The term ‘workflow’ has entered the lawyers’ lexicon to describe the development of a system to handle recurrent types of legal work. Many of us have personal and firm-wide workflow systems of some description for the areas we work on recurrently. Traditionally these have been paper-based. By migrating these onto information systems, their functionality is greatly enhanced.
The objectives in designing a workflow process in any legal arena such as litigation or in the commercial arena (eg due diligence) is to:
- raise efficiency and productivity levels
- provide a collaborative environment to interface with clients and other advisers
- provide better service to the law firm’s clients
- improve the business performance of the law firm through the lowering of cost
- increase revenue and widen profit margins
- increase management information and knowledge management
Components of Workflow Solution
The objectives are achieved via three components:
- Process: Traditionally known as ‘practice procedure’, this is the flow of work activity.
- Content: This includes tasks, guidance, precedents and forms.
- Functionality: The use of Internet and related technology to optimise the process by reducing manual and mental labour and facilitating the process.
In combination, these are bundled into a ‘workflow solution’.
Benefits
Litigation, debt collection, personal injury and some commercial activities (such as due diligence) particularly lend themselves to systemisation, as they typically involve a common process with complexity that benefits from guidance for the more junior staff (lawyers/paralegals) often involved. By standardising the process, greater consistency is obtained, improving the quality and consistency of service and reducing potential omissions and errors.
There is a plethora of ‘case management’ systems available which incorporate the ‘workflow’ principles which give rise to the benefits above. I do not propose to examine these as they are well known and accepted tools. That said, is it not strange that many non-contentious areas fail to make use of similar tools available? A commercial activity which remains unexploited yet and is an ideal candidate for the use of a workflow is due diligence. An effective due diligence workflow solution (indeed common to most workflow systems):
- provides a structure to guide the process, removing the chaos that often prevails
- takes care of much of the manual coordination usually required
- improves the sharing of data and knowledge, to optimise the performance of all teams – with different disciplines being brought together in an electronic forum, overcoming geographic and time differences
- provides a methodology and toolkit to assist lawyers to analyse the due diligence review and to assist them in extracting value from the review, and understanding what is extracted, by the various advisers in order to:
- draw conclusions to obtain competitive advantage both during and after the transaction process and
- assess the risks in making the acquisition/merger
- provides ‘information superiority’ – current information at all times, thereby improving negotiation advantage and reducing the risk of buying or encountering unforeseen liabilities.
Internal resources are therefore leveraged, increasing productivity and ensuring consistency and the capture of knowhow for subsequent transactions.
Due Diligence – The Client Collaboration
Clients and other advisers can be provided with access to specified sections of the workflow environment. This was first seen in the
All parties with access therefore have immediate access to the same information and documents. The material provided can be made personal to each user. For instance, the CEO of the client in an acquisition may only wish to see an overview of the status of the project. Each user can also be provided with their own secure section of the system where they can store information and documents privately.
| Figure 1 – Example of Preliminary Enquiries precedent,with guidance and entry fields linked to database for ease of identification as to which questions have been answered by vendor. |
Workflow systems can be used by the client before and after the legal matter has completed, and this provides opportunities for lawyers to become further involved in the client’s value chain. This enables a proactive approach by both lawyers and clients alike who therefore have a common point of reference. For instance, where the client has recurring legal activity, it makes sense for them to have a legal workflow system that is constantly being fine-tuned to their requirements. An example is an acquisitive company that would benefit from having a merger and acquisition workflow system set up ready to go with its lawyers, accountants and other advisers. Once an acquisition had been completed, the workflow system for that transaction can act as the management system for that business by virtue of the data that it holds.
The elements in a workflow system that add such value to a client create an opportunity for new revenue streams for the law firm – revenue that is not dependent on a lawyer’s personal attendance, or even direct involvement.
Workflow System Components in More Detail
Ideally, the due diligence process developed for the particular law firm or acquisitive enterprise will be combined with content and functionality to optimise performance, typically including:
- Tasks: A set of activities to lead the project (using project management techniques, where appropriate) and the activity of lawyers and paralegals.
- Guidance: Reference material to explain what needs to be done in relation to each task, its purpose in relation to the transaction and how it fits in with the activity (ie tasks) of other people involved. The experience of individual lawyers can be added to this on an on-going basis.
- Legal document precedents: Standard precedents that the firm wishes its personnel to use. Precedents can be loaded in formats to suit the law firm’s working environment, including word processing document format, a document assembly tool, or html entry forms. The experience of individual lawyers can then be collected over time to build documents and clause libraries.
- Analysis forms: To guide lawyers, paralegals and clients in their activity, analysis forms can be used. These can feed data into a database for easier reporting and analysis.
- Contract manager: A contract management tool can be used to allow lawyers or paralegals to schedule a reminder for activity during or after a transaction. This can be used, for instance, in association with Analysis Forms to remind the purchaser client and the lawyer of an upcoming key date in a document, such as a termination date. This ongoing service by the law firm after completion of the transaction adds value by the law firm and maintains their involvement in the client’s operational management of the target.
- Knowledge base: A searchable database of guidance, precedents, forms, tasks and related information is contained on the system. This can include a link to external legal and business databases to provide a wider range of information.
- Knowledge management: Where more than one person is working on a matter, their effectiveness and efficiency is enhanced through the sharing of knowledge. This is achieved through the development and management of knowledge processes that fit the law firm’s methodologies and culture, which are then deployed in the firm’s Mergers & Acquisitions workflow system.
- Managing data for analysis: In due diligence, data on the target’s legal affairs and associated documentation is acquired, stored and distributed. To ensure the availability of this data to all reviewing parties, some central management can be deployed – indeed this is recommended! Availability is enhanced by scanning documents and placing them on a central site for download at any time. Associated functionality can include search facility, OCR and the ability to make notes on images of documents.
| Figure 2 – Example of analysis form. |
- Reports: – the key findings resulting from the analysis. The output of the analysis of the due diligence teams is most effective if it is made available ‘in real time’ on an on-going basis rather than being aggregated until the end of the due diligence process. This allows the analysis to be shared with other reviewing personnel for their possible use. This is particularly useful in international transactions where a team in one jurisdiction can alert teams in other jurisdictions regarding weaknesses in target operations which may also occur in their territory. Reports can also be posted for negotiators and integrators on specific issues for their attention. Due diligence reports can be built up on an interactive basis, allowing the client and other advisers to absorb the information over time.
- Transaction documents: Each version of the transaction documents can be uploaded for viewing by those users approved for access to them.
- Workspace: Ability to create and upload correspondence and other documents and group them in folders for individuals, groups of team members or all team members.
- Timeline: Ability to track performance of tasks through a ‘digital desktop’ that highlights overdue tasks.
- Security: Ideally, data should be able to be encrypted and decrypted in accordance with users’ security preference. In this way, a user may choose to encrypt sensitive data such as loan amount but may leave the designation or title of the borrower unencrypted. Individual folders and documents can be subjected to encryption and access by named users.
- Monitoring: Ongoing use of the system after acquisition for integration of the target. This enables the law firm to continue to build the interaction with the client and observe the use of the information gathered hitherto. It also enables the client to be alerted as to the potential need for legal input.
Web Based
The Internet is the ideal means of providing access to a workflow system. The system might be hosted by the law firm or by a third party provider. In any event, it must be hosted in a secure environment.
If the system is to be used by people outside the law firm, it is best if the technology used is ‘Web based’, meaning that no software is required to be loaded onto their desktop. They can then use the system through their Internet browser. Although Web-based technology has been in use for a number of years, many law firms and software developers have not yet migrated their systems to it.
The Resources required to Develop Workflow Systems
Many of the large law firms in certain jurisdictions have been developing intranets with knowledge management and extranets or ‘dealrooms’ over the last few years, with large IT departments of over 100 personnel in some cases.
They therefore have existing systems into which they may wish to integrate their workflow systems. These systems might include:
- Document management
- Case management
- Knowledge management
- Financial management and time recording
- Communications (eg e-mail/voice mail messaging)
- Client relationship management.
Law firms are likely to wish for a third party workflow system to be integrated with their existing systems, and to maintain the IT elements of the system themselves.
Large firms are nevertheless recognising that the process content for the workflow is often best provided by a specialist legal writer who has already developed it. This process and content can then be fine-tuned to suit the individual requirements of the firm, costs of implementation and support are reduced by the provision of these ‘turnkey’ solutions integrated with existing systems.
Smaller Firms
For smaller firms, an application service provider service (ASP) will be more suitable, where the system has been developed and hosted by a third-party provider. In this way, the law firm need not become concerned with the technology but simply have it configured to their requirements. Usually they will require little more than a Web browser and user details.
What Next
Workflow systems in due diligence are likely to become a key differentiating factor among law firms for quality of service, lower cost and higher margins. These systems will become increasingly intelligent, with intelligent agents roaming the system extracting knowledge and sharing it among relevant team members. In larger due diligence exercises, sometimes spanning many jurisdictions, this sort of systemised approach can make significant differences to the outcome of the transaction and the risk exposure to the purchaser and its advisers. n
Iain Unett is the Product Development Director of Lexfutura. He is a practising solicitor, formerly Litigation Practice Manager with British Telecommunications Plc, he is also a Director and Company Secretary at NewWaveIT Services Ltd a Technical Solutions company. He is contactable at iain@newwaveit.com
© Iain Unett 2002
