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February 15, 2012

Legal project management in the real world: The case of Williams Mullen (Part 2 of 2)

Last week, we talked about how legal project management (LPM) has helped Williams Mullen litigators find new work, and perform it more efficiently. 

On the transactional side of the house, M&A Lawyer Steve Burke has also seen LPM marketing benefits, especially in relation to alternative fee arrangements (AFAs). 

Burke participated in Williams Mullen’s second just-in-time workshop in March 2011.  When I interviewed him eight months later, he mentioned that a client had recently called him with a question about possibly using an AFA.  “I was able to answer the question in 15 minutes,” Burke said.  “Before our LPM training, that would have taken me much longer.”

This is not to say that the workshop introduced Burke to LPM for the first time.  One of the reasons he had been selected to participate in the class was that he had a reputation as a highly organized proponent of careful matter management.  But before taking the class, Burke said, he always started project management later in the deal. Our just-in-time program enabled him to see that the sooner you start, the better off you are. Talking to the client more at the beginning and thinking clearly at the start about scope, fees, and expectations, and how things will play out, makes an enormous difference in the way a matter is handled instead of “hitting the ball back and forth like a tennis match.”

These skills are especially useful for fixed fee matters.  Does that mean that fixed fees are a way to higher profits?  Some legal experts certainly think so.  We wish they were right, but think that in today’s highly competitive legal marketplace at most firms a “win some, lose some” portfolio approach is more realistic.

As one AmLaw senior partner put it in the LegalBizDev Survey of Alternative Fees:

Some fixed fee matters will be profitable, some will be loss leaders.  In general for similar repetitive engagements, you win some and you lose some, in that sometimes the law firm covers its costs and gets a margin, and sometimes it does not.  To make this work as a business proposition, ultimately the law firm needs to have the profitable cases offset the losses and provide a margin.

That’s why some AFA leaders prefer to bid on portfolios of cases rather than single matters.  Writing in ACC’s blog, Nicole Nehema Auerbach of Valorem put it this way:

Pricing a portfolio of matters…is easier for us and better for the client because it allows us to spread the risk inherent with one case across more. This allows us to provide a lower overall fee since the risk of an outlier, a deviation from the norm, is diminished. It also allows us to customize the bonus on either a case-by-case basis or some achievement for the portfolio overall. For example, our bonus can be tied to the overall savings in litigation spend, or simply the amount of savings we achieved across the portfolio in connection with settlement or judgment payouts.

Or, as Williams Mullen’s Burke summed it up: “When you commit to billing on a fixed fee basis, you need to take the bad with the good and with a smile on your face.”

When I asked Camden Webb to predict the future, he said that the greatest challenge will be figuring out how closely they can they adhere to the eight issues in my LPM book when they are deep in the throes of a particular case. “It is a lot easier to define the initial scope than it is to stick to it. The discipline of project management is difficult, especially dealing with issues like, ‘Yes, I do have to track my time, and yes, I do need to know how much has been spent at key milestones.’”

According to litigator Billy Mauck of Williams Mullen, “We are starting to get better at project management, but we need to keep improving.”

Transactional attorney Allison Domson spoke for the entire profession when she said, “Legal project management is a new mentality.  It needs to be accepted, but it is going to take time.”

 

 

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Comments

At the law firm of Marshall Dennehy, where I was a senior shareholder for 23 years, we leveraged our sophisticated technology to notify the handling attorney and his or her client when a certain percentage of the agreed-to litigation budget had been used. Our clients determined the percentage of budget which would trigger this notification. Frequently the percentage used was 50%, but it could very widely depending on the preferences of our clients. The system we established also enabled client notifications to be provided at periodic percentage intervals throughout the life of the case. Our clients liked this monitoring tool very much.

In situations where the client and their law firm are transitioning from an longstanding billable hour approach to an alternative fee arrangement , it is very important to build into the agreement or contract a commitment that the client will have the same level of attorneys continue to handle the matters entrusted to firm under the new arrangement.

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