Every morning, somewhere between working out (physical health) and getting to work (fiscal health), I do a wide-ranging scan of what’s in the news and on the web (mental health). A few more items than usual this morning relate to areas I focus on.
A/B Testing Alternative Fees
Matt Hohman of LexThink and The [Non]Billable Hour suggests A/B testing alternative fees. A/B testing refers to comparing two systems with only one component swapped out between them; if everything else is kept the same and there’s a noticeable (or statistically significant) difference, you’re confident the difference is due to whatever you changed.1
So can you A/B test AFAs? I think the answer is yes, sort of. The key to true A/B testing is to limit the change to a single variable. With AFAs, for example, you might get a true measurement if you didn’t let the attorneys on the matter know which way you were billing that particular matter.
However, true value-based billing (VBB) or alternative fee arrangements (AFAs) are far more than just a method of calculating a fee. In effective VBB, for example, it should be a clear goal to do only the work the client wants and sees as highly valuable and not do work the client doesn’t really need. It means using the “right” resources, where “right” is a combination of skills, cost to the firm (not the same as billing rate), profitability (not necessarily proportional to cost), availability, internal firm needs, and so on. That’s a whole lot of variables to change at once.
Thus you won’t get true A/B testing. What you will have, over time, is a lot of data on which you ask someone in finance, or a consultant, to run regression analyses to determine which factors are influencing results in a primary manner.
Or you can focus on the metrics that matter — client retention (repurchase intent), attorney job satisfaction, firm profitability. Those are even harder to measure, by the way, but at least they’re direct rather than substitute metrics, measuring what you really need to measure.
I’m not disagreeing with Matt’s suggestion, by the way. I’m all in favor of AFAs, and think that easing into them is a solid approach. I just resist applying mathematical or statistical constructs to inchoate or not well understood data. Treat “A/B testing” as a metaphor, and I’m there.
Learning More About Alternative Fees
The Association of Corporate Counsel (ACC) is holding a two-day class in AFAs, a/k/a Value Based Billing, this coming Tuesday and Wednesday in Washington, DC. My colleague Aileen Leventon of QLex Consulting has done a yeoman (yeowoman? yeoperson?) job of pulling this program together on relatively short notice. Congratulations, Aileen, on the great work done so far.
I’ll be speaking there on Legal Project Management, partnering with six sigma expert Catherine Alman MacDonagh. Catherine and I also have set up some problems for participants to work through in small groups, with coaching from the conference faculty.
Learning More About Legal Project Management
My upcoming Master Class in Legal Project Management is now open for registration. It will be held in Chicago on September 28, and I’ve asked litigator extraordinaire Pat Lamb to co-teach it with me. Pat’s firm, Valorem, bills only via AFAs, so this Master Class will have a bit more of an AFA tilt to it than in the past.
I promise it will be fun, informative, interactive, interesting, and ultimately lucrative for the attendees’ practices. Okay, I can’t control the lucrative part, but if you put the material we present into practice, I’m confident you’ll see a real difference.
Can you go from a Master Class directly to useful implementation? Yes and no. Yes, in the sense that we’ll spend the afternoon together working on Ten Things You Can Do Tomorrow to make a difference. No in the sense that it doesn’t substitute for a practice training program in terms of significant organizational rethinking, awareness, and change.
And as always in my classes, I’ll have a short section on Legalnomics, debunking all sorts of myths about legal economics, the business of law, measurement and mismeasurement, and so on.
More on Measurement
Rees Morrison waxes philosophical as he dissects positivism v. postmodernism in a post this morning.2 He notes, “Those who put metrics and benchmarks on a pedestal adhere to positivistic beliefs.”
I guess I’m not a positivist. I believe deeply in metrics, but I don’t believe in putting anything on a pedestal. Ideas — and especially metrics — must be examined deeply. The users must understand that all models are flawed, and that failure to recognize those flaws can lead to serious mistakes. Metrics are far more complex than many people are willing to accept (actually, Rees gets this as well as anyone), and they do not map reality very well.
However, that doesn’t mean the alternative is “don’t do metrics.” Rather, it’s “take metrics with many grains of salt,” and work to understand what they measure, what they don’t, and how those measures do or don’t line up with reality. Which, by the way, is another short section of my Master Classes, as I discuss how to use metrics effectively and honestly.
On the (Band) Wagon
A couple more names jump aboard the Legal Project Management train, via a podcast on project management and lawyers. They’re specialists on technology tools, which to my mind are valuable when used effectively… but not by any means the biggest issue in Legal Project Management. In fact, getting hung up on tools is a red herring; it can make a practice feel like it’s making progress because something tangible is happening, but there are numerous process and techniques issues that must be resolved first.
Still, some tools are extremely useful simply as a platform — e.g., a collaboration space such as SharePoint.
Giving at the Office
And the basic tool remains Microsoft Office, or its competitors. Yes, everyone uses Word (or Google Docs or whatever), but… do they use it effectively? I’m frustrated when I see legal professionals doing things the hard way in Office, where an hour of training would have huge productivity increases. Word is not complex in itself — anyone can type, even with two fingers! — but its capabilities are immense. It just takes a bit of guidance to unlock those capabilities, especially if attorneys don’t realize they’re there in the first place.
The capabilities of Office 2010 are advanced over those of previous versions. (I’ve been on the beta for almost a year, and wrote the entire book Legal Project Management using the Office 2010 beta.) Word and Excel have smaller but useful advances, but those in PowerPoint are dramatic, at least for people who present a lot and care deeply about the quality of their onscreen work.
So I was surprised this morning to see this press release about a company signed up to help Eversheds upgrade to Office 2007. It’s putatively Charles Christian writing in the Orange Rag, but it sounds like he’s quoting the press release. (If not, I apologize in advance, Charles.) C’mon, it’s Office 2010 time. Even in the beta, the only stability issues I had were with Publisher; Excel, PowerPoint, and Word were rock solid. (For some reason it didn’t upgrade my OneNote installation — I just realized that! — and I don’t use Outlook for other reasons. When I move to the release versions in a week or two, I’ll upgrade OneNote too.)
I was surprised that Eversheds, which is ahead of the curve in so many ways, was just now upgrading to Office 2007. Then I reread the press release, and got even more confused. You tell me: are they upgrading to or from Office 2007? They’ve selected a vendor “to assist with a Microsoft Office 2007 software upgrade.”
In legal most of all, wording matters!
1Matt cites a reference to testing web pages, at which Amazon is an absolute master. However, the term “A/B testing” goes back at least 45 years. I first heard it in the late 1960s when I was in college and working on the air in radio (both the biggest college radio station in the east and commercial I-can’t-believe-they’re-paying-me-to-do-this radio). The team would have two microphones in front of the DJ, or two sets of speakers above the control board, and would use patch cords to instantaneously switch between them. It was a great way to figure out which speakers gave the cleanest sound, or which DJs sound best with which microphones. The term probably predates that period.
2I played in a band where for a year or two our keyboard player was a philosophy major who, every time we screwed up a song, would say, “That’s as bad as a collection of logical positivists.” I was anything but a philosophy major, and I always knew I was missing the joke a bit. And the keyboard player’s post-rehearsal explanations of logical positivism went on for half an hour. Rees has the best short and practical definition I’ve seen. (I don’t know if it’s right, but it is short and clear.) I hope the keyboard player — I can’t recall his name right now — is doing well, and has found something that is more fiscally rewarding than either being a philosophy major or playing in a band with little hope of landing a recording contract!