What If Lawyers Were Rewarded For Speed?

‘I feel the need, the need for speed!’ Tom Cruise exclaimed in Top Gun, but do lawyers and their clients feel the same way? And if they do, can we make a system that rewards quick work?

First, does speed matter?

In many areas of life speed matters a lot. Concorde cost a lot more than usual aircraft at the time precisely because it could get you from London to New York in just under 3 hours. Google’s search query responses are almost instantaneous, if you had to wait 10 minutes for a response would it be the leading search engine? Knowing that X restaurant on Uber Eats can get your food to you in 15 minutes rather than 45 may well be the difference between choosing that provider over another. While if a doctor took a few months to tell you what you were suffering from (and thus able to find a remedy), rather than hopefully a day or so, then people would not just be upset, there would…well, there would be less people.

So, yes, speed clearly matters to us for a host of reasons. But, do people want legal work to be completed faster?

Again, the answer has to be a resounding: yes. Have you ever met a client that said: ‘Don’t worry how long the deal takes, the company and its investors are in no hurry at all to get on with running our business, we love just waiting around for the legal work to complete. Please, take as long as you like’ ? Probably not.

What you may have heard is: ‘Look, we know this is super-critical, so please take the time you need.’

But, that’s not the same thing. People understand that legal work, especially on complex matters with multiple parties, takes time, and rushing, i.e. moving so fast you may make errors, is not a good idea.

And yet, if the same or better result could be achieved, i.e. risk levels were the same or lower, and the legal part of a transaction could happen much faster, wouldn’t clients leap at it? Of course they would.

People Power

So, until fairly recently how did law firms move faster, especially when there was a client need to really get something done as quickly as possible? The answer: put more lawyers on the job.

This is where is gets especially interesting. Let’s say a deal has a component, perhaps a doc review task, that will take a single junior associate about 100 hours to do. You can accelerate the speed of delivery by putting more such lawyers on the job. Let’s say we add four more. So, five lawyers working on 100 hours’ worth of work = 20 hours each. In short, between them the work will be done much faster.

Now, the money. It’s often assumed that by throwing more lawyers at a task you not only get the work done more quickly for the client, you make more money. And surely if five associates work on a matter you make more profit than if one did?

Well….nope. In fact it’s the opposite.

Five associates do 20 hours each, so let’s say the task is finished in a very intense day and a half. Yet, together the same number of billable hours have been clocked, namely 100 hours that you can bill the client. So, more ‘leverage’ here has not made you more money at all because the discrete task has limits and once the job is done, that’s it.

In fact, one could argue that the cost to the firm of having five associates generate 100 billable hours is higher, overall, than the cost of one doing so. You’ve also dragged those other associates away from new work projects they could have been helping with, thereby reducing the total possible throughput of the firm, i.e. the ‘total legal work capacity’.

Adding Technology To The Mix

Now, let’s add legal tech to the mix. The solo associate can now do the 100 manual hour task in 80 hours, i.e. the tech solution (whether AI or anything else) has provided a 20% efficiency gain.

But, it’s also just lost the firm 20 hours’ worth of billable hours on that discrete segment of chargeable work.

Sometimes that loss is worth it. Billable write offs can be massive across a large firm so the occasional write down may be negligible, plus to keep a big client happy maybe it’s worth it to go faster like this when they really need it.

But, generally this idea will never catch on as an overall approach with the current model, primarily because if this approach is applied to ALL billable work, then the firm is simply making itself less profitable per matter – and also paying a legal tech company for the privilege of making less money. I.e. a double whammy.

One could also say that it’s not less profitable in absolute terms, rather it has not realised some of the additional profit it could have achieved if everything had been done as manually as possible, i.e. via the current model. That is to say, expectations here are key.

It’s worth repeating that bit. Tech didn’t make the work less profitable in itself, but it prevented additional time-based profit from being billed because the work was done more quickly. It depends if you see a world where tech plays a central part in legal production or not.

Rewarding Speed

There are two ways to approach this dilemma:

1. Make absolutely sure that you don’t use any tech in billable work that will really make a difference in terms of completion time. On face value and perhaps based on expectations up to about last year, this is the most sensible option if you remain wedded to the old model. After all, if you were the managing partner of a law firm would you demand the firm made less profit by using tech to trash your time-based billing model? Nope, probably not.
2. Or, and especially since 2024 with genAI changing expectations, one can come up with a new way of dealing with the emergence of greater speed derived from technology. In short, reward speed instead of penalising yourself for it.

In several areas of the economy speed is rewarded. Take civil engineering. Many large projects have terms set out that reward the engineering companies for finishing early, for example.

How can we bring this approach into the legal world? You could encourage a system where clients paid a special bonus to a law firm for its speedy delivery. E.g. a due diligence exercise completed in a month gets $X, but every day you achieve that goal sooner you get $X-plus a special bonus.

But, that puts a lot of pressure on the clients to come up with novel fee structures for everything they need a law firm to do.

There is a much simpler way: fixed fees (also known as scoped fee, the key part is that the target price is set out and agreed by both parties before work begins. Plus, there can be caveats built in for over-runs, exceptional items, and other contingencies.)

A fixed fee implicitly drives speed – and also drives higher profits (unless there is a major unforeseen cost overrun that the client will not accommodate – which is why the billable hour is so favoured in a tech-less production environment, as it puts all the financial risk on the buyer.)

If a client and a law firm agree on a fixed fee, which could be based on billing data for a similar piece of work, or perhaps the firm can demand an ‘imaginary’ fee that they feel compensates them sufficiently, then no matter how the fee has been calculated the firm now many good reasons to move as fast as possible.

Why?

1. The faster they complete that billable task on a fixed fee using tech the sooner they can get on with other billable tasks.
2. The faster they complete that billable task on a fixed fee using tech the more profit they make relative to the profit they’d make if it were done on a billable hour, which is to say done via a traditional associate leverage model.

Look at it this way: a law firm agrees to do a task using one associate that will take them 100 hours. That translates (in a perfect world) to 100 billable hours. Because that work is not ‘machine-assisted’ it cannot be done faster.

So, there it is: 100 billable hours. During that time the associate cannot do anything else; they are wrapped up in that and cannot produce any other profit for the firm. So, a piece of work worth 100 hours occupies 100 hours of a lawyer’s time. OK. Next step.

Now, the job that is worth 100 hours is done in 80 hours with the help of some tech, but the fixed price is the same as that generated from all the prior manually billed hours, i.e. the fixed price is modelled on a previous job estimate. The firm now profits in multiple ways:

1. They’ve just made 100 hours’ worth of work in 80 hours. I.e. you made more by going faster.
2. The associate can now be deployed into billable work elsewhere more quickly, perhaps using the same approach, i.e. this associate is now 20% more profit generating than before. In fact, all the fee earners are, if they can bring tech into their work.
3. The firm as a whole now can now handle more work with the same number of fee earners, i.e. even more total revenue with the same number of lawyers, which in turn leads to even more profits.

Conclusion: going faster is more rewarding. All you need to make this formula work is legal tech that can make a difference and both the client and the law firm’s willingness to agree to a fixed/scoped fee.

Now, is that so difficult?

Richard Tromans, Founder, Artificial Lawyer, Jan 2025