fivehundred magazine > Interview with... > James Segerdahl: Price is a poor proxy for quality or value

James Segerdahl: Price is a poor proxy for quality or value

K&L Gates’ global managing partner on the influence of legal tech, alternatives to the billable hour, and what business drivers are critical to clients

How is technology changing the way you meet client needs? Which areas will be most affected by new tech?

We have sought to be very proactive in utilising technology to meet client needs because it is a key vehicle for delivery of value to clients. Much of the focus in the business of law is rightfully on the impact of artificial intelligence (AI) and blockchain.

Like many firms, we are using and developing AI technologies to automate repetitive tasks, such as document review and management, to complete work faster and reduce the risk of error. At the same time, blockchain solutions are coming online to replace traditional ledger-based tasks like security ownership, real estate titles, etc., while also creating self-effecting ‘smart contracts’.

Building on our pioneering experience as an early leader in e-Discovery Analysis and Technology (e-DAT), we continue to be at the forefront of technological development including, for example, our role as a co-developer with a leading global technology provider of its recently-launched, industry-wide interconnected platform that combines knowledge management, project management, price modelling, billing data, and matter mapping capability. We also have invested in our own internal, private, and permissioned blockchain, placing us among the first firms to begin implementing the technology, which we will expand and leverage across our globally integrated platform.

How do you differentiate your offering in an increasingly crowded and competitive market?

We do what we do best. We focus on our clients in everything we do. We are a highly integrated and collaborative global law firm with a multi-disciplinary client focus built to deliver solutions and results that clients need in order to grow, manage, and protect their businesses.

We serve clients in a variety of industry sectors, with particular profile in energy, financial services, healthcare, manufacturing and industrial, and technology. Our practice and geographic reach is extraordinary in its focus on seamless service, solutions, results and delivery of value.

What innovation have you introduced that has added the most value?

For us, innovation extends far beyond technology. We find that the most valuable asset is our culture of supporting innovation. Our client-focused teams include human-centred design practitioners who help us better understand our client service needs to develop and deliver creative, cost-effective, real world solutions. Our team also includes certified change management specialists who work alongside our clients and lawyers to drive innovation and continuous improvement.

These tech-savvy professionals work hand-in-hand with our lawyers and clients, using legal project management and process improvement techniques to address all facets of our service delivery and operations. Through this partnership with our clients, we have elevated the way we collaborate, escalated the speed at which we can develop and deliver solutions, and enhanced the security of valuable legal platforms and data.

To promote adoption of our innovative solutions over the past couple of years, we have featured a hands-on and interactive line-up of new and emerging technologies, products, and ideas at our global partner retreat, all designed to add value to clients in the course of our delivery of legal services. We call it the ‘Avenue of Innovation’. Our partners love it. It has been an extraordinarily valuable and engaging way to pilot, educate, and develop best practices for the benefit of clients. It helps meet the threshold challenge – firm-wide education about the resources that our firm, and the fertile minds across our platform, have in the works and in practical use that are available to enhance and improve our service to our clients.

What have been the main changes in the way you charge for your work in recent years? What percentage of work is charged out with alternatives to the billable hour?

In many markets, the billable hour as a foundational piece of the billing approach is far from dead – many clients prefer the familiarity and straightforward manner of this form of pricing, at least as a base. Having said that, there are some parts of the globe where the billable hour is on its last leg, if not yet deceased.

In all markets, alternative fee arrangements are here to stay, and will only increase on a percentage basis as time goes on. We don’t try to break down the percentage in any precise way; there is too much overlap these days for that statistic to be particularly meaningful. We believe it is in our interest, and in our client’s interest, to be open and creative regarding pricing strategies that can be mutually beneficial. This means our lawyers have to get better at legal project management through a culture of continuous improvement. For that reason, we have invested in education and training in that discipline, and this pays off for both the law firm and the client, and is increasingly a skillset that clients expect to see from their law firm.

The rise of legal operations has increased law firms’ focus on metrics and data – which metrics are clients most focused on now?

Clients are increasingly recognising that pricing of legal services is a poor proxy for quality and even less of a proxy for value. They need to justify their outside counsel spend relative to their budget and the value that the client receives from that work. The actual metrics can vary by clients, who often have an internal scorecard that compares their internal ratings of complexity and risk or value.

We are often asked how efficiently we are managing the work (e.g. days a file is open and number of timekeepers involved), the appropriateness of our staffing as compared to the client’s perceived complexity (e.g. leverage), and what other services/value we offer (e.g. CLE programmes).

Finally, we also see an increasing focus on objectively measuring diversity – not just our percentage of lawyers or partners, etc., but more granular evaluation of the diversity of our client service team makeup, in terms of either hours or fees as a percentage of our firm’s total for that client. Here, as in all other aspects, the key for us is working with our clients to understand what business drivers are critical for them and how we can help deliver our service, and monitor our own performance along the way, to help the client achieve its quantitative benchmarks.