Legal project management (Part 9): Getting away from perfectionism

When Voltaire wrote the phrase “Better is the enemy of good” in the late eighteenth century, he was not thinking about the needs of legal clients.  But the phrase is extremely relevant to the challenges lawyers face today as they adapt to what Paul Lippe has called “the new normal.”

In the “old normal,” lawyers developed a culture of perfectionism in which no stone went unturned.  When litigators were trained to prepare for a case, they were taught to consider every twist and turn of any argument that could possibly be raised by the other side, no matter how unlikely.  When transactional lawyers were taught how to draft contracts, they were encouraged to draft language that anticipated every possible threat that might arise.

Clients seemed to care little about efficiency, and most lawyers did not care at all.  In fact, truth be told, the hourly billing model implied that the more inefficiency a client would pay for, the more hours would be billed, and the more revenue would be generated.

But the world has changed and legal budgets are tighter than ever before.  (For example, Lippe noted that outside legal spending by the Fortune 500 has dropped 17% in the last three years, from $16.7B in 2007 to an estimated $13.8B in 2010.)

In the new normal, clients want to be the ones who make decisions about what they will pay for.  Many have concluded that if a “perfect” legal solution requires more hours and a bigger bill, they would prefer a lower cost legal approach that is simply “good” and meets their most pressing needs. 

For example, I’ve written before about the lawyer I worked with who thought he had written “the perfect lease” for a real estate developer.  It may have been perfect in protecting the client’s interests, but it cost so much that the client refused to pay the bill, and the lawyer ended up writing off part of the cost.

The underlying issue of how to deal with perfectionism is hardly unique to the legal world.  The phrase “better is the enemy of good ” is often heard in other businesses when project managers discuss how to stay on time and within budget.

When I discussed the issue with Don Schrello, who has headed my Board of Advisors for more than a decade, he told me about his days as a manager for the Apollo program in the 1960s, when the US was racing Russia to the moon.  The Americans had a reputation for technological excellence and innovation, the Russians had a reputation for getting things done.   Desk signs were therefore printed up for key members of the Apollo engineering team with the words that were engraved over the entrance to the U.S.S.R. Technical Institute:

  

The rough translation is – you guessed it – “Better is the enemy of good.” 

According to one often repeated anecdote, when US astronauts needed a pen that would write in the vacuum of space, NASA spent over $1 million developing “The Zero Gravity Pen.”  It was later marketed to Earthlings by the Fisher Space Pen Company because its pressurized ink cartridges were said to write “in zero gravity, upside down, underwater, over wet and greasy paper, at any angle, and in extreme temperature ranges.” 

Russian cosmonauts faced the same challenge, but they believed “Better is the enemy of good,” so they used a pencil.

(This is a great story, except for one little problem: it is not quite true.  NASA did not pay for the development of the pen.  The patent owner, Paul Fisher, did.  And before the Space Pen became available, both Americans and Russians used pencils.  But the story is repeated to this day because it is such a vivid illustration of a fundamental truth.)

The pitfalls of perfectionism are becoming more obvious to lawyers as a result of both client pressures to reduce costs and the growth of alternative fees.  In a white paper on entitled “Creating the Law Firm of the Future,” Ralph Palumbo of Summit Law Group wrote: 

Today, most lawyers are paid as hourly laborers. The hourly billing system does not reward efficient legal service. Plodding, pedantic legal service is rewarded. When lawyers are paid by the number of hours worked, conscious or unconscious self-interest can and does affect a lawyer's judgment as to what legal services are required.

An experienced lawyer is often able to give an answer that has a 90% probability of being correct. If the lawyer spends only a few minutes giving the answer, the lawyer is paid little for his answer − despite the fact that years of experience and a high level of expertise and judgment is required to give a good answer.  Paid by the hour, the lawyer is under-compensated for the service provided.  If the same lawyer assigns two associates to research the problem and write memoranda on the issues, the probability that the client will get the right answer may increase from 90% to 95%. The lawyer will make much more money and, in a few cases, the improved probability may be worth the extra fees charged. But in most cases, the customer would have been better off to accept the 90% answer and pay less for the advice.

Some lawyers will find it hard to change their ways.  Others have concerns about “missing an issue,” however remote it might be.  Clients may help them make this transition by refusing to pay some bills.  According to the 2010 Client Advisory from Hildebrandt and Citi Private Bank, billing and collection realization rates have been declining for the last 12 quarters.  Could client dissatisfaction with over-lawyering be one of the reasons?

If some lawyers feel that strongly about continuing the perfectionism of the past, I don’t think there is a client in the world who would object to having extra hours devoted to their matters, as long as the lawyers pay for them.  But if clients are expected to pay the bill, they get to decide what they need.