Charles Drayson wants his contracts written in plain English. He's banning hourly rates, too
"We're different to most law firms in just about every way possible," says Charles Drayson. It's a tempting concept. But different how? "Well, when I think about the way we should do things, our starting point is what other law firms are doing—I'll generally do the opposite." Drayson started The Contracts Team after seven years as an in-house lawyer at Ceridian, a pay-roll provider. It was paying for outsourced legal services at Ceridian that spurred him to start up on his own. When you're a client, "it really hits you," he says.
At Ceridian, he recalls, "I quickly worked out there was too much work for one person." But outsourcing the work to external lawyers was both expensive and unpredictable. Drayson discovered for himself the inherent paradox of the legal profession's billing system. "It's still done on hourly rates, so the longer it takes, the more you pay. You could say that rewards inefficiency," he says. "You don't often know at the beginning of a project exactly what the bill will end up being: is it for 20 hours, 30 hours?"
Most solicitors, he says, never question the way they work. "When you go to law school you don't get trained to draft contracts. Very few lawyers are of the type to say 'this is crazy'. And why would they? If you sell your service on the basis of hours, and it happens to take more hours than the client wants, as long as every other lawyer does it this way then you don't suffer. I don't think [lawyers] deliberately set out to take longer than they need, it's just an inevitable consequence of working the way they do."
Add in the fact that legal rates are "quite high compared to what you might pay other professionals", and you have a market that seems ripe for disruption. "I started networking with other in-house lawyers and it became apparent there wasn't a way to prepare contracts more cost effectively." Instead, he designed a template system for Ceridian that enabled the company to produce repeat contracts (with customers and suppliers) using "question and answer" software. He then added a system for dealing with "exceptions", such as customer challenges. "I approached it like any other business process," he says. "Instead of thinking that legal services is some special highly complex thing that nobody else can do anything with, I've thrown that out and made the whole process more efficient."
Drafting contracts may be what Drayson calls "grunt work", but it's also quite convoluted. "Most lawyers start from a precedent," which they "craft to fit the project. You inevitably end up spending a lot of time trying to refashion it to fit." The finished contract, which is rarely reused, is then passed to the customer or supplier's lawyer. "That process is very adversarial," says Drayson. "It's two lawyers scoring points off each other, watching the bill go up."
This is where all the unpredictability lies, says Drayson. "It's like two people in a boxing ring trying to hammer out an agreement. Of course at the end what you're left with is a document that doesn't have much resemblance to plain English. There's not too much point in concluding a contract if your colleagues don't understand it. I was desperate to get away from that." A contract prepared by Drayson's software, he says, will actually be of use to stakeholders.
His work at Ceridian won him an award and Drayson was persuaded to strike out on his own with The Contracts Team. His clients are business services companies, often technology firms, because "the services they provide tend to be fairly business critical" and therefore require legal cover. Drayson's software gives the client control of its contracts. "If you're selling web hosting or business critical software," he adds, "customers will hold you to your terms and challenge you if they don't like them."
"This is for repeat contract work," rather than large one-off projects, he says. "Smaller businesses like the fact that the price they are told at the outset is the price they pay." The objective, says Drayson, is to abandon hourly rates. "We also try to give clients more opportunity to reuse what we do so they don't have to keep coming back," another example of Drayson's intent to turn the current model upside down.
Is it making him unpopular among other law firms? "Surprisingly, when we win clients from other law firms, from what I hear they don't even notice that the work has gone, which probably tells you something about their account management." Drayson wants to be a better example of his profession. His product is designed to give more control to the client, but account management will still play its part. "Clients don't worry about a stopwatch running in the background when they call me."
Posted 27 April 2009 : Director.co.uk
