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2 posts from January 2018

January 24, 2018

The Top Three Facts Law Firm Leaders Need to Know About LPM

By Jim Hassett and Tim Batdorf

Law firm leaders who are interested in legal project management (LPM) should begin by focusing on these three central facts:

1. Clients want LPM

Any law firm that has responded to an RFP in the last few years knows that client requests for LPM are growing rapidly.

Survey after survey has shown that legal clients are seeking greater efficiency from firms.  For example, in its 2017 Chief Legal Officers (CLO) Survey (p. 37) , Altman Weil provided 280 CLOs with a list of ten possible service improvements, and asked “please select … [the improvements] that you would most like to see from your outside counsel.”  The top three things clients want were all closely related to LPM:

  1. Greater cost reduction (51%)
  2. Improved budget forecasting (46%)
  3. Non-hourly based pricing structures (39%)

Even when clients fail to ask for LPM by name, the results that clients are looking for definitely fall under the term, including minimizing surprises and improving communication.

If you believe that your clients are different and that they care only about legal quality and not about cost, consider yourself very lucky. But you’d better be right, because you may be at risk of losing these clients to competitors who focus on improving service with LPM.

2. Experts disagree about the best way to implement or even define LPM

There is widespread agreement that clients want LPM and that it can pay off for firms by protecting business and increasing realization and profitability. But the field is so new that experts still disagree about exactly how it should be defined. These arguments have slowed LPM’s progress, as seen in this quote from an AmLaw 200 firm leader from one recent survey:

We were just at a board meeting last week where we were talking about whether we should do formalized project management training. My answer to that is obviously yes, we absolutely should. But first we need to agree on what legal project management is. (p. 89)

Here is the definition we’ve used for years:  LPM increases client satisfaction and firm profitability by applying proven techniques to improve the management of legal matters.  Note that this is a broad definition that embraces a very wide range of management techniques, including pricing, communication, process improvement, and much more.  

By our definition, any lawyer who has ever planned a budget or managed a team has served as a legal project manager. But what was “good project management” for lawyers a few years ago is no longer good enough. Clients are now choosing law firms based on their ability to apply a more systematic and disciplined approach that delivers more value more quickly.

We argue that LPM revolves around improvements in eight key areas:

  1. Set objectives and define scope
  2. Identify and schedule activities
  3. Assign tasks and manage the team
  4. Plan and manage the budget
  5. Assess risks to the budget and schedule
  6. Manage quality
  7. Manage client communication and expectations
  8. Negotiate changes of scope

The key to success is to find the “low-hanging fruit”: The management tactics that are most likely to help each individual to increase value and/or profitability.

As Barbara Boake and Rick Kathuria summed it up in their book Project Management for Lawyers (p. 14): “project management is a tool box—choose only what you need to most effectively manage [each] project.”  

This pragmatic approach is closely related to the Agile approach to project management, an iterative process that focuses on key issues, one at a time, in their order of importance.In an article entitled “Agile: A Non-traditional Approach to Legal Project Management,” Kim Craig, then SeyfarthLean’s  global director of legal process improvement, and Jenny Lee, a senior project manager with Seyfarth, explained why Agile is particularly relevant to the legal profession

Traditional project management focuses on robust, comprehensive, mandatory project documentation with lengthy project charters, detailed project plans, complex status reports and rigorous, formal change control logs… [But] the world of legal service delivery is fast-paced and unpredictable. In legal matters, we cannot possibly know everything that will be involved with litigation at the outset. Developing an overall strategy is generally common practice, but detailed, cradle-to-grave planning is impossible.

Agile contrasts with the more traditional approach to project management which holds that every project should start with a well-defined plan.  Only after that is complete and approved do you begin working your way to the end, one sequential step at a time.

The traditional approach is also known as the “waterfall” approach because progress is seen as flowing steadily from the top to the bottom (as in a waterfall).  It typically sees projects in terms of five key phases or steps such as:

  • Analysis
  • Design
  • Implementation
  • Testing
  • Evaluation

In some cases, firms have hired LPM Directors based on their “waterfall” project management experience in construction, government contracting, and other areas where traditional techniques are used, and Agile techniques are not.  This has led to many stories of LPM Directors who could not or would not adapt to a legal environment, and who ended up working with the very small group of partners that were interested in project charters, Gantt charts, and tools like Microsoft Project software.

So, if anyone tells you that LPM is defined by five steps such as analysis, design, implementation, testing and evaluation, you should be aware that they are describing the traditional waterfall approach, not the Agile approach which we believe applies better to lawyers. As the old cliché says, you won’t get a second chance to make a first impression, and attempts to apply the traditional waterfall approach have set back the cause of LPM at many firms.

Another challenge in implementation caused by the controversy over definitions can be seen in the relative resources firms have devoted to two key questions addressed by LPM:

  1. Pricing: How do I bid high enough to make an acceptable profit, but low enough to get new work?
  2. Managing: After I set a price how do I manage the work to assure client satisfaction and a reasonable profit?

In a study based on interviews with 15 LPM directors we found that almost all of firms’ emphasis has been placed on the first question – pricing – rather than the second – management (p. 292).  We believe this is a mistake.  As we wrote in that study:

In this era of dog-eat-dog competition, firms sometimes have little control over pricing. But once the price is set they CAN control how the work is done. So why do so many firms concentrate on pricing before internal management… [Frankly], it’s a whole lot easier to get lawyers to agree to a budget than it is to get them to live within it… LPM directors need to help lawyers change their behavior, which is a [much more difficult] challenge. (p. 298)

Interestingly, since completing that study we have talked to clients who have performed their own internal proprietary “gap analyses” to determine how to improve LPM, and reached this same conclusion:  they need more emphasis on changing lawyers’ behavior.  Of course, the financial side of setting budgets is important. But if lawyers did a better job of living within those budgets, and communicating with clients, the impact on the bottom line would be faster and more significant.

3. LPM is hard. Success requires long-term management support

In our LPM work with hundreds of law firms, we’ve seen the importance of follow-up over and over again.  In every single case where we have seen a firm make significant LPM progress, it was led by influential partners or members of the executive committee who were strong believers.  In fact, in a few cases, we’ve seen LPM programs make an enormous amount of progress when they were led by a powerful internal champion, and then slow to a crawl when that decision-maker left the firm.

In our view, no law firm on the planet has achieved more LPM behavior change more quickly or more efficiently than Bilzin Sumberg, a Miami firm with about 100 lawyers.

Bilzin started several years ago with individual coaching for key partners aimed at creating quick wins.  Based on their success increasing client satisfaction and new business, these partners became LPM champions who spread best practices throughout the firm.  Practice group leaders are now required to report regularly to an LPM committee and to the managing partner about how they are applying LPM and what works best.

Many firms have individual lawyers or practice groups that are quite advanced in LPM, but in our opinion not a single law firm in the world can yet say that LPM has truly taken hold across the entire firm. LPM aims to change habits that have been reinforced over decades, and to help firms constantly adjust to evolving client demands.

As Bilzin Sumberg Executive Director Michelle Weber summed it up, “Applying LPM is a continual ongoing process.  It’s all about modifying behavior one small step at a time.”  

For a pdf of this post, plus additional related information, download our white paper The Keys to LPM success

January 10, 2018

Litigation AFAs (Part 3 of 3) 

By Greg Lantier, Natalie Hanlon Leh, and Mindy Sooter, WilmerHale

 

Five Questions Outside Lawyers Should Ask Themselves Before Submitting an AFA

In this third article in the series about AFAs, we discuss five questions that outside lawyers should be able to answer for themselves before submitting an AFA proposal for a litigation matter to a client.

  1. Why Am I Proposing an AFA for This Litigation Matter?

First, outside counsel should ask herself why she is proposing an AFA for this matter.  To be sure, AFAs are often beneficial—providing clients with predictability in litigation costs and simplifying the billing for outside counsel—but they are not without risk.  For example, if assumptions underlying the AFA were not accurate, or if these assumptions change over time, the original AFA proposal may likewise be off base.

Thus, outside counsel should be able to articulate the reason for proposing an AFA as a pricing alternative.  One common reason is client preference.  Some clients, including many public companies, value stability and predictability in litigation costs, and seek to avoid unexpectedly high monthly bills.  Other clients may prefer AFAs with success premiums to ensure that outside counsel has “skin in the game.”  But if the client has not requested an AFA, this might not be a good case to propose one.  Indeed, some clients prefer hourly-based billing.  And some cases may be unusual or unpredictable enough to make an AFA inappropriate.

In short, outside counsel should discuss the AFA approach with the client, understand the client’s preferences and concerns, and structure the proposal to address those needs.  While some clients are eager for AFA proposals, not all cases and clients are good fits for AFAs.  If the client has not requested an AFA or the case is unusually difficult to budget with accuracy, this might not be the case to propose an AFA. 

  1. How Long Do I Expect This Matter to Last?

Second, outside counsel should ask herself how long she expects this matter to last.  Outside counsel often has a sense of when or if a case might settle, depending, for example, on the litigation history of the opposing party and its counsel, and on the client’s historic preference for settlement versus trial.

Cases that are expected to settle almost immediately would probably not warrant an AFA.  Cases expected to last longer, but to settle before trial, could be good candidates for AFAs.  In those cases, AFAs provide predictability to clients without significant risk of diverging from the original budget estimate.  Likewise, AFAs in cases likely to proceed to trial are often beneficial to the client, providing the desired predictability and stability of fees throughout the case.  Those cases, however, present greater risk to outside counsel because over time, the budget assumptions underlying an AFA—formulated before litigation began—are more likely to prove inaccurate. 

For all AFA cases, and especially cases expected to “go the distance” to trial, outside counsel and her client should discuss and document the original budget assumptions as well as the circumstances under which the AFA may be modified if the litigation diverges from those original assumptions.  This will ensure that the AFA remains realistic and beneficial not only to the client but also to outside counsel.

  1. Would This AFA Be an Appropriate Template for This Client?

Next, outside counsel should ask herself whether this proposal is a sustainable model for future matters with this client. Often AFAs are presented in response to requests for proposals.  These are competitive bids, and, especially if this is an opportunity to work with a client for the first time, outside counsel might be tempted to present a low offer to beat out the competition.

If outside counsel hopes to build a lasting relationship with this client, however, it is important that the proposed AFA reflect a realistic case budget.  Certainly, the AFA should reflect any discount the firm is willing to offer to obtain this matter, but it should not be unsustainably low.  This proposal is likely to become a standard to which future proposals are compared.  If the original AFA is unsustainably low, the client will be shocked when the firm presents a more realistic budget next time. 

Thus, instead of presenting an unrealistically low proposal, outside counsel should talk through the AFA with the client to ensure that they are both working under similar budget and case assumptions.  That common understanding, leading to a realistic AFA, will build trust needed for future engagements, and be more likely to lead to a long-term relationship.

  1. Am I Confident the Client Will Make Adjustments if Circumstances Change?

Outside counsel should also ask herself how confident she is that the client will be reasonable in making adjustments to the AFA necessitated by changes in litigation circumstances.  Unfortunately, litigation is not always predictable.  A plaintiff may add claims or parties, and new issues may arise.  If these circumstances were not accounted for in the original case budget, it may be necessary to alter the AFA.  And if outside counsel is not confident that the client will cooperate in reasonably modifying the AFA, then an AFA may not be appropriate in this case. 

To determine a client’s willingness to reconsider an outdated AFA, outside counsel should have a frank discussion with the client before litigation begins about the circumstances under which the AFA may be modified.  Certainly, the outside firm should bear responsibility for meeting the original budget under the original assumptions.  But if those assumptions change, for example if the plaintiff adds new claims, there should be a mechanism by which the client and outside counsel negotiate a modified AFA.  If the client is not willing to include any such mechanism, or if outside counsel senses that the client will be unreasonably inflexible, an AFA pricing structure might not be the best approach.

  1. How Will I Train the Team to Work Within the Budget?

Finally, outside counsel should ask herself whether she has a plan for building a team that will work within the budget.  A good AFA is typically derived from an estimated case budget, calculated from the estimated number of hours to perform each litigation task. 

To ensure success of the AFA, therefore, outside counsel should have a plan for building a team that can work within the budget.  The plan should include training the team members about the budgets for each task, providing the team with tools for tracking their actual time spent and comparing it to the time allotted, and providing additional resources or skills to team members that have difficulty staying within budget.  Counsel must also ensure there are tools to track the overall team’s progress as compared to the budget.  These tools require mechanisms to track and report the hours expended versus hours budgeted. 

Without a plan for building a team that can work within the budget and for tracking that progress, an AFA becomes difficult to manage and the risk of departing from the AFA increases significantly.  Putting the necessary tools in place and training the team on the budget are essential prerequisites to entering into an AFA.

The authors are partners in WilmerHale’s Litigation/Controversy Department and IP Litigation Practice. This is Part 3 in a series of three related articles that have been adapted from Law 360 for the fifth edition of the Legal Project Management Quick Reference Guide.  The Guide also includes three additional articles on this topic by the same authors.