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Measuring Legal Service Value, Part 1

If you work at a law firm, how good is that firm? If you’re a client or potential client, how good are the different legal services providers that you might choose to patronize?

It’s too difficult, at present, to answer these questions in an objective and reliable way. This is most obviously true for individual people with legal needs. They generally confront a mysterious landscape populated with apparently indistinguishable law firms, as well as proliferating alternative sources of legal services.

However, even experienced corporate clients, and lawyers themselves, lack solid information about the respective merits of different legal service providers. To evaluate quality, they must often rely on opaque, methodologically suspect rankings or else anecdotal impressions of firms.

We need better ways to quantify and compare the value propositions offered by different providers of legal services. This column proposes a definition of legal service value, and next time in this space I’ll propose and categorize metrics for quantifying it. A detailed paper on these topics is available here.

Elements of Legal Service Value

There are four types of value offered by a law firm:

  1. Effectiveness Value means accomplishing clients’ legal goals and protecting clients’ legal interests. In litigation, this can mean maximizing (or minimizing) the award or settlement, or minimizing custodial sentence in a criminal defence matter. In uncontested matters, effectiveness means accomplishing the client’s legal goals, and minimizing all associated risks, to the greatest extent permitted by law and the client’s instructions.
  2. Affordability Value: More affordable legal services cost less. The way a firm structures its prices— for example by offering price certainty or deferred billing — also affects the affordability value the firm offers.
  3. Client Experience Value: Legal services are more valuable when they have a more favourable impact on the client’s time and the client’s mental state. Timeliness, communication, and understanding of the client’s life and/or business are valuable in and of themselves. If two firms are equally effective, and equally affordable, the firm that creates a better experience for its clients offers better value.
  4. Third Party Value: In addition to the client, there are various others who can be affected positively or negatively by a legal service and the way it is performed. Firms that create access to justice through pro bono work, or contribute to social goals like diversity and the rule of law, offer better value than those that do not.

The aggregate value offered by a service provider is represented by the space occupied inside this figure. The greater the area, the greater the total value offered by that firm.

The Value Profiles of by Different Firms

Different providers of a certain legal service (e.g. an initial public offering, or representation in an employment law dispute) have strengths and weaknesses in different elements of value. Quantifying elements of value separately, as this model seeks to do, allows consumers to make well-informed decisions, based on differing individual sensitivity to price and different aspects of value. Unlike rankings, this method can help consumers who are hunting for bargains, or those who are interested in results above all else.

The “All About Results” firm is the best of the four at getting the job done (high effectiveness value). The “No Frills” firm offers great affordability but modest scores on the other three elements of value. The third firm is “Service First” – its effectiveness and affordability are mediocre but it offers an outstanding client experience. Finally, the “Model Citizen” firm offers wonderful contributions to social goals backed by solid, if unspectacular results on the other three elements of value.

How to Quantify Value? 

This framework is of little use unless it can be filled in with real numbers. What data would quantify the extent to which competing legal service providers provide different elements of value? Next time in this space, I will consider output metrics, internal metrics, and input metrics – practical ways to measure and compare the value offerings of different legal services providers.

This blog is based on a working paper entitled “Measuring Legal Service Value,” which is available at http://ssrn.com/abstract=3144771.

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