Flat Fee Nation
As Managing Director of South Carolina-based Rogers Townsend & Thomas ("RTT"), Carol Cummings is faced with a simple but brutal mandate – leverage or perish. She must efficiently maximize the resources of the firm to ensure its profitability and productivity. Cummings’ job is getting harder, though, since two of the firm’s three divisions have been forced into accepting flat fee payment for their cases. RTT is feeling the pinch of pressure from clients to fix their fees, more evidence to the fact that the emergence of a Flat Fee Nation is in full swing.
According to Cummings, "The big question for firms with flat fees is how are we going to make money while also meeting the ever-increasing demands of our clients? Both the Default Services (Foreclosure) and the Real Estate/REO (Real Estate Owned) departments have gone to full or partial flat fee billing now, meaning that the same amount of money will come in for each matter, regardless of the time spent completing the work." Cummings observes that RTT is not alone, but is one of many firms adjusting to a national shift in the law firm billing paradigm to flat fees. Clients are trying to contain their spiraling legal expenses by fixing fees and law firms are figuring out how to survive despite these requirements.
The big squeeze takes place when clients demand flat or capped fees from their lawyers while at the same time firm’s are forced into paying higher salaries to incoming associates to compete with their peers to hire the best talent. With profit margin per matter declining and expenses increasing, it’s clear to see that firms have a major problem to address in order to sustain their businesses and to compete against other firms.
According to Cummings, the key to maintaining profitability in RTT’s flat fee environment is to streamline workflow and effectively use technology. The firm hired an outside process engineering consultant to observe their business processes and make recommendations on how they could increase efficiencies. The firm has since established a Technology Project Team, a division of their IT department dedicated to doing workflow analysis, supporting applications, troubleshooting and process advising.
Cummings remarks, "Unless you have your process systematized, you cannot survive and you cannot make money – it’s that simple. Gone are the days of divergent costs and unlimited hourly billing. We make money on volume. Just like Wal-Mart, we make a little bit of profit on everything, but since we’ve gotten smarter about how we work, we can handle more volume to make up the difference. We have automated every stage as much as possible. Any cases that have exceptions or are complex in any way and cannot be run through the standard process are immediately routed to the Exceptions team so they can be escalated to the attorney level right away."
From a technology standpoint, RTT relies heavily on its matter management software, LawBase, to be the central backbone of the workflow process. RTT assigns tasks to the person with the lowest skill level required to complete that project piece. Generally, the most expensive time is that of the attorneys, so that time is conserved as much as possible. Staff members enter data into LawBase and move the process along, preparing the material for various "touch points" at which point the lawyer will review it. Work is done simultaneously if at all possible – multitasking is critical. For example, when the Abstractor is in the field doing the title search, the Complaint team is busy at the office preparing the Complaint.
RTT is one of only two firms in South Carolina that is designated counsel for Freddie Mac. As such, they are under enormous pressure to keep that designation. Maintaining expected timelines is critical; Freddie Mac gives them a certain number of days to get the Complaint on record. The firm is compared with other vendors to meet this timeline. If RTT cannot perform, they could lose their designation.
Cummings says, "Our Complaint team uses HotDocs Document Assembly Software and LawBase to generate the complaint. Since complaints are pretty standard, we have built a HotDocs template for them and the necessary information is imported from the LawBase database to populate the complaint form. Once the Complaint Team has prepared the form, this is a ‘touch point’ at which the attorney will review the prepared complaint. At this point, the complaint is done; the lawyer reviews it for accuracy, to ascertain that nothing is missed from the records provided."
"They key here," Cummings continues, "is that the information is all entered into the LawBase system correctly. Then the data can be pulled out of LawBase into HotDocs. The success of this system is predicated upon accurate entry by our support staff into LawBase so the data is perfect."
While the Complaint Team is busily preparing the Complaint for the attorney’s eyes, the Abstractor is executing the title search on the property. With 2000+ abstract orders per month on average, RTT has a network of abstractors across the state. By equipping each abstractor with PCs, scanners, DSL lines and connection via Citrix, the abstractor scans in the title information with an encoded cover sheet so the document routes directly into the firm’s iManage Document Management System. This process used to take several days, but now the use of technology enables them to achieve same-day delivery. Currently the title documents are written by hand, but Cummings explains that they are working on a system whereby the abstract document can become a template that auto-populates the LawBase system.
Once the Complaint is submitted and the Title report has been received, the next step is the Service documents which are prepared by staff for another attorney touch point, and the process continues. Cummings said that RTT’s system is an example of the lengths that today’s firms have to go to for survival and success. "Technology and workflow are our best weapons in the battle for endurance. By focusing efforts on maximizing and integrating our technology, we can stay in the game – and win it."
Traditionalists will likely balk at the thought of law firms aspiring to be more like Wal-Mart in any way. However, by pushing technology to its limits and tasking internal staff to enforce the process, firms like RTT are living proof that adopting a business model of efficiency and process standardization can be a proven road to success in a Flat Fee Nation.