Strategic Librarian

Using strategy to develop the law firm library.


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Legal Research One of Leading Irritants says New Survey on Cost Recovery

A new Legal Technology News article, Cost Recovery Breeds Client Frustration in New Survey, written by Robert Mattern, reports that legal research is one of the leading irritants for law firm clients.  He further reports that the number of firms that do not charge clients for this service is 27%  – a significant drop from the 3% the Mattern survey reported last year.   While this number seems significant, it should be noted that the 2010  ABA Technology Survey confirms this % for all sizes of firms but reports 9.8% for firms with 100+ lawyers, 19.2% for 50-99 lawyers, 18.8% for 10-49 lawyers, 32% for 2-9 lawyers, and 47.7% for solo firms.

Mattern goes on to provide some suggestions regarding how firms might maintain their billable cost recovery revenue.  His recommendation for legal research?  He writes, “For legal research, develop a fair pricing policy that reflects the firm’s actual cost for these services.”  I have to say I agree with him but would like to take this idea a bit further. 

My presentation, Cost Recovery: Creating a Policy & Plan, has a recommendation along the same lines.  I’ve embedded it below but want to run through some of the ideas for you.

Steps for better cost recovery:

  • Develop a policy that outlines the what, when and how of cost recovery
  • Develop a cost recovery plan and procedures that detail how the policy will be implemented
  • Create and implement a cost recovery communication plan

Seems simple but the execution is made complex when you add people.  So, what makes up each step?

Develop a policy that outlines the what, when and how of cost recovery

Lawyers work with clients every day to develop policies but generally (while they may not admit it) when it comes to creating policies for their business, they often have difficulty.  If they have written policies, they can be written in a form that readers only get a nuance of the policy.  For example:  The Firm recovers external costs for telephone, copying, legal research, etc.  That doesn’t do enough to provide information to billing partners or researchers to give them an understanding of what the firm does with online research disbursements.

I suggest that legal research have its own policy with just a bit more information.  It makes sense when you consider the large sums spent on online legal research services.  What would I include besides the fact that the firm intends to recover the costs?  The following could be included:

  • What resources are selected as those the firm will attempt to recover
  • What resources are provided to clients at no cost
  • How discounts are applied
  • What training researchers are required to participate in to keep up their cost-effective research skills
  • That researchers will be required to respond to requests to provide correct client/matter numbers if asked
  • How will write-offs be handled

Note:  While researching this topic and working with firms, I’ve found that most firms use a hybrid method for recovering online research costs.  For example, what could be considered as a commodity (and what most resembles the use of books), finding and printing case-law and articles are comped while the cost for substantive research done using the online resources technology and applying directly to the matter is treated as recoverable.

Develop a cost recovery plan and procedures that detail how the policy will be implemented

Policies are bound to fail if there is no plan for implementation.  Beyond the simple need for a roadmap, cost recovery plans can be used to inform billing partners and researchers about the process.  What could you include in a plan?

  • Goals for recovery
  • Participants and the roles they play
  • Hi-level description of the process
  • Plan for tracking your success including process and timing
followed up with a detailed procedure for how disbursements get processed.
 
Create and implement a cost recovery communication plan
 
Although this part of the process gets all but ignored, communicating the cost recovery policy and plan is the most important component for success.  Transparency in cost recovery is needed for clients to feel comfortable with how the firm is handling the disbursements.  To do this, firms may have to go beyond the simple description now included in most engagement letters.  To provide this to clients you might want to consider the 4 P’s of communication in your messaging:
  • Purpose – Why
  • Picture – What
  • Plan – How
  • Part – Who
Once an overall message is established, there are multiple audiences and vehicles for the communication:
 
Internal:
  • Announcement of policy by management committee
  • Explanation of plan by library director / accounting director / executive director
  • Use various formats to introduce plan
    • Email, meetings, individual visits, small groups, orientation
    • Link plan to policy (handouts, intranet links, etc)
External:

Existing Clients

  • Billing partner has responsibility to inform clients
  • Library/Accounting can assist by providing materials
    • Policy
    • Talking points

New Clients

  • Engagement letters
  • Consider adding copy of policy as attachment to engagement letter
Vendors
  • Let them know that you expect their goal would be to provide training that leads to cost-effective research not up sell content not in your contract or software and services you don’t use
  • Provide copy of policy
  • Tell them you expect them to act as partner in cost recovery
  • Work with them to help form their communication to researchers (too many vendors like to say that their resource is free because of a flat rate contract or special offers – stop that message in its track)

Cost recovery is not easy but many firms make it more difficult for themselves because they haven’t addressed the issue in a manner that could, more likely, lead to success.  What I”m suggesting may sound time-consuming, create some conflict in the process or be difficult at best.  Still, the value it brings in terms of return on investment can be immense.


The Pirate Lawyers Recover Costs – Cost Recovery on the High Seas

The Pirate Lawyers Recover CostsA while back Greg Lambert at 3 Geeks and the Law posted a look at the legal industry through children’s eyes in the form of an online book on storyjumper.com.  In doing this, he made me think about how the same exercise could be applied to cost recovery of online resources.

My theory on why law firms are having problems recovering the costs of online research is that it is an issue that comes out of poor planning and communication followed by no one wanting to deal with the issues that arise.

Don’t get me wrong.  I’m not saying that law firms should recover costs.  I’m saying that firms that have made the decision to do so, need to be proactive in how they handle cost recovery to make it more palatable to clients.

The result of all this thinking is a book created with storyjumper.com and titled “The Pirate Lawyers Recover Costs”  that tells the tale of pirate lawyers and their swashbuckling ways.  As I couldn’t let myself play during the work day without some form of compensation, it does offer my consulting services on the last page.

I am giving away copies of the book to the first five firms that contact me to learn more about NPCI’s cost recovery planning services.  My email address is nplatt@ninaplatt.com.  All proceeds from the purchase of the book go to storyjumper.com


The Value of Legal and Other Online Resources

Every now and then someone writes an article saying that information is free and decrying the practice of law firms to charge for online research services.  I see these as poorly formulated attempts to move the access to information to a free model.  Peter Schwarz’s recent article, The Reinvention of Legal Research: The Future is Now, Huffington Post, August 13, 2009, stating information is a commodity is no different.

Don’t get me wrong.  I do think that some information should be treated as a commodity.  Information that is freely available and has been produced by government entities should be treated differently.  On the other hand, information that has been produced by individuals or companies, with an expectation of profit, should be able to realize that profit.  The creators of technology and editorial analysis that  helps researchers quickly answer a question or obtain information have that same right to charge for the use of the tools they created.

The paragraph talking about the fluidity of information is particularly puzzling:

Information is liquid. We now live in an ocean of information, and are swept along by its riptides and currents. The challenge is to manage our relationship to this information so it serves us our higher purposes. We need ways to filter real-time story-telling and reporting so we can identify narratives that have substance and reject those that are ephemeral, partial, distorted, or trivial.

I can only conclude from this paragraph that managing and filtering of information is more necessary today than in the past.  The commercial companies that create the means to find, filter and manage information do so for profit.  Even those that appear free (e.g., Google) have some type of business model that makes a profit.  Yes, some non-profit companies exist, but, for the most part, the companies that have delivered this technology are for profit.

Given that, let’s examine (again – in other words, get ready for a re-rant) what the value these companies provide is and why it can be disbursed to clients – for a more complete description of the each of the following points, see  Justice Hunt, We Need To Talk About Your Views on Cost Recovery of Online Legal Research.

Online legal and other online resources provide the following:

  • Creates multiple access points – You are no longer restricted to the table of contents, index, or even the print indexes that used to sit on library shelves.  Those print indexes only gave access by title, author, and subject.  Keep in mind that the subjects were assigned by individuals who made judgement calls.
  • Reduces the amount of time a lawyer needs to spend doing research – Yes, the client may still need to pay for lawyer time in addition to the legal resource but think of how that time has been reduced by the use of computers.
  • Produces more complete research results – Storage on computers allows for the addition of more information where a book is limited to what the author writes or the editor decides is the right number of pages to make the book sell.  More information, more complete results.
  • Contains overall legal research costs – while some of the research done for a matter is still done using books (there is information that you can’t get on a computer at this time or the lawyer doing the work believes books are better), the reality is that the cost of the research is less than if all of it was to be done manually.
  • Provides information to support the matter that would not be available on a  firm’s library shelves.  Many non-legal resources that get used for matters are specialized and complex.  The vast information available to us today is endless and growing exponentially.  In the hands of expert researchers (i.e., librarians), that non-legal information used to support a matter is available today where in the past we would not have had access.  The information found can make or break a matter.  Information and the time of the librarians doing the research is valuable and is also open to disbursement to clients.

If I were a client, I would wonder about the lawyer and law firms that did not use online resources.  In fact, as a client of a local law firm here in Minnesota, I have been thankful when I see charges for research.  I’m also thankful that they have a librarian and that the research done is cost-effective.  Instead of talking about information as liquid and suggesting that all information should be free, we should be thinking about how to improve research skills and how to prove to clients that law firms are doing the best research on behalf of their clients.

FOR THE RECORD:  I am not against freeing government generated data and treating it like a commodity.  I respect books and believe that some books have a place in research.  The physical library treated as overhead is not yet a thing of the past nor should it be.  At the same time, I believe the power of today’s libraries is on our computer desktops.  I am not a schill for the online publishers and aggregators.


Cost Recovery Ideas for 2009

Note:  NPCI will be offering Cost Recovery Webinars in February.  Click on the registration ad in the far right column to register for the first webinar taking place this week.  $30/pp or $60/group.

I’ve written a number of posts regarding cost recovery tactics over the last year and a half. 

They all follow a general theme that provides my ideas on how to deal with the cost recovery of online resources.  What would be different in 2009?  Not much, except that 2009 provides an opportunity for law firms to take real concerted action with regards to cost recovery.  Actions that will improve client service whether you decide to charge for online research or you decide not to.  Make 2009 the year you decide to:

Make a firm decision about cost recovery of online resource.  Whether you recover or not, decide as a firm.  Yes, some partners may write the expense off, but whatever gets done, make it a firm decision.

If you decide to provide all online research gratis to clients (according to the ALM Law Library Survey, only 3 % of firms are currently taking this route):

  • Draft a policy/procedure to include in engagement letters going forward.
  • Continue to provide training to researchers to make sure they are doing the best research possible and the vendor will not jack up the cost with the contract renewal.
  • Let clients know the value of the online research they are getting for free by providing a usage report by matter along with the matter’s invoice.
  • Consider increasing billing rates to cover the cost of the research although that would mean the service isn’t really free.

If you decide to charge clients for some online research services and not for others:

  • Draft a policiy/procedure and train all researchers on it.
  • Create a clear description of what is free to the client and what they will be paying for and include the description in engagement letters going forward. 
  • Meet with each client to explain the policy.
  • Consider increasing billing rates just enough to cover the cost of the portion of the resources that you will be providing gratis.
  • Alternatively, provide clients a monthly report showing both types of charges – free and billable.  Describe why each resource is being treated as it is including any changes from the last invoice.

If you decide to charge clients for all online research services:

  • Draft a policiy/procedure and train all researchers on it.
  • Create a clear description of what they will be paying for and include the description in engagement letters going forward. 
  • Meet with each client to explain the policy.
  • Enhance invoices to include more information about each research fee
  • Check back regularly with clients to make sure they continue to understand the policy (this could be done in a meeting that reviews all disbursements why, when, how, etc.).

Whatever decision gets made:

  • Provide annual update training to online researchers to make sure they are doing the best research for the client.  Require all researchers to attend.
  • Demonstrate that the firm is committed to research training by providing documentation that describes the training, how many researchers attended, results, etc.

This is just the tip of the iceberg in relations to what can be done in law firms to improve all aspects of the cost recovery of online legal research including better communications internally and with the firm’s clients.

Good luck with your recovery plans.  Please remember that Nina Platt Consulting offers services in this area and can assist you with making improvements to your program.


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Justice Hunt, We Need To Talk About Your Views on Cost Recovery of Online Legal Research

j0303025A couple weeks ago Fulton County Daily Report and several law library blogs reported on a Nov. 7 court order where, according to those sources, U.S. District Court Judge Willis B. Hunt decided that:

Among the expenses Hunt disallowed was $93,960.67 for LexisNexis, Westlaw and Online Library Research, writing,

This Court is of the opinion that charging separately for use of a research service is akin to charging for the use of a case law reporter. That is, the research service is a tool, much like a computer or a pen, and this Court considers the use of such a service part of a firm’s overhead. … Moreover, this Court is aware that many firms pay a flat rate to Lexis and Westlaw regardless of their usage, and class counsel cannot claim such flat rate payments as an out-of-pocket expense.

See Class Lawyers Against Coke Get More Than $31.5 Million.

He went on to write:

[C]omputer-aided research, like any other form of legal research, is a component of attorneys’ fees and cannot be independently taxed as an item of cost in addition to the attorneys’ fee award.

citing Leftwich v . Harris-Stowe State College, 702 F .2d 686,695 (8th Cir. 1983) . 

See Billing Wexis Expenses, posted on BARCO 2.0 : Law Library Reference for a summary of that opinion.

The Value of Online Legal Research

I’m sorry, but I don’t think Justice Hunt understands the value of online legal research.  The value of online legal research is very different than the decision by a firm to attempt to recover costs and the clients decision to pay or not pay for the expense – although it does play into that decision. 

What do online resources do for us that case reporters don’t?  A short answer would be “a lot”.  For example an online resource:

  • Provides many access points– Where a case reporter is organized by citation, online resources provide the ability to search by citation, assigned classifications (a numerical topic index), full text and more.   Not to say that books are no longer needed.  Before starting to use an online resource, researchers should use treatises or encyclopedias/dictionaries  to familiarize themselves with a legal issue or point of law.  Note:  These “books” may be available in print or online. 
  • Reduces the amount of time a lawyer needs to spend doing research  –   Rather than an associate going back and forth between digest and case reporter which can be very time consuming, that same associate can start with online digests or full text search to find a case, KeyCite or Shepardize it, find more cases, check to see if it is still good law or if it has been overturned, and more.  Researchers still need to use the critical thinking skills they developed in school (and for which their firm charges their time) but they are now able to move through the materials more quickly.
  • Produces more complete research results – There was a time when the amount of time it took to do research using books, resulted in researchers not being able to find and review all of the case law that existed that may have been on point.  In fact, they were most likely limited in the resources they had available to them as well.  The computer has changed that.  There is still a need to stop at some point but researchers can use the computer to find and review the materials more quickly.
  • Contains overall legal research costs– Researchers who has been schooled in what the cost is for online research, how to be cost effective in doing legal research online, when to combine the online research with the use of printed materials, and who does the bulk of there research online, will be able to produce the same or better results as one using print only within the same price points.  In the end, their time billed to the client is reduced making up for the online resource cost   Note:  You might argue that many young associates don’t know how to research.  That is the responsibility of the firm that hired them.  If firms want to recover these costs it is incumbent on them to make sure their associates are well trained.  That just touches on the issue which would take another entire article to cover.

Using an online resource is nothing like pulling a case reporter and locating the case by citation.  It has the same content but it has so much more in terms of tools that assist researchers in minimizing the work they need to do for a client.  The combination of the lawyer and the computer is very powerful.  Something you just don’t get with print.

The Decision to Recover Costs

With those comments on the value of online research, I would like to turn to a firm’s decision to charge their clients for the use of online resources.  It isn’t an all or nothing decision as it may have been in the past.  There are many instances that the work done using online resources warrants charging the client.  Yet, there are some tasks completed with that same online resource where the expense of the searches and their results should not be charged to clients.

For example, if a researcher has a list of cases she would like to read, she could do so using an online resource much like finding a reporter on the shelf and photocopying it for later use.  When the work being done isn’t substantive, and the analysis is done by the lawyer after the case is pulled, it probably needs to be treated as overhead.

Conclusion

There are many more examples like this where a firm could make a decision not to charge the client.  At the same time, any substantive research done online, requires a set of complex tools that the firm chooses to use on the clients behalf reduces the time a lawyer will track referencing the client’s matter,  contains cost and improves the quality of the output.  If a firm incurs expenses while doing this work, the client should most likely be charged.  

To make the decision to charge, the firm needs to evaluate the work for which they will or will not charge their clients, develop a Cost Recovery Policy that includes statements about the value of online legal research and communicate that policy internally and externally. 

Note:  My company focuses on assisting law firm clients with knowledge, information and library management challenges including working with those clients to improve their cost recovery of online resource expenses while doing their best for their clients.