53 posts categorized "Books"

September 24, 2014

Book excerpt: What should law firms do to improve profitability and LPM? (Part 1 of 4)

This series was adapted from my new book Client Value and Law Firm Profitability, which will be published in a few weeks.

This research was designed to help lawyers make the best possible decisions about how to adapt to a rapidly changing marketplace by providing insights into the actions and opinions of their peers.  In the months preceding this book’s publication, a number of conferences have been held by law schools to discuss the challenges facing the legal profession.  Countless articles and several books addressing these changes have also been written by law school and business school professors.  And consultants have written far more – probably millions of words on how client demands are changing and what law firms should do about it.

The only thing that’s been missing from the conversation is public statements by the people who run large law firms.  These senior decision makers rarely publish anything on their tactics and strategies, or even attend conferences.  They are the ones who deal with these issues every day, and whose very livelihood depends on coming up with the right answers.  What do they think?

To answer this question, I interviewed chairs, managing partners, executive committee members, CEOs, CFOs and other senior executives at 50 AmLaw 200 firms between June 2013 and January 2014.

Based on those confidential interviews, there can be no question thatclients are demanding more value than ever before.  There is, however, much less agreement about the best way to remain competitive in an increasingly challenging environment. 

There are many signs that as times get tighter, firms are paying more attention to profitability and to its role in compensation:

I think you’re going to see the pressure in law firms increase about how the pie is split. When things were going well, it was easier to take care of the worker bee partners, who are great lawyers. It’s going to be tougher now, because everybody’s strategy is through lateral hiring, and you don’t want the great brief writer. What you want is the person who has five to eight million dollars following him or her, or the group that’s going to bring 20 to 30 million dollars. – Senior executive

As the pressure goes up, the emphasis on total revenue is being replaced by an emphasis on profitable revenue:

Historically, virtually all law firms overweighted revenue. Often two partners who produce five million dollars each are treated equally for compensation, even if one of those partners used six and a half million dollars of resources to produce that revenue, and the other used three and a half million. – Senior executive

We merged a few years ago with a firm that principally focused on total dollars in the door and allowed billing attorneys to set their own rate exceptions without much oversight. We focused on those decision points that reduced realization, and the lack of profitability in a million dollars received that takes two million dollars of effort to generate. Consistently reinforcing these basic concepts through our BI tools and in the compensation system has resulted in significant margin improvement. – Senior executive

There are still far too many lawyers who respond to cost pressure by offering discounts, without understanding the implications:

Most of our partners have been doing things in a particular way for a long time. And the carpet is moving under them, because the market is changing. A lot of times, their reaction to competitive pressure is to just cut rates but not examine the way they deliver the service—not change the way they practice to be able to offer more value for the same price, or reduce the cost to deliver the same value at a lower price. Demand is down. Price pressure is up. So some lawyers will just say, “I don’t want to talk about value based billing arrangement. I’ll just give clients a big discount. They’ll be happy, I’ll be happy….” It’s really remarkable how few attorneys appreciate the economics of discounting. They just don’t get the math. They never had to before. – Senior partner

It is easy to make clients happy by just cutting the cost.Not enough lawyers have really embraced building a better mousetrap that makes clients happy while at the same time maintaining profitability. – Senior executive

Lawyers are proposing a 10% discounted deal or a 20% discounted deal, or a blended rate deal, but then they’re going to literally do everything the same way they’ve always done it. They don’t think about it in terms of profitability yet. So we’ve got a lot of catching up to do. However, at one recent conference I attended, it sounded like there are still a lot of firms that aren’t much ahead of us. – Senior executive

Many firms are working to fill this gap and develop new tools and approaches:

I’ve been with the firm a little over a year, and part of the reason that the firm brought me in was that we needed to look at our operational infrastructure and basically get caught up with the rest of the AmLaw 100. We didn’t have the ability to really measure profitability. We could just barely measure it at the firm level and at the office level, but not at the practice level, not at the client level, or matter level. About three months ago we finally started using a business intelligence platform that allows us to measure those things, and we’re still trying to make that part of the culture. – Senior executive

Life used to be so much easier. The world has changed, and I think in the new environment, to preserve and enhance existing client relationships and to get our nose in the door for new client relationships, we’ve had to be more flexible on pricing, particularly in the alternative fee context. I think we’re in a brave new world here, where we have to learn a lot of new sciences and employ a lot of new techniques. – Senior partner

Some firms are providing lawyers with very detailed reports, like these:

We developed a real-time report on our intranet that is role-based. For example, if you are a client attorney, then your report will show all the clients on which you have any client credit on any matter, and it will show you the components of profitability. The report shows you collected revenue, the costs associated with that revenue, the profit, and the profit margin. Then it shows you the number of hours that are in it, the revenue per hour, the cost per hour. Then it breaks down timing differences on billing and collecting time. And then it shows you the traditional measures of profitability such as realization rates at the various levels. You can click on a client and it drills down to the matter level, so you see it for every matter. And then you can click on every matter and it drops down to all the timekeepers, and you see it across the board for all timekeepers on each matter, all those same metrics. We built the database to go back 10 years. You can do it for time periods of year to date, rolling 12 months, from inception, or for any other time period. – Senior partner

Other firms are concerned that too much data can be counterproductive:

One of the traps you can fall into is giving people a lot of data but not giving them information. Simply revealing realization or matter profitability, just putting it out there, would not really advance the management goals of getting people to focus more on profitability. What you would engender is more questions about “How come she got paid more than I did?” That kind of stuff. – Chair

Merely sending canned reports to partners will not result in many partners changing the way they manage their practices to improve profitability. We need to better develop a process whereby partners with profitability challenges receive the help they need to improve profitability in a manner tailored to the issues presented by that partner’s specific practice. Otherwise they look at the report and say, “This is crap. It’s wrong.” – Senior executive

A pdf of this entire series can be downloaded from Altman Weil Direct, where it originally appeared.

 

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.

 

July 23, 2014

Business development best practices: Plan Advances

This is one of a series of occasional posts summarizing the most important best practices from my book the Legal Business Development Quick Reference Guide which is now also available in a Kindle edition.

The concept of a sales “advance” comes from Neil Rackham’s book SPIN® Selling, which is based on the most systematic research ever conducted on the sales process, and one of the most widely accepted approaches to sales in other professions. According to Rackham’s website, “More than half the Fortune 500 train their salespeople using sales models derived from his research.”

When Rackham analyzed 35,000 sales calls over 12 years, he found that “In major account sales, fewer than 10% of calls actually result in an Order or a No-sale.” The other 90% of sales calls should be classified as successful only if the salesperson gets an advance: “A specific action taken by either party that moves the sale forward,” such as scheduling another meeting, getting introduced to someone new, or providing a list of references.

When a client says we should talk again, but does not specify a date or time, that is not an advance, because there is no specific action. Rackham calls this a “continuation” and considers the meeting unsuccessful. It does not mean that the sale is dead, but it does mean that you are not making progress.

Great salespeople succeed because they plan every sales call, and strategize how to get the largest possible advance. Rackham’s book The SPIN® Selling Fieldbook: Practical Tools, Methods, Exercises, and Resources provides guidance on how to brainstorm possible advances before a meeting, and then select the one that is likely to lead to the greatest progress. This takes effort and practice. But the ability to consistently get advances is often the difference between success and failure. 

In Rainmaking Made Simple, Mark Maraia provided a slightly different definition of an advance, rewritten for lawyers: “An advance has three elements: (1) a commitment (2) to take action (3) in a definite time period.” For complex legal matters, the advance often involves getting a meeting with others who may be involved in making the decision.

Any lawyer who feels that she has enough meetings with potential clients, but that they are not getting far enough, would be well advised to read Maraia’s chapter on how to “Avoid Random Acts of Lunch.” It explains how to prepare for every business development meeting by writing down the needs of the person you will meet, a few questions to ask, and the advance you would like to achieve.

As Rackham summed it up (on p. 171 of the SPIN Selling Fieldbook):

If there was just one piece of advice we could give to people to improve their selling, it would be this: Plan your calls…Do you know exactly what outcome you hope to achieve? […] Plan what to ask, not what to tell.

 

 

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?

 

April 23, 2014

The most critical issues in legal project management (Part 1 of 3)

This three-part series previews results from my book Client Value and Law Firm Profitability, which will be published this summer.  All quotes are from managing partners, chairs, and other senior decision makers at AmLaw 200 firms.  Each participated in 30-minute in-depth interviews and spoke freely based on the understanding that they could review their quotes before publication, and they would not be quoted by name.

In 2009, when many firms first started talking about how to apply traditional project management techniques to legal matters, we proposed that lawyers think about the field in terms of these eight key issues:

  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
  6. Manage quality
  7. Manage client communication
  8. Negotiate changes of scope

When we coach lawyers on LPM, we always start by asking which issue is most important to a particular client or matter, so that we can focus on the low hanging fruit. Not surprisingly, the answer depends on the situation, and each of the eight has sometimes been rated as most important. However, in this research we wanted to get a sense of which issues seemed most important to the profession as a whole, and so one of the questions we asked was, “Which of these eight LPM issues do you consider most critical for client value and/or profitability in the short-term and why?” Of the 37 people who answered that question, 8% said that they were all basically equal:

It’s very difficult to rank order them. They are all important. There may be subtle variations, but these all work together, and I really can’t differentiate in terms of which is most important and which is least important and what’s in the middle. They all have to come together.

However, 92% were willing to single out one or more issues as particularly critical, as in the following quotes, the first from a managing partner, the second from a C-Level executive:

There are two that I would rank the most critical: the setting of objectives and scope, and managing client communication and expectations. Those, to me, are linked at the hip. You really have to understand what the client’s expectation is, and you also have to have a good relationship to be able to tell them whether or not their expectation is real and achievable. A lot of things can happen in litigation that can change the scope of an engagement. You can run into difficult parties and unforeseen problems, and that’s where an understanding between you and the client has to be solid enough that you can have those kinds of conversations and work your way through it.

There are three things I don’t think we do very well. The first thing is negotiating changes of scope up front. The second is clearly setting and understanding the objectives and the scope from the beginning. Lawyers think they do it, but I don’t think they get the right level of detail. The third is assessing risks to budget and schedule. They don’t wear the project management hat and think through what might go wrong.

When we analyzed the answers from people who saw some issues as more critical than others, they were ranked in the following order:

Most critical short-term issues in LPM
Set objectives and define scope 50%
Manage client communications and expectations 38%
Plan and manage the budget 28%
Assign tasks and manage the team 22%
Negotiate changes of scope 20%
Identify and schedule activities 12%
Assess risks to the budget and schedule 10%
Manage quality 10%

The top two – defining scope and communicating with the client – are especially interesting because they have nothing to do with software or Gantt charts or anything a relationship partner should delegate to an outside project manager. Instead, they come down to understanding what clients want, and giving it to them.

In this three part series of posts, we will briefly discuss each issue, arranged in this order of importance.

Set objectives and define scope

The short-term issue that was mentioned most often as critical starts on the very first day of each new matter, or before:

Setting objectives and defining the scope are crucial. You can budget. You can do anything you want. But if you don’t know what those objectives are, and what the client is willing to do or wants to do, you’re just putting stuff on paper. – Senior partner

Defining scope is the most critical in my mind. That’s where we struggle the most on the front end. – COO

The critical issue is sitting down with the client at the beginning and deciding what their goals are with the matter. Is it getting it done quickly? Is it getting it done so that nobody ever brings a matter like this again? Is it getting it done in advance of the big merger on the books a year from now? There are all different considerations as to what will lead a client to think this was a successful representation. And I find that the more you push your client to think through what they care most about, the better off both of you are. – Managing partner

Obviously clients have got to know what they’re paying for. How many times in a litigation matter do the clients say, let’s beat the guy, and then after you spent the money, they have buyers’ remorse? – CFO

I think the lawyer really has to understand what the client’s objective is, and manage to that objective, which is a hard thing for a lot of litigators to learn, in particular those who are from the win-at-all-costs school. – Chair

However, defining scope properly can be quite difficult. As I noted in our Legal Project Management Quick Reference Guide (3rd ed., p. 20), lawyers who are trained to prepare for every possibility can get in trouble if they try to be too specific:

If a list of carve-outs gets too long or too specific, it can annoy the client and lead to lost business. Unfortunately, there is no simple general way to create assumptions that balance client needs and firm needs. The details must be worked out case by case. This can be especially difficult in a highly competitive environment.

One way to deal with this challenge can be seen in the following comments from a C-level executive:

I counsel people against a three-page list of assumptions, because it just drives clients crazy. I tell them to pick the big ones, and I say, “If you’re assuming very limited document review under 300,000 documents, and then it comes in that you’re going to have to review two million, you’ve got to be able to identify that that’s a huge variable and cost driver, and you’d better make sure that you’ve been very clear in your assumptions, so that if that happens, you can quickly pick up the phone and say, ‘We’ve got a major change in scope. Let’s talk about how to deal with it.’”

Another major complicating factor in defining scope is that with large clients, different stakeholders may have different objectives:

There is sometimes less than optimal communication within some of our client organizations, between the legal department and the corporate higher ups, as to objectives, priorities, timing, and budgets. We often receive our work directly from the legal department. The legal department at times may not quite understand what top management wants done, at what cost and in what timeframe, and that leads to inefficiency.

There’s no question that this is an art that needs to be developed further. We find sometimes with clients that the people we work out the sale with aren’t the same people that we work out the delivery with, so whether the scope has been properly defined or not becomes a really big deal, and changes in scope needing to be negotiated depends upon how well you defined the scope in the first place. This is something law firms have not historically done well, compared to, say, contractors and others who are used to a fixed fee type environment. So there’s a lot of room for improvement on that.

Finally, it is worth noting that the emphasis on scope does not apply to all clients and all law firms. In the statement below, one AmLaw 200 chairperson argues that it applies to only a small percentage of his firm’s clients:

In a world where your client is cooperative and just as accountable as you are, then I would say that setting objectives and defining scope would be the most important. We just haven’t found clients to buy into that, for the most part. For our firm, about two-thirds of clients use the word value just as a polite way of asking for a discount. Right off the bat, those two-thirds are not interested in setting objectives and defining scope. They’re just interested in price. Another sixth of my practice has no need for this at all, because they’re completely price insensitive. They just want really good work. They trust us. So it’s only that last sixth that actually cares about scope.

In Parts 2 and 3 of this series, we will discuss the remaining seven issues.

 

February 26, 2014

Book review: Law Firm Pricing

In the current competitive environment, many law firms are struggling with three key questions:

  1. Pricing: How do I bid high enough to make an acceptable profit, but low enough to get new work? 
  2. AFAs: When are non-hourly alternative fees best?
  3. Managing: After I set a price, whether AFA or hourly, how do I manage the work to make a profit?

Based on the data we are currently analyzing in our study of Client Value and Law Firm Profitability, most firms are making a lot more progress on the first two questions than on the third.

The new book Law Firm Pricing: Strategies, Roles, and Responsibilities provides a guide to this progress.  It was written by two of the leading pioneers in this new field – Toby Brown of Akin Gump and Vincent Cordo of Reed Smith – and provides an excellent overview of the current state of this rapidly evolving area.  (Full disclosure:  Vince has been a LegalBizDev client for the last few years.)

This book should be required reading not just for pricing directors and their staffs but also for managing partners, executive committee members, and pretty much anyone who wants to understand how large law firms are changing the way they price both hourly and AFA work.

In 2012, we wrote an article for Bloomberg Law Reports entitled “The Rise of the Pricing Director.” At that time, despite extensive networking we were able to find only a handful of people who held the title of pricing director in a law firm, or performed that function. Law firms generally move a little more slowly than glaciers, but the growth in pricing directors in the two years since has been meteoric.  There is now even a blog site that tracks the names of senior managers at large firms with the word “pricing” in their title.  The total stands over 70 as this is written, and may be higher by the time you read this. 

With 20/20 hindsight, it is easy to see the reason for the rapid growth of the “pricing director” title and function. The well-documented changes in the legal profession over the last few years have placed intense pressure on profits. It is therefore not surprising that a new host of high-level executives has emerged to help law firms set their prices in a way that will help them to maintain and grow profitability.

This book is quite well written, with a notable absence of legal and business jargon. Brown and Cordo discuss, clearly and thoughtfully, the responsibilities of the pricing director; the director’s multiple roles, both internal and client-facing; the crucial importance of pricing strategy to long-term profitability; the need for data-based solutions in all contexts; and the frequent resistance of law firm partners to many of these developments.

The authors are especially incisive in their analysis of the behavioral incentives and factors that affect law firms, which are after all made up of human beings:

Lawyers live in a reputation world, and [financial] monitoring exposes that reputation to risk. Once lawyers realize that others in their firm can see their financial performance on matters, their behavior often changes. In one example, a lawyer was losing money on the first phase of a fixed fee arrangement. Once a monitoring program was put in place, performance on the second phase dramatically changed – leading to a reasonably profitable result. (p. 39)

They are also extremely thoughtful about the role of technology in today’s law firm and about its limitations:

The core systems of a law firm – the client database, document database, financial database, and people database – all stand alone. Getting data from one to another is very difficult. Therefore, understanding which clients are buying specific types of services, the staff resources committed to resolving the legal challenges, as well as the profitability of the effort, is a significant challenge. (p. 50)

This wouldn’t be much of a review if we didn’t find something to criticize, and there are a number of places where we wished the discussion went deeper.  For example, Chapter 3 – Pricing and Profitability – begins with a two page introduction to how profits are defined differently by different firms, a topic that we think requires far more detail, including the implications of different definitions of realization (which many lawyers confuse with profit) versus cost accounting and other models.  Lawyers will never agree on how to become more profitable if they don’t first agree what the word means.

Another problem can be seen in the book’s discussion of “four drivers of profitability”:  rates, realization, productivity and leverage.  Leverage is defined “as the percentage of partner time worked per matter or per client” (p. 18).  The authors go on to argue that:  “The basic economic concept of leverage is that the more workers work, the more owners (partners) benefit. Workers generate the profits that pay partners. Therefore, the more work is pushed down to them, the better leverage you have and the more profit is generated (p. 19).”

That is certainly how firms thought about profit under the “old normal” pyramid model, but the world has changed.  For example, in a fixed price environment, efficiency is king, and leverage can lead to higher costs and more unbilled time.  Suppose a $1,000 per hour senior partner can solve a problem in one hour, but a $300 per hour associate will require ten hours to come to the same answer.  If the firm is paid the same fee regardless of who does the work, it is obvious that solving the problem at the unleveraged partner “cost” of $1,000 is more profitable than at the leveraged associate cost of $3,000.  (Of course, billable rates are really not a cost, but let’s keep it simple.) 

In a post I wrote in 2009 entitled the “Law Firm of the Future,” I quoted Fred Bartlit, founder of Bartlit & Beck, as noting that to maximize leverage “some big firms traditionally hire over 100 new associates per year, and that most leave within a few years.  This means a significant portion of the firm’s workforce is inexperienced.  ‘Who cares? Their inefficiency is billable,’ he said.  ‘In the future, the ideal firm will be underleveraged with about 50 partners and three associates in training.’”  Thus, in Bartlit’s view of the future, leverage is not a driver of profit, it is a driver of loss.

But enough quibbling.  Discussions like this can get very complicated very fast, and it may be years before law firms reach a consensus.  So this criticism of the profitability chapter says more about the state of the art of pricing than it does about the book.  I am hoping that in a few years Toby and Vince will write a second edition with the expanded explanations we are waiting for.   

In the meantime, the practical experience of these two industry leaders places them in the forefront of critical changes in the legal industry, and they have written an extraordinarily valuable book.

As they summed it up: “From the authors’ experiences, the pricing director role has been very challenging, but quite rewarding. It exists at the vanguard of change for an industry in desperate need of it. . . . The last word on legal pricing is that it is a roller coaster ride and nobody is sure yet exactly how it will end.” (p. 2)

 

This post was written by Jim Hassett and Jonathan Groner.

February 18, 2014

Announcing a new Kindle version of our Legal Business Development Guide

Amazon is now selling a new Kindle version of my Legal Business Development Quick Reference Guide.  This book lies at the heart of the highly successful Adams and Reese program I’ve described in the last few posts, and is used in all of our business development coaching and training programs.  See our web page for sample chapters, reviews, and ordering information for the printed book, including volume discounts up to 50% on orders of multiple copies.

September 11, 2013

Why is legal project management growing?

Some background on this post: Lawyers often ask us for a one page summary of what LPM is, and why they should care.  But summarizing all the facts in a single page is very difficult.  As Mark Twain once put it“I didn't have time to write a short letter, so I wrote a long one instead.” Over the last few months, LegalBizDev Principal Ed Burke and I have been exchanging drafts of this post.  If you want to prove to yourself that we met the challenge, feel free to download the one-page pdf version.

Clients have been using project management for decades to reduce risks, cut costs, streamline processes and protect profits.  Now they’re pressing law firms to adapt it to legal services, to provide more value and improve the predictability of budgets and schedules.

 

What is legal project management?

Though new to law firms, project management has long been used by businesses to protect profits through efficiency and predictability.   Their projects – from the design and production of a new line of jet engines to the acquisition and integration of a billion-dollar company -- can reach nearly unimaginable levels of complexity, variability and risk.  Businesses from engineering to investment banking have developed a rich and deep body of knowledge about how to manage projects on time and within budget.  Legal project management adapts these proven techniques to the unique challenges of managing unpredictable legal matters and disputes.  

 

How it works.

Project management applies templates, checklists and other recognized management tools to planning, managing, delegating, budgeting, tracking, meeting deadlines and avoiding risks.  A 2011 meeting of litigation experts hosted by the Association of Corporate Counsel and the American Bar Association found that, while lawyers are quick to grasp new management techniques, “the challenge is change/behavior management.”  As a result, the quickest path to ROI is one-on-one coaching, in which experts advise lawyers on immediate legal project management tactics each lawyer can use to address the issues they face today.

 

What’s new?  

Any lawyer who has ever planned a budget or managed a team has served as a legal project manager.  But clients are now choosing law firms based on their ability to apply a more systematic and disciplined approach that delivers more value, more quickly. “More efficient project management” is now one of the top demands of in-house Chief Legal Officers, according to a recent survey by Altman Weil.  

 

The benefits.

Project management was initially adopted by many firms to protect profits in fixed-fee arrangements.  But then they saw its benefits in billable-hour matters, including decreased write-offs and write-downs through more accurate budgeting and tracking.  It also enabled firms to take on more work without adding headcount or cost. A recent American Lawyer Media Legal Intelligence survey found that firms that use legal project management report more productive client relationships, improved communication, greater cost predictability and other benefits.   


*  *  *

The first “how to” text in the field – the Legal Project Management Quick Reference Guide by LegalBizDev founder Jim Hassett – was published in 2010 and is now in its third edition.  For more information, see www.legalbizdev.com/projectmanagement. 

July 17, 2013

Book review: Time Management Handbook for Lawyers

In the good old days of few fixed fees and many billable hours, firms had little reason to care if lawyers were inefficient, as long as they billed their 1800 or 2000 or 2200 hours per year.  If they might have found a way of doing something faster… well, why would they even try if they were being paid by the hour?

But all that has changed in the “new normal.”  When clients demand efficiency, all of a sudden personal time management matters. 

When we first designed our project management coaching, and the Certified Legal Project Manager® program, we felt that this would be a very important topic for some lawyers.  So we not only included a section on this topic in my Legal Project Management Quick Reference Guide, we also identified supplementary readings for lawyers who were interested. 

Several years ago, when we searched Amazon for “time management books,” we came up with hundreds of options.  We did not read them all, but we did buy quite a few of the top ones to see which we thought would be most useful to lawyers.  A separate Amazon search on “time management books for lawyers” came up with a much smaller number.  But when we looked at the top sellers, we were not impressed.  We ended up picking a book written for a general audience for our coaching and certification:  The 25 best time management tools and techniques by Pamela Dodd and Doug Sundheim. 

The book is very easy to use quickly, because each of the 25 techniques is described in a separate chapter such as “minimize interruptions,” “delegate more/better,” and “hold better meetings.”  When lawyers in our coaching program express a special interest in improving personal time management, we buy them a copy of this book, tell them to scan the chapter titles for topics that could help them personally, and then come up with practical and immediate steps to improve one thing at a time.

But many lawyers prefer books written specifically for lawyers, so we’ve been keeping our eyes open for new books.  When I heard a few months ago that Gary Richards, one of our principals, was writing a new book called the Time Management Handbook for Lawyers, I couldn’t wait to see it.

Well, Gary’s book just came out, and since I work with him every day, of course I will understand if you think my review may be a bit biased.  But I can say in all honesty that Gary’s book is the best legal time management book that I’ve seen.  His subtitle says it all:  “How-to tactics that really work.” 

I especially liked the practical tools in the appendices, including “how to take and analyze a time log,” “the top 40 most common time barriers,” “typical complaints of associates and staff about how partners delegate,” and examples of a new client information letter and requirements for engagement letters.

Some of the material overlaps with concepts covered in my Legal Project Management Quick Reference Guide including chapters on meetings, delegation, and client communication.  (To see Of Counsel’s review of the Guide, published yesterday, click here.)  Gary and I took slightly different approaches in some cases, and have different writing styles.  But who knows, maybe you’ll like his more than mine.

If you need to improve your personal time management, would you benefit more from a book specifically written for lawyers or from one of the many written for a more general audience?  The answer depends on you. 

In the future, when we offer selected lawyers in our coaching program a free book on time management, we will give them two choices:  the Dodd book if they want a quick high level overview of common techniques or Gary’s book if they want a more detailed discussion of time management techniques specifically for lawyers.  If they want both, we will send both.

If you need help on time management, and are not sure which book sounds better, you might as well buy both.  The total cost of the two books on Amazon is just $24.40, so it’s hard to go wrong.  The first time you are able to bill just one more hour based on your reading, you will already be way ahead of the game.

July 10, 2013

The top ten best practices in legal project management

 This post was adapted from the new Third Edition of the Legal Project Management Quick Reference Guide.

When you begin to think about your first LPM action items, you may find it useful to begin by reviewing this list of the top ten best practices to determine what matters most in your situation:

  1. Make sure you understand client needs early on. What would the client consider to be a successful outcome? What are their priorities, both overall and for this particular matter? Also determine who the primary decision makers are on the client side, especially about cost issues.

  2. Divide a large complex matter into a number of smaller tasks. Then schedule a meeting of key team members to define the schedule and budget the tasks. Bottom-up planning (which is interactive and iterative) is more effective than top-down planning (which is linear and one-way). Remember that it is human nature to be optimistic; don’t underestimate how long tasks will take.

  3. Aim for a cohesive team approach, with one lawyer managing all assignments and monitoring the time of all lawyers assigned to the matter. Also assign primary responsibility for each task to a single individual. When specific people are assigned to tasks, each person will have a sense of ownership and you will have a clear view of who is responsible for what.

  4. Individual tasks should be easy to track. Each activity should be budgeted for a manageable chunk of time (typically 8 to 80 hours) to give team members freedom to perform the task as they think best while still assuring accountability.

  5. Communicate the budget and hourly expectations for each task to the team. Then ask the person who is responsible for each task to estimate how long they think it will take. If there is a large gap between their estimate and yours, discuss why and consider revising the estimate.

  6. Always know what you have spent so far, and what you expect to spend in the future. Check at regular intervals to make sure the work is being done within the projected budget. Compare the percentage of the budget you have spent with the percentage of work you have completed. Focus attention on the largest tasks that will require a high percentage of the budget.

  7. In large projects, schedule regular team meetings to review progress and remind members of the overall goals of the project and of upcoming tasks. Create status reports that are easy to review. Watch for roadblocks that interfere with team progress and remove them.

  8. If cost reduction is required, look for procedures that can be simplified or standardized. Also consider delegating some tasks down if they can be performed efficiently at lower hourly rates. But note that the cost will often be lower if you “delegate up” to more senior lawyers who need less guidance and feedback.

  9. Keep clients informed as the matter progresses. Consider whether it would be useful to send monthly one-page status reports which summarize what was accomplished last month, what is planned for next month, and any issues or challenges.

  10. Effective managers spend twice as much time planning as ineffective ones. Find the balance between planning too little and planning too much. (For the data behind this claim, see the book Alpha Project Managers: What the Top 2% Know that Everyone Else Does Not.)