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April 30, 2014

The most critical issues in legal project management (Part 2 of 3)

Manage client communications and expectations

In the eyes of some, nothing is more important than communications. Consider these comments from an AmLaw 100 managing partner, and from an AmLaw 200 COO:

Client communication is the one that requires the most improvement and the one that has the potentially greatest impact for us. “Here’s what this should cost. Here’s how you can help us keep it within this cost. Here are the things that could really knock it off the rails. Let’s be sure we agree on the assumptions that are built into this budget or fix the arrangement. And then we’re going to talk to you along the way and tell you if we’re maybe getting off track.”

Communications between firm and client are very important. It drives me crazy when a lawyer says that the client’s going to be really shocked by this month’s bill. I then ask the lawyer, “When did you know the bill was going to be really high?” and they say they knew a while ago.

Why is communication so often delayed? In the opinion of one C-level executive:

There is just a dislike generally for lawyers wanting to talk to their clients about anything but legal work, so many lawyers just aren’t adept at it, and they don’t like talking business with clients. It’s not what they’re comfortable with, so they avoid it. And as a result of avoidance, by the time you have to do it, it’s too late. It’s a surprise, and the client really gets upset.

When communication is handled well, it can directly impact the bottom line:

We had a fixed fee a couple years ago on a $300,000 matter. The partner managed it very well and had continuing dialogues with the client’s GC. The $300,000 turned out to be closer to a million, and he got pretty much every penny of it. There were things that happened out of our control, but there was constant communication about what was going on, which is so important.

I have done many client interviews over the years, and I’m always amazed that I can have two lawyers in the same department, and servicing the same client, where one of them has fabulous relationships and the client never cares how much they charge, and the other one has a horrible relationship and the client wants them to budget everything they do. And the difference often comes down to how well the two lawyers are communicating with the client.

How can lawyers improve communication? First they must be convinced that it makes a difference. Then it’s “simply” a matter of support and practice asking the right questions, in the right way, at the right time:

I have a list of questions for AFAs and legal project management. At the top of it is, “Do you know who the attorney on the other side is?” And if I get a no, I say, “Well, then, how can you quote a price if you don’t know who your adversary is going to be?” There are opposing lawyers in one firm where if somebody comes to me and says, do a fixed fee, I won’t do it. Seriously. I think it’s that important.

Years ago I had a client whom I did a lot of work for. Early on in the relationship, I called the general counsel all out of breath one day to give him a blow-by-blow report on developments. He cut me off, and he said, “Don’t do that. You can call me when you’ve accomplished the project or you’ve screwed it up. That’s it.” I’ve had plenty of clients since where if I took that attitude with them, they’d fire me. If you tell the client you’re meeting with a regulator, and several days pass by and the client hasn’t heard from you, most are going to be annoyed. One thing to do, particularly with a new client, is to ask them how often they would like to hear from us on our progress. And then do it.

Plan and manage the budget

Anyone who has spent time working with lawyers knows how important budgets are, and also knows that most lawyers have problems establishing realistic budgets and even bigger problems living within them. Some of the problem has to do with the unpredictability of legal work, but many improvements could be made with simple changes, like this one described by the CFO at one AmLaw 100 firm:

I was formerly in public accounting, and I would tell my assistants, “You have 12 hours for this account. If you’ve gotten halfway and you’ve used more than six hours, come and tell me to try and figure out what you’re doing wrong.” I’d be surprised if more than a handful of lawyers say to the people working on their files, “Here’s how much time it’s supposed to take, and if you disagree or if something goes wrong, let me know at point X.” I have to do write-offs around here, and every day somebody’s got to write something off, because somebody else ran away with the amount of time. I always have the same question: “Who was supposed to manage them?” And they say, “I was. I’ll do it better next time.”

There are signs that many firms are improving on budgeting:

We’re evolving to a system that provides better real time monitoring, both for the lawyers responsible for the engagement and for management as well. Someone must be able to send an inquiry: “Wait a minute, this is tracking way out of line with what we understand the engagement to be.”

In the eyes of one managing partner, it all comes back to defining scope:

I’d say the most critical issues are setting objectives and defining scope, and then planning and managing the budgets. That’s where things go off the rails, when clients expected you to be doing one thing and we understood we were supposed to be doing something else. Then the budgets get out of whack. If you define the scope up front, that helps, and then you’re monitoring the budgets and you can see if you’re getting out of line with your expectations.

The chair of another firm had a different view:

If I had to pick one as a starting point I would say planning and managing a budget is probably the most important task. I started off by thinking that setting objectives and defining scope would be more important, but it turns out that planning and managing a budget actually subsumes a lot of the other items on the list. Even if your budget turns out to be terrible, and you didn’t manage it well, the fact that you started off with one will make you better the next time. And I think that none of these other elements have quite the same residual impact as planning and managing to a budget. It’s not what I would have expected if you had asked me this question a year or two ago, but I’ve come to believe it’s all about getting people to just sit down and think about what they are doing, who’s going to do it, and how many hours it will take. And it’s important that they do that in the present. You don’t really learn anything from taking a look at the last 15 deals that didn’t have a budget.

The remaining five issues will be described in Part 3 of this series, which will appear on May 14.  Next week’s May 7 post will be a “Tip of the Month.”

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