The Very Real Promise of Artificial Intelligence to Recapture Lost Billable Revenue - Zero

Corporate law departments have a very clear message for the law firms they employ: “We have fully
embraced technology-enabled efficiencies and cost controls in our workflows, and we expect a comparable level of accountability and performance from the outside firms we hire.”

If this message has not already captured the attention of law firms and their technology committees, it should. The recent emergence of comprehensive alternative legal service providers like the Big Four, Accenture, UnitedLex, Axiom and others, only drives home the point that a reactive mindset toward technology is untenable in today’s hypercompetitive legal marketplace.

Many firms are attempting to respond to the marketplace’s digital challenge by investing in a variety of tools to speed up workflows and create new efficiencies. The ever-increasing array of available applications presents a different set of challenges, however. Besides the difficult choices in selecting the appropriate software, there is then a learning curve that users must navigate. Moreover, the constant transitioning from one tool to another can be a major distraction for lawyers – so much so, that investing in more applications than a firm is able to support can become an unfortunate example of the reactive approach to technology that the profession needs to move beyond.

The practice of adopting point solutions to address specific operational bottlenecks does little to boost revenue growth in the long run, suggest the authors of “Navigating a New Reality in the Client-Empowered Era,” a report on a recent global survey of 300 of the world’s top law firms conducted by Intapp in collaboration with The Lawyer. “Although driving growth is a strategic focus of law firms, to date they have primarily invested in technology to drive operational efficiencies,” the report’s authors point out. “While every law firm in the survey considered intelligent automation and data-driven insights to be highly important, there is a significant gap between this recognition and the actual investment in deploying these technologies.”

Instead of more applications, what is needed is technology that operates “beneath” existing applications to gather and analyze the information they generate, and continually “learn” from the collected data to forecast the individual and collective behavior of the firm. Such technology should perform these tasks efficiently, automatically and accurately. This is the promise that artificial intelligence (AI) holds for law firms and legal departments. The future of legal tech is less about building new applications but more about inside of applications that law firms and their clients already use.

The costs of distraction
If it is not enough for the firm to rely exclusively on the preferences of a corporate law department client to make the decision to adopt AI, consider the real cost of maintaining the status quo – the cost of distraction. The high degree to which lawyers are distracted from substantive legal work is quantified in the Clio 2018 Legal Trends Report, which reveals that lawyers at law firms have an average utilization rate (the percentage of time they spend doing billable work) of just 30%. This means they are able to devote just 2.4 hours to revenue-generating tasks in a typical 8-hour day. “When factoring in the number of billable hours that never make it to an invoice and the amounts forfeited by unpaid bills, the average lawyer earns just 1.6 hours in billable work for their firm each day,” the report notes. “If ignored, inefficiency can have a devastating effect on profitability, which is a problem that will only compound day to day, year to year.”

Where is all that unbilled time going?

According to the Clio report, lawyers average an astonishing 1.2 hours per day simply “recording and summarizing time entries.” While a significant number of these lawyers are already using time capture applications that digitize the information they enter, lawyers must still recall each of the countless tasks they’ve completed, associate these tasks with a matter, quantify the time they’ve spent completing them, and then manually enter that information into the system. This is tedious work and inevitably subject to human error. It’s no surprise that corporate clients sometimes dispute time entries in the invoices they receive.

Inefficiency and cognitive drag: The example of email
Perhaps the most difficult challenge related to time capture for lawyers is email. Although this is hardly a new challenge, the rapid adoption of email on mobile devices among lawyers only makes the problem more acute and complex.

Most matters generate hundreds if not thousands of emails. Lawyers must filter
and prioritize their inbox by identifying and qualifying individual emails as urgent, important, time-critical, of peripheral interest, redundant, related to a specific client matter, and so on. They must then review the body of the message, which often contains non-essential information before moving the email into the appropriate folder, sometimes having to choose among more than one plausible filing location. Lawyers repeat these activities dozens of times each day, all the while staying alert to potential compliance issues. Then, at some point, they must reconstruct the appropriate billable time spent performing such tasks for time cards and narratives to substantiate invoices. Whether this activity takes place in a mobile or desktop environment (likely both), it interrupts substantive work and drains cognitive energy from a lawyer who is attempting to stay on task without distraction. Consequently, tasks that are legitimately billable are often forgotten. Conscientious lawyers who try to track that time after the fact are forced to do so manually, consuming more non-billable time in the process, with little or no substantiation.

There are, of course, tools to help manage email and time capture, but most of them rely on dated technology designed for desktop computing, and few have been designed for the rigors and nuances of legal work. Document management systems, for example, can be used to manage emails and “predict” where specific emails should be filed, but their predictions are either often inaccurate or overwhelming. These tools are also not available for mobile devices, which today’s lawyers use with increasing frequency to keep up with client-related work. Many lawyers also use business software like Outlook to drag and drop individual emails into folders, but messages can easily be misfiled and critical information is often lost in the process. Some firms also use time capture software that, while much improved from previous iterations, still fails to truly automate time and narrative capture for client-related email.

Accuracy in billing and time capture for law firms is critical to preventing revenue leakage. What may be less apparent, however, is that it also engenders client confidence and trust while offering the firm important information for planning and budgeting for future matters. Firms that use AI technologies to automatically extract and report such information enjoy a significant advantage as they seek to establish more sustainable and innovative billing models in their efforts to win new clients and retain existing ones.

Data Leakage = Revenue Loss
Every minute devoted to client-related work that firms fail to capture and convincingly substantiate is a form of revenue leakage, and those losses can add up quickly. Most firms understand this, but they fail to grasp that most forms of lost revenue are now preventable. Without user intervention, AI technologies like natural language processing, machine learning and data analytics can automatically extract, structure and organize the data that flows through many of the applications already in use in law firms and produce accurate, coherent narratives of how lawyers are using their time. This is the kind of documentation that corporate clients find
reassuring when they are trying to understand what they are paying for.

With respect to email, AI is capable of analyzing thousands of emails in seconds. It can automatically recognize and capture the billable time lawyers spend interacting with different clients, prioritize the most important and urgent emails so lawyers can focus on their content, and efficiently organize emails for the entire firm to ensure emails are securely stored, easy to find and managed in a way that is fully compliant.

Even if firms don’t end up billing the client for all the time their lawyers spend on every email related to a particular matter, AI technology working in the background can capture the details of those activities and automate the organization of inboxes and email folders based on an individual lawyer’s actual behavior over time. This is something machine learning is very good at, and it won’t be long before the organization using such technology has a body of data that reveals with remarkable precision how individual lawyers are spending their time.

AI is not just another application
AI can be used to measure, analyze and optimize just about any legal workflow. Deployed over time, it can provide valuable insight to help organizations operate more efficiently and competitively. AI can even make predictions to inform a broad spectrum of tactical and strategic decision-making.

Consider, for example, the value to be offered by a program that can identify which clients that consume the most non-billable time, which lawyers are most efficient at performing specific kinds of tasks, which tasks create the most administrative drag, or which matter types or practice areas are eroding the firm’s bottom line, and why. Because AI technologies like machine learning get “smarter” as they are exposed to more data, the precision with which they produce predictive insights related to costs, workflows and operations increases with time.

AI is not designed or destined to take over the truly valuable and highly complex work performed by lawyers. Its promise lies instead in its ability to automate many of the “small,” tedious and organizational tasks that consume too much of a lawyer’s time and energy. Burdening lawyers with these ministerial tasks is not only unproductive; it also diverts their attention from their true purpose: providing clients with real value and favorable outcomes.

The inability of firms to efficiently manage email and time capture is symptomatic of a broader problem in the profession. Our technology focus needs to undergo a shift – from applications to data, from tools to insights. That is what advanced technologies like AI are poised to do, and the firms that understand this will be in the best position to thrive in an increasing digital and global marketplace.

This article originally appeared in the first summer edition of Peer to Peer. To read the original, click here.