During any procurement process the question of return on investment will come up before any buying decision is made. After all, the business will want to know that the money they are spending on software has a clear benefit and that the money is worth the benefit of having the software. Return on investment in relation to document automation is a challenge but the following gives an idea of the broader benefits of it:
If you’re procuring document automation then the chances are you’re looking to make a time saving on the time it takes for lawyers to draft agreements. Estimations of time saved are going to be based around the following equation:
Time currently taken to create document
It may be possible to assess length of time taken to currently create documents from the time recording of the relevant lawyers – although from experience people tend to merge different tasks into one narrative and therefore it might be difficult to get it to 100% accuracy. If you aren’t able to get the data, then the backup option is to ask the relevant lawyers how long they estimate it takes to create the document.
If using the latter approach, there will be all sorts of variables that impact their response. For example, someone that re-uses the same template from their C: drive and just adjusts some of the parts each time is likely to say that they take less time to draft. However, that isn’t going to take into account time taken to errors flagged at approval stage – or time taken in future dealing with complaints where the template used includes the previous client’s details. It is probably prudent to take an average of how long it currently takes from the team as a whole.
There may also be some elements that are difficult to ascertain but will inevitably save time. For example, the time it takes for a senior to approve a contract before it is sent out is likely to be reduced if a standard approved template is used and documents are generated from it. They can then focus only on the points that are unique safe in knowledge that the remaining part of the agreement is the latest standard wording. So approval time should also be factored in prior to sending out to client for the first time.
You may also want to estimate the saving across a particular time period e.g. per month or per year.
Time taken to create document with document automation tool
In relation to the amount of time it takes post-implementation, it might be worth having a pilot with the vendor prior to signing on the dotted line. This will give you an idea of the tool’s capabilities in a real-life use case and can provide the information required to determine how long it will take after it is implemented (even it is just one or a couple of documents).
Understanding both the time taken before and after implementation over a particular period will give you an idea of the saving that can be made per month or year. This information could allow strategic decisions on resourcing – but the caveat is that past performance doesn’t always equal future performance.
Other factors that are difficult to measure
- Provided everyone is using the document automation tool that has been implemented, any changes to the template (e.g. as a result of regulatory change) will take effect immediately for all users, thus alleviating any compliance-related issues.
This is also a challenge to determine. For law firms the way we’ve seen it calculated before is to use cost rates (ie how much the employee costs the firm to employ). Something like the following:
The result of the equation gives you an idea of how much the firm has saved in terms of cost per document drafted. If you have an estimate of how many documents on average are created per week, per month, per year, etc then you’ll also be able to determine the cost saving across a wider time period. Something like this for monthly saving:
The previous equation gives an idea of how much money is saved by the business as a result of the more efficient drafting. However, a time saving means that there is a possibility that the lawyer can carry out other chargeable work – and therefore become more profitable individually (subject to there being more legal work they are able to do of course). This is likely to include the lawyer’s charge out rate and perhaps their average utilisation rate to determine this.
Other factors that are difficult to measure
- Cost saving of any complaints or claims as a result of drafting errors (e.g. using prior client’s details in contract, not using market-standard or latest wording, etc). Copy and pasting text has its risks!
The purpose of document automation is to create efficiencies in the drafting of documents. However, the byproduct of this is that it is possible to shift the first draft generation of agreements downwards in seniority. The seniors would have been part of the creation of the template in the first place, understand how it works conditionally and which data inputs are required and when. That knowledge is then utilised in the automation of the template. It then allows more junior members of the team to draft agreements quickly based on the constraints set out in the automation (ie document used, inputs added, conditional clauses added, etc).
This probably isn’t factored into the cost equation you would have done previously as it’s difficult to ascertain but be aware that the tech itself allows you to make benefits to ‘people’ and ‘process’ internally that will amplify the time/cost savings.
For in-house teams that may be at capacity – implementing a document automation solution that allows others within the business to create first drafts may be of benefit. It’s difficult to assess how much time is saved but it may be a way of increasing capacity in the team, and thus relieving the pressure to bring in further expensive legal resource to fulfil the drafting needs of the internal clients.
An intangible benefit to document automation, and especially client-facing document automation tools like Ment, is that reputation can be enhanced. This is for the following reasons:
- Output is more consistent (output from anyone in the team will be in the same format which is easier for the client to review if it’s an ongoing relationship);
- Provided the templates are maintained properly, the document generated should always be the latest market-standard terms;
- Client-facing data collection can make the process much easier for the client to provide information to the lawyer before they create the draft agreement; and
- Internal clients (for in-house) and external clients (for law firms) can see that technology is being utilised to provide them with a better quicker service.
- Something that is potentially difficult to measure is job satisfaction. It is likely though that the impact of being able to draft quicker and easier (especially if usually done in volume) will increase job satisfaction. No one wants to fill in boxes, which a computer could do and certainly not the same information multiple times for the same document!
- The overall increase in accuracy of drafted documents that have been generated from an approved base template (ie less errors, less risk). By answering a set of questions it also requires the drafter to apply their mind, which results in better output
- Another factor that is difficult to measure but is likely to provide a benefit is the use of self-service document automation to assist clients with their own drafting needs. Offering a service like this is likely to produce a ‘sticky’ relationship, which if built upon, could lead to more lucrative work/cross-selling opportunities.
Some final points
The calculation of return on investment is likely to be a snapshot in time based on the working practices and working environment of the lawyers that you are looking to adopt it. Return on investment is therefore an estimate that could go up or down based on the following factors:
- How successful the implementation was within the organisation
- How successful the organisation was at managing change and therefore getting users to use the new tool
- How diligent the organisation is in making sure that the templates are the latest templates (if not regularly updated then people will return to C: drive bad practices)
- How much work you have in the pipeline
How Ment can help you
We can support you in the following ways:
- We can provide you support for your business case and the calculations you require for your return on investment
- We can work with you on a pilot to assess whether Ment is the right for you and so you’re able to assess the likely efficiency gains
- We can work with you to manage change within your organisation to maximise your return on investment
Feel free to reach out to Marc May here for further information.
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