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2 posts from January 2019

January 23, 2019

Tracking and Controlling Cost (Part 1 of 2)

By Steve Barrett, Jim Hassett, and Tim Batdorf

 

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 article and start talking to your finance or practice development staff about the tools and techniques that are currently available and what is planned for the future.

This article provides a brief overview of three major steps for tracking and controlling costs.  Steps 1 and 2 of this process are discussed in this post.  Step 3 will be discussed in our next blog post on Wednesday, February 6, 2019.

Step 1: Define a baseline budget before the matter begins

A number of the tools and templates in our Legal Project Management Quick Reference Guide are  devoted to this first obvious point. You can’t control costs if you have no idea what the total cost should be at the end of a matter.

For important matters, you will ideally develop what we called a “high detail” budget, 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. (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 even 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, we have probably seen the most change in the area of timekeeping practices. 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 paycheck. Another was to create a contest among administrative assistants, with cash rewards for those whose groups, including lawyers, 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.”

January 09, 2019

LPM success at Baker McKenzie (Part 2 of 2)

By Tim Batdorf and Jim Hassett

Baker McKenzie is one of the largest law firms in the world, with 78 offices in 46 countries.  This interview with Kevin O’Sullivan, Baker McKenzie’s Head of Legal Project Management in London, was conducted by LegalBizDev CEO Tim Batdorf. 

 

LegalBizDev:  Do your project managers get involved in coaching lawyers?

O’Sullivan:  Yes, very much so.  Our process includes both coaching and delivering on time-consuming tasks such as running the resourcing, the management reporting, and the team task management.

LegalBizDev:  How are your project managers organized?

O’Sullivan: They are actually assigned to three different types of roles:  practice-group-facing, client-facing, and technical support.  The technical support team is a new concept for us and a recognition that increasingly many of our interventions involve innovative use of technical solutions.  We have therefore created staff roles to focus on the deployment of technology.  This enables them to become experts in numerous emerging technologies and in designing good process solutions for given challenges.

The reason that some assignments are practice-group-facing is that within a law firm there are obviously different mandates with different requirements, such as trademarking vs large M&A transactions, or contentious filings.  There are different people working within those practice groups who we need to take on a change-management journey.  And therefore, by being present, by being an established member of that team, we’re able to get more hooks in and suggest ways to approach something.  This makes it easier to disrupt some of their current processes and drive a greater understanding of the way in which LPM can improve the efficiency of their approach.

Practice-group-facing project managers work in local offices with partners, senior associates, trainees, etc. – all the way through the team – to look at matters where there is significant complexity, such as multi-jurisdictional issues or complex interdependent processes.

These project managers nurture the team members.  The word I tend to use is they’re ‘harvesting’ work from those practice groups.  Project managers are embedding themselves to remind team members: ‘Don’t just plan to perform this matter in the same way you did on previous matters.  Let’s have a think about whether we can approach it in a different way.’  These project managers build up knowledge, both of our people internally and also, to some extent, of the clients with whom we regularly work.    

The motivations for having a project manager involved vary.  From the client’s perspective it might be that the client has stepped in and said, ‘We would really like to see the efficiency brought by the presence of a project manager on this matter.’  It may also come from the internal team saying, ‘This is a significant risk to us because we are investing heavily in this piece of work.  We’ve got a fixed-fee arrangement and we need to make sure that we’re controlling and managing the matter to give us the best chance of success.’

LegalBizDev:  What about client-facing project managers?

O’Sullivan:  The client-facing project managers are not wedded to a single practice group.  One day they could be drafted into the contentious area of the business, and when that piece of work comes to an end, they would move into a different area.

In cases where there is a large team, high client expectations, or just a complex new matter coming on board, we would often have project managers on the team that help deliver on that matter.  They embed themselves within a working team and lead on the process aspects of that matter.

Client-facing project managers are also brought in if we have developed processes which can increase efficiency in other matters.  Since there is already a proven way of working, we don’t really need to design it as dramatically as the first time we did that kind of work with that client. 

Another reason to add a project manager to a team is the resourcing consideration.  This situation arises if a team on the ground is managing a number of matters and a number of different people on a day-to-day basis.  This particularly applies if there is a very large piece of work, very complex, and perhaps globally reaching.  Then we can put in a member of the team who is able to be fully available to that project.

LegalBizDev:  The idea of having project managers working so directly with clients is an unusual one and quite interesting.  Could you sum up some of the benefits?

O’Sullivan:  The benefits fall into the areas of driving controls, visibility, and better communication.  On the client side, there’s also an element of transparency as well. 

If we look at the way many lawyers track financial information and communicate with clients traditionally, the approach has often been: ‘We have finished the work, here’s the invoice, and by the way, we are overrun.’  But communication needs to be much more alive than that.  Our LPM initiatives have brought regular reporting.  But we’re not just providing a report.  If the number has been driven up beyond where we expected, we’re deeply involved in looking in and analyzing why, and doing something about it.

LegalBizDev:  People often ask us how many project managers they should hire per 100 lawyers.  How many do you have?

O’Sullivan:  In the London office, our current ratio is about 3 project managers per 100 lawyers and equivalent professionals.  More specifically, we have 14 project managers serving 440 lawyers and equivalent professionals.  Remember that in many cases these are billable.  Our goal is always to assure that our total LPM team is not an overhead expense, but actually increases the bottom line.

We don't believe that we have yet achieved the critical mass within London.  Our focus is to ensure that we not only grow the team but also complement the managers with improved technology and supporting staff, including legal project coordinators.  We currently have 12 legal project coordinators in our local service center in Belfast, as well as other functional support teams in local offices and service centers.

LegalBizDev:  Given that Baker McKenzie has the resources of one of the largest law firms in the world, many people who are reading this may wonder what smaller firms should do.  Do you have any advice for them?

O’Sullivan:  My best advice for any size firm is don’t underestimate how much of a change program LPM requires.  This is a profession that has long operated in a certain way.  Lawyers continue to be trained to operate in this way, and therefore will naturally default to it until they’ve been shown the benefits of the LPM approach. Those seeking quick wins will likely find them in improving collaborative working, task delegation, visible matter reporting, and communication.

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