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5 posts from October 2013

October 30, 2013

Two new surveys reveal what legal clients want

Every year around this time, I look forward to reading Altman Weil’s annual survey of in-house law departments to get insights into the needs of legal clients.  When the results of the 2013 Chief Legal Officers survey came out last week, the first thing I noticed was that “78.5% of CLOs negotiate price reductions from outside counsel to control costs.” I’d love to see a list of the 21.5% of companies that don’t negotiate.

Then I turned to this key question about what CLOs want law firms to do differently:  “Of the following service improvements and innovations, please select the three you would most like to see from your outside counsel.”  This year’s top three were improved budget forecasting (57%), greater cost reduction (52%) and more efficient project management (52%). 

Since better legal project management (LPM) leads to improved budget forecasting and to cost reductions, you could say that the top three client requests were LPM, LPM, and more LPM. 

The survey was based on questionnaires filled out by 207 law departments and is largely focused on their internal operations.  It also included a very interesting discussion of CLOs’ preferences for four types of pricing:  transparent, guaranteed, value-based and lowest price.  However, my interpretation of those results will be based on what I am hearing in my AmLaw 200 interviews on Client Value and Law Firm Profitability which are still underway, so that discussion will have to wait for another day. 

The survey also found that 29% of law departments plan to cut spending on outside counsel this year, while only 15% plan to increase it.   (For the remainder, 49% said that spending would stay the same, and 7% were not sure.) 

Spending cuts like this have been going on for years.  In a different survey of 968 senior legal decision makers entitled Winning and Losing Business, Acritas recently reported that in the last year, one out of three of the world’s largest companies have fired at least one law firm.  The most common reason for “firing” is an inevitable fact of life that law firms cannot avoid: the case or matter ended (20%).  The next two reasons for being fired, however, are very much under law firms’ control:  the firm was too expensive (19%) or its lawyers were slow or provided poor service (17%).  Both can be addressed by LPM.

In our experience, prestigious firms often think they are above this trend, but according to the Acritas survey (p. 4): “Prestige certainly does not provide immunity from dismissal. Three of the top four most fired firms are market-leading premium global practices. This significant shift away from premium-priced firms as primary providers is a trend we have seen developing since 2010. Under pressure to control external spending, clients are becoming more selective in their use of ‘elite’ firms, reserving them more for bet-the-company work or highly specialized matters alone.”

There is every sign that price pressures for every type of firm will continue.  Reverse auctions in which the low bidder wins, the race to the bottom, and what Bruce MacEwen has called “suicide pricing” are all part of the new normal.

What should you do if your firm is too expensive?  You could cut expenses to the bone and fire “non-essential” staff and associates.  Oh wait, you probably already did that.  You could slash your own compensation, but I don’t see too many lawyers lining up to volunteer for that option.  Or you could learn to become more efficient, by applying legal project management. 

The choice is yours.

October 23, 2013

Eight Common Problems Solved by Legal Project Management

This post was written by Ed Burke and Jim Hassett, and is also available for download as a one page pdf.

 

Correcting any one of these could increase your bottom line.


1.  Unclear, expanding or shifting objectives and scope

Set objectives and define scope. The seeds of budget and scheduling failures are often planted at the start.  At the outset, you must know and record exactly what is included in each assignment – and what is not.

2.  Lack of organization  

Identify and schedule activities.  Break the matter down into smaller tasks that can be better budgeted, scheduled, staffed, and managed so that a problem in one task can be identified and solved before it throws the others – and the entire project – irretrievably off course.

3.  Ineffective management of valuable personnel

Assign tasks and manage the team.  Assigning the right tasks to the right people is not enough.  You must create a sense of teamwork, guide the process, monitor performance and motivate staff in the face of competing priorities. 

4.  Budget guesstimating

Plan and manage the budget.  Estimating and controlling costs is very difficult, but absolutely essential.  Careful tracking, constant communication and early adjustments – on the task level -- can prevent write-downs.  

5.  Failure to prevent problems before they occur 

Assess risks to the budget and schedule.  Alternative plans for the most likely and damaging threats should be in place at the outset.   Developing a Plan B only after a problem occurs causes delays, raises costs, diverts focus and creates an air of crisis.

6.  Compromising quality

Manage quality.  Everyone must be clear it’s about cost-effectiveness, not shortcuts.

7.  Excellent legal work that nevertheless fails to meet client expectations

Manage client communications.  This is extremely important to clients even if they neglect their end of it.   Vague and shifting client objectives and priorities require you to build regular, two-way communication into the project plan.  Otherwise, it will be neglected in the focus on the matter itself.

8.  Scope-creep 

Negotiate change orders.  Changes are inevitable.  The key to success is learning when and how to negotiate their costs with the client.

October 16, 2013

What lawyers can delegate in project management, and what they cannot (Part 2 of 2)

Many firms seem to believe that the first and most important step in LPM is to invest in technology and infrastructure. At the P3 conference, a great deal of energy went into comparing the features of the leading LPM software programs on the market. But several speakers who had installed software reported that most lawyers failed to use it.

One firm in our research that invested substantially in technology put it this way:

I think we have significant additional work to be done in budgeting, in really monitoring the budgets. We’ve built systems. We’ve got resources available to let us know where things are. Say we’ve got a piece of litigation with a $4.9 million fee cap. I can look at that and say that we’re a million dollars into it and I’m not going to lose sleep over it tonight. But what I don’t always have is a broader sense of where we are. Did we really budget this out? Are we tracking it to that budget? Where are we today versus where we thought we were going to be? As a result we discover surprises too late. We may miss an early opportunity to have an important discussion with the client about the scope of work and why we are off budget, and to reexamine whether we are staffing this in the right way or doing work inefficiently.

According to a research participant from another firm:

We spent an incredible amount of time and resources coming up with a very sophisticated reporting system that would allow people, with a couple of clicks through our intranet, to go into any particular matter that had a budget, and see down to the timekeeper and task level, exactly how they were doing. Nobody uses them, as far as we can tell. Literally nobody. All they care about is the high level. Lawyers want an email once a week saying, Where am I with my budget? They don’t care about the more detailed information.

This is not to say that budgeting and management software has no place in LPM over the long term. No one can manage to a budget unless they know what their team has spent so far, and some research participants have reported being extremely pleased with the technology they’ve installed.

The issue is exactly when to invest in new software. We think the answer is only AFTER key lawyers have seen the benefits of LPM for themselves, made a commitment to manage differently, made some decisions about exactly what they personally will manage and what will  be delegated, and determined how many of these tasks can be accomplished with the software they already own, including accounting programs and Outlook. 

Once commitments have been made, staff members can be enormously helpful in performing tasks that lawyers do not want to do for themselves. The Chairman of one AmLaw 100 firm in our study that is just starting down this path noted:

We’re going to start hiring different people to manage the non-legal aspects of the practice, not the relationships. Lawyers are notoriously bad managers. You could be a fabulous trial lawyer, but you might not be able to get your hours in on time, or bill on time. You might not be able to collect on the bill. You’re always in an awkward situation if there’s an account receivable outstanding. With all these different components, it’s better to look to a project manager on accounts receivable, on AFAs, on collections, rather than the lawyer.

The managing partner of another AmLaw 100 firm started that kind of hiring years ago, and has been extremely pleased with the results:

What’s had the greatest effect is our business managers. They can impartially sit down and analyze profitability. They build up a database of what it costs us to do things, and they’re just invaluable. The business managers are able to focus on it, and their minds work differently, and I think we’ve been very effective at actually developing a tool to help people price things. It’s a pretty basic tool. But then lawyers say: “Wow, was that sophisticated, this is really helpful.” So what’s had the greatest effect for us is the non-lawyers who really are focusing on the business side of the equation and what it costs to do things; pushing back, and helping people have a little bit of backbone. They can now show them a model and say, “No, that’s too low, you’re going to lose your shirt.”

A senior litigator from another firm that participated in our research said:

We now have a pricing director, and he and I really split the work. He’s incredibly effective with my partners, and incredibly good. It’s an interesting job that he has, that we both have, of trying to facilitate partners’ entrepreneurial instincts and helping them to get business, and guiding them in the transition into this new world of pricing. But we’re also the police for bad deals.

Summing it all up, the good news, from both our research and the P3 conference speakers, is that there are many different approaches that have worked at different firms to improve legal cost-effectiveness and efficiency. The bad news is that some take much more time and money than others, and there is considerable controversy as to which is which.

We believe that as the legal marketplace continues to evolve, both staff and technology have extremely important roles to play, especially in the area of budget and schedule planning at large firms. But success must start with lawyers buying in to the process, and overseeing the central issues of client and team management.

Many of the grizzled veterans who spoke at the P3 conference agreed with the position we’ve been arguing for years: conversion to LPM must begin the hard way, one influential lawyer at a time.  The first step in any realistic long-term LPM plan must be creating a core group of partner champions who will guide the approach so that it meets the true needs of each practice group and firm.

October 09, 2013

What lawyers can delegate in project management, and what they cannot (Part 1 of 2)

Last week, I was in Chicago to speak on a panel about “Legal project management in the trenches” at the Legal Marketing Association’s first “P3” conference. The name came from the three Ps in the conference subtitle: pricing, practice innovation, and project management.

The organizers had originally expected a maximum attendance of about 100 people. In fact, more than twice as many attended, in still another sign of how quickly the legal marketplace is changing.

In February 2012, when I published an article with Jonathan Groner for Bloomberg Law entitled “The Rise of the Pricing Director”, after extensive networking we were able to find only three AmLaw 200 executives that had that title. Last week’s conference was crawling with pricing directors.

In the privacy of a conference with their peers, people talked frankly about the challenges of adapting to today’s deep discount, reduced-demand legal environment. Personally, I was less interested in the question of how to set a price in the first place than in how legal project management (LPM) can help firms protect profitability after committing to a fee.

Different firms had different answers.  According to several speakers, that is to be expected since firms have different cultures, needs, and goals.  But there is still an enormous amount of controversy about how to select the LPM approach that is likely to produce the greatest benefits for a particular firm.

At the heart of many of the arguments was the question of the role that lawyers must play in project management versus what can and should be done by supporting staff. Very few of the people who attended this conference were practicing lawyers, so almost all of the emphasis was on delegating project management to staff and on the technology used to support them.

Now, I am a huge fan of delegation. Our Legal Project Management Quick Reference Guide includes three different sections explaining what lawyers should do to delegate more effectively. But I also believe that at the heart of LPM there are some core issues that lawyers must do for themselves. If you need to exercise, you can’t hire someone to do your pushups, and if you need to communicate better with your clients, you would be wise to pick up the phone yourself.

The reason communication is on my mind is that I am currently spending a lot of my time interviewing managing partners and decision makers at AmLaw 200 firms for a research study entitled “Client Value and Law Firm Profitability” which will be published next year. (We will soon publish the names of firms that have participated so far, but not of the individuals interviewed. All the quotes below are anonymous, because we’ve found in past studies that such confidentiality makes it possible for senior decision makers to speak frankly and openly.)

In one question, I ask participants to assess the relative importance of the eight key issues we’ve identified in LPM: defining scope, scheduling activities, managing teams, planning budgets, avoiding risks, managing quality, managing communications, and negotiating changes of scope. I’ve only finished about 20 in-depth interviews to date, but, as I noted in a recent post, so far the issue that is considered most important is the need for better communication with clients.

After the conference, as I thought about what elements of LPM can be delegated to staff and what should be done by lawyers, I realized that my eight issues could be grouped together under two larger categories:

  1. Budget and schedule management
  2. Client and team management

The first is where staff and software can help the most, depending on the skills, interests, and business model of each firm. The larger the matter or the firm, the more sense it makes to delegate budget and schedule management.  However, no matter how large the firm, client and team management must largely be performed by the lawyers themselves.

In the non-delegable client and team management category, communication must begin at the start of every matter by defining scope clearly and understanding what clients want to pay for and what they do not. As one participant in our research put it:

We need to get better at focusing on what we need to do to meet the clients’ business objectives, not what we need to do to make ourselves feel good that we’ve just produced the greatest brief in the history of the law… And that is a monster hurdle to get over with successful lawyers at a top firm. That’s been a major problem. It’s about how you get people more focused on meeting business objectives and less focused on the pure intellectual, “I just want to spend all day and all night doing this, because I’m interested.”

When it comes to team management, project management staff can and should help with setting up plans, but how many project managers will be in a position to tell senior partners what they can and cannot do? To increase efficiency, somebody needs to be in charge. Here’s another example from our research:

Isn’t it amazing that you could produce a world class brief, and if it’s due at midnight tonight, you’ll work right up till 11:55, and you will be ready to file this world class brief, and everybody will be high-fiving. And if at the last second, somehow there’s an extension for two days, you will work the next two days to try and make what was perfectly good, if not great, even better. This is what lawyers do, and it sometimes has absolutely no value to the client, but that’s what they do.

Many problems go back to the perfectionism that has caused so many legal budget overruns in the past. Said another research participant:

I think one of the biggest problems in the industry is that we over-engineer and over-deliver quality, when there’s not enough discussion with clients up front about the cost trade-offs and what really needs to be done. One of the very first things I did when I left practicing law was that I agreed that for every prospective securities offering or document that I was going to read, I was not going to correct the typos. At the end of the day, most typos are not important. If a number was wrong, I might look at that one. We had a discussion the other day with somebody about what we could do for a certain cost, but only if they understand that they are not going to get a Cadillac. And so we too often think that we can only produce a Cadillac, and we don’t have the discussion with the client about, is a basic car more than adequate for this, or is it worth the additional cost of building the Cadillac?

Overruling that perfectionism will require management techniques that are unfamiliar and uncomfortable to many lawyers, according to another interview:

Identifying and scheduling activities: that’s where I feel like we immediately fall off a cliff. Even if we do the budget down to the level of timekeeper and task code, I know very few people who out of the gate start managing the case that way. Are we on track for this small piece of the work? What I see more of is where people say, “I’ll monitor how we do against the overall budget, and if I start to see that we’re eating up too much of the budget too quickly, I’ll stop, and maybe I’ll go back and now dig into this stuff.”  A lot of it is backwards looking… we’re light years away from partners truly managing their cases in real time.

Next week, in Part 2 of this post, we’ll talk about the role that technology and new staff positions can best play in the transition to a new and better approach to LPM.

October 02, 2013

Tip of the month: Evaluate results regularly, and learn from mistakes

Once you have established metrics for evaluating the success of your legal project management or business development program, key decision makers within the firm should evaluate results quarterly or on another schedule, to review what worked and what didn’t. In this new, more challenging, world, it is not possible to avoid occasional failures. But it is possible to learn from mistakes and to improve results.

 

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.