82 posts categorized "Alternative Fee Arrangements"

September 10, 2014

Case Study: Update on LPM’s benefits at Bilzin Sumberg (Part 1 of 2)

Last December I wrote in this blog that “no law firm on the planet has achieved more LPM behavior change, more quickly or more efficiently” than Miami firm Bilzin Sumberg.  Since then, the firm’s LPM success has been featured by others in books and at conferences.

As explained in my book Legal Project Management, Pricing, and Alternative Fee Arrangements, their breakthroughs were built on a foundation of providing LegalBizDev’s individual coaching program to the majority of their partners (26 out of 51).  That coaching was completed in May 2013.  By then, the LPM had reached critical mass and had developed enough momentum that no more coaching was needed.  The partners themselves and Bilzin’s internal staff took ownership of moving the effort forward.

No one at Bilzin Sumberg would say that their LPM work is done.  As the chair of one AmLaw 200 firm put it in my new book Client Value and Law Firm Profitability:  “It’s an evolving process.  I don’t think there’s ever going to be a point at which you can say: ‘Now I’ve arrived.’”  But Bilzin Sumberg’s continuing experience provides valuable lessons in the best and most cost-effective ways to get started, and what happens next, so we will continue to update their results from time to time in posts like this.

Jon Chassen, a partner in the real estate group at Bilzin Sumberg, was one of the three lawyers in the firm’s original pilot test of LPM coaching at the beginning of 2012 with LegalBizDev principal Steve Barrett, and his success encouraged other partners to give it a try. Jon’s practice focuses on complex real estate deals  and on real estate deals with unusual twists. He often works closely with litigators to solve his clients’ problems, although he is not a litigator himself.

Jon says that a lot of things that he learned in the LegalBizDev coaching were similar to techniques that he had been trying to implement throughout his career.  The coaching crystallized and formalized these methods and techniques.

In Jon’s practice, LPM works best for larger transactions, where at the very outset, you need to design an engagement letter that spells out what you will and will not do for the client. “This way, the engagement letter guides the entire project. It establishes the scope of the project so that everyone in the transaction, outside lawyer and client, knows what role they will play. Then, as the transaction changes in unexpected ways, the engagement letter can be modified to reflect changing expectations.”

“Sometimes it’s relatively easy to anticipate that the scope of work will change and that the project will become larger or smaller than originally anticipated,” Jon says. “Sometimes, the changes are completely unanticipated. Either way, LPM techniques permit the lawyer and client to make changes pretty much on the run. I can now see at a glance who needs to be added to the team, who is dropping off the team, and so on. I see immediately when we’re at a fork in the road, and what the possible choices are at that decision point.”

“LPM also permits me to delegate more effectively. Since all the assignments to attorneys are made well in advance and carefully specified, I don’t need to be the funnel point on everything. If I have a lawyer working on a particular set of documents, I can trust that he or she will complete that assignment.”

“I am a bit technologically challenged in terms of creating charts and work flows. But with the use of LPM techniques and with people in the firm who can help me, I can now create these charts in a very useful manner. The chart will tell me what happens next. Who needs to get involved? LPM helps me come up with answers to those questions.”

Carter McDowell’s practice as a Bilzin Sumberg partner involves land use, zoning, environmental, and other regulatory approvals for major building projects, including regional malls, resort hotels, industrial complexes, professional buildings and marinas. Carter completed LegalBizDev’s three month coaching program in its second wave, after the pilot test.

“At the end of the day,” Carter says, “LPM is mostly about organization.”

“It enables you to step back and look at the process and compartmentalize it. It also enables you to look at it in the largest possible sense, from the very beginning.”

For one major project on South Beach that Carter has worked on, he made a very specific LPM outline of all the aspects of the project and of the budget associated with each aspect.

“We separated the project into several parts,” Carter says, “and we made several updates to each part as we went along. The government, after all, doesn’t take a linear path in granting approvals, so this LPM document has helped us plan each step. Our client used the LPM document on an ongoing basis.”

“In the South Beach project, there have already been seven hearings at which some sort of approval was granted, and two more approvals remain to be granted,” says Carter. “Each hearing is before a separate board. So the LPM document was helpful in documenting and managing the whole process.”

“We actually prepared the LPM document as soon as our client acquired the property. It was that long ago.  The client had asked us to put together a list of the most likely tasks that needed to be accomplished. So we used the LPM document to prepare that and we have updated and expanded it on an ongoing basis.”

“The firm now has sophisticated budget software (ENGAGE). On this project, the financial department staff at the firm established the outline of the document before the current software was available. So in this case, I don’t manipulate the software myself. I do receive reports from the financial people. They have been very helpful and responsive.”

“The document has led us on more than one occasion to go back to the client and to say, Here’ s a hearing that we hadn’t anticipated, so we updated the budget to include that process.”

“The LPM process is working well to enable us to provide our clients with better service at a lower cost.  Some of the procedures that we documented repeat themselves in other projects, so I can reuse this outline for other clients and efficiently tailor it to fit their needs.”

 This post was written by Jim Hassett and Jonathan Groner.

 

August 27, 2014

LPM Case Study: Loeb & Loeb (Part 4 of 4)

Livia Kiser is a Chicago-based partner at Loeb & Loeb who represents defendants in consumer class actions, primarily those that relate to claims by consumers of a defect or a false claim about a product. She also reviews product advertising in advance to counsel clients on their advertising and what is likely to be a “red flag” for plaintiffs’ counsel.

Her LPM coaching, with Michelle Stein, focused on the litigation side of her practice. 

“This training has made me more cognizant of how to create and implement a realistic budget on every matter, even one that can seem historically hard to quantify or to control, such as a class action brought by a plaintiff,” Livia says. “Even for cases which are hard to predict, I have learned how to provide more accurate budgets, not only because it is important for internal business reasons, but these days clients understandably expect it.”

“I am very interested in strategies for how we can stick to a budget.  Will this particular task really take ten hours? Should we budget it for that amount of time? These are the kinds of questions LPM causes you to consider,” Livia says.

Livia says that as a partner and lead counsel, she is also required to get involved in planning the time of other attorneys such as associates. She says many associates don’t think about these issues until they become partners.  When the issues become relevant to them, they’re not prepared. LPM, Livia says, is not only about numbers and budgets; it’s about human beings.

Livia uses Excel to prepare budget documents – just garden-variety Excel that she’s already familiar with. She receives weekly updates on her projects from Stephanie Flitcroft and also speaks with Stephanie at least once a week, if not more often.

Stephanie reports that “We provide many ad hoc reports so that lawyers can compare budgets to actuals along the way.  If there is a variance, they can determine if it was caused by a change of scope or whether some timekeeper simply didn’t understand the requested task.  This allows them to deal with issues before they get too far off course.”

Livia says Stephanie and her team are involved both in ongoing client matters and in pitching new matters. They are also extremely helpful in working on alternative fee arrangements (AFAs). “We cost out all the scenarios that make sense before we propose an AFA,” Livia says, “and Stephanie helps provide the assumptions and ideas that we need.”

The more lawyers take this approach, the easier it gets.  As Andrea Danziger explained, “We endeavor to share the actual tools and templates that have come out of the coaching program, as well as others that we’ve developed for proposal bids. This has been a grass roots effort. We’ve tripled the number of people in the program since you first wrote about it, and we want to keep going, because the more lawyers incorporate LPM into their matters, the more the ideas spread.”

What does the future hold?  According to Deputy Chairman David Schaefer, “I think legal project management is going to become one of the core business skills of running a law firm. Even in situations where we still bill hourly, every client wants to know:  How much is this going to cost? How long is it going to take? What’s involved? It may take a few years, but it will become part and parcel of how we do business. Lawyers will be comfortable having those discussions. They will expect it. And I think that you’ll see an increasing growth within our firm, and other firms, of non-legal professionals who will take a bigger and bigger portion of these tasks under their wing.”

Schaefer has also seen that the benefits of LPM go not just to clients, but also directly to the firm’s bottom line: “LPM has already protected our profitability in very significant ways. These days, lawyers are more prepared to provide accurate bids. We have better data and more reliable information. In the past, when we looked at a class of cases or of deals, and there was a fairly significant range between the high and the low, we really didn’t know why we had such a wide spread. Now we understand what the key considerations are. We can look for those at the outset of a matter, and try to address that with the client, rather than letting it catch everybody by surprise. And so I think that LPM has made our processes much, much better.”

 

This series was written by Jim Hassett and Jonathan Groner.

 

July 30, 2014

Five questions to ask lawyers before they begin LPM coaching

You won’t get a second chance to make a first impression, so if your first legal project management (LPM) program is not well designed and executed, it may be quite some time before there is a second one.

We have consistently found that the most effective way to change LPM behavior and build momentum within a firm is for motivated attorneys to directly experience immediate benefits and then become internal champions who spread the word. And the most efficient way for lawyers to experience those benefits is to work one-on-one with a legal project management coach.

Who should be coached first?  We recommend starting with the motivated: lawyers who are open to new ideas and who have the most to gain. They could be the key partners who are responsible for new alternative fee arrangements. Or they might be relationship partners who are worried about protecting business with key clients who are looking for greater efficiency. Or maybe an entire practice group is considering new checklists, templates and processes to improve its competitive position.

The exact individuals and groups will vary from firm to firm. But in every case, the best lawyers to start with are those who are open-minded about change and efficiency, in a position to benefit when it works, and influential enough to quickly spread the word of their success.

That’s the model we used when we began working with Hanson Bridgett a Northern California law firm with more than 150 attorneys that has launched many new initiatives to increase client satisfaction by providing greater value, including several focusing on project management.  As Managing Partner Andrew G. Giacomini put it:  “The legal marketplace is changing, and as a result Hanson Bridgett is making a significant commitment to what we are calling 'Pricing to Client Value':  fairly pricing the creative scope of work and efficiently delivering what's most important to the client.”

Last August, we began an LPM pilot program test with eleven of their lawyers, who were split between our two most popular programs.  Five lawyers completed three months of individual coaching, and six others were enrolled in a just-in-time training program that began with a group workshop and also included one month of coaching. 

Based on the testimony of the first group, firm management was interested in expanding the program, so the firm was faced with the task of identifying the candidates who would provide the greatest return on investment.

Program leaders Garner Weng – a partner who participated in the pilot program -- and Chris Fryer – their IT Director and internal project management guru -- developed a very brief questionnaire to pick the best candidates.  When we saw the questionnaire, our first question was:  Why didn’t we think of that?  Our second question was:  Could we share it with others through this blog?

They said yes, so here are the five questions Hanson Bridgett asked, emphasizing the need for each lawyer to provide specific and concrete examples:

  1. Have you used any flat-fee or other alternative-fee arrangements in the past?
  2. Are you willing to commit at least 2-4 hours per week to your participation in this program?
  3. Describe two challenges you commonly face in managing your work.
  4. What benefits or skills do you hope to gain by participation in our project management coaching program? 
  5. With greater or improved use of project management, describe the impact or long-term benefit you hope to achieve for the firm or on behalf of firm clients.

Hanson Bridgett used the results to select ten more lawyers to begin a LegalBizDev coaching program in April.  It is a hybrid which combines the just-in-time workshop with two to three months of coaching.  We will describe the results of these programs in future case study posts.

July 16, 2014

Research update: What clients should do to increase value (Part 2 of 2)

This post previews results from my book Client Value and Law Firm Profitability, which will be published in October, and can be pre-ordered now for a 25% discount.

 

The second most important client issue raised by research participants was the need for more transparency and better communication. Lawyers are trained to hold their cards close to their vest, and there are many situations where that is exactly the right thing to do. But when clients are trying to establish a long-term partnership with a law firm, secretiveness does not help.  Here are quotes from five different firms highlighting the problem: 

The pricing and delivery process needs to be transparent. Clients and firms need to be forthright when they come to the table. The client needs to declare what they’re trying to achieve and how they want to achieve it and the law firm needs to be transparent about what they can do and how much they need to charge. It’s too often a negotiation when it should be a collaboration. You need to figure out if you can service the work in an economically meaningful way… so that we’re not trying to squeeze the last nickel out of each other.

The more information the law firm has, the better their budget, the better the flat fee. If we get really spotty information, then we’re grasping to come up with something. And sometimes you know clients have the information, they’re just not sharing it for whatever reason.

Clients have to communicate with us about what’s important to them, what they want us to do, what they don’t want us to do. Otherwise, alternative pricing becomes impossible.

I don’t hear a lot of partners or clients initiating honest and open conversations with each other. Most in-house counsel are former law firm counsel and they’re reluctant to have a candid conversation about the relationship. Not enough of them talk about their challenges and the pressures on their department, or explore openly with their law firm partners how they could work more effectively. It’s almost easier to avoid that conversation and instead get fed up and switch law firms.

Clients are as afraid as we are about bills. They have budgets and they’re worried we’re going to blow them. But they’re like us in thinking that if they don’t talk about it, maybe it will go away. When they’re willing to say up front, “Give me a scope on this. How much are you thinking?” they get better value.

A previous post about this research emphasized the importance of better project management by law firms. However, to maximize results you must increase efficiency on both sides of the table. Greater value demands that in-house departments, too, embrace legal project management.  Below are unusually frank comments from four firms that made this point (anonymously):  

When you’re working on a fixed fee or a sophisticated alternative fee, clients have to change how they deal with their outside counsel. If you’re going to do all their work for a million dollars and they keep you on the phone every day for hours with questions, they’re going to burn up all the value they could get and we’re going to be unhappy. So those kinds of things need to be real partnerships. Some clients get it and other clients don’t.

Clients, too, have to shed the restraints of thinking in billable hours. They want a deal, cost certainty, the best value. That doesn’t mean throwing everything you can think of into the shopping cart. If the client wants to micromanage and review drafts and revise drafts and do it again and get it to somebody else for revision, it makes the AFA much more challenging.

We get clients who don’t give the appropriate time for a matter, and there are a bunch of clients who are just managing the matter to reduce the fee, like insurance companies. They say they’re not going to pay for an internal meeting, which is pretty short-sighted. You need people to talk. I think some people are just trying to show their bosses they beat up their lawyer…. Clients have to work more as a team with their lawyers and not make it as adversarial as they sometimes do. It doesn’t engender loyalty either way.

Like firms, clients too can be inefficient. They can be bureaucratic and take a long time to make decisions. If it takes them 90 days to decide about a settlement, a lot of fees may have been incurred. You may have a trial date in six months, and you can’t say we’re going to take 90 days off while the client is deciding.

Similar issues came up several years ago, when I published the LegalBizDev Survey of Alternative Fees and the chair of one AmLaw 100 firm remarked:

It is very difficult for a law firm to tell a client that a matter is not going well because of what is going on in the legal department. I think we’ve all had experiences over the years with in-house counsel who are just not good managers. A lack of skills in project and relationship management on the part of either in-house counsel or the project leaders in a law firm can increase cost and reduce the quality of outcomes. I believe both sides could use more training in these areas.

After reviewing a draft of this report, Michael Roster, co-chair of the ACC Value Challenge Committee, had some related advice for clients:

The most important thing clients can often do to increase value is to get out of the way. Stop micro-managing. Stop insisting on memos that aren’t important to the ultimate client, that is, the relevant business unit. Harness firms more effectively for their legal expertise. One of my former partners confirms that client cost could easily be reduced at least a third if both sides simply focused on what matters.

Each of these issues – better definitions of scope, increased transparency, and improved in-house LPM – reflects the need for clients to consider ways to improve their role and their relationships. They may also represent an opportunity for law firms to start some of the difficult discussions mentioned above. Outside counsel should try to be a little more courageous and assertive in raising these issues tactfully and repeatedly, rather than rely 100% on in-house counsel to get it on their own.

July 09, 2014

Research update: What clients should do to increase value (Part 1 of 2)

This post previews results from my book Client Value and Law Firm Profitability, which will be published in October, and can be pre-ordered now for a 25% discount.

Over the past year, I have interviewed managing partners, chairs, senior partners and executives from AmLaw 200 firms about how to meet client demands for greater value while protecting profitability. 

The 50 firms who were interviewed are listed on our web page, but I agreed to keep the name of every individual I spoke to confidential, and gave them complete editorial control over what appears in print. (In fact, participants are currently reviewing a Preview Edition of our final report, to insure its accuracy.)  This approach enabled senior decision makers to speak frankly and openly about highly sensitive issues. The research provided a platform that made it easy for firm leaders to say what they really think, since they would not be quoted by name.

Most of the book focuses on internal operations:  what has worked and what hasn’t in such areas as measuring and managing profitability, legal project management, software, new staff positions in pricing, contract attorneys and more.

But one chapter focuses on participants’ answers to this question:  “To maximize value in a sustainable way, do clients need to change the way they work with law firms?”  98% said yes they do. 

Today’s post describes the single most important thing clients should do to increase the value they receive:  Better define objectives and scope at the beginning of each matter.

However, before we begin, it is important to note that several participants noted an important caveat: the client is always right.  In fact, as one firm chair put it, these days,

Clients can do whatever the hell they want to.

A senior executive from another firm put it a bit more diplomatically:

If law firms are sitting back saying, “Well we’re in the right and we’re just going to wait it out, and clients need to be doing this or that,” I wouldn’t want to bet on that horse.

The underlying problem is that the legal profession is in the middle of a period of historic change, and both clients and law firms are still finding their way:

I think there have been some false starts in the in-house world, things that have been tried and have not really worked out.

The belief that clients have this figured out, and if these darned law firms would just get on board, everybody would be in a better spot, is, I think, a complete mischaracterization. Take a look at some of the RFPs. It’s just laughable, the questions that are being asked. We have to come together as an industry to do a better job of defining value and doing things that will help relationships on both sides.

In our view, this respondent really hit the nail on the head:

Clients only need to change if they perceive that a change is necessary for them to either reduce their cost or to improve their outcome.

That is the answer to the client-is-always-right quandary. Clients only need to change if firms can persuade them that it’s in their own interest. It puts the burden on firms to think through how to raise these issues diplomatically and persuasively enough so the client sees the benefit.

While no respondent claimed to have a roadmap for conducting these difficult discussions, the discussions below of problematic client attitudes, policies, and practices suggest that the best place to start is with this key issue: Define objectives and scope at the beginning of each matter.

In a previous post about this research, I quoted evidence that the most important thing law firms can do to increase efficiency is to start each engagement by getting a better sense of the client’s objectives and what is inside and outside the scope of a particular engagement.

The fault lies not just with law firms but also with clients who fail to spend enough time thinking through what they need vs. what they want, how much they are willing to pay for what they want, and communicating those decisions to their law firms.

As one chair put it:

If there was one single thing that clients could do to make it easier to assure their satisfaction, it would be to help me identify at the outset of the project what the client would consider to be success. What would make them smile? So many things evolve from that. How do I spend my time on that objective? How do we structure our fee arrangement so that we are providing value to the client? What sort of communication does the client want from me?

Many other respondents echoed this concern:

Often, what we’re hired to do is not clear, and so we have a lot of people sitting around, treating all of this as research of documents, and it turns out that’s not what the client really wanted. Then they change what they want.

We can certainly reduce the cost, but clients have to jointly work with us to figure out what it is they want us to do less of in order to meet their expense goals. You can’t do scorched-earth approaches to matters at reduced fees.

It’s important for clients to really understand upfront what they’re willing to spend and how far they’re willing to go. You can try to explain as things are going on, but if a client didn’t anticipate something would take so much time, it’s hard to explain it when you’re in the middle of the process.

Our biggest issues are in getting our partners and our clients to sit down to properly scope and budget prior to a project. Clients want lower cost, but they want to do it the way they’ve always done it. When you sit down and talk to a client about the practical nuts and bolts, things work out great. When our partners dismiss the conversation or the client doesn’t have time, that’s where we have some matter management issues.

Some clients understand that working with the lawyer in advance makes it easier to get what the client wants, at their price, time, and so on. Others are a harder sell. Some general counsel communicate better than others and know what outside counsel is saying. Others misunderstand, which can create inefficiency.

Next week, in Part 2, I will talk about two additional things clients should do: increase transparency about client needs, and improve in-house project management.

 

June 11, 2014

Book Review: Smarter Pricing, Smarter Profit

Six months ago, if you had asked me what book to read for a complete analysis of legal pricing, I would have said “Nobody has written that book yet.”  (At that time, my book Legal Project Management, Pricing and Alternative Fee Arrangements was the only one that even provided a 20,000 foot overview.)

But now there are two.  Jonathan Groner and I reviewed the first, by Toby Brown and Vince Cordo, last February.  Today’s review focuses on a brand new book by Stuart J.T. Dodds, director of global pricing and legal project management at Baker & McKenzie,one of the largest law firms in the world. 

Smarter Pricing, Smarter Profit is the only book on the market that goes step by step through everything lawyers need to know to survive and prosper in today’s rapidly changing marketplace.  It is divided into four main sections:  set the price, get the price, manage to the price, and review the price.  Until a few years ago, lawyers could make a great deal of money with only a basic understanding of these stages, so that’s what most did.  Since the dawn of the new normal of a few years ago, competition has gotten much tougher, and lawyers have learned that they must improve their business practices to remain profitable.  Several books have appeared that provide useful advice on the third stage of legal project management (LPM).  But Stuart’s book is the first to review all the practical steps a lawyer should take from the first moment she becomes aware of a new opportunity, through negotiating a deal and managing the work to the final post-matter review.   

I was particularly interested in the chapters on LPM, especially the ten steps which Stuart recommends at the start of every matter:

  1. Confirm what the client wants and expects
  2. Group the work into the main areas
  3. Agree how to address changes of scope upfront
  4. Develop and agree on the matter plan
  5. Agree on the fee and fee approach
  6. Agree on the engagement letter and share with the team
  7. Agree on the reporting format and schedule
  8. Establish your matter phases and tasks
  9. Approve new timekeepers
  10. Staff the core team and agree on client responsibilities

All this before you begin working on a matter!  While it is true that in some legal situations there is simply not enough time to accomplish all ten steps upfront, it is also true that in many matters there IS time, and a little initial planning can save a lot of  long-term expense.  At this moment in history, any lawyer that follows even a few of Stuart’s steps will be ahead of most competitors.  But as one managing partner said in my soon to be published research on Client Value and Law Firm Profitability:

Project management will probably have the biggest long-term positive impact [of all the things that are changing in law firms], 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.

That’s why the key to success is changing behavior.  Stuart has been a panelist on several of my Ark workshops on “LPM:  Changing Behavior within the Firm”, and underlines a key lesson we’ve seen one law firm after another learn the hard way when he writes “Educating is easy (relatively), but changing behavior is much harder, and the change is especially difficult for lawyers.”  (p. 213)

In addition to all its business insights, there are also many small things to like about this book.  Stuart is based in Chicago but spent most of his career in London, including 14 years as a management consultant at Accenture.  (He often reminds people that he is actually from Scotland.)  Anglophiles will especially appreciate the references to UK research which has not been widely cited in the US, and the occasional British colloquialism.  For one example, read the story of a lawyer who put a procurement officer “on his back foot” (p 148) by threatening to walk out of a meeting about discounts, when the meeting should have focused on “protecting your company from losing a potential multi-million dollar claim.”

I’d love to keep writing about this book, but the best advice I can offer is that you stop reading this review and order a copy.  Read the book and act on it before your competitors do, and you will earn back the $169 price many times over.

Full disclosure:  I have worked closely with Stuart over the last several years, since he manages our LPM coaching program for Baker & McKenzie.  Whenever Stuart quoted me in this book, I smiled a little.  But to be honest, I also got a little jealous when I saw how well he presented some of the key concepts.  When I saw the title of Chapter 14, for example -- Thinking Big, Starting Small – I thought:  Why didn’t I think of that catchphrase?

 

May 21, 2014

The most important findings from Altman Weil’s new survey

What’s wrong with this picture? 

In the 2014 Law Firms in Transition Survey which Altman Weil released a few days ago, 304 managing partners and chairs of US firms with more than 50 lawyers were given a list of legal market trends and asked “Which do you think are temporary and which will be permanent?” 94% rated “focus on improved practice efficiency” as permanent, in a tie for the number one permanent change with “more commoditized legal work.”

But when the same survey asked “Has your firm significantly changed its strategic approach to the efficiency of legal delivery?” 35% said no and 26% said it was “under consideration” (code words for we have a committee that could decide any year now).  In other words, only 39% of US firms have started to take action to deal with the most important change in their profession.

If you read the entire 131 page report (which can be downloaded for free), the good news is that there are many signs that law firm leaders increasingly understand that the world has changed and they must adapt.  The bad news is that so few have started doing anything.

If you are a regular reader of this blog you will not be surprised to learn that the first section I turned to was on legal project management.  I LOVED Altman Weil’s conclusion (p. viii) so much that I will quote the whole thing:

Invest in Legal Project Management

Perhaps no other long-term initiative will do more to support staffing innovation, pricing innovation, efficient delivery of services, improvements in margin and reductions in overhead than true project management training. It’s important to distinguish between a one or two day seminar which will not produce much long term value, and a systematic, hands-on approach that instills fundamental operational change. Firms that give their people the right kind of tools and training in this area will create new efficiencies for clients, improve profitability of matters, and create significant competitive advantage.

This underlines a point we have been writing about for years: traditional training to educate lawyers to understand LPM will not change behavior, any more than understanding how to run a marathon will enable you to complete one.  Behavior change requires practice, whether it’s through the kinds of coaching programs we offer, or other real-life hands-on approaches.  The point is, you need to do it, not talk about it.

This conclusion has also been supported by our research on Client Value and Law Firm Profitability, which will be published in a few months.  When I interviewed managing partners, chairs, and senior partners and managers from 50 AmLaw 200 firms, here’s what the managing partner of one firm that invested heavily in LPM education had to say:

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.

A few years ago, traditional training in LPM became the rage in a number of firms.  Several got to put out some great press releases describing themselves as leaders of the new LPM movement. But from everything we have heard, this education had little impact on the way anybody practiced law.  What has worked is one-to-one coaching, as described in my book Legal Project Management, Pricing and Alternative Fee Arrangements.  (A free copy of the chapter on LPM case studies can be downloaded from our web page.)

Does it matter how quickly firms move to increase efficiency and provide greater value?  In our study 85% said that firms that move more quickly in providing value will gain a competitive advantage.  Some respondents thought this was a life and death matter.  As one managing partner said:

I think the firms that are most effective are going to do well, and I don’t think everybody will survive. In the last several years, there have been several firms that went away. And I believe that’s going to continue.

A senior partner at another firm put it this way:

I think the market’s going to shake itself out. I think firms that can’t deliver more value will fail.

If that’s not scary enough, there’s more.  I have saved the most frightening news for last. 

In my opinion, the most revealing question in Altman Weil’s entire research was one that was just added to the survey this year for the first time: “Which of the following is a greater driver of decision-making in your law firm in 2014: Long-term investment in new pricing and service delivery strategies to lock in your most valuable clients or short-term profitability to lock in your most valuable partners?” An astonishing 44% are looking inward at their own partners rather than outward at their clients.

As Tom Clay, the primary author of the Altman Weil survey, noted in our research report:  “If a law firm cannot attract and retain good clients, nothing else matters.” At a moment in history when so many clients are demanding more value, it can be business suicide to focus on partners before clients.

The obvious explanation is that with all the lateral movement between firms, management is afraid that if they don’t focus on partners first, big rainmakers will jump ship and take their books of business with them.

But forward-looking firms are taking a longer view.  In our study, one chair noted that in his AmLaw 100 firm some rainmakers were the very people who were slowing down progress.  As he put it:   

To be perfectly honest, some of the partners in our firm who don’t get it, don’t want to get it. They’ve got a big book of business, and they would prefer us to just leave them alone. Law firms get very nervous about this, because they worry that these big, bad actors are going to take their big, bad book of business and go elsewhere. I say “Don’t let the door hit you on the butt on the way out,” because that’s not the culture that we’re trying to build. As long as we continue to reward bad behavior, we’re going to continue to get bad behavior.

Full disclosure: LegalBizDev is a strategic alliance partner of Altman Weil.  More disclosure: I began praising their annual surveys several years before we formed that relationship.

May 14, 2014

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

Assign tasks and manage the team

Like communication, management is not a strong point for many lawyers:

We did an internal survey where we asked, “How do you communicate caps and fixed fees to your team of associates?” Some said by email. I think only about 10% of them said that they actually talk to the group, get them together on a call, and explain the project. It doesn’t really happen. And when you don’t manage things well, it affects more than just the profitability. It affects the associate’s confidence in working with you in the future, because they get their time written off since they weren’t told the parameters.

Negotiate changes of scope 

In light of the problems with communication and management, it is not surprising that when the moment comes to negotiate a change of scope, many lawyers have problems:

We have people who recognize that the scope of a project has changed, but you would think they were 15 years old again and asking a girl to a dance. They never get around to making the phone call.

As far as negotiating changes of scope, there is enormous room for improvement. When something has gone bad, there is tremendous reluctance to have that discussion with the client.

When scope changes, the first thing you’ve got to think about is talking to the client and making sure that you’re on the same page as to what’s changed. That’s an area we still struggle with.

This widespread problem goes directly to the bottom line, as seen in these comments, the first from a managing partner, and the second from a CFO:

In the real world, almost no project is defined in advance so clearly that there is no need for changes. And it is in that need where the law firm’s expectations about profitability and return get thrown out the window. So if you’re not really careful on a management level about how the assignment changes, you very quickly go from, “Yup, we’re going to make money on this engagement” to “How much am I writing off again?” It is that time of year when I get the memos from people that say “Time for the write-offs.” And it’s astonishing to me, first of all, how many there are. And when you ask people why it happened, invariably, the answer is, “Well, we started out doing X, but really, it turned out the client wanted Y.” And unless you deal with the client up front about how those changes are going to be negotiated, you have that kind of mission creep all the time, and it’s costly.

We had a small criminal engagement on a fixed fee, and we went over it. I saw it and didn’t deal with it in a timely fashion, and we ended up with a lot of extra time. The original fixed fee was based on some local lawyer doing a lot of the leg work, which he didn’t do. We stepped in and did it instead. We won. But we never communicated that the other guy didn’t do his job and that we did the work, so we ate the money.

Identify and schedule activities

You can’t plan a project until you know exactly what needs to be done. One C-level executive highlighted the problem:

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. Instead, 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 dig into this stuff.” A lot of it is backwards looking, where once they’re off track people ask what happened. And then we dig into the task codes and find a motion that they budgeted X hours for. We say, “Look at all the hours.” Then they realize the problem, but it’s too late because they’re not doing it in real time.

Assess risks to the budget and schedule

Lawyers specialize in assessing and managing legal risks, but when it comes to risks that affect time and money they are not nearly as effective. One senior partner used a football analogy to stress the importance of this type of planning:

Years ago, when Bill Walsh was still the coach of the San Francisco 49ers, he had his thing where he scripted out the first 25 plays of every game, which he stuck to no matter what. If they were down 21 to nothing, he still stuck with the script until he got through the first 25 plays, because he found that then people panicked less. Those were the Super Bowl years. I just think that in litigation sometimes we are much too reactive. A project manager would help us be much more proactive. They would allow us to resist the temptation to say, “Gee, we’re really busy on this case right now. Let’s just bring in another timekeeper to bill 40 hours,” and then that timekeeper falls off, all of which has inefficiencies.

Manage quality

If a client sees that the drive for efficiency leads to an unacceptable drop-off in quality, he will find a new firm. In the words of two managing partners:

Making sure we keep the client happy on quality is still, in the end, the highest requirement.

If you can’t manage quality, nothing else matters. But, it’s not sufficient. That’s the new paradigm that lawyers need to get through their heads. Quality is not enough, and it’s not a tool for getting better client value.

Meanwhile, many lawyers are still married to the perfectionism they learned in law school:

We’re focused on delivering the highest quality, and we are turning over every stone. I think it should be about delivering just enough quality. We’re not there at all, because we’re just trying to deliver the highest quality, at some level, without caring about the cost. We haven’t gotten to the part where we don’t turn over every stone.

It is going to take time for some lawyers to get the message:

I can’t believe I’m going to say this, but if anything 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. 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 it and everybody will be high-fiving. But 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. That is what many lawyers do. It sometimes has absolutely no value to the client, but that’s what they’ll do.

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.”

March 26, 2014

Preview of a Loeb & Loeb budget template from our May workshop

At Ark’s Legal Project Management Showcase & Workshop in Chicago on May 22, David Schaefer, Deputy Chair at Loeb & Loeb, will describe several tools his firm utilizes to make it easier for lawyers to provide clients with more accurate and reliable budgets, including the sample template below that the firm has customized for a sell-side M&A transaction. They have created similar customizable templates for other matters, including a variety of corporate, finance and real estate transactions, and commercial, IP and class action litigation. In addition to helping establish and manage the budget, the templates create a consistent approach to gathering data for historical comparison of matters. Mr. Schaefer will also discuss innovative procedures Loeb & Loeb has developed to improve the efficiency of lawyers’ budgeting time by providing staff support and combining the power of ENGAGE with the simplicity of Excel.

Panelists from four additional firms that are national leaders in the movement to provide more value through legal project management will also describe the tools, templates, and approaches that are being used at their firms:

Sari M. Alamuddin, Partner, Morgan Lewis
Vincent Cordo, Global Director of Client Value, Reed Smith
Stuart J T Dodds, Director of Global Pricing and Legal Project Management, Baker & McKenzie
Donald R. Ware, Partner, Foley Hoag

For more details, see the Ark Group’s web page or contact Ark’s Peter Franken at pfranken@ark-group.com or call (312) 212-1301.  A 15% “early bird” discount is available if you register by April 4. 

 

Budget template for sell-side M&A transaction

 

F71   Pre-Acquisition

 

F71-01 

Pre-Acquisition

 

 

Assemble Team

 

 

Retain and negotiate engagement agreements for consultants and experts

 

 

Structure transaction and analyze tax issues

 

 

Prepare organizational chart

 

F72   Term Sheet/Letter of Intent

 

F72-01 

Term Sheet/Letter of Intent

 

 

Term Sheet/Letter of Intent

 

F73   Due Diligence

 

F73-01 

Due Diligence

 

 

Draft and negotiate confidentiality agreements

 

 

Review organizational documents

 

 

Review material agreements and correspondence

 

 

Review intellectual property documentation

 

 

Review consent requirements

 

 

Review industry specific statutes, regulations and applicable law

 

 

Review corporate statutes and applicable law

 

F75   Purchase Agreement

 

F75-01 

Purchase Agreement

 

 

Review and negotiate Purchase Agreement

 

F78   Ancillary Agreements (as applicable)

 

F78-01 

Ancillary Agreements (as applicable)

 

 

Review Employment Agreements

 

 

Review Noncompetition Agreements

 

 

Review Escrow Agreement

 

 

Review Bill of Sale and Assignment and Assumption Agreement

 

 

Review Assignments of Copyrights, Trademarks and Patents

 

 

Review Promissory Note(s)

 

 

Draft and review Opinion of Counsel to Seller

 

 

Review Opinion of Counsel to Buyer

 

 

Draft Indemnification Contribution Agreement

 

 

Other Agreements

 

F79   Disclosure Schedules

 

F79-01 

Disclosure Schedules

 

 

Disclosure Schedules

 

F80   Consents and Notices (as applicable)

 

F80-01 

Consents and Notices (as applicable)

 

 

Third party consents

 

 

Government regulatory consent

 

 

Board consent

 

 

Shareholder consent

 

 

Notice of Appraisal Rights

 

F81   Filings (as applicable)

 

F81-01 

Filings (as applicable)

 

 

SEC

 

 

State/Blue Sky Filings

 

 

Special Regulatory Filings

 

 

Antitrust filings and notifications

 

 

Press Release

 

 

Qualification to business

 

 

Articles/Certificate of Merger

 

F82   Closing

 

F82-01 

Closing of Transaction

 

 

Closing of Transaction

 

F83   Post Closing

 

F83-01 

Post Closing

 

 

Post Closing