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6 posts from September 2013

September 25, 2013

Value and profitability: Confidential insights from the managing partner of an AmLaw 100 firm (Part 2 of 2)

See Part 1 of this post for background on this interview.

When I asked this AmLaw 100 managing partner how well individual partners understood which matters and relationships were profitable and which were not, he replied:

I would say we’ve got people that don’t understand it very well at all, like a 1, and we’ve got some who understand it very well, like a 10. Probably if you averaged all that out, we’d be 5 trending towards 6, or 6 trending towards 7. We’ve come a long way, but we still have a long way to go on that.

This led naturally to a question about how many lawyers have started changing their behavior to meet all these new challenges, and how many had completed the transition to the new normal. Since this particular firm has been so proactive, the numbers he quoted below were much higher than we have heard from other firms:

I think 100% of them have started to change the way they practice, because we make it such a feature in everything we do and everything we talk about that it’s sort of impossible for anybody to be here and not have changed somewhat. However, I think that very few have changed enough that they can fully meet clients’ needs. I think probably a few have, but less than 10%. There’s a lot of upside. The bad side of all this, the way I look at it is, it’s not going away. The good side of it is, we’re moving the needle, and yet there’s still a lot more upside if we can get better at a number of things.

I then asked a few questions about our eight key issues in LPM: defining scope, scheduling activities, managing teams, planning budgets, avoiding risks, managing quality, managing communications, and negotiating changes of scope. Which are most important and need the most improvement? The answers have varied from firm to firm. At this firm, one of the biggest issues is defining scope:

There’s no question that this is an art that needs to be developed further, because we find sometimes with clients that the people we work out the sale with aren’t the same people that we work out the delivery with. Whether the scope has been properly defined or not becomes a really big deal, and changes in scope needing to be negotiated depends upon how well you defined the scope in the first place. This is something law firms have not historically done well, compared to, say, contractors and others who are used to a fixed fee type environment. So there’s a lot of room for improvement.

Another possible area for improvement at this firm is team management:

Management is a skill that is not natural to lawyers. We’ve always been trained to get the case done well to win, but now we have to get the case done well to win, and also efficiently, whatever the arrangement has been. And that last piece is not part of the natural toolkit for most people, so that’s where the project management need for improvement is greatest.

Team management is particularly critical for this firm because when I asked about the most important steps this firm has taken to provide greater value, the managing partner replied:

I would say the biggest thing for us has been an increase in the non-hourly based pricing structures. Our non-hourly business is running at about one-third of our new business, and probably 25% of the fees collected last year. And that’s maybe a 20% increase from the prior year. So that’s a pretty steep curve… I think where we have the most need for improvement is where we have some big fixed fee projects where we haven’t been able to utilize the lower cost lawyers and where we have too many higher cost lawyers operating under the old business as usual model. The profitability or realization of that work is much lower than the average. That’s a function of the project management not yet fully taking hold on those big engagements.

Finally, I asked about whether clients needed to also change their ways to make the new normal work. In every single interview to date, the answer has been a resounding yes. Here are the suggestions from this managing partner:

Clients could get more out of their law firms if they fully embraced change and trusted it. For example, we have a client that does a lot of fixed fee work with us. They require almost every project to be a fixed fee, yet we still have to submit detailed time reports that they use to see how they’re doing. So I say to them, “Look, you basically use us to employ people and spend time preparing reports that you really don’t need, which makes the cost of our business higher. And if you’re comfortable with the deal that we’ve struck, you want us to be incentivized to find ways to do it more cheaply and be more profitable, so you can push us harder to cut the price more. But by requiring all the old fashioned reports as a belt and suspenders, you force us to keep our costs higher than they would be.” So I think clients can more fully embrace what they are starting to embrace, and that would incentivize the firm to really get greater alignment with the clients, and be even more efficient.

Given the pace of change and the difficulty of predicting the future, it is not surprising that other firms have provided different suggestions for changing both client behavior and their own. I will continue to post previews like this as the research continues, and a full report will be published next year, after we complete all the interviews and our analysis.

September 18, 2013

Value and profitability: Confidential insights from the managing partner of an AmLaw 100 firm (Part 1 of 2)

Last month, I wrote in this blog about a research study I am currently conducting entitled “Client Value and Law Firm Profitability: Insights from AmLaw 100 Leaders.”  The study is designed to provide law firm leaders and their clients with advice on how to achieve greater value in a sustainable way that makes business sense for both sides. Since then, I’ve conducted over a dozen confidential interviews with AmLaw 100 chairmen, managing partners, and senior partners and executives.

The name of every individual who participates in the research is confidential, and all published quotes will be anonymous. That’s because we’ve found in past research that this cloak of anonymity is the best way to assure that senior decision makers speak frankly and openly about what works and what does not.

Since we’ve just begun collecting this data, it is too early to report trends. However, in the meantime, I cannot resist sharing the highlights of some of the most thought-provoking interviews, starting today with some comments from the managing partner of an AmLaw 100 firm that has been particularly proactive in changing the way they operate to adapt to this new world.

When I asked how great the pressure has been to provide more value since the 2008 downturn, this managing partner said, “All clients are very much more focused on more value, and it’s been a dramatic change, as dramatic as it could be.”

When I asked exactly what clients want when they ask for more value, he explained that it is very difficult to measure, because value means different things to different people:

Some clients want to pay less to get the same thing they always bought. Some don’t mind paying the same amount, but they want more. Some want greater certainty and predictability, and to shift some of the risk to the law firm. Some want additional things that make their lives easier, whether it’s different reporting or portals into information, or secondment or staff support. Sometimes they’d like lunch and learn and continuing education, or help with pro bono initiatives. So for different clients, some or all of those things end up being part of how we’re making sure they’re getting more value.

When I asked how much pressure this has put on the firm’s profit margins over the same five years, he said:

On a scale from 1 to 10, it’s not quite a 10, but that’s only because we’ve been paying a lot of attention to it. We’ve done a lot of different things to try to meet the client demand and their expectations and still maintain or increase profitability. We’ve started a new staff lawyer program to provide lower-cost internal options and an e-discovery business. We’ve implemented project management training. We’ve implemented professional estimating and value delivery, and lots of other things. If we had not changed anything, then the profit pressure would have been unbearable. We’re having some success at continuing to drive up profitability while still meeting client expectations. But the pressure is not going away, that’s for sure. 

Of course the mention of project management training caught my attention, since I’ve often written about our belief that simply educating lawyers often fails to change behavior, unless it is supported by one-to-one coaching with key partners. (For example, see the free downloadable chapter from my book Legal Project Management, Pricing, and Alternative Fee Arrangements.) This firm’s experience supports my view. When asked about which initiatives were most important, and which still needed improvement, this managing partner said:

I think project management probably will have the longest-term positive impact, but it’s been the biggest challenge, because it’s something that hasn’t been easily absorbed by a lot of the lawyers. When busy lawyers start scrambling around, the inefficiency creeps right up… Project management training has not met expectations, although it’s improving, and I do think in the long term project management will have a really big impact.

He then talked about the key role of one senior executive who oversees project management, pricing, value, and more:

I think that the role we’re asking ____ to play, which is part consigliore, part expert, part preacher, is going to have a very positive impact, not just on project management, but also on the pricing side, including better understanding among the partners about what agreeing to certain things means.

 

Next Wednesday, Part 2 of this interview will go into more detail about how this particular firm is changing, and what clients must do to maximize the benefits of the new normal.

September 17, 2013

Legal project management: Five law firms compare notes on how to maximize its benefits

In theory, it is easy for lawyers to find ways to increase efficiency.  In practice, however, getting lawyers to change the way they practice law has proven extremely difficult.

On November 13, 2013, I will moderate a panel discussion in New York City with leaders from five law firms that have successfully begun the long process of changing behavior:

These experts will talk frankly about what has worked at each firm and what has not.  The discussion will include training and coaching techniques, as well as tools and software, such as sample templates for handling loan transactions, reviewing documents, calculating fees and more.

This is the third time this year the workshop has been offered by The Ark Group, publishers of Managing Partner magazine.   After attending the first session last March, Delilah Flaum, the Partner in Charge of Knowledge Management and Legal Project Management at Winston & Strawn LLP, said:   

This workshop did an excellent job of offering practical suggestions for dealing with the issues law firms encounter when they implement legal project management.  The frank discussions between partners and executives at firms that have successfully changed lawyers’ behavior would be helpful to anyone who is trying to get their arms around this challenging transition.

After attending the second session in May, Christine Johnson, the Director of Client Matter Management at Quarles & Brady LLP noted: 

The greatest benefit of the workshop was hearing from others about what they are doing and how they are responding to the same market challenges that we are facing.  Brainstorming solutions together was useful because it helped me to walk away with some ideas that could be adapted for our firm.

Kevin Klein, the Program Director at Ark, says that:

This is the only workshop we have offered three times within nine months, because the approach has proven so useful to participants.  We had to turn down several people who wanted to register in May when the last session sold out early, and we were unable to get a larger room.

The program will be held on November 13, 2013, at the American Management Association’s Executive Conference Center at 1601 Broadway near Times Square in New York City.  For more details, see the online brochure and registration form or contact Peter Franken for details at pfranken@ark-group.com or (312) 212-1301.

September 11, 2013

Why is legal project management growing?

Some background on this post: Lawyers often ask us for a one page summary of what LPM is, and why they should care.  But summarizing all the facts in a single page is very difficult.  As Mark Twain once put it“I didn't have time to write a short letter, so I wrote a long one instead.” Over the last few months, LegalBizDev Principal Ed Burke and I have been exchanging drafts of this post.  If you want to prove to yourself that we met the challenge, feel free to download the one-page pdf version.

Clients have been using project management for decades to reduce risks, cut costs, streamline processes and protect profits.  Now they’re pressing law firms to adapt it to legal services, to provide more value and improve the predictability of budgets and schedules.

 

What is legal project management?

Though new to law firms, project management has long been used by businesses to protect profits through efficiency and predictability.   Their projects – from the design and production of a new line of jet engines to the acquisition and integration of a billion-dollar company -- can reach nearly unimaginable levels of complexity, variability and risk.  Businesses from engineering to investment banking have developed a rich and deep body of knowledge about how to manage projects on time and within budget.  Legal project management adapts these proven techniques to the unique challenges of managing unpredictable legal matters and disputes.  

 

How it works.

Project management applies templates, checklists and other recognized management tools to planning, managing, delegating, budgeting, tracking, meeting deadlines and avoiding risks.  A 2011 meeting of litigation experts hosted by the Association of Corporate Counsel and the American Bar Association found that, while lawyers are quick to grasp new management techniques, “the challenge is change/behavior management.”  As a result, the quickest path to ROI is one-on-one coaching, in which experts advise lawyers on immediate legal project management tactics each lawyer can use to address the issues they face today.

 

What’s new?  

Any lawyer who has ever planned a budget or managed a team has served as a legal project manager.  But clients are now choosing law firms based on their ability to apply a more systematic and disciplined approach that delivers more value, more quickly. “More efficient project management” is now one of the top demands of in-house Chief Legal Officers, according to a recent survey by Altman Weil.  

 

The benefits.

Project management was initially adopted by many firms to protect profits in fixed-fee arrangements.  But then they saw its benefits in billable-hour matters, including decreased write-offs and write-downs through more accurate budgeting and tracking.  It also enabled firms to take on more work without adding headcount or cost. A recent American Lawyer Media Legal Intelligence survey found that firms that use legal project management report more productive client relationships, improved communication, greater cost predictability and other benefits.   


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The first “how to” text in the field – the Legal Project Management Quick Reference Guide by LegalBizDev founder Jim Hassett – was published in 2010 and is now in its third edition.  For more information, see www.legalbizdev.com/projectmanagement. 

September 10, 2013

Of Counsel’s excerpt from my LPM Guide

In case you missed the most recent issue of Of Counsel:  The Legal Practice and Management Report, you may want to go to our web page to see the excerpt they published from my Legal Project Management Quick Reference Guide. While you’re on our web page, you may also want to see their review of the book, published in Of Counsel’s July issue.

September 04, 2013

Tip of the month: Define and measure success

Whether you focus on legal project management or increasing new business, some of your efforts will be much more successful than others. You need to specify the metrics that will be used to identify the winners and losers, so that you can refine your tactics and increase your success rate.

 

The first Wednesday of every month is devoted to a short and simple tip 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 Legal Project Management, Pricing, and Alternative Fee Arrangements.