How Automation Will Make the Next Big Difference to Margins

Automation seems to be the technology that top-tier firms want the most now and that they believe will have the biggest impact on their competitiveness and efficiency going forward.

This much was made clear by the recent State of the Industry keynote at LegalWeek New York where emphasis was placed on the need for firms to increase their levels of automation and technical sophistication in order to continue to be profitable in an increasingly competitive and complex market. With significant growth in in-house lawyers and alternative service providers and the increasing legal presence of the Big 4 consultancy firms, the traditional firm market is being squeezed. The net result is that 93% of firms report a decline in one of their key success metrics.*

A similar pattern is reported among the U.K. top 100 firms who, interestingly enough, still cite “firms like mine” as the key competition they will face in the short to medium term. Regardless of where the perceived threat comes from, however, it is clear that firms are turning to technology to try to shift the balance. The two key areas of focus are “get more business in the door” (competitiveness) and “reduce our overhead to deliver the work we have” (efficiency). Any technology innovation that can deliver benefits in both areas is considered to be a key area for investment. It’s no surprise, therefore, that when questioned, most firms respond that they are seriously looking at the possibilities of automation as it applies to the business of law.

The big question to be answered then is where exactly do you apply automation so that it effectively benefits your firm? History is littered with examples of cure-all automation systems that promised much but delivered little.

Where to Start with Automation

As with any innovation, for all the notional benefits of automation, the costs of implementation—both in time and resource—have to make sense. That's why I recommend that firms opt for pragmatic introductions of proven automation technologies in the first instance. You'll have seen or heard discussions about advanced automation, artificial intelligence, blockchain, etc... That's not where I suggest you begin. I'm thinking instead about the things which automate simple day-to-day tasks. This way you are able to introduce automation quickly and at a low relative cost. You can then establish a track-record of proven successes and build people's confidence and appetite to introduce more.

What automation do I have in mind? It seems to me that timekeeping, costing, and billing are good places to start. Timekeeping has a big impact on a firm's revenue. Clearly the more time that can be logged, the more money you earn. Conversely, the more time spent collecting and inputting time, the more money you notionally lose. It therefore makes sense to automate as much as possible how time is collected and fed through to the billing system—that way less valuable time is wasted. It's indeed ironic that many firms spend so much non-billable time every month on the effort to assemble time to be billed, especially given that this is an area where automation technology is already available and proven.

If you want to begin by automating elements of timekeeping, here’s an example of three simple things that an off-the-shelf automation could deliver:

• Missing Time Report—Let your fee earners know if they are falling short of their target hours for the week/month before it becomes an issue. An early gentle reminder will help reduce time and billing lag. Follow up alerting to departmental managers can escalate this process, from a gentle reminder to the fee earner, where there is still a short fall in hours as the firm approaches month end.
• Monthly/Weekly/Daily Summary—Having reports/e-mails automatically sent out at key points in the month would save manager’s precious hours when compiling statistics for their teams
• Key Financial Metrics—Automation can collect, collate, and distribute key financial information at specific points during the year, such as month and year end or when a key event is triggered (i.e. matter budget exceeded)
• Shortfall Warnings—Where departments are falling behind key targets, automation can be used to trigger processes such as emails to department heads

Moreover, once automation is successfully handling some small, discrete tasks—things like running your monthly billing runs—you can start working out the ROI and demonstrate the value. Remember that the impact of any small gain you make is multiplied by the number of times you do that task. Remember to factor in the added value you can realize from having some of your team redeployed on higher value work. You could find that small inroads into enhancing efficiency and increasing productivity begin to accumulate into quite significant impacts.
 

*ALM Intelligence