Is your law firm just blowing smoke?

How can you tell for sure?

Patrick Lamb of Valorem Law Group provides some guidance in a recent series of blog posts on discerning “signal and noise” in law firms.

Lamb sets the stage in Part One by introducing the concept of the signal-to-noise ratio, which “is sometimes used informally to refer to the ratio of useful information to false or irrelevant data in a conversation or exchange. For example, in online discussion forums and other online communities, off-topic posts and spam are regarded as ‘noise’ that interferes with the ‘signal’ of appropriate discussion.”

Law firms are guilty of filling the air with noise, Lamb explains, by throwing out meaningless marketing phrases like “exceptional client service.” But it’s all a bunch of gibberish. Worse, it’s designed to drown out the signal that may actually set certain firms apart from the crowd.

In Part Two and Part Three, Lamb provides the following ten questions a GC should ask a firm to distinguish the signal of an innovative, client-focused practice from the noise of firms that want to sound innovative but in fact are committed to the old way of doing business.

  1. Are your associates eligible for bonuses based on the number of hours they bill? 

A positive answer here means that the firm is “successful only if you spend more on them.” Presumably, Lamb would advocate for different ways to incentivize associates, but he doesn’t give any suggestions.

  1. Is your satisfaction with performance and service a factor in compensation?

Again, Lamb does not explain how client satisfaction should factor into partner and associate pay, but he says if the answer here is “anything other than an unqualified yes,” then client satisfaction simply will not influence how people in the law firm are compensated.

  1. Does the firm provide alternative fee quotes on every matter or only on request?

A firm that only provides alternative fee quotes on request is just putting out noise, Lamb suggests. It shows their lack of commitment to alternative fee arrangements (AFAs) because there’s a “huge difference between doing something you want to do and doing it because you have to.”

  1. What percentage of a firm’s revenue comes from alternative fees? What is the firm’s definition of an alternative fee?

The noise here comes from law firms including blended hourly rates, discounted hourly rates and capped hourly rates in their definition of AFAs. Lamb argues those are just different ways of describing hourly billing structures. A firm that’s really committed to AFAs would categorically exclude all hourly rate structures and be able to detail the exact percentage of revenue that comes from real AFAs.

  1. What changes has the firm made in how it handles cases in the last 5 years?

Lamb is highly critical of the traditional, “bloated” law firm approach to litigation. From staffing to handling discovery to project management, firms need to make wholesale changes across the board. To locate the signal amidst the noise, clients should get very specific information about the changes the firm has implemented and the tools it uses.

  1. What is the average cost of a deposition taken by your firm?  Not the preparation, just the deposition itself.

Ideally, a firm should be able to tell you how much on average it bills clients for depositions, including the hours spent at the deposition and the costs associated with it. Lamb bets, though, that most outside lawyers would not know any of that information. (Personally, I would include deposition preparation to get a better picture, as preparation can be time-consuming and typically includes a lot of unnecessary paper costs.)

  1. Can I see three samples of Early Case Assessments?

Everyone talks about doing early case assessments – that’s the noise. To get at the signal, ask to see some examples and see how consistent they are in form. If the forms vary widely, that may indicate that the firm does not have uniform processes in place. Lamb does not explain how this should work in light of lawyers’ ethical duties to protect confidential client information. To what extent can a firm provide a potential client with assessments made for other clients?

  1. At the same time, can I see three After Action Assessments and how those were communicated to the client?

Most firms also talk about doing after action assessments (A3s) in which they debrief what went right and wrong on a case. But the firms that actually do A3s will be happy to share them and talk about the lessons learned and how clients reacted. The last part is key, Lamb says, because unless the client is involved in the process, it doesn’t mean much. Here again, though, he does not explain how a firm can share A3s (or the kind of detail that might be included in them) without divulging confidential information.

  1. What is an area where your firm led innovation? Where it was at the front end of change?

I suspect Lamb would see most firms’ talk about being “innovative” as just noise. These questions are designed to elicit specific examples if they exist.

  1. Tell me about your approach to project management, process mapping and use of checklists?  Can I see examples?

Ask a firm if it uses project management, processes or checklists, and you will get a lot of noisy head-nodding. “Seeing is believing,” Lamb says, “so ask to see them.”

All in all, that’s a pretty good list to use if you want to clear away the smoke and find an innovative law firm. Of course, some GCs would see things like conservatism and consistency as signal rather than noise, but that is a post for another day.

What do you think? Anything you would add to Lamb’s list?