October 23, 2012

Work Less, See More Success: Digging into Substantive Automation Systems

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April/May 2008 Issue | Volume 34 Number 3| Page 24


Work Less, See More Success: Digging into Substantive Automation Systems

Most of us realize our work could be transformed with smarter tools. But we’re busy, and we don’t know where to begin. Too often, we settle for systems that are radically … adequate because we don’t know the questions to ask. Here, two lawyer-technologists experienced in developing document automation systems offer a framework for approaching practice automation—and challenge us to get past the status quo. Armed with an understanding of the concepts, and practical steps to follow, imagine the rewards you can reap.

Your ultimate goal in practice automation is to work less while accomplishing more. That should be your mantra. Lawyers who leverage technology in a business-savvy way can achieve wonders, especially when they focus on substantive applications, not just infrastructure and generic software. Many have radically improved their core operations through the intelligent use of technology—but that’s old news. What’s remarkable is the number of lawyers who haven’t yet tapped into the benefits.


Cross the Threshold

Does at least some of your work involve preexisting materials and routine document components? If so, automated systems can be of great value to you. If not, stop reading. Systems by definition will not be of much use.

To put the issue in the simplest perspective, consider these questions:

  • What would it cost to buy or build the needed tools to streamline your work?
  • How much would the improvement be worth to you?
  • If you are in a law firm, can billing arrangements be structured to reap maximum benefit from your automation investment? If you are in a legal department, what time-savings could directly improve your bottom line?
  • Are you prepared to make the up-front and ongoing commitment needed for success in an automation initiative?

Choosing applications well and maintaining your efforts, on both the substantive-champion and the technical-implementation fronts, are the greatest determinants of success. Practice applications require careful planning, consistent follow-through and regular care and feeding. Many law offices have had short-lived success with these technologies, but couldn’t sustain it for the longer term.


Consider the Possibilities: The Document Audit

One effective technique when overviewing systemization options is a document audit, an analysis of document life cycles within a practice. For each class of document, you should ask the following:


  • How many times per month or year is the document prepared?
  • How much lawyer and staff time is involved in preparing each document?
  • What work-flow steps, draft cycles and approvals are involved?
  • What causes errors, omissions and delays during preparation?
  • Where does information for the document come from—clients, lawyer instructions or other sources?

Interview all those involved in the document preparation process. You will be surprised at their varying answers. Lawyers tend to give time estimates based on ideal, no-hitch scenarios. Be sure to cross-check the information with statistics on the number of cases handled, documents per case and time spent on non-document-related tasks.

Many tools and methods can dramatically improve the effectiveness of your substantive legal work. Educate yourself about what’s possible. (See the page 26 sidebar describing the benefits of document assembly systems.)


Think Return on Investment

We lawyers consider ourselves professionals, not businesspeople. Yet success is often determined by applying sound business principles to practice. Key here is recognizing that investments in technology shouldn’t be based on keeping up with the Joneses. Technology investments should achieve a measurable return on investment (ROI).

If you can’t demonstrate that each dollar spent will likely return a dollar plus X, either in reduced cost or greater revenue, then the money should not be spent. If analysis portends significant savings or increased profit, then investments should be made.

Many law firms operate on a “steady state” principle. In other words, if the firm receives more cases than it can handle, it experiences delays, clients become dissatisfied, and the firm reaches a maximum sustainable income level. Firms try to cope by adding staff or increasing rates. But higher rates can deflect potential business, and hiring more personnel risks increasing expenses without guaranteeing more profit.

Another way to shake things up is to invest in technology and modify billing practices. Let’s say you can make existing staff twice as effective. You may see direct savings in non-billable-hour staff expense but the pool of timekeeper hours remains static. That’s why value-billing or flat-fee arrangements may need to be implemented simultaneously.

It is sobering to remember that at one time a dedicated word processing system cost $20,000 per user. Yet firms were able to justify the cost based on the increased productivity of support staff. Nonetheless, today firms still balk at software investments of more than a few hundred dollars per desktop because they compare these applications to generic products like Microsoft Office. What should be compared is how much work can be done with and without the software.

For example, preparing and sending a standard business letter costs approximately $20 (perhaps higher for lawyers). If an office prepares thousands of letters per year and could reduce the cost to $10 or less, isn’t it worthwhile to spend thousands of dollars automating the generation of routine correspondence? Consider how much more benefit can be obtained by automating substantive legal documents.


Ask Questions

Most businesses will not develop new products or services without market research and a solid, forward-thinking business plan. Lawyers should do the same when it comes to technology investments.

To gather needed information, poll your clients on their expectations about your legal work.

  • What do they consider a desirable turnaround time?
  • Do they collect data that can be supplied to the firm electronically?
  • How do they want you to communicate with them?
  • Are they willing to complete interviews online?
  • Are they open to changes in billing practices?

You also want to evaluate trends in the economy that may have an impact on your practice. An economic upturn, for example, will positively impact real estate or commercial lawyers. A downturn will benefit lawyers involved in bankruptcy, debt enforcement and (perhaps) family law.

Here is a case in point: A law firm had a mortgage enforcement practice area with annual revenue of $300,000. It serviced two financial institutions. The senior partner saw an economic trend that would result in increased foreclosures and engaged a junior lawyer to automate the mortgage enforcement templates that the firm’s lawyers used. Through interviews with key clients, they learned the clients could supply data files with transaction details. During the pilot they realized they could automate key documents and prepare them, on average, fives times faster. They developed the ability to import the client-supplied data so that information would automatically flow into documents, eliminating data-entry time and reducing transcription errors.

As expected, an economic shift resulted in dramatically increased mortgage defaults. The partners then approached existing and new financial institutions, offering fixed fees and guaranteed turnaround times. They were so successful that revenues increased by a factor of 20, while staffing increased only fourfold. Clients realized lower per-transaction costs and faster responses, while the firm realized substantial profits, increased employment and intangible benefits.


Measure for Success

To determine whether automation of particular document groups will have the desired impact in your firm, you need to benchmark the situation (as described earlier) with a document audit. The next step is to take the estimates from your audit and do a calculation of the time and costs involved.

Here is a sample cost-per-document formula:

(Lawyer Hours per Document x Lawyer Hourly Rate) + (Staff Hours per Document x Staff Hourly Rate)

Note that lawyer and staff hourly rates should be calculated with markups to reflect overhead for benefits, office space and similar items.

Lawyer-technologist Ross Kodner, in his presentation Getting Your Money’s Worth: The ROTI Factor (Return on Technology Investment), gives detailed examples of ROI calculations for implementation of a case management system. (See www.microlaw.com/legal_technology.html for his materials, originally presented at the ALA 2005 Annual Meeting.) Similar calculations can be performed for document assembly implementations.

Here is an annual percentage calculation formula for a class of documents, assuming that the same number is created per year both before and after automation:

((No. of Documents per Year x ($ per Existing Document – $ per Automated Document) – Template Automation $ per Year)) x 100

Template Automation $ per Year

So let’s say, for example, that you prepare a document 200 times per year and it costs $6,000 to automate it—amortized over three years—and results in a 50 percent reduction in the previous cost of $250 per document. The ROI will then be 1,150 percent—or, in dollar figures, a $2,000 per year investment results in $23,000 in cost savings.

You can make ROI calculations for a variety of scenarios. We have designed a spreadsheet for that purpose, which you can find here.

There are many nuances in assessing your practice’s amenability to profitable automation. You’ve no doubt been collecting some as you read, although there isn’t room here to cover all of them. Our best advice: Satisfy yourself first whether a systematic effort in principle could yield enough benefits to motivate you. Don’t become paralyzed by the details. They can be handled by you or others once your project gets moving.


Take a Small Bite

Armed with your audit and ROI results, you should then create a pilot project with a few promising templates. Don’t try to automate the most complex documents first. While such documents may have high potential ROI values, complexity can significantly delay initial success. Many projects falter because they never win lawyer and staff buy-in. Consider doing powers of attorney before wills or trusts in an estate practice, or standard court forms before sophisticated pleadings in a litigation practice. Realize the benefits of automating simpler documents while more complex ones are being automated.

In addition, make sure that users don’t have to resort to workarounds such as editing a document after assembly. To maintain confidence, respond to staff reports of errors or problems and fix them immediately. Pay attention to details—they’re important. Small considerations like arranging the address on a letter so that it can be inserted into a windowed envelope can save hours if the task is repeated thousands of times.


Scale It Up

As the project proceeds, you should regularly interview staff to determine whether you’re achieving desired results. It is critical to assess whether the system in fact reduces errors, eliminates steps or draft cycles, or delivers other benefits. Document the results, even if anecdotal.

Also, compare the time taken to prepare automated documents to the benchmarks and ROI estimates and update the calculations. If the annual ROI is less than 20 percent, you need to think twice before making more substantial investments because there are risks of cost overruns and extended paybacks. But if the ROI looks good? Well, who wouldn’t want to invest their money at a bank when rates of return exceed 100 percent?

Once you’ve begun to enjoy the rewards of more results for less effort, you should, naturally, look for ways to realize automation benefits elsewhere in your practice. So take some of your liberated time and apply it to investigating further systemization. However, be aware that it’s rarely desirable to automate all documents. Some may be used rarely and not warrant the effort. Or it may make sense to automate some templates only partially (e.g., only the caption of a litigation form). Users can still benefit from the standardized appearance and rapid completion of a portion of a document.

At each phase, re-measure. You will find that as more work is automated, overall efficiencies can improve dramatically, particularly if the templates are designed to prepare packages of documents at once, share answers across multiple documents, or integrate with databases or case management software.


Tune Your Practice for Systemization

As you get a feel for the opportunities to systematize your practice, keep in mind that your own best opportunities may lie in shifting your practice to the kinds of work that lend themselves to those opportunities.

For instance, one firm developed a system for filing a proof of claim in a bankruptcy matter, resulting in a lucrative volume practice on behalf of financial institutions. This firm receives a percentage of funds collected from bankrupt estates—in the long run a higher return, although not collected until a year or two after filing. Another firm developed a system to rapidly generate demand letters for loans. It runs a weekly routine to generate hundreds of demand letters in minutes. The biggest job is signing letters—at $75 a pop. Neither firm previously had significant volume in preparing those forms.

Analyze what you do best. Can a part of your work be commoditized and marketed on a volume basis? If so, carve out that area and build a system around it. Then you can market it to potential customers. Myriad examples in dozens of practice areas are amenable to such automation.

Remember, your ultimate goal in practice automation is to work less while accomplishing more. You want to deliver more value for your clients—and income or other benefits for yourself—by taking advantage of tools and methods for a more streamlined practice. By becoming alert to opportunities in your environment, you will get more done with less wear and tear. And you can take pride in how few hours you bill.

About the Author

Marc Lauritsen is president of Capstone Practice Systems, which provides advice, training and system development services for top law firms and departments, as well as many nonprofit organizations.

Doug Simpson is president of Backdraft Systems, which provides consulting services to law firms and legal departments regarding legal technology, with an emphasis on document assembly systems.