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Transactional Legal Services

Four Considerations When Simplifying Transactional Legal Services

Microsoft announced in July that the company’s legal department is planning to move 90% of its outside legal work to fixed fees, retainers, and similar arrangements—anything but the billable hour. Deputy general counsel David Howard identifies a number of factors driving this change; a desire to work more closely with outside counsel, create incentives to work more efficiently, and save money, or as Howard succinctly puts it, “get (and give!) more value with our law firm relationships.” Microsoft isn’t alone in moving away from hourly billing. At GlaxoSmithKline, the billable hour is pretty much extinct.

Working more efficiently means changing how work is done, and Microsoft recognizes this:

“We’ve learned that simply comparing the billing rates of different firms doesn’t tell us very much. Firms which work less efficiently usually cost us more, even if their billing rates are lower. Competing on the basis of a fixed fee or similar alternative fee permits a true apples-to-apples comparison.”

The reason that just minimizing hourly billing rates doesn’t really accomplish anything is that it doesn’t change how work is done. No one will be willing to find more efficient ways to do work if you leave the old incentives in place, and as Richard Susskind puts it in Tomorrow’s Lawyers: “Hourly billing is an institutionalized disincentive to efficiency.”

One of the primary ways that people work more efficiently is by using tools, and the modern tool of choice for many different kinds of work is software apps. Here are four things to look for in apps for doing transactional legal work more efficiently.

Is The App Versatile?

Businesses typically deal with many different kinds of contracts. Microsoft, for example, deals with acquisition agreements (for LinkedIn, Skype, Nokia, and others), IP license agreementssettlement agreements, and probably many more.

When choosing a contract drafting app, the question is how well the app handles the endless variety of contracts that exist in real-life legal practice. What kinds of contracts can the app handle? The ideal, of course, is all of them. (Most lawyers, and certainly most clients, think not in terms of a list of contracts that might fit a particular set of circumstances, but rather on just getting the deal done.) Does the app take the Model T Ford–approach (any kind of contract you want as long as it’s a nondisclosure agreement)? Is the list longer than that? If the contract isn’t on the list, is the expectation that you make a support request if you need to do anything a little out of the ordinary?

Does The App Align With Your Mental Model?

There’s a concept in cognitive psychology called a “mental model” that made its way into user interface design in the 1980s (thanks in large part to The Design of Everyday Things by Don Norman). The idea is that people generally make decisions and otherwise get work done based not on a complete, detailed, well-structured understanding of a task, but rather on a mental model of the task that’s incomplete, fuzzy, and confused. Good, bad, or indifferent, mental models are what people use to get work done, so it’s best if tools (software included) fit people’s mental models.

Judging by the way contracts are typically put together, the generally accepted mental model of a contract (in broad strokes) seems to have been settled by the 1960s (or earlier). When you look at a contract from the 1960s, you see numbered paragraphs, cross-references that use these numbers to specify paragraphs, and important concepts (often set off with quotation marks or text formatting) that are defined in specific ways. When you look at a contract today, you see exactly the same things.

From the standpoint of choosing an app for working with transactional documents, the question is: Does the app fit the mental model that people have been using to create and understand contractual obligations for 50 years or more? At minimum, are provisions, cross-references, defined terms, and so on actually things in the app? Assuming these things are there, can you do anything with them? Can you create, remove, navigate, check, filter, and so on? Or does the app force the person who’s supposed to be using it for day-to-day work to forget this mental model and instead use a tedious questionnaire for everything?

Does The App Offer Visual Feedback?

Two of the most notorious failed technology products of the past five years are Windows 8 and the Amazon Fire (The Financial Times compared Windows 8 to “New Coke,” and Fast Company characterized the Fire Phone as a “debacle”). While a wide variety of factors contributed to the failure of these products, it’s notable that both products expected people to discover visual affordances (like buttons) that weren’t shown or even hinted at on screen. In Windows 8, these invisible controls were called “charms,” and on the Fire Phone, they took the form of menus and buttons that you could see only if you turned the phone or your head a certain way.

The takeaway here is that, for a tool to be useful for day-to-day tasks, it needs to offer visual feedback.

For contract drafting apps, the question is: Does the app show information, highlight potential problems, and offer controls within a document in an unobtrusive way? Or is what you see little better than what you would see if you were using a typewriter?

Can The App “Get The Deal Done?”

The goal of transactional law, broadly stated, is to “get the deal done”—but the fact is that transactional lawyers spend more time with contracts that aren’t done than with those that are. While a contract isn’t done, there are business terms to negotiate, language to add and remove, numbers to confirm, things to double-check, and so on—usually several times in an unpredictable, nonlinear process.

How does a contract drafting app deal with a contract while a person is making changes to it? Does the app keep up automatically? How long does it take to get updated information? Milliseconds count here: Research on human cognition indicates that 0.1 seconds is the upper bounds of “instantaneous,” one second is perceived as a distracting hiccup, and 10 seconds are about as long as people are willing to wait before they move on to something else. If the app doesn’t keep up automatically (or close to it), does it essentially avoid dealing with change by outputting a onetime report based on the unlikely assumption that a draft contract isn’t going to change eventually?

Major companies are realizing that change needs to occur to ensure they are making the most of the time and resources available to them. Using the right tools can greatly increase the productivity and efficiency of a legal practice. Knowing what to look for and what the technology will be used for is the first step.

About Benjamin Whetsell

Benjamin Whetsell
Benjamin Whetsell (bwhetsell@papersoftware.com), is the co-founder of Paper Software. He is admitted to the bars of New York and Washington, D.C. Previously, he was an associate at Fried Frank in New York City, where he worked on financings, mergers, and fund structures for clients such as Bank of America and Goldman Sachs. He holds a BBA from the University of Michigan Business School and a JD from Columbia Law School.

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