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4 posts from March 2013

March 27, 2013

Managing outsourcing and eDiscovery (Part 2 of 2)

By Matt Hassett, Jim Hassett, and Mike Egnatchik

 

The oversight of outsourcers can be complex.

We will illustrate this with an example from eDiscovery, which includes outsourcing to a software team. Consider the eDiscovery technique of predictive coding. Unlike simpler forms of eDiscovery—such as keyword search, concept searching, and looking for clusters of similar document groups—in predictive coding attorneys train software algorithms to find the most relevant documents by using samples of documents called training sets. According to Predictive Coding for Dummies:

Training the predictive coding system is an iterative process that requires attorneys and their legal teams to evaluate the accuracy of the computer’s document prediction scores. If the accuracy of the computer-generated predictions is insufficient, additional training set documents are selected from the document population being considered. Multiple training sets are reviewed and coded until the required performance levels are achieved. Once the desired performance levels are achieved, decisions can be made about which documents to produce.

The great advantage of this approach is that attorneys will be able to explain the decisions made by the computer, since they worked to train the computer algorithms. This can satisfy the obligation of competent representation, so long as things are properly done. But there is always the danger that things will not be properly done. Predictive Coding for Dummies goes on to say:

Understanding how to use predictive coding tools properly is critical for several reasons. First, predictive coding is relatively new to the legal field and introduces additional complexity to the eDiscovery process. Second, many different predictive coding solutions are available on the market that vary in quality and approach. Third, even though predictive coding solutions can be difficult to use, clear instructions and training are often lacking, which can increase the risk of error. These and other factors have combined to create confusion about the proper methodology for using predictive coding tools.

The message is clear: A firm that uses predictive coding cannot rely on it as a black box that gives right answers at all times. Not all providers are equal. There must be a procurement process that evaluates and selects the best provider.

Competent representation includes understanding and monitoring the provider’s work. If that does not happen, the law firm may be at risk.

Due to the growth in outsourcing, in 2008 the ABA Standing Committee on Ethics and Professional Responsibility issued an opinion to provide ethical guidance to lawyers about how to outsource in a manner that is consistent with the profession’s core values.  State and local bar associations have also offered guidance in this area.

In August 2012, the ABA Commission on Ethics 20/20 concluded that outsourcing did not require changes to the Model Rules of Professional Conduct.  However, it did propose new Comments to identify the factors that lawyers need to consider when retaining outside lawyers (Model Rule 1.1) and non-lawyers (Model Rule 5.3) to assist on a client’s matter. The Commission also proposed a new sentence (for Comment 1 on Model Rule 5.5) to clarify that lawyers cannot engage in outsourcing if it would facilitate the unauthorized practice of law.

Like many obligations described in the Model Rules, these proposals were intended to be “rules of reason” and were not intended to preclude consideration of broader legal concerns, such as malpractice and tort liability. But they did reflect the fact that new trends in outsourcing place new demands on the supervising lawyers. A recent lawsuit has highlighted some of the potential risks of failing to manage outsourcers properly.

According to a report in the Wall Street Journal:

An increasingly contentious lawsuit by a former client against law firm McDermott Will & Emery LLP is putting a spotlight on the legal industry’s widespread use of itinerant “contract” attorneys who review documents for lower hourly wages… The case “may well be a harbinger,” said Jonathan M. Redgrave… There could be more disputes between clients and law firms over work performed by contract attorneys and outside vendors as they are used more in the pre-trial discovery process.

The Wall Street Journal also alluded to the underlying economics that are driving the move to outsourcing: “McDermott’s own attorneys billed J-M at ‘rates as high as $925 an hour’ [and paid]… $61 an hour to staffing firm Hudson Legal.” Hudson, in turn, hired the lawyers who did the work for even less.

According to Mark Ross’s description of this suit:

J-M Manufacturing alleges that McDermott failed to adequately supervise contract review attorneys who inadvertently produced privileged documents to the government. The documents were subsequently handed over to a third party who refused to destroy the documents, arguing that J-M waived attorney-client privilege when it produced them to the government.

McDermott has vigorously defended itself against these allegations. According to a firm spokesperson quoted in the Wall Street Journal article, “J-M keeps changing its story.”

Ultimately, the case may be decided for McDermott or against them. From our perspective, the way this particular lawsuit turns out is far less important than the simple fact that a client has sued its law firm for failing to adequately manage its outsourcers. As Ross summed it up, “While this may be the first e-discovery malpractice lawsuit specifically dealing with the issue of lack of supervision of contract lawyers, it surely won’t be the last.”

Firms that decide to use outsourcers will therefore need to develop effective management processes, policies, and techniques for this type of work.

 

This post was adapted from the forthcoming third edition of the Legal Project Management Quick Reference Guide, which will be published on May 20.

March 20, 2013

Managing outsourcing and eDiscovery (Part 1 of 2)

By Matt Hassett, Jim Hassett, and Mike Egnatchik

At a time when clients are demanding to pay less for legal services, it is easy to see the benefit of getting work done for lower hourly rates. Law firms and their clients are looking at each step in legal processes and asking the question, “Can I hire somebody else to do this step at a lower cost, or do it better, or both?”

Outsourcing is a growing trend, and it is leading to new challenges in managing work.

Some types of legal work are relatively easy to outsource. Here’s how Pat Lamb has explained the underlying rationale:

The four-buckets rule—developed by Jeffrey Carr, general counsel of FMC Technologies—is that that legal work fits into one of four buckets: process, content, advocacy and counseling. The Carr corollary is that general counsel are willing to pay generously for advocacy and counseling, but believe process and content should be free, or at least much less expensive, while law firms make the bulk of their revenue from the process and content buckets.

In one widely quoted discussion of outsourcing, Legal OnRamp founder Paul Lippe has argued that about 25% of all legal work falls into Carr’s process bucket:

Moving information from one place to another to create legal work product, typically either generating or analyzing contracts, or working through discovery-based work in litigation or investigation…. Process work will continue to grow, but it will increasingly be managed… with a combination of lower-cost people, process and technology.

Lippe went on to note that “large law firms charge from $150/hour (paralegal) to $400/hour (mid-level associate) for process work.” He then listed these lower cost alternatives:

  • “In-house teams can execute process work for $100-200/hour, and much less if they organize for it as Cisco has.
  • Non-traditional providers like Axiom charge perhaps $125-250/hour for process work, but are still often advantageous for clients, because they represent a variable, not fixed, cost, and don’t require supervision.
  • Legal process outsourcers (LPOs) can deliver process work (including onshore lawyers, technology and process) for around $60/hour with predictable quality, integrated with legal departments and with formal methods for delivering and ensuring quality.
  • Law firms have started to create their own ‘captive’ LPOs, like Orrick in Wheeling, W.Va., Wilmer in Dayton, Ohio, Allen & Overy in Belfast and Baker McKenzie in Manila.”

In his new book Tomorrow’s Lawyers: An Introduction to Your Future (p. 33) Richard Susskind takes this much further:

In the past, when confronted with a legal job, a client had a single choice: undertake it internally or pass it out to an external law firm (or perhaps a blend of the two). The legal world has now changed, so that new alternative sources of legal service are now available. I have identified 15 ways of sourcing legal work.

The key point here is that the identification and management of outsourcing alternatives will become an important task for firms that want to compete in the new normal.

The field of legal project management includes a variety of best practices for managing the activities of an internal legal team. If your team includes contract lawyers and other external non-traditional staff, many of these same principles apply

The challenge of managing subcontractors is familiar in other professions. The tenth edition of Harold Kerzner’s widely quoted textbook  Project Management has an entire chapter devoted to working with external suppliers. The perspective is interesting, since the chapter makes it clear that a firm using an external source for some of its work on a matter is now in a role reversal. The firm is a client of the outsourcer it has hired, and has the same responsibilities to monitor that outsource supplier that its own client has to monitor the firm’s work.

If XYZ Corporation has hired your firm for a matter, the legal department of XYZ had the job of hiring you in the first place and has the responsibility to monitor your work. Similarly, if you hire supplier DIS for discovery work, you had the job of hiring DIS in the first place and then you have the responsibility of monitoring DIS to assure that their work product is acceptable. The firm is responsible for the entire work product, and must make sure that all the parts work.

Lawyers are just starting to become familiar with the idea of subcontracting work, and the use of outsourcers presents new challenges.

As Mark Ross noted in a paper entitled The Ethics of Legal Outsourcing, “It is clear that to satisfy the duty of competently representing one’s client, a US lawyer engaging an LPO provider cannot rely on the LPO provider to evaluate its own work product and must himself or herself be able critically and independently to evaluate the work product received.”

Next week, we will talk about some of the challenges of this new requirement.

This post was adapted from the forthcoming third edition of the Legal Project Management Quick Reference Guide, which will be published on May 20.

March 13, 2013

Six ways LPM improved our practice

By Elizabeth Harris, Harris Cost Lawyers

This guest post was written by one of the first lawyers to complete our Certified Legal Project Manager® program.  Liz’s initial experience was described in this blog in May 2011.   I asked her to write this piece to report on results since then for the third edition of my Legal Project Management Quick Reference Guide (to be published on May 20).


Since I began focusing on LPM, our practice has improved in six major ways:

Liz_Harris21.      Setting and defining the scope. We undertake work on a fixed fee basis and in the past the scope was often not clearly agreed and defined. Our expectations often differed from those of the client regarding the work which was to be included within the fixed fee, and scope creep could easily develop. By improving the way we define scope at the beginning of every matter, we have been able to make fixed fee work far more profitable.

2.      Identifying and scheduling tasks. The identification of tasks is particularly important, as the failure to identify actions which will be required affects both the fee which is set and the schedule of work. In the past, work had been held up because dependencies had not been identified and there were consequential delays in waiting for predecessor activities to be completed. By focusing upfront on identifying and scheduling tasks, we have been able to reduce the number of situations in which a failure to identify all the activities to be undertaken resulted in the fixed fee being too low and the schedule blown out. With more planning, we have a better understanding of what the finished product should look like, and work breakdown structures have helped us to formulate better estimates.

3.      Planning and managing the budget. We have considerable control to introduce changes in the way work is undertaken, including who performs particular aspects of the work. In the past, we did not sufficiently consider this when planning the budget. Nor did we take into account the level of expertise of the person undertaking the work and the fact that the time likely to be spent on the task would vary depending on the person’s experience. There was also little management of the budget as the matter progressed. By devoting more attention to planning and management, we have been able to identify potential problems much earlier in the process, and thus reduce the number of instances where the budget has been exceeded.

4.      Assessing risks to the budget and schedule. Before we started focusing on LPM, we did not assess budget and schedule risks at the beginning of a matter. Risks can be both internal and external and often we are asked to give estimates by someone who has little understanding of the background to the matter and can therefore give us only very limited instructions. We have developed checklists of possible risks and questions to be asked to identify them. A brainstorming session with all team members often goes a long way to addressing this issue.

5.      Negotiating changes of scope. In the past, most of our descriptions of the scope of work were far too general and therefore gave us little ability to negotiate changes to the scope. We have since trained our lawyers to better define scope in the first place and be more aware of changes as a matter proceeds. We have also focused on promptly speaking with the client when there is a change of scope.

6.      Conducting end of matter reviews. Before we began focusing on LPM, we did not take the time to undertake end of matter reviews. We now conduct them frequently, and as a result are learning from our experience and introducing process improvements to enhance future performance.

March 06, 2013

Business development tip of the month: Focus on personal strengths

When the Gallup organization collected systematic data on 250,000 sales representatives over forty years, they found that the most successful salespeople develop unique selling styles based upon their particular personality strengths. Some top legal rainmakers succeed through public speaking, some by becoming active in professional groups, some by taking clients to football games, and some by providing clients with greater value.  So when you plan your business development activity, think about what you like to do, and how you can use your personal strengths to build relationships and provide more value.

 

The first Wednesday of every month is devoted to a very short and simple tip like this to help lawyers increase efficiency, provide greater value to their clients and/or develop new business. This month’s tip was adapted from my book the Legal Business Development Quick Reference Guide.