit it.

Do you think that there are many lawyers who are good, despite slight technophoia?

Absolutely. But I audit law firms, not individual lawyers.

I employ partners whom I rely on for sage advice on esoteric topics. As far as I am concerned, I would continue to turn to these lawyers even if I discovered that they were disembodied heads, locked in a closet, and incapable of turning on a computer. Fifteen minutes of their time would still be more valuable to me than 3,000 hours of work by the most technologically adept first year associate in the history of the profession. Auditing these partners has never crossed my mind.

Their firms, however, provide an entire range of legal services to my company and have proven well worth auditing.

Is your audit dispositive in your hiring decisions?

No. Expertise is paramount. There is no better guarantor of efficiency and efficacy. In fact, I genuinely believe that partners billing rates are too low — at least, relative to the billing rates for associates. I understand some of the structural factors that give rise to the situation, but I still find it incredible when some first-year associate is billing at half the rate of a twenty-year partner when the partner adds many orders of magnitude more value than the associate.

It remains, however, an inescapable reality that many commonly billed legal tasks are both essential and labor intensive. The proper use of technology cuts down on the labor required. Since labor equals cost, I take an interest in how well my law firms deploy labor-saving technology. But I don’t choose between law firms on this basis; that is, unless performance on the audit is the only item that separates two firms vying for a project.

My firm does not bill clients for busywork. We give that to the staff.

Possibly true, but unlikely. I will visit your firm’s office to conduct the audit. You are welcome to demonstrate how your firm is different. A few observations:

  1. It is important to reflect on the implications of the statement, which translates, to my, admittedly, cynical ears as: We may be wildly inefficient, but we don’t charge clients for it.
  2. The audited tasks are designed to test general skills. Few lawyers can avoid using Microsoft Excel, Word, and Outlook as well as a PDF program.
  3. “Staff” often includes paralegals, who bill for their time. The audit is concerned with the work my company pays for, not the title of the person whose time is billed.
  4. Reliance on unbilled staff has been shrinking for decades. For example, anecdotal data suggests that the ratio of lawyers to secretaries has grown from approximately 2:1 to 5:1 since 1980.
  5. The less training, the more busywork the lawyers will generate. Likewise, the less training, the less assistance the staff can provide. Thus, the firm’s training program is a good indicator of both the volume of busywork and its division between the lawyers and staff.
  6. Staff are not usually available during the marathon night and weekend sessions during which so many billable hours accrue.

My firm does not bill clients for busywork. We cut that time.

Again, possibly true, but unlikely. I will visit your firm’s office to conduct the audit. You are welcome to demonstrate how your firm is different.

In general, I don’t believe lawyers are intentionally inefficient. The audit presumes pure motives. The audit, however, also presumes ignorance. The lawyers billing the time don’t know they are being inefficient; nor do the lawyers reviewing the bills recognize the inefficiencies. The willingness to cut wasted time is implicated only after waste is identified.

Further, parsing bills is hard. Regardless of the guidelines or task-code requirements, lawyers bill time in large clusters and undifferentiated chunks. It is genuinely difficult to say how long a particular assignment should have taken.

Timekeeper: I worked on X from 10 a.m. to 4 p.m. with a few breaks for coffee, internet, etc. So 5.2 [hours]. Billing partner: She did a good job, but 5.2 seems a little long. So 4.9 [hours].Client: I have no idea whether that particular task should taken .9, 4.9, or 9 hours. But the overall bill seems in line with the matter. So I’ll approve it.

Isn’t an alternative fee structure the better mechanism to align incentives and place the onus on law firms to address these systemic inefficiencies?

Probably. But the perfect should not be the enemy of the good. And, for the moment, the billable hour remains dominant. Personally, I have encountered difficulties, internally and externally, in moving toward alternative fees.

In addition, even in an alternative fee environment, I would still be concerned with the technology-related efficiency of my outside counsel. The problem with incentives is that they work. Alternative fees incent outside counsel to cut costs, which for lawyers means reducing labor. There are beneficial (productivity enhancing) and harmful (productivity decreasing) approaches to reducing labor. Especially at the outset of the relationship, an identifiable bent towards technological proficiency would give me more confidence that a particular firm is taking the proper approach to achieving profits under an alternative fee structure.

Further, the costs of inefficiency are cognitive, not just monetary. Despite the many blessings of caffeinating, there are very few human beings who are as sharp in the first ten hours or 10 of work as they were in the first two. Billed or not, losing several lawyer hours to drudgery is likely to affect overall quality.

How much can you really learn from a sample size of one associate?

Considerably more than I can learn from a sample size of zero. If anything, auditing a single associate should skew the results in the firm’s favor. They get to select their best, most technologically proficient associate. But even if the associate is an outlier, I still gain insight into the firm’s technology, training, and processes.

Again, the perfect should not be the enemy of the good. Of course, the good should not then be confused with the perfect. I recognize the audit’s limitations:

The audit is inefficient.

Ironically, for a test of technology-based efficiencies, the audit is markedly analog. What could be more pre-digital (not to mention uncomfortable) than in-person, one-on-one audit? The audit, as currently constituted, is time consuming and logistically challenging. Ideally, the audit would be a web-based, adaptive test with a training component. That is, the associates — an appropriate sample size — would actually learn what they are doing wrong and be instructed on a better approach. Moreover, the firm would be provided precise feedback on where their training is falling short.

The audit is idiosyncratic.

The audit is something I put together by myself in my spare time. The audit lacks the refinement, consistency, and comprehensiveness of a truly finished product. The audit is the kind of crude but effective prototype that often emerges from the garages and basements of passionate hobbyists. The audit also evinces the amateurism of its author. The audit reflects the problems I have personally confronted and the solutions I have uncovered.

I was trained as a litigator. I have only worked at one firm and one company. There are many, many problems I have either not encountered or not recognized as such. Nor am I confident that my solutions are optimal.

I am proud of the audit in the abstract, but I take minimal pride in authorship. I would very much welcome feedback, suggestions, collaboration, and constructive criticism.

The audit is arbitrary.

I developed the audit, but it does not have a scoring system. I haven’t identified a bright line between passing and failing. I can’t make direct apples-to-apples comparisons between firms. In short, the audit does not yet embody the process-driven ideal that it demands from law firms.

The audit has a shelf life.

The audit evolves, but it rarely changes. It is just too time consuming to start over. Like a test that a professor gives year after year, the audit will start to become something for which firms can prepare. I genuinely need help if the audit is going to deliver more than ephemeral benefit.

The audit is not a panacea.

I recognize that I am focusing on one small piece of the legal cost puzzle. I don’t want to pretend that the audit has some magical properties and is somehow better than every previous approach to cost containment. I am looking to add a tool, not replace existing ones.

Indeed, my goal is to render the audit obsolete. I believe it would be a boon to the profession if adaptive training and testing became standardized across the profession so that clients no longer had to worry about avoidable, technology-related inefficiencies.

D. Casey Flaherty is corporate counsel for Kia Motors America. Flaherty’s opinions are his own, not those of Kia Motors. Email: CFlaherty@kiausa.com.