Is it possible to control the costs of legal matters?
While some lawyers have been working on a fixed price basis for years, others still believe that fixed fees simply cannot be applied to complex legal matters. The cost of defending a suit may be very low if your opponent is willing to settle early in the process. But if they engage in scorched earth tactics, the cost of defending the same matter will be much much higher.
While it is certainly true that total costs are impossible to predict, it is also true that some law firms are offering fixed fees for one phase of a case at a time. This requires a “win some, lose some” mentality which many large firms now accept. As the managing partner of a firm with over 1,300 lawyers put it:
Everybody in business plays the odds. We’ve had situations in corporate deals where we’ve really gotten burned on something. But if it’s a good client, they don’t say, “gotcha” and laugh about the fact that you made a bad deal. They say, “We’re going to do more deals,” and life goes on. And you assume that you’ll make it up in volume with better situations.
These days, many clients want predictable legal costs, and they will do business only with law firms that offer them.
One of the most interesting observations in my research was made by a senior executive at a 1,000-lawyer firm who had previously worked at a publicly-traded real estate company:
The two most important people we had in the company were the estimator and the project manager. Law firms historically have had no one play either of those roles. It’s very dangerous to move into a world of fixed fees if you don’t have somebody who’s capable of estimating and you don’t have somebody who’s capable of project managing.
The discipline of project management
Historians have traced the origins of project management to the pyramids, the Great Wall of China, and civil engineers in ancient Rome who oversaw the construction of a 53,000-mile network of roads, many of which are still in use today. The modern discipline of project management developed in response to schedule pressures during and after World War II. Admiral Hyman Rickover developed the Program Evaluation and Review Technique (PERT) to manage the Nautilus nuclear submarine program from 1951-1954. In 1957, DuPont began developing the Critical Path Method (CPM) to plan the complex process of opening multiple chemical plants. The Apollo program applied these methods and more to put a man on the Moon by 1969. Since then, a number of professional associations have grown in influence, including the Project Management Institute, which now has “more than half a million members and credential holders in 185 countries.” Some institutions of higher learning now offer master’s degrees in project management.
These days, project management techniques are routinely applied many fields, including information technology, engineering and construction.
The argument has already started about exactly how much of this knowledge lawyers need. We believe that less is more. We’ve found that many lawyers can quickly find ways to save time and money simply by focusing on the low hanging fruit.
For example, we recently conducted a workshop at Warner Norcross & Judd in which senior partners quickly reviewed project management best practices and picked out the ones that best fit their needs. After reviewing our list, one lawyer decided to focus on setting estimated hourly goals before beginning each task. He noted that the firm already did this with law students in their summer programs. When these interns were given a new assignment, they were asked to estimate how many hours it would take before they began. If the estimate seemed out of line, the supervising lawyer discussed the task with the law student to see if he or she really understood what was required. The lawyer from our workshop is now adapting this technique to working with his partners on alternative fee matters.
This series will continue next week. For more information, see my new Legal Project Management Quick Reference Guide, a customized book used by clients in our project management workshops, webinars and in-house presentations.