283 posts categorized "Legal Business Trends"

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.

July 27, 2016

Using outsourcing to reduce legal costs (Part 2 of 2)

By Jim Hassett, Mike Egnatchik, and Jonathan Groner

Michael Bryant, the CEO of nSource, stressed that help desk functions are only one of many operations that law firms can and are outsourcing with the help of companies like his.

For example, DLA Piper asked nSource to manage a “captive operation” for it in an off-site location in Tampa, Fla. Bryant says that some law firm functions that were at first thought of as requiring attorneys on site actually were susceptible to being done off site by contract employees. One of them, in DLA Piper’s case, was conflict checking – a crucial function that a law firm must undertake before it takes on a new matter.

“We distinguished between the strategic and the tactical aspects of conflict checking,” Bryant said, “and we found that the tactical, day-to-day aspects could be done off site. By doing so, we reduced the firm’s costs for this function by 50 percent, and we also achieved a 50 percent decrease in the time required to hire a new conflicts analyst and bring him or her up to speed.”

nSource did this by carefully studying the conflict checking process – what steps were involved, who did them, and how long each step took. After completing this process mapping, it was able to advise its client, DLA Piper, on how to outsource that task.

Bryant said DLA Piper’s leaders were so pleased with the way outsourcing worked in the conflict checking arena that they expanded it to other functions as well, saving money, increasing efficiency and improving the way the tasks were done.

Legal marketing, like conflict checking, has aspects that are highly strategic and can’t easily be outsourced. But, DLA Piper and nSource found, it has many routine aspects as well.

“Although there are some people in marketing who really need to be near the lawyers,” Bryant said, “when you think about all the external and internal communications demands on a marketing team, the RFP responses, the responses to honors and awards submissions, these can be leveraged and done in a centralized way, off site. For DLA Piper, we moved to a factory-like setting, where they really churn these things out. We placed rigor and precision around an area that has historically been chaotic.”

In similar ways, nSource has set up outsourced offices for other functions such as library services and human resources for DLA Piper and other clients. 

The new world of legal outsourcing does however raise some new management issues.  The challenge of managing subcontractors is familiar in other professions. The 11th edition of Harold Kerzner’s widely quoted textbook, Project Management, has an entire chapter devoted to working with external suppliers. The perspective is interesting, since the chapter makes it clear that a firm using an external source for some of its work on a matter is now in a role reversal. The firm is a client of the outsourcer it has hired, and has the same responsibilities to monitor that outsourced supplier that its own client has to monitor the firm’s work.

If XYZ Corporation has hired your firm for a matter, the legal department of XYZ had the job of hiring you in the first place and has the responsibility to monitor your work. Similarly, if you hire supplier DIS for discovery work, you had the job of hiring DIS in the first place and then you have the responsibility of monitoring DIS to assure that their work product is acceptable. The law firm is responsible for the entire work product, and must make sure that all the parts work.

Lawyers are just starting to become familiar with the idea of subcontracting work, and the use of outsourcers presents new challenges.

As Mark Ross noted in a paper entitled "The Ethics of Legal Outsourcing", “It is clear that to satisfy the duty of competently representing one’s client, a US lawyer engaging a legal process outsourcing provider cannot rely on the provider to evaluate its own work product and must himself or herself be able critically and independently to evaluate the work product received.”

Oversight can be complex. For example, consider the eDiscovery technique of predictive coding. Unlike simpler forms of eDiscovery—such as keyword search, concept searching, and looking for clusters of similar document groups—in predictive coding attorneys train software algorithms to find the most relevant documents by using samples of documents called training sets. According to Predictive Coding for Dummies (p. 8):

Training the predictive coding system is an iterative process that requires attorneys and their legal teams to evaluate the accuracy of the computer’s document prediction scores. If the accuracy of the computer-generated predictions is insufficient, additional training set documents are selected from the document population being considered. Multiple training sets are reviewed and coded until the required performance levels are achieved. Once the desired performance levels are achieved, decisions can be made about which documents to produce.

The great advantage of this approach is that attorneys will be able to explain the decisions made by the computer, since they worked to train the computer algorithms. This can satisfy the obligation of competent representation, so long as things are properly done. But there is always the danger that things will not be properly done. Predictive Coding for Dummies (p. 11) goes on to say:

Understanding how to use predictive coding tools properly is critical for several reasons. First, predictive coding is relatively new to the legal field and introduces additional complexity to the eDiscovery process. Second, many different predictive coding solutions are available on the market that vary in quality and approach. Third, even though predictive coding solutions can be difficult to use, clear instructions and training are often lacking, which can increase the risk of error. These and other factors have combined to create confusion about the proper methodology for using predictive coding tools.

The message is clear: A firm that uses predictive coding cannot rely on it as a black box that gives right answers at all times. Not all providers are equal. There must be a procurement process that evaluates and selects an appropriately qualified provider.

Competent representation includes understanding and monitoring the provider’s work. If that does not happen, the law firm may be at risk.

Due to the growth in outsourcing, in 2008 the ABA Standing Committee on Ethics and Professional Responsibility issued an opinion to provide ethical guidance to lawyers about how to outsource in a manner that is consistent with the profession’s core values. State and local bar associations have also offered guidance in this area.

In August 2012, the ABA Commission on Ethics 20/20 concluded that outsourcing did not require changes to the Model Rules of Professional Conduct. However, it did propose new Comments to identify the factors that lawyers need to consider when retaining outside lawyers (Model Rule 1.1) and non-lawyers (Model Rule 5.3) to assist on a client’s matter. The Commission also proposed a new sentence (for Comment 1 on Model Rule 5.5) to clarify that lawyers cannot engage in outsourcing if it would facilitate the unauthorized practice of law.

Like many obligations described in the Model Rules, these proposals were intended to be “rules of reason” and were not intended to preclude consideration of broader legal concerns, such as malpractice and tort liability. But they did reflect the fact that new trends in outsourcing place new demands on the supervising lawyers.

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


July 20, 2016

Using outsourcing to reduce legal costs (Part 1 of 2)

By Jim Hassett, Mike Egnatchik, and Jonathan Groner

At a time when clients are demanding to pay less for legal services, it is easy to see the benefit of getting work done for lower hourly rates. Law firms and their clients are looking at each step in legal processes and asking the question, “Can I hire somebody else to do this step at a lower cost, or do it better, or do both?”

Some types of legal work are relatively easy to outsource. Here’s how Pat Lamb has explained the underlying rationale:

The four-buckets rule—developed by Jeffrey Carr…—is that that legal work fits into one of four buckets: process, content, advocacy and counseling. The Carr corollary is that general counsel are willing to pay generously for advocacy and counseling, but believe process and content should be free, or at least much less expensive, while law firms make the bulk of their revenue from the process and content buckets.

In one widely quoted discussion of outsourcing, Legal OnRamp founder Paul Lippe argued that about 25% of all legal work falls into Carr’s process bucket:

Moving information from one place to another to create legal work product, typically either generating or analyzing contracts, or working through discovery-based work in litigation or investigation…. Process work will continue to grow, but it will increasingly be managed… with a combination of lower-cost people, process and technology.

Lippe went on to note that “large law firms charge from $150/hour (paralegal) to $400/hour (mid-level associate) for process work.” He then listed these lower cost alternatives:

  • “In-house teams can execute process work for $100-200/hour, and much less if they organize for it as Cisco
  • Non-traditional providers like Axiom charge perhaps $125-250/hour for process work, but are still often advantageous for clients, because they represent a variable, not fixed, cost, and don’t require supervision.
  • Legal process outsourcers (LPOs) can deliver process work (including onshore lawyers, technology and process) for around $60/hour with predictable quality, integrated with legal departments and with formal methods for delivering and ensuring quality.
  • Law firms have started to create their own ‘captive’ LPOs, like Orrick in Wheeling, W.Va., Wilmer in Dayton, Ohio, Allen & Overy in Belfast and Baker & McKenzie in Manila.”

In his book Tomorrow’s Lawyers: An Introduction to Your Future (p.33), Richard Susskind takes this much further:

In the past, when confronted with a legal job, a client had a single choice: undertake it internally or pass it out to an external law firm (or perhaps a blend of the two). The legal world has now changed, so that new alternative sources of legal service are now available. I have identified 15 ways of sourcing legal work.

The key point here is that the identification and management of outsourcing alternatives will become an important task for firms that want to compete in the new normal.

In addition to outsourcing some elements of the work that lawyers do, law firms are also beginning to outsource many back office functions that don’t directly involve the practice of law (such as their IT help desks and elements of their marketing departments) and that involve the practice of law only indirectly (such as conflicts-checking functions).. Outsourcing of these functions can reduce costs significantly and help make firms competitive.

“What has caused this situation,” said Brad Christmas, a co-founder of nSource, a Chicago-based outsourcing consulting firm, “is the fall-off in demand for legal services – the dramatic change in how legal services are being priced and purchased.”

“All the sins of inefficiency that were covered up in the past, when law firms were riding high, are becoming exposed,” said Christmas. “Unless you are truly a premier law firm, you are fighting with many other firms over a diminishing body of legal work. The result is intense pressure to reduce prices and to keep expenses down.  And not all expenses can be kept down. There has been a constant increase in the cost of top legal talent, and firms certainly don’t want to start paying their partners less, so there are not many easy choices left.  Firms have to run their business more efficiently.”

Enter outsourcing consultants such as nSource, who describe their role as advising law firms about how to cut costs and become more competitive in the same way that consulting firms like Accenture advise corporations on how to become more efficient. In fact, they suggest to law firms many of the same cost-saving techniques that corporate America has used for years. nSource was founded in 2012, when it became clear that the new legal economy was here to stay.  It has since grown rapidly by advising major law firms on how to outsource a wide variety of their functions and on actually hiring people to perform those functions in off-site offices.

Law firms, Christmas said, “are starting slowly and gradually” to outsource many functions.  “These changes particularly affect any lower-skill, routine, rote functions that a law firm may be performing.  As to what is considered ‘routine,’ the bar keeps moving up. When e-discovery first became a major need, law firms responded by hiring lots of staff attorneys. But later, many corporate GCs took control of that function and told law firms they wouldn’t be paying for that many staff attorneys. And advances in e-discovery are gradually reducing the need to have human beings doing much of this work.”

One good example of low level work being outsourced is the information technology help desk function. A recent college graduate – not even a trained computer analyst – can easily be trained to solve the technical computer problems of most law firm attorneys and staff. And they don’t need to work on site; they can work anywhere, as long as they are connected by phone and email to the firm’s worldwide offices. So the law firm will place these people in remote offices where costs of living and wages are lower.

“The business approach for outsourcing low skill tasks is similar to the military,” Christmas summed it up. “You find an intelligent young person. You train him or her, and they do the job very well at a low cost for two or three years. Then they move on, and you hire someone else.”

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