Recently, 3 Geeks and a Law Blog invited readers to suggest basic processes that law firms are really bad at. The responses they received are on display in this post, and two caught my eye:
Maintaining Practice Group Forms
One of the things that firms still struggle with is managing forms. It was something that has been discussed for years (decades?), but we still have problems assigning responsibility to maintain standard forms and best practices. The main issue revolves around getting the attorneys to review the forms from time to time. Even when a system is set up, it quickly gets out of date because of the lack of action on behalf of those that benefit the most by having a good forms database. So simple, yet still not happening.
Bad Document Management
Documentation is such a HUGE part of the practice of law yet so many firms still struggle with templates and forms. They start with “Should we even bother to use templates?” when meanwhile hours are being wasted with dupe and revise documents gone corrupt, or the user who *wants* to use styles but builds them piecemeal into each document, individually. Or the firm invests in a really nice template suite but no one uses it. These documents are the bread and butter, the work product, the piece de resistance if you will; yet so many firms (eh hem, decision making attorneys) put next to no effort into knowing how to create, edit and manage them.
These responses will come as a surprise to no one: the landscape is littered with the rusting hulks of law-firm template initiatives. Below I consider why that is, and whether that might change.
Here are five reasons why many (most?) law-firm template-contract initiatives die aborning.
Poor Economies of Scale
Compared with companies, which tend to have a limited number of templates that they use repeatedly, law firms tend to draft a broad range of contracts. Furthermore, what they will be called on to draft at any given time is unpredictable—it depends on what business walks in the door. So unless you’re a law firm that can count on drafting a certain kind of contract many times—unless, for example, you’re Wilson Sonsini doing Series A preferred stock offerings—it can be hard to justify the investment required to implement and maintain a template initiative.
The Billable Hour as Disincentive (One)
As long as a law firm bills by the hour, the efficiency offered by a rigorous template initiative would seem to work to the law firm’s disadvantage.
The Billable Hour as Disincentive (Two)
As long as lawyer performance is measured primarily by how many hours they bill, lawyers will be reluctant to sacrifice hours for the greater good by working on a template initiative.
A Dearth of Expertise
Compiling a template that ostensibly contains optimal substance expressed in optimal language is very different from tweaking and recycling precedent contracts of questionable quality and relevance. Doing deals doesn’t by itself qualify you to compile templates.
It’s commonplace for law-firm partners to be most comfortable sticking with the way they do things. As a result, it’s routine for an associate to be asked to use one precedent contract to do a particular deal for a partner and to be asked to use a different precedent contract to do the same kind of deal for another partner. That attitude isn’t conducive to the centralized approach required for a successful template initiative.
Enhancing the prospects of law-firm template initiatives would require that something change with respect to one or more of the above factors. I suggest that the most likely agent of change is use of document-assembly software to draft contracts. (I use ContractExpress.)
More specifically, document assembly could prompt law firms to reconsider the notion of the billable hour as an obstacle to efficiency. For one thing, law firms might realize that since, invariably, they don’t collect on every hour of time billed on contract drafting, using document assembly to draft contracts more quickly would allow law firms to reduce the amount of time they write off. Furthermore, for busy law firms, using document assembly to draft contracts offers an opportunity for premium billing while still saving the client money.
And more generally, the notion of profiting off of inefficiency is unseemly, and perhaps untenable in the long run.
But the greatest scope for change would come from rethinking the role of economies of scale. It makes no sense to have law firm after law firm implementing and attempting to maintain templates for standard kinds of contracts. The substance of such contracts and the language used to articulate that substance should be commodities: there is no secret sauce. It would make sense to outsource the task of implementing and maintaining document-assembly templates. In other words, it would make sense for law firms to get out of the template business.
That reality is increasingly being acknowledged, but so far what has been offered by bar associations and by the major legal publishers is inadequate. Of course, Koncision Contract Automation‘s confidentiality-agreement template offers a glimpse of what document assembly can do, but Koncision won’t be adding any content until someone expresses an interest in financing further work. It might be that the best hope for progress is trade associations. Watch this space.
9 thoughts on “Yes, Law Firms Do Have a Hard Time Maintaining Template Contracts”
Or it might be that the best hope for progress is the crowd. 😉
Great post. A top-down, firm-level shift in drafting practices seems challenging for all of these reasons: habit, techno-phobia, the billable hour, high setup/maintenance costs, and the “fiefdom” mentality.
Hopefully, the templates-as-commodities model gains the universal following it deserves. The best way to get there may be for individual lawyers – particularly junior associates – to take responsibility now for their own drafting efficiency.
Even at full-service firms, individual lawyers tend to specialize and perform repetitive drafting work well-suited to templates. So, become immersed in the technology. Buy automation software on your own dime if your firm won’t pay for it. Maintain your own clause library. Share it with others. You will do better work faster, and it will show.
As they move up the ranks, lawyers who take this path can evangelize and drag those around them into the more sensible “tomorrow” you describe here.
I think that the way that inside counsel can make this worthwhile to outside counsel is to add something to the list of things that they refuse to pay for (like secretarial work and faxes).
To make it work, you would have to break the first phase of contract drafting assignments into two phases:
– Phase 1: Present me with a generic form that has not be customized to my deal, but is of the same general class as my deal. For example, if this is a settlement agreement, present me with a form settlement agreement without any of our negotiated terms. If you are going to be writing me a alliance agreement, present me with a form alliance agreement. The form must meet my standards of draftsmanship and I am not going to pay for the time needed to fix bad draftsmanship — I don’t pay for defects. I’ll tell you what those standards are in advance. If you have invested in your forms — or even better, in automation — this should be a trivial task for you. If you have not, don’t blame me for your lack of foresight.
– Phase 2: in this phase, we will work to turn your form into something specific to my need. For example, we will make the agreement reflects negotiated points in a negotiated deal. Or we will adapt your well drafted form to match up with my new product line, which is what the form needs to cover. This part is full price.
What do you say?
Here is what I think:
1. Most drafting in law firms happens in M&A. As a seller, while I could easily get an M&A firm to agree to this approach for an M&A deal, I would never start out a key relationship this way. As a repeat buyer, I would embrace this approach, though.
2. Inside counsel have no incentive to do this. Contract drafting is our bread and butter. We turn to outside counsel because they are specialists in substantive areas. If we needed good drafting, we would do it ourselves. Among other things, our salaries are generally a lot cheaper per hour than an outside lawyer’s hourly rate.
If a law firm has its act together sufficiently to meet your requirements for your phase 1, they might as well do a bit more work and automate the process, so that instead of giving you a static document they invite you to complete a document-assembly questionnaire with them. Presumably you wouldn’t mind paying a premium rate for the half hour or hour that the process takes.
And what do you mean by “inside counsel have no incentive to do this.” No incentive to do what?
Implementing formal template systems at larger law firms will only end in tears. But these law firms already have a pretty good informal template system in place. You need a NDA for a potential real estate transaction? Contact Janet Smith, explain your particular need, and she’ll have a form emailed to you pretty quickly. You want an uncomplicated software license? Dave Brown is your guy.
When I worked at a law firm, I found the informal system to be more flexible as it resulted in documents that reflected practice area requirements better (an NDA for an investment is not the same as an NDA for an evaluation of hardware) and were more up to date (Janet Smith can update her form easily to reflect the current state of the world; the firm template? hey, check out what they put in a form in 1998!).
Templates probably work better in small practices where a practitioner does not have access to someone down the hall. And, of course, better drafting principles apply to us all.
What is the essence of contract drafting automation? Checklists plus a library of template provisions? Where is the best explanation and defense of document assembly software? Is there an honest case to be made against it? Is everyone who refuses to run out and buy it either (1) a self-interested knave seeking to gouge the client for unnecessary fees or (2) a fool who cannot see his own self interest?
I’ve made the same pitch for document assembly annoyingly often, perhaps most recently in this article.
Assuming that one has overcome any cultural impediments, the basic question facing anyone contemplating using document assembly is whether the cost (in terms of time and technology costs) is worth the benefit (increased speed, efficiency, and control). Basically, does your deal volume, deal value, and level of customization required from deal to deal warrant your making the investment?
Good post. As you know, firms also need to to do a better job in the basics of drafting documents. I just sent a note to my contact at a large law firm telling her how disappointed I was with the quality of a form they provided to me. The form was a basic indemnification agreement for directors and officers of a Delaware corporation, something I think most major corporate firms should have pretty well perfected by now. But apparently that’s not the case.
Here’s the message I sent:
“I decided to use a different form of indemnification agreement. I tried working with the one you sent me, but after spending a couple of hours trying to make it work I decided I really didn’t like the form and it was taking me too long to fix it. I didn’t think it was well drafted at all. It wasn’t just the (in my opinion) somewhat antiquated drafting. There were some provisions I didn’t think worked very well, and the document just didn’t seem well organized to me. I was able to find another form through the Association of Corporate Counsel that originated from another large firm that I thought was a better starting point. I took the recitals and a couple of definitions from your form, but the end result is going to look quite a bit different. I think it covers all the same points, but in a way that, at least to me, is easier to understand and better organized. ”
My guess is that the firm has used this form many times, but their clients have just accepted it and haven’t taken the time to actually read it and try to understand it. The form from the other big firm also needed quite a bit of work, but at least it provided a good framework. It’s obvious that the lawyers drafting these forms have never read “A Manual of Style for Contract Drafting,” but they need to. The firms won’t have any incentive to improve their forms unless we complain, so I think it’s important for them to get this kind of feedback.
It will be interesting to see what the firm’s response is.
I’d be interested to know what they have to say, if anything. I’ve found that law-firm partners are oblivious, or feign being oblivious: if there’s no easy fix to what ails law-firm contract drafting, pretend that everything’s hunky-dory.