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January 20, 2016

How to improve the process of defining legal scope:  The case of Levenfeld Pearlstein (Part 2 of 2)

By Gary Richards and Jim Hassett

Managing partner Rob Romanoff provided a specific example of how our scope workshop related to an ongoing matter where a client requested some work for a flat fee:

This was in an area where we typically work on an hourly basis because there are so many things that can’t be predicted.      We only represent one of the parties, and we don’t know the other party’s lawyer, so this could go on a while. But in the email where our client said he wanted us to do this work, he repeated more than three times that he wants it done for a flat fee…

One of my partners who wasn’t at the scope workshop said “we really can’t do this for a flat fee.”  My response was that the client had made it very clear he wants a flat fee. We can’t simply say “no”!

So the pricing partners broke down the core phases with a detailed analysis of scope, and we agreed to work on a flat fee basis for drafting the documents. When we begin negotiating with the other party’s lawyer, at that point it will be billed on an hourly basis going forward.

It could be a win-win both for the client, in terms of certainty of costs, and for us, either not being taken advantage of or having to take on all the risk that the other lawyer will delay the process and drive up the fees. 

David Solomon, another workshop participant and a partner in the Corporate & Securities Group offered a different fixed fee example, and explained how the course had led him to refine and improve a process that the firm was already using:

In the past, we have set up our budgets based on a pricing matrix which combines our experience with some input from our pricing people. Then I’ve been putting together simple intuitive spreadsheets to show the client the status of the budget and taking time with our bills to allocate out all of our time to each bucket of the project. Then I’ve been sending it to the client without any editorial comments.

But for the last couple of project budget status reports since the workshop, I’ve sent quite a few editorial comments about exactly where we are, especially if we are higher on certain things, and telling them where I predict we’re going to be. This helps set the stage for when there may be scope changes, as opposed to waiting until there actually has been a scope change. It’s been very effective.

Stuart Kohn, Head of the Trust and Estates practice group, gave another example of how the workshop helped him improve a process that was already in place:

A lot of the work we do for estate planning is based on flat fees that cover creating the documents.  But for work after they sign, such as funding their trust, we bill them hourly. We state that in the engagement letter, but I think the need to have the conversation again to remind them and to clarify is really important, and that was a good highlight of the workshop.

Also, we already use an estate administration checklist internally to guide our work and activities on a matter. But now we will take that one step further and incorporate that description of our work into the engagement letter.

Another key reminder was that it is better to talk with the client along the way about scope changes as opposed to waiting till they get a bill and complain, and we deal with it after the fact.

Overall, I thought it was a great workshop. Incredibly helpful!  The materials are really valuable and I have gone back over them a couple of times.

The benefits of the program extend not just to client interactions, but also to internal communications within the firm.  Marc Fineman noted that:

The value of a specific scope statement carries over to delegating and supervising tasks that are assigned to others. That means that you have to 1) give people on your team the benefit of knowing the scope of work that has been developed and 2) make sure that they operate within that scope of activities… so that things don’t go off the rails. I realized after the workshop that this is something I need to work on myself, and I’ve already started.   

Similarly, David Solomon reported that:

I can have it all in my head and know what the budget is, but everybody that is working on it also needs to know. So at our last team meeting, I showed everybody’s budget, how it was spread and especially in their particular area. And I urged them “…when something seems to be going awry, raise your hand and tell me.”

I certainly think the team will benefit from seeing the entirety of what has to happen, and this will help get their agreement/ buy-in to all the things that go into the plan. Also, their involvement will help me to make sure that when I’m creating a budget I’m not forgetting something.

Executive director Angela Hickey summed up the workshop’s benefits as follows: 

Instead of avoiding conversations about scope, our partners now recognize that this is a business process and that it only gets better with more give and take, as opposed to just hiding from the discussion, and hoping it all will work out in the end.

In addition, the workshop tips for how to handle a fee increase negotiation has had a positive impact on our partners to rethink the client relationship. I heard some light bulbs coming on in conversations among our partners when they discussed how negotiating is sometimes a natural part of the process. It’s not distasteful, it’s not bad, it’s something that we should embrace, expect and plan for. And it does not have to be adversarial. It could, instead, be a way to get to every party’s interests.

After all, it is a business transaction and most clients are used to negotiating the terms of everything: contracts, agreements, standards, and processes. Clients don’t find it distasteful to negotiate. It’s just business as usual.

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