Legal tech produces many business benefits for law firms and inhouse legal teams, but its value is often experienced on a very human level and ROI analysis won’t always see the true picture.
‘Show me the money!’
When considering Return on Investment (ROI) it’s probably essential to throw into the formula some hard economic figures, e.g. we saved 10% of the team’s time reviewing those documents with this technology, which translates into X amount of money saved.
The problem is that very few lawyers think in such terms in real life. In large commercial law firms there is only one rule that really counts: stay busy. If you save time doing something there is just more stuff to do as you have to keep billing. If a tool shaves off some costs for a client, then that saving also has to be recouped somewhere else in the firm. Economising is about as appealing to most law firms as having to eat cold porridge for breakfast.
For inhouse teams, there is a permanent tsunami of work to be done. As the company grows, this constant wave of legal and compliance matters just grows too. Everyone is busy. Always. Even if they are not on the hour. Yes, inhouse teams have budgets, but the team’s main role is to stop the company getting killed on the sacrificial altar of legal claims. That one very narrow stream of work which has been made 17.3% more efficient with a tech tool may get the accounting team excited, but for the many inhouse lawyers at the company, not really. There are bigger things in play.
So, let’s not kid ourselves that lawyers on either side of the line get ecstatic about saving money. They don’t. In fact, in a world where someone in their early twenties doing what is in effect high-grade secretarial work can command multiple hundreds of dollars an hour, the idea of making micro-economic savings, for buyer or seller, as the main driver for implementing new legal tech solutions seems almost absurd.
So, why buy legal tech? The answer is, perhaps ironically, that economic benefits do indeed really come into this, but they are experienced indirectly – almost instinctively – and what really might turn on a lawyer to your product is something far more immediate and human: making life easier for them.
The True Value of Legal Tech: Making Life Easier
In the absence of a burning economic platform for most lawyers, what driver is there to invest in legal tech? There are two main reasons: your people and your clients. Or in other words, making life easier.
For example, a transactional team is always in the trenches, especially the associates who have to do nearly all of the heavy lifting on deals. They enjoy the buzz of being on a big deal, but the drudgery really grates after a while. The partners also fret that with all this pressure and so much data flying around there may be errors, which in turn will annoy the clients. If the clients are annoyed then they may eventually lose one, and in turn the firm will be a little worse off than before, not to mention that partner may have one client less they can depend upon to generate revenue for their team, which in turn may impact remuneration.
So, what’s the fix? Let’s bring in a deal management tool. It’s not magic, but it soaks up a lot of basic work and helps everyone keep on track. What are the benefits? As noted, they are not directly economic, but there’s plenty there.
Reducing Burn Out and Loss of Talent
With less manual drudgery involved in the deals the associates don’t get a holiday because of the time saved, but they do get to do less of the work they don’t like and don’t find meaningful. So they stay at the firm.
Keeping the best talent is a huge long-term benefit for a law firm. They are the future of the firm, and those who have a lot of ‘get-up-and-go’ are the ones you want to keep, not drive to the exits because of the burden of process work. In turn this is for the economic benefit of the firm as a whole. More quality talent = a better service for clients = happy clients = long-term success for the business.
Also, for the inhouse and contract management teams, there is their own version of this story. A junior inhouse lawyer is not thinking about money when someone brings in a new contract review system, they are thinking: ‘I really hope this makes my life easier!’ If it does, then everyone’s happy. If it doesn’t then it’s a waste. The money point is not the key issue.
Helping Other Departments
Another one for the inhouse world is how tech helps the whole of the business. Data extracted from contracts may help the business as a whole and allow it to really see what is happening (as contracts contain key data about every transaction the company has made).
Now, some legal tech companies get into quite complicated explanations about how X system can help you to reduce costs (a little bit) by helping you to better negotiate certain contractual terms – but I bet that doesn’t really excite many people in the company.
What would excite the sales or finance team, for example, is having all the key business data they need at hand as it’s been extracted from all the company’s contracts and can be easily understood via a dashboard. I.e. it’s convenient, it’s helpful, it makes life easier. There may well be financial benefits from this, but it’s the convenience that wins the day.
Making Tools for Clients is also about Convenience
A growing number of law firms are trying to build suites of tools to provide clients with self-serve offerings so they can do things like assess data rules on their own. It’s low value work that an automated tool is perfect for. But why do it? It doesn’t make the firm much money. It’s because it makes the life of the client easier. It solves a problem quickly and easily in an area where the firm wouldn’t make much cash.
Use legal tech – or in fact just ‘tech’ – to help the client, so they are happy and see you as a helper, not a barrier that only opens up when they wave their wallets. In the long-run what seems like an uneconomical project is in fact a very business-savvy move.
So, Farewell ROI
And there are many other examples. The key point is that selling on the money first is tough. It puts you into a discussion about ROI, which if we are frank about it, many people don’t really care about.
ROI and charts with numbers sounds good, looks good, but it’s weak compared to: ‘Hey, the clients really loved this new thing we can do for them with X!’ Or, ‘Wow, the CFO just came down and patted me on the back to say thanks for making it so easy to see all the contract renewal data. We really have a much clearer idea of where the company is heading now.’
What sounds better?
‘Team X in the organisation has saved 10% on Y process.’
‘The client was really pleased with how we did X for them.’
If you were a lawyer it would be the second one, without a doubt.
And So, Back to Economics…
The irony here is that it does all come back to money. This is the challenge for legal tech in the commercial legal world: it is all about business issues. Why? Because this is a world of organisations that are all seeking to make a profit. They make a profit when they can retain the best talent and attract the best clients and maintain those relationships. Those things translate into more money for the shareholders (or partners).
If you don’t believe me, look at the opposite. Firm A doesn’t care that its associates are unhappy with too much process work, so some of the most talented people leave to those firms where they are not expected to do that work unassisted with tech. Firm A doesn’t care about making life easier for its clients either and provides no value adds, nor seeks to make any deal process easier with tech. Things that tech can do easily are ignored. Costs for basic things are passed to the client.
End result, the firm loses talent. The clients also see they are being treated poorly compared to what is now the market norm and relationships get frayed. Over time, the firm starts to lose its position in the market. It therefore misses out on top deals and makes less money. Because it makes less money it cannot pay higher salaries and some key partners jump ship. That can then lead to a steady sinking down the tables. I.e. it all has a very real economic outcome. And all because they ignored the need to make life easier with legal tech.
Personally, I would recommend law firms and inhouse legal teams maintain a twin strategy with legal tech, keeping one eye on the immediate benefits of making life easier for their talent and their clients, while knowing that in the long-term this will have economic benefits.
I.e. think about tech’s benefits on a very human level first, and perhaps always first, then appreciate the business value as a result of this.
For the legal tech companies, it’s perhaps time to drop the ‘we can save you 10% of X’ sales routine and focus on the people and the clients instead. Because the most powerful sales pitch in the world is the one where you believe this tool will make your life easier – and then it turns out that it really does.
By Richard Tromans, Founder, Artificial Lawyer, August 2022
[ Note: I have to admit that I am going through something of a reassessment of several of the key pillars associated with the ‘new wave’ of legal technology. In the past I have praised the value of ROI, but now, I am happy to say that view has changed. There are just too many intangibles that need to be considered and they are very hard to measure with an Excel spread sheet. ]