285 posts categorized "Legal Business Trends"

November 09, 2016

Four ways to simplify legal process improvement (Part 3 of 3)

By Jim Hassett and Tom Kane, LegalBizDev

Approach #3: Five steps to improve any business process

Step 1: Make a very quick list of the most critical processes that you want to consider.

If you don’t know where to begin, use the standard task codes described on page 183 for a starting point. For example, a litigator focused on the discovery phase of cases could begin with these six tasks:

  • Written discovery
  • Document production
  • Depositions
  • Expert discovery
  • Discovery motions
  • Other discovery

Step 2: Pick one process to focus on first.

It is important to begin with the process that is most likely to allow you to meet your goals, which of course means that you have to be very clear about what your goals are. When you have several goals in mind, you could start by constructing a “process selection matrix” like the one below to make your choice.

 

 

Easy to change

Impact on profitability/ realization

Cost saving to client

TOTAL

Written discovery

2

2

2

6

Document production

2

4

3

9

Depositions

3

4

5

12

Expert discovery

4

2

4

10

Discovery motions

2

2

3

7

Other discovery

2

1

2

5

 

(Note: The format of the table in this example is based on the book Improving Business Processes (page 22). The rows are from the Uniform Task Based Management System and the column values are for a hypothetical mid-sized law firm.)

In this example, there are three different goals, all are rated on a scale from 1 (low) to 5 (high), and the lawyer considers them equally important in selecting a process. Therefore, the last column, the total rating, can be used to determine that your process improvement should begin with the deposition process because it has the highest total rating.

Step 3: Define exactly what is included in the process. Where does it begin and end? Then break it down into five to 10 high-level parts.

Step 4: Decide which step to redesign first.

Again, the step you choose depends on your goals. The following questions from Improving Business Processes may help you to make your choice (p. 32):

  • At which points does this process break down or experience delays?
  • At which points do people typically experience frustration with the process?
  • Which parts of the process seem to consume an inordinate amount of time?
  • Which parts of the process lead to low-quality outcomes?
  • Which parts of the process incur unacceptable costs?

Step 5: Think through the details of the step you will redesign and look for ways to increase efficiency, e.g. by simplifying the process, creating a checklist, and/or focusing more clearly on the factors that the client values most highly. Define action items and implement them.

Approach #4: 10 steps to improve critical business processes

These 10 steps are explained in detail in Susan Page’s book, The Power of Business Process Improvement. Here, they have been adapted and simplified for legal matters.

Step 1: Develop the process inventory. List all the big picture processes within a particular legal area, establish criteria for prioritizing them, and pick the one you want to start with. (The discovery tasks in the table above provide a good example.)

Step 2: Establish the foundation. Write a scope definition document that defines the problem you need to solve and provides a blueprint for the start and the end of your process improvement.

Step 3: Draw the process map. Identify each activity with a specific action word (e.g. create, review, develop, approve, update, or communicate) and then diagram the steps in a form that can be communicated to everyone involved. (Chapter 4 of The Power of Business Process Improvement includes standard flow charting symbols and several sample process maps.) Be sure to include handoffs to lawyers, staff, clients, and others.

Step 4: Estimate time and cost. Specify what is involved in each stage or activity in the process, how long it usually takes, and what it costs.

Step 5: Verify the process map. Ask other stakeholders to review the process map for accuracy. This provides a baseline to begin improvement.

Step 6: Apply improvement techniques. This is where the rubber meets the road. Eliminate bureaucracy, evaluate value added activities, eliminate duplication and redundancy, simplify processes, reports, and forms, reduce cycle time, and more.

Step 7: Create internal controls, tools, and metrics. Create controls to avoid errors, tools to support the new business process, and metrics to quantify improvements.

Step 8: Test and rework. Pilot test the new process, identify any issues, and rework them before introducing the new and improved process on a wide scale.

Step 9: Implement the change. Just as businesses develop marketing plans before they introduce a new product, they must plan how to implement business process changes, including “who has to know about the change, what they need to know, and how to communicate the right information to the right people.” (See page 14 of The Power of Business Process Improvement).

Step 10: Drive continuous improvement. After the change succeeds, you will still need to invest in maintenance. Evaluate, test, assess, and execute to sustain any required change.

Conclusion

All four approaches have value in different situations, and all take advantage of the 80/20 rule to maximize the benefits you will receive while minimizing the time it will take.

If you want to use these approaches in your own personal practice, you should be able to identify improvements quickly. But if you want to get other lawyers in your group to do the same thing, that’s a lot harder.

Whether you use approach 1, 2, 3, or 4, or you go out and buy Page’s book for more detail, or you hire an outside consultant, figuring out how to improve legal business processes is not the hard part.

The hard part is getting lawyers to do it. For more about that, see Chapter 9, “How to implement LPM throughout a firm,” in the fourth edition of the Legal Project Management Quick Reference Guide.

 

This post was adapted from the recently published fourth edition of The Legal Project Management Quick Reference Guide.

October 26, 2016

Four ways to simplify legal process improvement (Part 2 of 3)

By Jim Hassett and Tom Kane, LegalBizDev

There is no shortage of theories, tactics, or opinions about the best way to increase efficiency, and hundreds of books and articles have been written on business process improvement and related techniques. Many of these systems have become so complicated and demanding that you can earn an MBA in the field. As Susan Page has written in her award winning book  The Power of Business Process Improvement: 10 Simple Steps to Increase Effectiveness, Efficiency, and Adaptability  (p. 5) this supports “the myth that business process improvement must be time consuming and complex.”

(Although we use Page’s book in our Certified Legal Project Manager® program, her full process is too time consuming for most lawyers most of the time. For example, the last chapter of her book is a case study applying her 10 steps to a real world example for the human resources department of a large bank. That chapter includes 67 pages of text, charts, and diagrams, and the simplification project took one year. Lawyers don’t have a year.)

Parts 2 and 3 of this blog series describe four approaches to business process improvement that we have developed with lawyers to increase legal efficiency quickly. They are listed in order of ease of use. We recommend that most lawyers start with Approach #1, which is limited to two simple questions. For critical, time consuming, and repetitive processes, we outline three increasingly sophisticated options which require more time, but can be more effective in simplifying the way you handle legal matters.

Approach #1: Two questions to improve a business process

Ask yourself:

  1. Of all the things you do for clients, what legal work provides the biggest opportunity to deliver greater value quickly or to increase efficiency?
  2. What could you do to improve this process?

Then do it.

Yes, this is so simple that it sounds trivial. But if in fact you stop and think about where inefficiencies lie, and act on what you already know, chances are you can increase efficiency very quickly.

No, it isn’t brain surgery, but for some lawyers, Approach #1 is a great way to get started. If you prefer an approach that is a bit more detailed, read on.

Approach #2: Ten questions to improve a business process

  1. What steps and activities are typically included in this process?
  2. Which steps and activities does the client value most highly?
  3. Which steps and activities do not add value, and could be eliminated?
  4. Could you standardize and/or streamline the process?
  5. Could you reduce or eliminate repetition?
  6. Could you reduce or eliminate bottlenecks?
  7. Could you improve communication within the team and/or with clients?
  8. Could you reduce cost by delegating some tasks to junior staff who bill at lower rates?
  9. Could you reduce cost by “delegating up” some tasks, to senior staff who can complete a task quickly at a low total cost?
  10. Could you reduce cost through legal process outsourcing of selected tasks to another law firm or a legal support services company in the US or in another country?

The final post in this series will describe two more approaches that are a bit more complex than these, but still far simpler than traditional, orthodox process improvement.

This post was adapted from the recently published fourth edition of the Legal Project Management Quick Reference Guide.

October 19, 2016

Four ways to simplify legal process improvement (Part 1 of 3)

By Jim Hassett and Tom Kane, LegalBizDev

Traditionally, lawyers have been trained to place enormous emphasis on avoiding risk, and little or no emphasis on increasing efficiency. As Ron Friedman put it:

Clients often want to know if there are any major risks: “Let me know if there are any boulders in this playing field.” Lawyers often hear that and think they need to find not just the boulders, but also the pebbles. The fear of being wrong—and of malpractice—runs deep. “Perfection thinking” makes it hard to approximate, to apply the 80-20 rule, [or] to guide in the right direction but with some imprecision.

But as in-house departments are increasingly pressured to control costs, they in turn are pressuring outside law firms to find ways to increase efficiency. Business process improvement is one path to the lower costs that many clients are demanding.

While there is widespread agreement that clients also want legal project management (LPM) and that it pays off for firms, the field is so new that experts still disagree about exactly what should be included and excluded from its definition. These arguments have slowed LPM’s progress.  For example, consider these remarks from one AmLaw 200 firm leader we interviewed for the book Client Value and Law Firm Profitability (p. 89):

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

We first became aware of the seriousness of this problem a few years ago when the director of professional development at an AmLaw 100 firm asked us to explain the differences between project management, process improvement, Six Sigma, and Lean. This was an extremely sophisticated client who had been researching this area for months, but she had heard so many different claims from competing consultants that she had trouble keeping them straight.

Process improvement, has gotten a lot of headlines in the legal world as a result of Seyfarth Shaw’s highly publicized success in using it to streamline work, along with Six Sigma and Lean. All three approaches originated in the world of manufacturing.

Six Sigma is built around techniques Motorola developed to eliminate the causes of manufacturing defects and errors. Lean was developed by Toyota to increase manufacturing efficiency by eliminating the “seven wastes” (excess inventory, excess processing, overproduction, transportation, motion, waiting, and defects).

Process improvement typically starts by defining the exact steps that are required to perform a legal process. This includes looking at every process from the client’s point of view, analyzing whether each step adds value for the client, and eliminating the steps that don’t.

Writing in Law Technology, Alan Cohen has noted that this traditional approach “can take weeks to create a map, but the result is a template that spells out the various phases of a matter—and an efficient way to do them.” If you consider the fact that Seyfarth has developed over 500 process maps, each of which took a team of lawyers and staff weeks to develop, you can see why Six Sigma for Dummies (p. 10) says the approach is “not for the faint of heart. It is intense and rigorous, and it entails a thorough inspection of the way everything is done.”

In my book, Legal Project Management, Pricing and Alternative Fee Arrangements, I described how Seyfarth has spent more than 10 years and millions of dollars refining its system. They have trademarked the term SeyfarthLean® and formed a separate company—SeyfarthLean® Consulting—as a wholly owned subsidiary which offers advice to law departments on how to work more efficiently.  However, the Seyfarth model has been so widely publicized that some law firms think that LPM equals process improvement.

We have frequently argued for a much broader definition of LPM, including any activity that increases client satisfaction and firm profitability by applying proven techniques to improve the management of legal matters. Thus, we see LPM as an umbrella term that embraces a very wide range of management techniques, including pricing, communication, process improvement, and much more.

Under this broad definition, process improvement, Six Sigma, and Lean are simply specialized approaches that fall under the more general umbrella term LPM. They are simply tools in the belt, to be used in some cases and ignored in others.

And when they are used, we recommend always looking for simpler and more efficient approaches, starting with the four approaches described in the next two parts of this series.

This post was adapted from the recently published fourth edition of the Legal Project Management Quick Reference Guide.

 

[1] http://www.prismlegal.com/wordpress/index.php?p=1026&c=1

[2] http://www.dailyreportonline.com/id=1202566995546/How-six-big-law-firms-get-serious-about-legal-project-management

[3] Link to the book on Amazon

September 21, 2016

Tracking legal progress with Kanban

By Paul Saunders

In 2015, after working as a corporate lawyer for seven years at Stewart McKelvey in Halifax, Nova Scotia, I agreed to devote 100% of my time to the newly created position of Practice Innovation Partner. My role is to develop and implement innovative technologies and systems for the firm and its clients, to increase efficiency, profitability, and client value. One of the first things I did in this new role was to pilot-test several classic Agile techniques at our firm, starting with Kanban.

Kanban is a management tool that originated in Lean manufacturing. The term loosely translates to “signboard” or “billboard” in Japanese. As law firms focus on increasing efficiency, reducing their costs, and becoming more responsive to clients, it seems logical to adapt this technique to work closely with clients in charting the stages of each case or transaction and to track progress.

Kanban is a highly flexible tool for planning and scheduling tasks that creates a visual representation of project teamwork to facilitate transparency, accountability, and collaboration. Knowledge work, such as software development and law practice, isn’t inherently visual. Progress often becomes buried in countless emails, status reports, and complex tracking spreadsheets. It is difficult to identify opportunities for improvement and to gauge progress when there is no single place where progress is tracked. Kanban makes this non-visual work visual.

In its simplest form, Kanban relies on a physical or virtual whiteboard with three columns: to do, doing, and done. All tasks that make up the project are represented by cards or post-it notes on a board. The title of each task, when it’s due, who is responsible, and any other pertinent details are written on each card. Cards advance from left to right on the board to track progress and coordinate work.

The beauty of the approach is its flexibility. Rather than having to periodically overhaul detailed project plans and realign tasks when change inevitably occurs, team members can simply re-organize the cards on the board. The approach also better ensures clarity in who is working on what when and creates accountability for results since members are expected to regularly report back on progress on the tasks they are assigned. It also shines a significant light on bottlenecks and can thus motivate teams to remove barriers that impede progress. The board can be organized by a junior partner or an associate, which produces the added benefit of avoiding some of the awkwardness of “managing your manager” by increasing collaboration and transparency.

Another critical aspect of Kanban is its ability to limit the amount of inventory or work in progress. Capacity restrictions are sometimes placed on team members so that they can only be assigned a limited number of tasks or volumes of work in order to permit them to focus on completing tasks rather than being overburdened through multi-tasking.

Kanban boards can also be highly customized by expanding the various columns for different purposes in a specific context. For example, to coordinate a portfolio of related projects or matters, a law firm practice group may want to expand the “doing” column to include different phases of work. In litigation these columns could include: matter intake, pleadings, production and disclosure, discovery, pretrial, trial, appeal, billing, and matter closing. In a corporate transaction, the phases could be: letter of intent, principal agreement and schedules, conditions, pre-closing, closing, reporting, undertakings, billing, and matter closure.

One of our first pilot tests of Kanban was managed by Patti Mitchell, a litigation partner practicing in insurance defense at our office in Halifax and the lead lawyer for a major insurance client there. She worked closely with the law firm’s client service team to use Kanban techniques to organize and streamline assignments in a multitude of cases and to move the matters through the standard phases of insurance litigation more quickly. The firm used Kanban techniques in conjunction with Agile Scrum concepts, in which issues are quickly identified at brief and regular stand-up meetings among all staff.  (These will be described in a followup post in this blog next month.)

“The insurance defense practice,” Mitchell explained, “was identified as an area of practice that would benefit from Kanban because it tends to be work with consistent volume and repetitive processes, but the matters were not moving as quickly as they could and we wanted to improve that aspect of service delivery for our clients.”

In addition, Mitchell noted, the firm chose to use Kanban with this client as a pilot project because its contractual requirements for service delivery were quite strict and the firm wanted to “see if we could improve upon deliverables.” The results were exactly what they had hoped for:

With Kanban, visual representation of the matters and stages of litigation allows us to see the volume of work and where processes are getting held up. It allows us to modify traditional processes that bog us down and remove barriers to meeting timelines. For example, we were able to develop a system of more quickly producing pleadings and delivery of documents for the client.

More substantively, we are now able to ensure that all matters are properly staffed and to assign additional resources more quickly when issues are identified in the weekly stand-up meetings. The process fosters a sense of teamwork and personal responsibility that results in improved service for the clients. Spin-off benefits also include the development of new and more consistent precedents and task coding for billing purposes. That makes preparation for discovery and billings more efficient.

Like the underlying work itself, the tools used to manage that work must also be flexible. Since Kanban boards are so versatile, a team should start with an approach that makes sense at the outset. The goal should then be to learn from the experience, see what works and what doesn’t work with the tool, and incrementally evolve the approach over time based on feedback from the team.

In addition to using Kanban in its classic sense with physical whiteboards and post-it notes, we are also currently experimenting with “virtual Kanban.” The firm has a cloud-based system to track assignments, which a number of lawyers have on their phone as an app. The next step is to expand the use of digital or virtual Kanban so that clients can use it as well to track the progress of a matter. That will require a security audit before the firm can put it in place, and the firm plans to start small. Whether the virtual approach works well or not, we expect that our use of Kanban will grow substantially over the next few years.

This post was adapted from the fourth edition of the Legal Project Management Quick Reference Guide which will be published next week.

 

September 14, 2016

Case Study:  LPM Certification at Tucker Ellis

By Tim Batdorf, Jim Hassett, and Jonathan Groner

In the November 2010 press release that announced the start of our Certified Legal Project Manager™ program, we called it “the first to award certification in this new discipline.”  Many other LPM certifications have been introduced since, but most offer simply a “certificate of attendance” a piece of paper you get for going to a workshop. In contrast, ours remains the most demanding program.  It is still the only LPM certification program designed for the small and select group of lawyers and staff who want to take a leadership role on these important issues, help change policy inside their firms, define new processes, and train others. 

To become a Certified Legal Project Manager™, participants must study over 300 pages of assigned readings, answer 18 essay questions about how these concepts apply to their situation, demonstrate their skills and knowledge with real-world applications in their practice, and pass a written essay test.  To determine its long-term impact, we recently went back and interviewed several participants who were certified years ago.  This is the first of several case studies that will appear in this blog addressing the progress they made during the program, and after it was complete.

Jonathan Cooper, a partner and trial attorney at Tucker Ellis in Cleveland Ohio, was awarded his certification in January 2012.  In his written project, he completed a “Mass Tort Litigation Checklist” which he has updated several times since.  The latest version is reproduced in the recently published fourth edition of our Legal Project Management Quick Reference Guide. 

In the years since he completed certification, Jonathan has gone on to apply many other project management tactics to change the way he practices law.   For example, he continued to refine his checklist of all the steps necessary to defend against an asbestos claim.  The checklist is now in the form of a flow chart which shows what to do in a variety of scenarios to make sure that no key steps are missed.  The firm now uses this checklist/flowchart for all asbestos matters, and, according to Jonathan “This one simple step greatly improved our practice.”

Tucker Ellis is a relatively young law firm, founded in 2003.  It differentiates itself by creating a unique type of client experience – one that focuses on the client’s ideas of success.  Jonathan says, “After all, if you can define the benchmarks of success in advance with the client, you can be appropriately rewarded for achieving them.”

Tucker Ellis handles hundreds or even thousands of similar cases for its clients.  This requires a high level of sophistication in the way in which the firm processes cases and high efficiency from its lawyers if the firm hopes to successfully meet its clients’ objectives profitably.  

Tucker Ellis also offers a significant number of fixed fee arrangements.  With fixed fees, Jonathan says, “The only way to make any money is to reduce the number of timekeepers who touch the matter. That’s why our firm has become an expert at doing things efficiently, with fewer people getting involved in each matter.”

That is not to say that LPM, or Jonathan’s certification, provided a magic bullet that immediately addressed all of the firm’s challenges.  “The most challenging part,” Jonathan says, “was attempting to ‘preach the gospel’ of project management to other practice groups within the firm. It was not immediately obvious that project management would succeed because it’s not easy to get the typical lawyer to change the way in which he or she does things… It remains very hard for some lawyers to give up on the idea that every case is unique and that every rock needs to be turned over in a particular case, even though we’ve already repeatedly turned over that rock in other cases.”

The process of changing lawyers’ behavior is never as quick as LPM proponents would like, but at Tucker Ellis LPM has clearly paid off.  For example, after overcoming initial skepticism, the firms’ ERISA lawyers discovered that they could find commonalities in their employee benefit plans which allowed the practice group to regularize its processes and become more efficient and profitable.  Although it took a while, Jonathan says, “Adopting LPM has started a sea of change at the firm.”   

Tucker Ellis lawyers now realize that much of what they do can be boiled down into common elements that can be repeated.  As Jonathan summed it up: “The key to success in many areas, including our asbestos and medical products cases, is efficiency.  The firm has developed repeatable processes that give clients very high odds of success.” 

August 31, 2016

How pricing can affect legal practice

Guest post by Carl Herstein, Chief Value Partner, Honigman

Changes in pricing lead to changes in the way law is practiced. 

For example, the way contingency fee lawyers practice is different from the way most commercial full service business firms practice. At Honigman, we have a very big contingency fee segment of our practice in the real estate tax appeals area. So I’ve gotten to see how contingency practices work. They are enormously efficient. As a general rule, lawyers don’t do things until the last minute. That might be thought of as a vice, but call it “just-in-time management” and suddenly it becomes a virtue! 

Now, traditional commercial clients like to talk a lot about their cases, especially if they have in-house counsel. It’s their life, after all, and they are accountable for what happens in these cases. As a result, they often want frequent updates and strategy discussions. The biggest complaint one hears about contingency fee lawyers is “They don’t want to talk to me.”

That’s because for a lawyer on contingency, after communicating what is absolutely necessary, talking is a waste of time and therefore money. It’s a very different model: “We’ll tell you when we think you need to know something.” Now, I’m not suggesting that if you are on a contingency you shouldn’t talk to your clients, and I am exaggerating a bit for effect. But the point is that the billing arrangement changes the perception of the value of the interaction. If somebody wants to call you on the telephone and is willing to pay you $450 to $1,300 per hour to listen to them talk, you are happy to listen.  But, if it doesn’t make any difference to the fee you’re going to collect – or actually reduces it – maybe you will want to move that call along a little faster! 

Similarly, if you’ve got the billion-dollar case, it doesn’t matter how many interesting legal issues there are to chase down or how uncertain the law is. You’ll do the legwork, and the client will want you to. Otherwise, lawyers need to make judgments about what their clients can afford.

Clients will tell you, “Don’t bankrupt me by doing a perfect job,” which is really hard for the current generation of lawyers to deal with. Sometimes a client can talk to a lawyer and say, “We are going to have a problem with this case because fees are already $600,000, the most we can collect is a $1.8 million, and we haven’t even gotten to trial yet.”

And they’ll answer, “You’re not asking me to commit malpractice, are you?”

No one wants anyone to commit malpractice, but you have to make judgments. You can’t bankrupt your client while you worry about perfection. Younger lawyers are usually better able to grasp these dynamics. They are flexible and adaptable; they see the way the world is changing. People my age, my partners and many other lawyers whose world is different than it was when they were growing up – we’re the ones who have the hardest time with it.

This guest post is an excerpt from Carl Herstein’s thought provoking article “The Changing Legal Market: Some Thoughts for Law Students,” originally published in Of Counsel, Wolters Kluwer, August 2016.

August 24, 2016

Three causes of high legal fees:  Perfectionism isn’t the only challenge

Guest post by Carl Herstein, Chief Value Partner, Honigman

The AmLaw 200 and many smaller firms are in the early stages of trying to improve efficiency and provide higher quality at lower costs.  There are three major trends that have led to the ever-increasing costs of legal services and to the segmentation of the legal market:

1) Lawyers have to deal with the rapidly expanding size, scope, and complexity of American and international law. 

2) The impact of technology on the law.

3) The nature of the American legal system, with its emphasis on perfect procedure and perfect outcomes, is a decisive element. 

Those trends, in turn, have inspired a focus on improving the process of providing legal services, reducing costs, and improving quality.  The third point – perfectionism - is talked about a lot, but the first two have inspired far less discussion.

Why do I talk about the size, scope, and complexity of the law? Forty years ago, when I graduated from law school, at least it was a manageable proposition to try to do legal research. Nowadays, with the incredible number of cases, sources, and materials out there, it’s almost impossible in certain respects. Similarly, while there were statutes and regulations at the federal, state, local, and international levels, it was complicated but not overwhelming. In my judgment, it is now overwhelming. 

In 1976, when I left law school, there really was no environmental law. There was no healthcare law, no ERISA, and no significant practice in various other areas.  Now there are departments in each of the major law firms to deal with these things.  Law is more and more complex, so there’s more and more work for lawyers and law firms to handle. 

And of course we have a love-hate relationship with technology. Technology allows us to access all of these hundreds of thousands of cases. But the more you have, the more you have to encompass. Technology allows clients to preserve all sorts of data in the form of emails, voicemails, documents, notes, etc. Guess what: discovery in litigation matters is a herculean task. Again, new technology is helping us sort these things out, but every time it helps us solve a problem, it makes other problems more complex. 

When I started out, the typical commercial mortgage document was five to fifteen pages in part because it actually had to be typed. Now, it’s not surprising to get a 125- or 150-page commercial mortgage document. One of the resulting problems is that very few buyers can afford to have a lawyer read the whole thing. It takes five or six hours to read one of these documents and actually figure out whether it all makes sense. 

If you do read one of them, often you find that some of the provisions don’t jive; that, in attempting to address every potential problem in detail, people have just made terrible problems for themselves. So just a bit of gratuitous practical advice here: if you are writing documents, shorter and simpler is often better. 

We have a quest for perfection in America. This virtue is also a vice. We have wonderful procedural protections. We have tremendous appellate rights. If you have a claim, in many respects you have all the time in the world to prosecute it to a conclusion. Unfortunately, it makes the cost of dealing with a legal matter almost incalculable in many situations.

As a result of these factors driving ever-higher legal costs, the marketplace has segmented. Let’s say that you work in a 100-plus person law firm. A relatively modest commercial case comes in the door with a mere $1 million at stake. Since yours is not a mega-firm, but just a good regional firm like some here in Detroit, your clients are only going to be paying a mere $400 or $500 per hour for an experienced partner’s services. They are going to get billed $300 per hour for the second lawyer; perhaps $175 per hour for a legal assistant. You’ll have to hire an expert with similar costs, perhaps several. You’ll need a firm to help you with the electronic discovery simply because we have a few hundred thousand documents to review. 

Figure a seven-10 day trial could cost you a mere $150,000. It then probably costs $200,000 to get up to the trial with a complaint, motion practice, and discovery.  Now you’ve got a $350,000 budget for your million dollar case. No wonder clients think costs are out of control! 

Imagine you’re the defendant in that case. You think you have been wronged, not the other way around, yet the plaintiff is demanding $1 million from you. Your lawyers tell you they are going to charge $350,000 to vindicate you in a situation where you think your liability is zero.

 

This guest post is an excerpt from Carl Herstein’s thought provoking article “The Changing Legal Market: Some Thoughts for Law Students,” originally published in Of Counsel, Wolters Kluwer, August 2016.

August 17, 2016

Tracking and controlling costs (Part 2 of 2)

By Steve Barrett and Jim Hassett

 

Step 3:  Compare planned spending against actual spending at regular intervals

If the firm does have timely information going into the system, the next step is to get it out.

Whatever accounting package your firm uses -- whether it is Elite, Aderant, Juris, Rippe Kingston, or another -- it already has a number of built in features to assist budget tracking.  The exact details vary not just from one program to another, but also depend on the version your firm is running, and any add-ons they purchased.  Since features are also constantly being updated and enhanced by software vendors, the best way to find out exactly what your firm’s software can do is to talk to your finance staff.

There is no one best solution for tracking.  The best answer for you will depend on client needs, the way you like to work, the features of the software your firm already owns, and how much time is required and available for assistance from finance personnel.  (Depending on your software, your finance department may simply not have enough staff available to implement a solution which is technically possible but time consuming to set up or administer.)

The need to talk to appropriate personnel is especially strong if you work at one of the many firms that has developed, or is in the process of developing, its own individual custom applications to track and report spending.

During your discussion, you may want to talk about how practical it is to set up features in advance such as: 

  • Initial budgets for a matter, phases, tasks within phases and/or work in progress (WIP) on individual tasks by each timekeeper.
  • A set of specific tasks and phases (whether the standard UTBMS set or a custom developed set).
  • A standard set of prose descriptions to identify tasks, with uniform nomenclature. (In many packages, you can enter a task name in the pre-designated user-defined task field, typically with a 60- or 80-character field text limit.)
  • The ability to limit which timekeepers are allowed, or not allowed, to bill time to a particular matter.

Then you should discuss the most practical way for you to review the data, such as:

  • Summary reports by matter – The finance department may be able to set up a simple report that can automatically be generated every week, every month, or at whatever reporting interval you specify.
  • Summary reports by client – It may be practical to track and report on overall client charges (by percent, absolute amount, retainer or credit limits), as well as the phase, task or individual timekeeper reports.
  • Excel spreadsheets – If you like to work in Excel, reports can often be delivered in this format at your request (e.g. simply showing three columns: the initial budget, actual spending to date, and remaining budget).
  • Alarms or flags can be set to warn you – via computer-generated automatic e-mails – if a matter is running beyond its budget for a period, or any time a certain number of dollars have been spent, or whenever a matter has spent any pre-defined percentage of its budget. For example, you could request that emails be sent to you automatically when you reach 25%, 50%, 75%, 90%, and 100% of spending).

In addition to the features in standard accounting packages, and the custom programs some firms have developed, there are a number of related software tools that firms use to track and analyze financial metrics, such as Redwood Analytics and DataFusion’s Intelliquest family of analytic tools.  In the last few years, legal project management software has also started to emerge as a new category, including Prosperoware’s Umbria, the Cael™ app suite from Elevate, and Randy Steere’s Budget Manager.  A few years ago, Engage was the leading software in this space, but late in 2014 Thomson Reuters announced that they would stop supporting the product in 2017.

In summary, there are so many options and variations in this area, and they are changing so rapidly, that if you want to know the most practical way to track budgets in your firm, you will need to talk to the appropriate staff.

Step 4:  Define a plan in advance to address critical gaps between planned spending and actual costs

We’ve discussed this critical step before in several blog posts.  For example, see the guest post by Stacy Ballin, a partner and General Counsel at Squire Patton Boggs, entitled “Scope changes in litigation.”  Another related post in this blog is entitled “How to track legal work that is out of scope” and describes how some firms are using special task codes for out of scope work to make lawyers more aware of the issue.  The fourth edition of our Legal Project Management Quick Reference Guide, which will come out in October, includes some new resources on this topic, notably an article by JT Stuart Dodds, the Director, Global Pricing and Legal Project Management at Baker & McKenzie, entitled “Establishing a change control process.”

At the end of the day, the details of the system you use to address gaps is less important than the simple fact that you have set some rules in advance.

August 10, 2016

Tracking and controlling costs (Part 1 of 2)

By Steve Barrett and Jim Hassett

Tracking and controlling legal costs is one of those topics that would require an entire book of its own to do it justice.  This short overview is designed to outline a framework for an effective system.  The practical details of how budget tracking works in your firm will depend on the approach of your finance department, and the tools they use. 

In many firms, this is an area that is evolving rapidly as clients demand more timely and sophisticated information about spending.  If you are not already familiar with the latest budget tracking procedures in your firm, our single most important piece of advice is to stop reading this post and instead talk to your finance or practice development staff about the tools and techniques that are currently available to you, and what is planned for the future.

This two part series provides a brief overview of four major steps in tracking and controlling costs.

Step 1:  Define a baseline budget before the matter begins

If you have no idea what the total cost should be at the end of a matter, it’s pretty obvious that it will be hard to know where you stand.  Yet we continue to be amazed at the number of lawyers we see who operate without sensible budgets.

If you need to improve in this area, you may want to see the posts from this blog on Six steps to better budgets”.  For important matters, you should ideally develop what we called a “high detail” budget in that series, in which you have estimated the cost for each phase. For example, in litigation you could have separate budget estimates for case assessment, pre-trial pleadings, discovery, trial preparation and trial, and appeal.  (As noted in our recent series of posts on task codes, high level phases generally work better than detailed tasks for this, because it is so difficult to get lawyers to accurately code their time entries by tasks.)  Many firms now require high detail budgets for all matters over a certain dollar threshold, even if clients do not request them.  The threshold may be as low as $50,000 or less, or as high as $250,000 or more, depending on the size of the firm and the amount of financial control that is desired and practical.

Step 2:  Obtain accurate and timely information about spending as the matter proceeds

In order to evaluate the financial status of a matter, you need to know how much has been spent to date.  In coaching lawyers in LPM over the last several years, timekeeping practices is probably the area where we have seen the most change.  Years ago, the standard at most firms was for lawyers to submit timesheets at the end of the month, which occasionally became an exercise in “creative writing.”  And if a partner submitted a time sheet a month or two late, no one got too excited.  Until the day that time was submitted on a matter after the final bill went out, and the firm had to write off the difference.  There are still firms that live with this system, but the number goes down every year.

At the other extreme, there are now practice groups and entire firms that require lawyers to submit their time electronically at the end of every day.  The next morning, the relationship partner can get a real time view of exactly how much has been spent.

Most firms fall somewhere in the middle and many are still struggling with systems to encourage timesheets to be submitted promptly.  We have seen many approaches used by firms to induce compliance with prompt time entry practices, both “carrots” and “sticks.”  The “stick” ranges from continually nagging and cajoling, to systems of either financial penalties (e.g. $50 per end-of week or end-of-month tardy time release) or evaluation penalties (e.g. reduction in the offender’s year-end evaluation for bonuses).  The “carrot” systems offer evaluation or dollar awards for compliance. 

One of the more creative systems we’ve come across was the CEO of an AmLaw 100 firm who suspended direct deposit on pay day for anyone whose timesheet was late.  The individual had to then come to the CEO’s office to pick up a physical pay check.  Another creative firm created a contest among administrative assistants, with cash rewards for those whose groups had the best record for meeting timesheet deadlines.

Regardless of the state of timesheet practices at your firm, if you are responsible for keeping a matter within budget, you will need to find a way to get complete and timely information on hours billed to your project.  Without it, any subsequent analysis will simply be a matter of “garbage in, garbage out.”

This series was adapted from the fourth edition of the Legal Project Management Quick Reference Guide which will be published in October.

 

August 03, 2016

Tip of the month:  Adapt your reporting style to each client

Under-reporting of the status and results of legal matters can result in surprises to the client and unpaid bills.  But over-reporting can make clients think that you are insecure or even lack competence.  The trick is that different clients draw the line at different places, so whether your reporting consists of weekly phone calls or short monthly reports or something else will vary from client to client.  Success starts by talking with each client about what they want.

The first Wednesday of every month is devoted to a short and simple reminder like this to help lawyers increase efficiency, provide greater value to their clients and/or develop new business. For more about this tip, see our Legal Project Management Quick Reference Guide.