June 29, 2016

Task codes and budgeting: What works and what doesn’t (Part 6 of 7)

Before concluding our review of task codes, it is important to emphasize that while this series of posts summarizes an emerging consensus, the area is still evolving and our conclusions are by no means universally accepted. As the use of task codes for budgeting has spread, a small number of critics have even begun to question the very idea of task coding. In our confidential interviews, the most extreme view was held by the expert who said:

I have looked at task codes for all of the possible reasons, including looking at past performance and planning future budgets for nearly a decade. I have looked for patterns in types of cases and I have tried to use task codes to create pricing components for templates that can be used in the future. My general conclusion, having looked at hundreds of legal matters, is that I have found task codes, as presently constituted, to be worthless.

In 2014, Toby Brown (who also participated in the confidential interviews for these posts) posted a piece in his “Three Geeks and a Law Blog” entitled The Value of Task Codes? which began:

Billing task codes are not magic pixie dust. There seems to be a broad perception that task codes will solve pricing and legal project management problems for all practices. “If we only had task codes for [insert type of work], we would know how to price this.” My general feeling is that A) the task codes were not designed to address this need. B) The use of task codes is highly inconsistent, so the data is poorly structured. And C) Even if the data was in good shape, it won’t provide magic pricing and budgets.

In our opinion, the most serious of these objections is the quality of the data. Several people we talked to mentioned that even if you use the ABA code for depositions, let’s say, the system does not enable you to easily code the type of depositions for a particular case or even their number. One interviewee put it this way:

You really can’t figure out in any meaningful way what a deposition costs, even though that’s something you’d like to know. But even if you could say that a deposition costs $50,000, the question would be: For what kind of case? Single-plaintiff employment? Toxic tort? Patent litigation? Simply saying it costs $50,000 says nothing.

Ken Grady has taken this argument a step further in his blog post, “The Days of UTBMS Codes Are Over, Let’s Focus on Value,” which includes the following example:

Assume we have two single-plaintiff lawsuits where the issues and facts are relatively similar, and both are in the same jurisdiction so the law applying in each case is the same. Lawyer 1 is handling the first case and Lawyer 2 is handling the second case.

One of the premises of the UTBMS code system is that we can use the data to compare performance by lawyers. We assume we can look at the time spent by Lawyer 1, compare it to Lawyer 2, and draw a conclusion about which lawyer is more efficient.

But there are far too many variables with values we don’t know to make such a judgment. The following list contains just a few examples of those variables as they could apply to one piece of the case – the plaintiff’s deposition:

  • Was the plaintiff in one lawsuit very experienced with depositions and the plaintiff in the other inexperienced?
  • hat impact did the plaintiff’s attorney have in each case (preparing the plaintiff, at the deposition, otherwise in the case)?
  • What other factors affected the deposition (e.g. mood of each participant, logistical issues)?

These types of variations are behind the problem that Toby Brown wrote about in his article “The State of Legal Pricing”:

What most clients ultimately want is to know that a patent litigation will cost $X through the Markman hearing or that an acquisition will cost $Y for Due Diligence, and $Z to close the deal. But an acquisition service may have a price range of $10,000 to $10,000,000 – from experience, that type of fee range is not an exaggeration – and what drives the range is a combination of scope, size and client goals related to the deal.

Some of the strongest proponents of task codes whom we interviewed are well aware of this variation, but argue that this just requires a higher level of sophistication when analyzing task code data:

If you have 100,000 depositions in your database and the average cost is $10,000, that’s just a “so what” factoid. But if you categorize matters based on the type of case, size of the company, whether it was public or private, and other relevant factors, you can get very useful information for predicting future costs.

Despite these counter-arguments, Grady’s overall conclusion is that:

Continuing to spend a lot of time and effort on UTBMS codes, in my opinion, does not add value to improving the efficiency, productivity, or quality of legal services. I don’t want the least effort low value service. I want a high value service delivered efficiently. To accomplish that goal, I want to focus on what adds value, measure the value, and ruthlessly eliminate things that don’t add value or detract from the value. 

Many critics take a less radical view that offers more hope for the future. In the comments that were posted to Toby Brown’s 2014 blog post quoted above, Michael Byrd, currently the director of financial operations (North America) at Baker & McKenzie, wrote:

I have struggled with this topic for several years now and agree that there is little utility within the current construct [of task codes]. That said, my gut tells me that there is an opportunity here. If firms can find a way to leverage their use when required by clients with internal budget tracking by major components of an engagement AND provide transparency into that budget for their working timekeepers, then maybe, just maybe, the quality of the data will improve generally and outside counsel can legitimately claim progress in project management while meeting their clients’ e-billing requirements.

This series was adapted from the Fourth Edition of the Legal Project Management Quick Reference Guide which will be published this fall.

June 22, 2016

Task codes and budgeting: What works and what doesn’t (Part 5 of 7)

In our work coaching lawyers about how to use task codes, one of the most interesting innovations we’ve seen was from firms that have created a special code to internally track work that fell outside the scope defined by each engagement letter.  This led to the sixth and final recommendation from our research:   Create an internal code for work that is out of scope.

At the beginning of every matter, lawyers should be asking clients about their goals and expectations so that the legal team delivers what the client needs and is willing to pay for. A failure to get a clear understanding at the beginning of a matter can lead to unnecessary work, strained client relations, and ultimately to reduced realization and profitability if clients refuse to pay their bills.

Anyone who has ever worked at a law firm knows that a clear definition of scope at the beginning of a matter often simply does not happen. Many lawyers are impatient problem solvers and they like to just jump in and start working. In our Legal Project Management Quick Reference Guide, we quote the executive director of an AmLaw 100 firm (who preferred to remain anonymous) about the ambiguities in a typical engagement letter:

The scope of work often contained in our engagement letters is generally no more than one or two lines. Lawyers are missing an opportunity to clearly specify the scope of what is included in each matter and what is not.

And even if an engagement letter is well defined, there is the question of who sees it. A senior executive at a different AmLaw 100 firm (who also preferred to remain anonymous) recently did an informal survey of senior associates during a talk he gave on LPM. He asked very simply, “How many of you have seen the engagement letter for the matters you’ve worked on lately?” Only one in four raised their hands. To put it another way, three out of four of these lawyers had no way of knowing what was in scope and what was not. When this executive later shared those results with a group of partners, “they were horrified.”

Any system that requires lawyers to classify some hours as out of scope starts with a huge benefit, simply by requiring lawyers to be clear about the distinction.

At the beginning of key matters at Bilzin Sumberg, they now post the statement of scope on their intranet, where every team member can review it. Then lawyers are required to record each hour worked under two different codes in their accounting system: one for work within scope and the other for work that falls outside scope.

As Bilzin Partner Al Dotson summed it up:

Keeping the scope of work top of mind has many benefits. The tactic of tracking out of scope work requires:

  • An understanding by all billers to the file as to what the scope of work is
  • An ongoing recognition of the status of the matter and when a task is out of scope
  • An understanding of the protocols to be followed when out of scope work is requested or done

This benefits both the client and the law firm and often is the basis for clearer communication.

The idea of having a separate code for work that is out of scope is directly related to one key goal of the entire task code movement -- to improve cost estimates before similar matters begin:

If the codes are in place for long enough, the firm can start using them for practical purposes. For example, the litigation department may be able to carve out certain components of litigation that are conducive to fixed fee work. They may then be able to go to a client and say, for example, that they will do a series of depositions for a certain fee.

But this isn’t easy. As another interviewee summed it up:

It takes a long time to build a reliable history of transactions. The more often lawyers use this system, the more data there will be and the more useful it will be. At the start, we thought it would enable us to just give our clients an estimate right on the spot, but every experience and every deal is different and has its own story. Not all transactions will develop the way you expect them to happen.

How well are firms using the data they do have? Several noted that there is room for improvement:

Our firm right now does not do such a good job of leveraging the fee data that it has and tracking all the trends. For example, we should have enough data to answer the question of how many hours are typically needed to respond to a motion to dismiss. But this process is usually being done only on an individual basis, where a lawyer will compare a present case to a past case. The firm could be using “Big Data” gleaned from its past experiences more effectively. In fact, that is one of the firm’s current projects. We have perhaps 1,000 cases and matters with phase code information, so there are resources to generate comprehensive data from those cases and matters…. All of that data is in the firm’s hands to slice and dice. Just seeing the range, the highs and lows, would be quite eye-opening.

Based on our experience, we would recommend resisting the urge to “slice and dice” the data and instead focus on a “less is more” approach that makes it extremely easy for lawyers to get the big picture quickly. This could be as simple as a one-page summary for each type of matter listing the total costs of all similar matters in the last few years, with quick comments on any factors that appeared to raise or lower the cost.

The shorter that each summary document is, the more likely it is that lawyers will use it. Several pages of task summaries will have much less impact than one page listing key recent matters and the total cost. Even if people see only the wide variation, it will move the conversation forward.

Of course, even if a firm had a crystal clear understanding of what a motion to dismiss would cost at its standard rates, that does not mean that they can charge that price in the current highly competitive marketplace:

The task code system lets you know what the deal is worth and how it should be valued in an ideal world, but you don’t always bid that. You will often need to bid lower to try to land the business.

Nevertheless, phase and task code analysis can also be helpful in other ways. As one expert put it:

Ultimately, it’s not just a matter of adding up the numbers. The firm can use the data to add ideas and to maintain and increase profitability by learning to work more efficiently.

This series was adapted from the Fourth Edition of the Legal Project Management Quick Reference Guide[1] which will be published this fall.

 

June 15, 2016

A free research report you can’t afford to miss

If you are the slightest bit interested in how the legal profession is changing and what it means to you, I hope you’ve already seen Altman Weil’s recent release of its annual Law Firms in Transition survey. But just in case you’ve been a little busy and missed it, I highly recommend that you download it today. The report costs nothing, but failing to find time to plan for the future could cost you quite a lot. (Full disclosure: LegalBizDev is a strategic partner of Altman Weil, but I would write exactly this same post even if we weren’t.)

The summary of the opinions of 356 managing partners and chairs is just a few pages long and covers a broad array of areas, with insights and recommendations focused on five key findings (p. i):

• Unreliable demand
• Surplus of lawyers
• Inefficient delivery of legal services
• Proactivity as a competitive advantage
• Resistance to change

The first question that appears in the detailed section of the report is, “Which of the following legal market trends do you think are temporary and which will be permanent?” The top three answers were more price competition (95% think this is permanent), focus on improved practice efficiency (93%), and more commoditized legal work (88%) (p. 1). Of course, all three can be addressed through legal project management (LPM).

But when Altman Weil asked the same group “Has your firm significantly changed its strategic approach to efficiency of legal service delivery?” only 44% said yes (26% said no and 30% said changes were “under consideration”). To put it another way, the majority of firms know what the biggest challenges to their future are, but they are not doing much to address them.

Personally, I think the true problem is much worse, and that most respondents exaggerated their efforts when they answered this question. I spend my life talking to law firm leaders about what they are doing to increase efficiency, and my guess is that the percent of firms that have made significant changes is closer to four percent than to 44.

The gap between what firms should be doing and what they are actually doing has existed for years, and the survey also dug into the details of what’s behind the problem. Authors Eric Seeger and Tom Clay concluded, “The biggest impediment to change, identified by 64% of law firm leaders, is that partners resist most change efforts” (p. vi). As a long-term strategy in a profession where client demands are changing rapidly, that’s a great way to insure that your job will be in danger.

The survey results include considerable documentation of the trouble that is already here, and of more trouble around the corner. For example, another question asked, “Which of the following activities is your firm proactively initiating to better understand what clients want?” (p. 9). I found the results particularly interesting because last fall, Altman Weil’s Chief Legal Officer survey asked for the client perspective on the exact same list of activities: “Rate the value to your law department of the following things law firms can do to better understand your organization.”

Comparing the answers revealed that many law firms are wasting their time doing the wrong things. “Conversations about matter management efficiency” ranked second in value for clients but only fifth among the things that firms were actually doing. “Post-matter reviews” ranked fifth for clients but was number 9 out of 10 for law firms. Of course, both of the factors that clients rated highly are key elements of LPM.

Meanwhile, some of the things that law firms are doing with their marketing time and money are of very low value from the client perspective. “Law firm participation in industry groups and events” ranked #2 for law firms, but #8 for clients. And “visits from law firm management” was #4 for law firms, but finished dead last in value – #10 out of 10 – in the eyes of clients.

In summary, this free report includes the best available data on what your competitors are doing in a wide variety of areas, including staffing, headcount, and pricing. So what are you waiting for? Download the complete survey now and turn directly to the sections that matter the most to the future of your career.

June 08, 2016

Task codes and budgeting: What works and what doesn’t (Part 4 of 7)

The 12 experts were interviewed were far from a random sample. We purposely chose people who were leaders in this area. But even among this group, most recommended that firms should use phase or task codes selectively rather than on every matter:

Probably about 30 percent of our firm’s cases are phase coded at this time. The firm requires phase coding for all new matters involving two of its largest clients, because these clients require budgets by phase for all their matters.

Only about 10 percent of our matters are coded, but they represent 35 percent or so of the dollar value, mostly in litigation. And as many as three-quarters of the cases that are task coded are done so at the direction of the client, while the other one-quarter are done at our direction.

This is not done on a firmwide basis, but rather only when the need arises. So if a particular client has a large portfolio of cases or matters and wants its time tracked, the firm will track that time. The firm is, however, considering making the use of phase coding mandatory for certain types of cases.

In fairness, some of the experts we interviewed do think task codes should be used for every matter:

My firm task codes everything. My team is responsible for setting up the task code system, deciding what codes should be used, eliminated, and added. The finance people have roles in loading the task codes in the system, the information systems people use them for reporting, and the lawyer-facing people are looking at task codes and how they interact with the work the lawyers are doing. At first, there were lawyers who were reluctant to do this, as they didn’t have clients who required task codes. But now we make the process as easy as possible with lots of training, the use of pull-down menus, and so on. Eventually, even these reluctant lawyers need a robust data set, and it’s interesting to me that they see value when they see a number based on this data.

Another interviewee was not as far along in the process but was optimistic about the future:

I am helping to lead the firm’s efforts to induce all partners to use our template and task code system. In 10 years, the picture will be quite different, as nearly all partners will use it.

But most of the people we interviewed are still facing an uphill battle getting lawyers to use task codes:

Attorneys are slow to change, except when a client insists on it.

The biggest problem is still lawyers’ resistance to change and many clients’ continued acceptance of chronological billing rather than task billing.

There should be a great deal more use of task codes at the firm but many lawyers object to it.

I am impressed that the idea has strong support from the firm’s management. But it’s still hard to get attorneys to do what they need to do.

I try to encourage the use of task codes but feel that I must pick my battles.

Given these realities, we believe that the best practice at this time is to use codes selectively, in the areas that matter the most:

We don’t use task codes on every matter but we do emphasize their use on any fixed fee or tight budget matters.

Our firm’s leaders definitely understand the importance of Task codes and budgeting, but they don’t want to take punitive measures against partners who don’t use them. The process must start at the grassroots and build upon success. We have only one shot to get this right.

Another recommendation from the experts we interviewed was that firms should limit retrospective analysis of past matters. While some firms begin by creating a database of the costs of past matters, most of the people we talked to felt it was not worth the effort:

Our firm does not go back into old closed files and try to assign task codes in retrospect. That just isn’t possible on any realistic basis. Not enough value will be added.

There is no effort to look at historical matters, only current matters, and not all of those.

The firm decided not to go back in time and look at past cases and code them. It was not deemed worth the effort, but the firm is making a concerted effort to code all present and future cases.

Aside from the amount of time that it would take to code past matters, there is a second reason not to invest in this: The whole idea of the LPM movement is to find ways to reduce costs by working more efficiently. Why devote resources to studying what things cost the old way when the same time and energy could be invested in finding new and better ways of doing things?

This series was adapted from the Fourth Edition of the Legal Project Management Quick Reference Guide which will be published this fall.

June 01, 2016

Tip of the month:  Find the balance between too little planning and too much

When Andy Crowe studied the characteristics of 5000 project managers for his book Alpha Project Managers, he found that effective managers spend more than twice as much time planning as ineffective ones.  Lawyers often like to jump right in on a new matter because they “have no time to plan.”  But a little time devoted to planning upfront can save an enormous amount of time later.

The first Wednesday of every month is devoted to a short and simple tip like this to help lawyers increase efficiency, provide greater value to their clients and/or develop new business. For more about this tip, see our Legal Project Management Quick Reference Guide.

May 25, 2016

Task codes and budgeting: What works and what doesn’t (Part 3 of 7)

The third conclusion from our research was that firms should train lawyers and staff to use the codes.

Whatever system is used, many experts have written about the problem of accuracy. Keith Lipman is the president of Prosperoware, a legal technology firm that created Umbria, one of the best known legal process management software packages. In a 2015 blog post entitled “The Task Code Conundrum” he wrote:

The problem with all these codes is that a significant number of lawyers don’t use them accurately. Anecdotally, I’ve been told on many occasions that 60 to 80% of time entries have inaccurate codes.

Ken Grady, one of the most widely quoted experts in LPM, has worked both in-house, as the general counsel at Wolverine, and on the law firm side, where he currently holds the position of Lean Law Evangelist at Seyfarth Shaw. He is unenthusiastic about task codes, in part because:

Self-reported data, especially when it involves things like measuring time spent on tasks, is notoriously unreliable…. We have to make sure each timekeeper is well-trained in how to apply the codes to work.

Similarly, several of the experts we interviewed described problems of inaccurate coding, including these eye opening examples:

I did an analysis of a certain type of litigation, where partners thought that analyzing the task codes would be very helpful. Instead, I showed the partners that the L100 codes, which are supposed to be used for trial preparation, were used during the week of trial…. The lawyers explained that secretaries at the firm picked the task codes…. I told the partners in a different matter that it was just not possible for a case to have the amount of effort in a particular category that the task codes indicated. They said that when the secretaries reach some pre-assigned limits for the amount of time in a particular code, they just stop using that code and start using another code. If a secretary knows that, say, the L330 code will always be fine to be used, he or she will just keep using it. They just dump time there. That makes the results really inconsistent.

Several of the people we interviewed, however, reported that accuracy can be increased if time is taken to train lawyers to use task or phase codes properly:

When we first started using task codes, we had problems with consistency. Five lawyers who attended the same meeting sometimes coded their time five different ways. That is not happening anymore, because now at the beginning of every project everyone involved discusses all the possible codes, to put everyone on the same page.

Different lawyers have widely different views of the application of the ABA task codes, so when they are used, we have to have meetings in advance to explain their use.

If it appears to my group that time is not entered correctly, we re-educate the lawyers on how to do it.

For present cases, lawyers can’t enter their time without task codes. If we see a sign of “garbage entries,” it is part of my job to hold discussions with the group involved to make sure that we get better data.

Some lawyers do give us “junk data” or refuse to participate, but lately that number has been fewer than five percent of our attorneys. We do have some lawyers who use task codes that are obviously incorrect or irrelevant, so we explain the proper use of task codes to them and this usually corrects the problem. We have met with many attorneys in person and we have emailed many secretaries to show them how this should be done.

The role of staff should not be ignored. A number of firms we’ve spoken to have trained admin staff to save lawyers time by entering the codes for them, and they have reported that this not only saves lawyers time, it also increases the accuracy of data entry.

 

In a review of a draft of this article, Peter Secor, the Director of Strategic Pricing and Project Management at Pepper Hamilton, emphasized this point:

Secretaries and billers often work on time entry edits. That group is key… they need to understand the value that codes can add. I just cannot emphasize that enough.... We have developed cheat sheets for certain engagements on which task codes to use for what. We have also have cheat sheets on the practice group level, including how narratives should be worded so we can data-mine the cost of a particular type of deponent or specific motion.

In a related development, the Association of Legal Administrators (ALA) has released a draft of a set of codes entitled UPBMS (the Uniform Process Based Management System) system to clarify and standardize legal support operations roles and responsibilities.  (Note that the P in the title refers to processes, replacing the T for tasks in the lawyers’ code set.)  The codes are scheduled to be finalized in the summer of 2016.

The head of the committee that developed these codes, Bill Mech, a principal at ofPartner Consulting Services, notes that:

One reality often overlooked is that a lawyer never practices alone. They are supported by numerous administrative personnel including legal secretaries and paralegals.

An important area of innovation is re-engineering the role of legal secretaries and other support staff to identify new ways to leverage their knowledge and experience as well as manage operating costs.  For example, Mech has worked on several projects with nSource, a provider of legal consulting, technology, and managed services, in which they utilized an early version of the ALA UPBMS codes to perform functional analysis of legal support staff roles, aimed at improving processes to better meet clients’ needs.

At the end of the day, the value of the data collected with any kind of coding system is based on everyone using the same terminology in the same way. Note that this is true whether one uses UTBMS codes, UPBMS codes, or simple English language task titles. Many legal accounting software packages can make this easier by enabling “forced” categorization of time entries according to a preset list of categories defined by the matter manager. While this alone will not eliminate miscoded time entries, it goes a long way toward improving accuracy.

 

This series was adapted from the Fourth Edition of the Legal Project Management Quick Reference Guide, which will be published this fall.

May 18, 2016

Task codes and budgeting: What works and what doesn’t (Part 2 of 7)

The first conclusion from our interviews with the twelve experts listed in Part 1 was: Use standard UTBMS codes whenever possible.

One of the challenges in working with task codes is that the original UTBMS committee developed just four sets of codes: litigation, bankruptcy, counseling, and “project codes” for transactional work. Later committees issued several revisions and also approved new codesets. The UTBMS webpage currently also includes codes and standards for eDiscovery, governance risk and compliance, intellectual property, workers’ compensation, and mergers and acquisitions.  The last of these codesets was developed by the ABA Task Force on Legal Project Management and approved by the LEDES Oversight Committee in February 2016.

So the question about using the standard UTBMS codes applies only to a subset of lawyers. At this time lawyers in many other areas of law have no standard codeset to begin from. Some software vendors have included starter codesets in these areas, but there is no ABA-approved version. In addition, practice groups in many firms have developed their own codesets.

The key question in areas like litigation, where a standard set exists, is whether to use the codeset as is or to customize the codes to better fit the needs of a particular firm. The experts we interviewed agreed that while the UTBMS codes may not be perfect, they have the great benefit of standardization and it’s best to stick with them:

If we had it to do over, the firm would have turned more quickly to existing task codes like that of the ABA rather than starting from scratch.

Originally, the firm developed its own set of task codes from scratch, but at a certain point, we realized that the ABA codes were similar to the firm’s own codes and were required by some clients. So we transitioned to the use of the ABA codes.

Our firm does use the UTBMS codes when they are applicable. But we are also developing special phase and task codesets for specific types of matters such as financing deals.

The ABA task codes do work well, but only for litigation. In other areas, the challenge is using enough task codes to get the granularity that you need for budgeting, but not so many codes that you have a problem with “garbage in, garbage out.”

The second conclusion listed in Part 1 was: Avoid excessive detail; focus on phases not tasks.

In UTBMS, each time entry has both a high level phase code and a more detailed task code. For example, litigation was divided into five phases: case assessment, development, and administration (coded L100); pre-trial pleadings and motions (L200); discovery (L300); trial preparation and trial (L400); and appeal (L500). Each of these phases was further broken down into tasks. For example, the discovery phase included tasks for written discovery (L310); document production (L320); and depositions (L330).

Many lawyers are detail-oriented by nature, so it is not surprising that when they modify existing codes or create new sets, they often increase granularity by adding more and more new task codes. In our 2012 article, we quoted pioneers who favored the movement toward increasingly detailed codes and others who felt they were counter-productive. Now, several years later, most of the experts we interviewed believe that less is more. Some have entirely given up on task codes and simply look at phases:

We’ve learned that we get better data with more general codes that are not too granular, because this makes it easier for lawyers to code their time.

In the last 12 to 18 months, we have undertaken an effort to customize the task codes for our own purposes and to make them broader and less granular so that they can be used more easily.

In general, the lower the number of task codes we use, the more accurate the data is. Ironically, if there are too many codes, some lawyers will just give up and toss all their time into a bucket called “due diligence” or something similar, and then the data will be useless. Giving lawyers too many options decreases accuracy.

Say there are 12 to 15 possible task codes. Many timekeepers will pick the first one on the list simply because it is first, and my office will need to look back and review this data because it is unreliable.

There is always some uncertainty and judgment involved in task coding and as a result, it is usually better to roll up the task codes into phases which are better for estimating.

This type of observation is not limited to US firms. In February 2016, the UK firm Jomati Consultants published a 39-page white paper entitled Re-engineering Legal Services.”  (Full disclosure: Like LegalBizDev, Jomati is a strategic partner of Altman Weil.) It included only two quotes about task codes, and both made a similar point, in surprisingly strong language:

We’ve banished the use of task codes in our LPM initiative, unless a client requires [them]…. Our new approach has hugely simplified what we do, but still provides us with rich project data. What is important is how long a phase takes to complete. By contrast, you get nothing from trying to undertake a granular analysis of task codes.

I am not a fan of task codes. People think there’s pricing magic about them. But, after reviewing thousands of matters, I can tell you – there isn’t.

It is also interesting to note that the most recent set of new codes, developed by the ABA Task Force on Legal Project Management in M&A, consists almost entirely of phase codes, not tasks. In an interview for these posts, task force Co-Chair Byron Kalogerou, a partner at McDermott Will & Emery, noted that:

The task force is confident that coding by phase, in a way consistent with the way M&A clients demand budgets, will speed adoption and lead to more robust data collection, which in turn will support better budgeting.

This series was adapted from the Fourth Edition of the Legal Project Management Quick Reference Guide, which will be published this fall.

May 11, 2016

Task codes and budgeting: What works and what doesn’t (Part 1 of 7)

By Jim Hassett, Jonathan Groner, and Steve Barrett

This is one of the longest series of posts in the eleven year history of this blog, because there is currently so much controversy about the best uses of task codes.  A much shorter summary of this research was published recently by the Bloomberg BNA Corporate Counsel Weekly and reprinted in the Bloomberg BNA Corporate Law & Accountability Report. 

In 2012, we published an article in Of Counsel entitled “Tracking Legal Costs with Task Codes: Different Firms Take Different Approaches.” Since then, the number of firms using task codes has grown dramatically and a consensus has started to emerge about what works best.

This series of posts summarizes new conclusions and recommendations based on our experience working with lawyers in numerous firms, on published reports by a number of experts, and on interviews we recently conducted with 12 experts who have had significant experience using task codes to plan and track legal budgets:

Nicole Beck, Senior Client Value Pricing Lead, Reed Smith

Diane Bertrand, Partner, Fasken Martineau DuMoulin LLP

Toby Brown, Chief Practice Management Officer, Perkins Coie

David Cohen, Lawyer, Project Management, McCarthy Tétrault

Stephanie Flitcroft, Director of Pricing, Loeb & Loeb

Bill Garcia, Chief Practice Innovation Officer, Thompson Hine

Sam Goldblatt, Partner, Nixon Peabody

Jon Hulak, Director of Pricing and Client Service, Mintz Levin

Keith Maziarek, Head of Strategic Pricing, DLA Piper

Megan Panchella, Legal Project Manager, Reed Smith

Robert Parker, Practice Group/Client Matter Management Administrator, Quarles & Brady

Scott Wagner, Partner, Bilzin Sumberg

To maximize the frankness of participant responses, we promised that while their names would be listed in our research summary, no quote would be attributed to a particular person or firm. In addition, all of them reviewed a pre-publication version of this section of this summary and had an opportunity to remove or edit any of their quotes before publication.

The main reason that these and many other experts have increased efforts to implement task codes over the last few years is easy to understand: To remain competitive in an ever more challenging marketplace, firms are being forced to predict and control legal costs better than ever before.

Several of the people we interviewed reported that their use of task codes had already produced a payoff:

We have seen immediate benefits in tracking our alternative pricing arrangements and working to budget. The use of task codes takes the guesswork out of the budget.

Some partners have actually landed new work because the firm has a task code system in place. A number of potential clients won’t even deal with a law firm that doesn’t have such a system.

Task codes have been useful in helping track matters against budget, so they are already paying dividends.

We use task codes to price better, to help attorneys manage better, to determine what our profitability drivers are, and to make the business case for alternative staffing models.

Task codes make it easy to have a conversation with the client who wants to know where things stand in terms of the matter and its budget. For us, task codes have also been an integral part of the AFA process. We can offer a flat fee for, say, a motion to dismiss because we can see how much a motion to dismiss has cost us historically. Also, task codes help attorneys see the budget vs. actual reports for any matter and see what, if anything, has changed from the original budget. Was there a change in scope?

Even at firms where there has been resistance to using task codes, the lawyers that have used them have reported benefits:

In my personal practice, the use of phase codes has been very helpful in improving estimating and budgeting.

One expert we talked to has developed about 10 different templates so far for various transactions:

If an attorney is starting one of those types, he or she just goes to the template and builds a budget. These templates can compare actual versus budgeted time on any phase of the matter. You simply look at a picture of what the transaction will probably be in advance and compare it to what actually happens. In addition, there is another advantage: You never forget anything. The template prompts you to remember each needed step, and each task within the step, so you budget better as a result.

Originally we included a brief history of the most widely used system – UTBMS, the Uniform Task-Based Management System – starting from the fact that the system was designed in the 1990s primarily by clients who wanted to standardize e-billing and understand and control costs rather than by law firms who wanted to predict costs.

Many clients, especially in insurance defense, require law firms to use task codes in e-billing as a condition to getting paid.

Unfortunately, what started out as an effort to create a universal language for analyzing legal work later evolved into a system in which many clients tweaked the system to fit their unique demands. For example, in 2007 the UTBMS Insurance Update Initiative issued a slightly revised set of codes to better meet the needs of insurance companies.

As one expert put it:

Sometimes it seems every client wants to use a different set of task codes. For example, one Fortune 50 firm doesn’t use L-codes [for litigation], it uses what they call K-codes. If the clients think the codes don’t tell them what they want to know, they just make up some new codes.

Another summed up the situation like this:

The problem with standards is that so many people have different ones.

In some cases, a single lawyer may have to use two different codes for exactly the same type of work performed on the same day for two different clients. If one wanted to maximize human error, it would be hard to come up with a better system.

This problem is so common that some legal financial software vendors have added automatic translation features so that all the lawyers in a firm can use one standard codeset and have it automatically translated into different codes for different clients. However, these algorithms require painstaking mapping and assume that there is a one-to-one correspondence. If a code in one system overlaps with two or more codes in another system, no algorithm in the world can do an automatic translation.

Despite these barriers, in the last few years many law firms have invested significant effort in using task codes to better track time and cost and ultimately to respond to client demands for more predictable costs. The remainder of this series will explain six key lessons they have learned to date:

  • Use standard UTBMS codes whenever possible
  • Avoid excessive detail; focus on phases not tasks
  • Train lawyers and staff to use the codes
  • Use task codes selectively rather than on every matter
  • Limit retrospective analysis of past matters
  • Create an internal code for work that is out of scope

This series was adapted from the Fourth Edition of the Legal Project Management Quick Reference Guide which will be published this fall.

May 04, 2016

Tip of the month:  Involve team members in planning near the start of each large matter

On large matters, invite team members to participate in the early planning to get their buy-in on budgeted time estimates, and to assign tasks across the team in a way that maximizes efficiency by taking advantage of each individual’s personal strengths and available time.

The first Wednesday of every month is devoted to a short and simple tip like this to help lawyers increase efficiency, provide greater value to their clients and/or develop new business. For more about this tip, see our Legal Project Management Quick Reference Guide.

April 27, 2016

How to evaluate legal project management programs (Part 3 of 3)

When you want to evaluate an LPM program, the best source of information is to rely on the opinion of the people who are in a position to make an informed judgment: the lawyers themselves. In our coaching, for example, if a lawyer gets new business that seems to be related to their LPM activities, we simply ask them: what do you think? Was LPM partly responsible for this? Whether they say yes, no, or maybe, we don’t second guess them; we merely record the opinion and move on.

At the highest level, this means listening to the opinion of the decision makers who ultimately decide whether to invest in LPM or not. For example, as Hanson Bridgett Managing Partner Andrew Giacomini summed it up in the middle of one of our ongoing coaching programs, “I don’t have any statistics, but if I didn’t believe that LPM was producing a return, I wouldn’t keep investing in it.” After each program concludes, he continued, “You can see the energy that lawyers are putting into applying it to their practices. As they pass these tools along to others, it creates new strengths for the entire firm. And if our lawyers become the best at LPM, they will get noticed.”

In the first few years we offered LPM coaching, lawyers’ reports of its effects were limited to internal reports and occasional public case studies. More recently, we’ve created systematic reports of results both when a program ends and 90 days later, in a format like Table 1 below. This can be circulated internally to assess what works best and to publicize success and generate enthusiasm for spreading the approach.

Note in Table 1 that we recommend that the first column identify the person who first made the change. However, depending on its culture, some firms may prefer to eliminate the “who” column. Since LPM takes time, the benefits column should include not just benefits experienced to date but also the potential benefits for the future. The more specific this can be, the better.

Table 1

Sample format for tracking LPM benefits

Who?

LPM behavior change

Benefits

     
     
     
     
     

 

Table 2 includes typical results from past coaching programs, with some details changed slightly to protect the confidentiality of the firms.

Table 2

Examples from past LPM coaching programs

LPM behavior change

Benefits

For every matter over $50K, lawyer shared a description of project scope and assumptions with everyone on the project team

Team members became more familiar with what each budget included and excluded, which improved cost predictability and client satisfaction

Required lawyers to use a special task code to identify any work that was performed despite the fact that it was technically beyond scope

Kept lawyers more aware of the scope of the agreement, enabled relationship partner to negotiate increased scope with the client where appropriate

A lawyer established a procedure to provide written summaries of strategic objectives to clients for their review at the beginning of every new matter.  This later was adopted by his entire firm

Improved client satisfaction, led to more accurate budgets and increased realization

At the start of a large matter, one lawyer used our matter planning template to create a list of key sub-tasks and assignments, then asked team members to estimate how many hours each sub-task would take them

Team members completed most tasks within the time estimates they provided, which led to more accurate bids, increased realization, and new business

A litigator explained our risk analysis template to a key client and then used it to assess their budget in an early case assessment

The client loved the template and used it to structure their discussion of risks vs. costs. The result was increased client satisfaction and cost control.

The lawyer developed a new fixed fee product for consultations in a specialized area by working with a coach to identify all sub-tasks required and the range of possible time to complete each

Increased new business by offering a fixed price product in a specialized area before competitors did

One lawyer added a cover memo to monthly invoices with a bullet point summary of the progress of each matter on the invoice and the expected remaining costs

By explaining the rationale for each fee and what to expect, the lawyer avoided surprises and increased realization

A litigator developed a checklist of questions to ask at the beginning of each case to better define scope and assign lawyers to cases

More accurate bids, better team assignments, lower costs to clients

The lawyer arranged to have the accounting department to provide “tickler” emails sent automatically when certain financial milestones were reached, such as when 50% of the budget was spent.

Improved budget tracking led to cost control and avoided surprises to clients by enabling early discussions of possible scope changes

For a multi-million dollar flat fee for handling a large number of litigations, the relationship partner designed spreadsheets showing cost to date and cost to estimated completion for each case. This made it easier to quickly spot where there were significant overages in attorney time spent, above the flat fee for a given month

Early identification of possible problems improved discussions of why any cost overruns may have occurred in a particular case and ways to control overruns in the future. Ultimately, this led to the fixed fee arrangement becoming more profitable

IP lawyer used our matter planning template to simplify the steps required to complete patent applications for a key client. The lawyer identified 12 steps that were required for every patent application and a likely range of hours for completing each step

Team members were able to easily compare their effort on each phase against expectations and increase efficiency. This improved client satisfaction and increased new business

At the end of a matter, the relationship partner conducted a short lessons learned review with the client

The discussion led not only to ideas for increasing efficiency but also to being assigned similar matters in the future

Senior partner who had to approve write downs identified a few key partners with high write-down rates and interviewed them about the causes and possible cures

Each lawyer developed a personal action plan to reduce write-downs, and the firm improved realization

A practice group required team leaders to hold weekly internal team status meetings for each matter over $100K

Avoided duplication of effort and led to early identification of issues that could increase scope

As firms increasingly use this type of evaluation to document the results of their LPM programs, the approaches that work best for each lawyer and each practice group will gradually spread to the entire firm. The firms that follow this path first will achieve the greatest benefit by giving clients what they asked for in the Altman Weil CLO survey quoted at the start of this piece: LPM, LPM, and more LPM.

This series has been adapted from the fourth edition of the Legal Project Management Quick Reference Guide, which will be published this fall.