205 posts categorized "Legal Business Trends"

August 20, 2014

LPM Case Study: Loeb & Loeb (Part 3 of 4)

Ross Emmerman is a Chicago-based corporate and M&A lawyer at Loeb & Loeb who was coached by Fred Kinch.  Ross says that although many attorneys at the firm start out by considering LPM to be just one more thing that management wants them to engage in, Loeb & Loeb’s National Business Manager Stephanie Flitcroft has “taken the laboring oar” and helped the firm add a great deal to its capacities through the use of LPM. He is in constant touch with Stephanie and says he uses LPM tools at least twice a week.

Ross knows that the firm uses ENGAGE “behind the scenes,” but he works with easier to use Excel spreadsheets prepared by Stephanie.  (A sample format for a typical spreadsheet for a sell-side M&A transaction appeared in a previous post.)

From a practice standpoint, the most important aspect of LPM for Ross is that his sophisticated clients “understand that changes in scope are inherent in transactions” but matters still need to be on budget and on time. In comparing an attorney’s role with LPM to a general contractor’s role to a construction project, Ross mentioned that no builder would tell a prospective homeowner in advance that a new home would cost anywhere between $300,000 and $600,000; that is much too large a range and does not contain any analysis. A home builder would not be expected to have enough data to hit the number on the spot before all the variables were known, but bids would be expected to fall within a much smaller range, such as $420,000 to $450,000. In today’s marketplace for legal services, the same is true for predicting legal costs.

The essence, according to Ross, is not whether a firm uses Excel or ENGAGE or other software. What matters is the data that a firm retains and how the firm tracks and uses that data to come up with a reasonable advance analysis of the cost of each phase of a project. As a partner, he says, “I am accountable to the client,” and his ability to provide accurate estimates in advance is very helpful to creating and maintaining client relationships.

During the coaching, he not only developed more detailed budgets himself, but also sent out budget hours by task to the team members at the start of matters to get their input and buy-in. In the future, he expects that the team members will become accustomed to this process and may even be call upon to set the initial budgeted cost and time estimates.

Back in the old days, he says, lawyers simply did this by the seat of their pants, and no one knew where you were going with the deal or its costs. That is no longer acceptable. One of the reasons that better budgeting was not possible years ago was that firms did not retain their data for this purpose or kept their data in a “big lump,” with no effective way of breaking it down. Now Loeb & Loeb and other leading firms retain their data in a form that can be broken up into pieces as needed. They can then use the data “quickly and intelligently.”

Ross joined Loeb & Loeb in March 2013, and in his previous firm he had received LPM training. But LegalBizDev’s coaching was able to take him “from theory to practice.”

According to Andrea Danziger, Loeb & Loeb’s director of business development and practice management, a number of people who went through the program had similar experiences:   “Once they started working with a coach, they realized right away, I’ve been doing LPM all along. But now it’s more methodical and sophisticated, supported by new resources, including business managers, budgeting software, and the various reports that we run.  That makes lawyers much more confident to explain to clients how they will use LPM to manage a matter within budget, and communicate effectively about mutual expectations.”

This series was written by Jim Hassett and Jonathan Groner.

 

August 06, 2014

Tip of the month: Keep a written record of business development hours and progress, every week

What gets measured gets done.  Keeping a weekly list of how many hours you put into business development, and how many advances you achieved will help keep your business development effors moving forward.  Tracking behavior works for people who are increasing exercise or changing their diet, and it will work for you when you develop new business.

 

The first Wednesday of every month is devoted to a short and simple tip to help lawyers increase efficiency, provide greater value to their clients and/or develop new business. For more information on improving results, see page 54 of my Legal Business Development Quick Reference Guide, which is now available in both paperback and Kindle editions.

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.

 

May 28, 2014

Business development best practices: Prioritize relentlessly

Since business development is more important than ever for lawyers, over the next few months I will be posting occasional summaries of best practices from my book the Legal Business Development Quick Reference Guide.  This is the first and most important.

When lawyers ask us for the single most important piece of advice in legal business development, the answer is simple: Ignore good ideas. You must prioritize relentlessly.

Before we started working with lawyers, my company coached professional salespeople. Those clients spent 60 to 80 hours per week living, breathing, and acting on sales. The lawyers we work with these days often struggle to find two or three hours per week that they can devote to business development on a consistent and predictable basis.

Lawyers are much too busy to spend time on ideas that are only good. To maximize the chances of success, each individual must focus on the very best ideas for their practice, their personality, and their schedule. This requires relentless prioritization, and constantly returning to the question, “What should I do today to increase new business?”

For example, it’s good marketing advice to volunteer for a bar association committee. It’s an easy and enjoyable way to develop new relationships that could lead to business in the future. But it is usually better advice to skip the bar association and volunteer instead in an industry organization whose members are potential clients. That way, the relationships you develop will lead to more new business, more quickly.

Even that is probably not the best advice. For most lawyers, the best place to start is with current clients. If you would have averaged an hour per week on that committee, spend it instead on your top clients. Take them to lunch. Listen. Find out what they want. Give them more. Do things for free.

But don’t make those client lunch reservations just yet, because there are no generic answers to the question of what’s best. Maybe in your unique situation the bar association would be best. Or maybe none of these three are right for you and you need to go in a different direction.

You must prioritize relentlessly and keep returning to the question, “What should I do today to increase new business?” Place the highest priority on tasks that are most likely to yield the type of clients you want to work with, and the types of matters you prefer to focus on.

For example, I often talk to lawyers who are writing articles or books in their marketing time. As a man who spends a lot of time writing, I obviously think that writing can be a good way to increase visibility. But there are several important caveats. First of all, writing is way too much fun for some of us, and it’s easy to write things that do not serve the central marketing purpose. Second, by itself publication is unlikely to bring in new business. To be an effective marketing tactic, writing must be used to build relationships, one person at a time. (One example: send copies of your article to key contacts, each with a short written note.)  Third and most important: you must consider what else you could be doing with that time. If an article takes 10 hours to write, what else could you do with those 10 marketing hours? Would you get more results with current clients, or by strengthening relationships with people you already know?

Another example: Before a lawyer decides whether to attend a networking meeting, she should realistically assess how many hours it will require, including preparing, following up, and even driving to and from the meeting. Suppose a particular networking meeting requires an investment of five hours. She must then ask whether the meeting is the best possible way to spend that time. Would five hours be likely to produce greater results if she instead offered a free meeting to a current client to understand what they value most about current services, and what could be improved? What about sending personalized emails to 20 people she already knows, just to stay top of mind? Or re-establishing contact with a few friends from law school who now work for large corporations?

Still another example: many lawyers put considerable effort into responding to RFPs, without any realistic idea of the likelihood of success, or even what they should do to win. According to consultant Ann Lee Gibson, typical RFP win rates across the legal industry are “very small, probably no larger than 5%.”  In other words, unless you know how to win the RFP game, 19 times out of 20 you will lose. Does that sound like the best use of your time?

The same type of prioritization should be applied to a firm’s marketing tactics. Consider your firm’s last marketing event. What was its impact on new business? Could the firm have achieved greater results if all that time and money had been used differently? Suppose that you outlined a step-by-step sales program to build relationships with a short list of decision makers and/or industry gurus. Or suppose you had redirected those resources to support individual meetings with people the lawyers already knew, focused on broadening contacts in a particular industry segment. Would the results have been greater?

Of course, business developers in every profession ask questions like these every day. What’s different about working with lawyers is that we must ask them more frequently and more rigorously, because lawyers have so little time.

You must start with enough planning to make sure you are don’t waste your time taking people to lunch who are unlikely to ever hire your firm or introduce you to others who will.

But once a basic plan is in place it is time to come up with a list of activities and get started trying them out. Review things that have worked in the past for you, for your partners, and for other firms. Do this quickly. Because every minute you spend planning is a minute you are not following up with clients.

Many lawyers would rather read about marketing than pick up the phone and call a client. If you are one of them, you must fight that tendency, and spend as little time as you can on studying.

Just jump right in and try something. And when you do, keep a written record of what you tried, and what worked. If you track short-term activity and results, you will be more likely to follow up consistently.

Developing new business is like going on a diet: There is no sense starting unless you plan to stay with it.

 

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.”

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.