This is a two-part post addressing quality in the practice of law. In the first post, I addressed the need for quality standards. In this post, I’ll address how I think we can begin developing quality standards useful across clients and firms.
In my first post, I explained the need for quality standards in the practice of law. Today, quality is left to each lawyer and each client to determine on an ad hoc basis. Rather than encouraging uniformly high quality legal services tailored to meet client needs at various price points, this practice has led, I believe, to a broad range of quality in legal services. Even more disturbing, quality does not translate to price. In some cases, clients pay very high prices for mediocre quality, in other cases they pay very low prices for very high quality, and in most cases the correlation (as I perceive it, since we don’t have standards or metrics) between quality and prices is inconsistent.
Out traditional explanation for not having consistent quality standards in the legal industry is that it is difficult to measure objectively something that is subjective. As I demonstrated in my first post, even things subjective can be measured with a relatively high level of objectivity. I don’t see any reason why we can’t bring quality standards to the practice of law.
Contracts without Standards
We can start with a favorite topic of in-house lawyers, contracts. Commercial contracts are the bread-and-butter and bane of in-house lawyers. An in-house lawyer may do a few, dozens or even hundreds of contracts each year. Those contracts may be all of one type, for example distribution agreements, or may comprise many types, including vendor agreements, non-disclosure agreements, professional services agreements, and so on.
Each lawyer brings his or her quality standard to each contract. Typically, the lawyer makes a risk assessment of the contract, compares that to the company’s risk tolerance and standards within the department or organization, and then devotes time to the contract process commensurate with that risk assessment. Generally, this process all happens within the lawyer’s head. When confronted with the next contract, the lawyer repeats the process. Over time, the lawyer hopefully develops some internal consistency in how she performs the risk evaluation. The lawyer in the next office, however, may also be consistent, but reach entirely different results.
When working on the contract, the lawyer again uses an internal quality system. She drafts contract provisions that seem clear to her and she hopes will be clear to her client. She drafts according to her personal preferences and experience. Having read a case recently about the importance of a well-written force majeure clause and the risks of a poorly drafted one, our lawyer revises the contract’s force majeure clause to match what she read in the article. She continues her review, revising the contract by inserting wording, modifying phrases and editing clauses to fit her personal style.
The completed contract is signed and filed. The client is happy, because the signing of the contract means it can move forward with the business arrangement. As time passes and no disputes arise, the client’s confidence in the lawyer’s skills grows, because the contract is serving its purpose. The contract is complex, of course, so when an issue does arise the business people consult the lawyer. Her counterpart in the other company’s law department left soon after the contract was signed, and his replacement is not familiar with the negotiating history. While he can read the contract provisions, he has no context for interpreting those provisions. Without real disputes, however, our lawyer’s client is satisfied and says that she does quality work.
Quality Standards for Contracts
Let’s imagine a different situation. Our lawyer’s first task is to evaluate the contract according to pre-defined risk standards implemented by the law department. The standards have been reviewed and approved by the department lawyers. They based the risk evaluation system on the company’s system, so clients will find it familiar when the lawyers discuss risk with them. Each lawyer who joins the department receives a policy explaining the standards and how to apply them. The policy contains examples from the contracts typically received by the department. After studying the policy, the new lawyer is given a test during which he evaluates contracts according to the standards set out in the policy. Other lawyers review the results and explain where their evaluations differed from those of the new lawyer. This process continues as the lawyer receives and evaluates actual contracts submitted for law department review. After a short period, this step ends because the new lawyer’s evaluations match those of his colleagues.
The law department prepared its risk standards based on the company’s overall risk process. By doing it this way, the law department avoids creating a risk management process separate from the company and at the same time establishes a way of discussing risk that allows lawyers and business people to share a common terminology. The risk map might look something like this:
The lawyers would measure financial, operational, and reputation risk along with the probability of the risks being realized. Placement on the map indicates the overall risk level to the company and guides the lawyer to the path to take for reviewing the contract.
Now that she knows the risk for the contract, our lawyer can compare contract provisions to the department’s playbook. The playbook indicates which contract provisions are important at specified risk levels and gives the lawyer guidance when negotiating those provisions. When the lawyer reaches the force majeure provision in the contract, she remembers the advice she read recently in an article. She prepares a new force majeure provision for her colleagues to review and sends it to them with a copy of the article and a brief explanation of why she is suggesting updating the playbook. If there is a consensus, she will use the new clause in the contract. If not, she will wait for a consensus before using the clause. This improvement process ensures that one lawyer doesn’t get ahead of the department, while at the same time encourages continuous improvement.
As she moves through the contract, our lawyer pays more attention to the critical clauses and the drafting clarity. In several instances, she understands the provision, but believes the drafting is complicated and will make it difficult for the business people to accurately implement the contract. However, before making changes she copies each clause and pastes it into a readability calculator. The calculator, which uses the widely accepted Flesch-Kincaid Grade Level scoring system, returns a 12th grade level reading score for the first clause she checks. Although that indicates someone with a reading comprehension at the 12th grade level should be able to understand the clause, the department lawyers know that is deceptive. After extensive discussion, the department agreed to use a standard of 8th grade for general commercial contracts. The department found that contracts drafted at that level resulted in very few interpretation questions coming to the law department (a nice work reduction) and even fewer misinterpretations and disputes. (A 12th grade score for many legal documents would be pretty good. A much higher score is not unusual. This blog post has a 10.2 score. The Harvard Law Review typically scores in the low 30s. The scores can go down to -3.40, though even children’s books seldom score this low. An exception is Dr. Seuss’ Green Eggs and Ham which has a -1.3 score.) After a few tries, she is able to bring the score down to 8.1 by simplifying the language, breaking up some sentences, and deleting redundant provisions.
Quality Brings Broader Benefits With It
The law department implementing these simple quality measures should see many benefits. Remember that variation is the most significant reason for waste, including poor quality. Reducing variation will reduce waste and improve quality. Our first step was to reduce variation when assessing the risk associated with a contract. By establishing a system through which contracts with similar risk profiles receive similar risk ratings, we have reduced waste. High-risk contracts will receive more attention, reducing the likelihood of disputes (and disputes that don’t go to court still waste many resources). Low-risk contracts will not be over lawyered. The playbook approach means that when contracts are revised, we will have greater consistency across contracts. Two lawyers reviewing contracts will go to the same playbook and use the same substitute provisions when making revisions. Finally, applying the Flesch-Kincaid scoring system to contract provisions will help us simplify drafting. Our clauses will be easier to read and understand, reducing the likelihood of misunderstandings, errors and disputes.
We can check whether we are receiving these benefits by using simple metrics. For example, we could track questions to the law department per contract and Flesch-Kincaid score per contract. The metrics will tell us where we are seeing improvements and where we have further work to do. The metrics also will give us a baseline against which we can measure future improvements. Over time, we will want to bring greater consistency to what we do, adjust risk levels, and continue to improve our drafting.
I recognize that contract drafting involves two parties. Sometimes, the other party will not agree to the changes you want to make. They may refuse to accept your force majeure clause. They may disagree with your attempts to simplify and clarify drafting. But, sometimes they will and in those cases you made progress. When you have difficulty getting the other side to agree, you can rely on some of the information you have gathered to support your arguments in favor of your changes. For example, having a systematic risk scoring system can help you demonstrate to the other party why the changes are important to your client. In addition, being able to show your client where the contract falls on your law department risk scale may help you get your client’s support for the change. Similarly, using the Flesch-Kincaid scale could help you demonstrate to the other party why your clause will help both parties understand the agreement and, hopefully, avoid disputes.
Don’t Let Perfect Come Before Progress
My goal was not to devise the perfect quality system for contract drafting. You may find (and I hope you do) better quality systems to use. I believe, however, that we can apply quality metrics to legal services. Doing so, will help all of us reduce waste, improve quality, and establish a more objective framework for measuring the impact of innovation on the delivery of legal services.