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2 posts from December 2019

December 18, 2019

Legal Project Management: The Year-In-Review (Part 1 of 2)

In 2019, three major papers were published summarizing data collected from over 500 law firms and 250 law departments: 

  1. Altman Weil’s Law Firms in Transition survey (“LFiT”)
  2. Altman Weil’s Chief Legal Officer survey (“CLO”)
  3. The CITI Client Advisory report (“CITI”)

Based upon these reports, and also upon the multiple webinars, interviews, and informal discussions that we held with LPM decision-makers in 2019, we believe that law firm leaders should concentrate on five key issues to improve profitability, as discussed below.  One of our major takeaways from 2019 is that, if a law firm aggressively seeks to implement an LPM program and works to change lawyer behavior, it can make great strides towards resolving the challenges described in this blog series.

(1) For non-hourly alternative fee arrangements (AFAs), increase efficiency to reduce costs

It’s difficult to obtain unanimous agreement on anything, particularly among law firm leaders.  But not a single leader predicted that there would be a decline in the use of AFAs in 2020 (p. 8, CITI).  A huge majority (87%) predicted that the use of AFAs will increase in 2020, while 13% said that the use of AFAs will remain about the same (p. 8, CITI). 

From the client perspective, CLOs consistently report that one of the best management techniques for improving outside counsel performance is to negotiate fixed, capped, or alternative fees.  Over 75% of CLOs say that the use of AFAs significantly improves outside counsel performance (p. 47, CLO).  This too suggests that the use of AFAs will increase in 2020.

But any firm that has ever offered a fixed fee knows how easy it is to lose money on them.  The key to maintaining financial performance is to increase efficiency, so that the work can be completed at or below what it would have cost at standard hourly rates.  And this in turn will require significant improvements in LPM at most firms.

(2) To reduce discounting, law firms must accelerate the use of LPM

We were floored when we read the statistics on the percentage of legal fees that are derived from discounted hourly rates.  “Nearly one in five law firms (18%) receive 50% or more of their legal fees from discounted hourly rates” (p. 27, LFiT) [emphasis added].

Altogether, just over 75% of law firms receive a substantial portion (11% or more) of their legal fees from discounted hourly rates.  A paltry 2% of firms receive the full amount that their lawyers charge.  Amazingly, 3% of law firms do not collect this data and have no idea what percentage of their legal fees are derived from discounted hourly rates (p. 27, LFiT). 

Large firms offer more discounting than smaller firms.  The median for firms with 250 lawyers or more is that 41% to 50% of legal fees are derived from discounted hourly rates, while the median for firms under 250 lawyers is 11% to 20% (p. 27, LFiT). 

These results are validated by CLOs.  The number one strategy for controlling law department costs (at 57%) is to receive reductions on hourly rates from outside counsel (p. 26, CLO).

If law firms want to reduce discounting, their lawyers must embrace LPM.  The more efficient a lawyer or legal team becomes, the more valuable their time becomes (when compared to lawyers at other firms), which reduces discounting.  Moreover, the LPM tactic of properly delegating work ensures that the right person is handling the work, which again establishes efficiency and reduces discounting.  And even when clients are simply unwilling to pay standard hourly rates, LPM allows firms to increase profitability by embracing fixed fee work and using LPM tactics to ensure that matters are managed profitably. 

(3) Use LPM to better utilize financial data and increase profitability

Survey results confirm that most law firms are investing time and money obtaining better financial data.  For example, 52% of law firms have invested money to develop data on the cost of services sold, though only about one-third of those firms report any clear corresponding improvement in performance (p. iv, LFiT).  The data shows that merely gathering data does not necessarily translate into improved performance.  Instead, as Altman Weil notes: “Real achievements can and must be made in using cost data and project management techniques to improve matter profitability.” (p. iv, LFiT) [emphasis added]. 

One project management technique that could improve matter profitability is to use collected profitability data in conjunction with the firm’s LPM efforts.  For example, only 55% of law firms that collect profitability data currently use that data to manage their practice groups (p. v, LFiT).  If profitability data is readily available, the natural next step is to use that data to actively manage practice groups in conjunction with LPM efforts.    

(4) To increase new business, law firms must differentiate themselves

Anyone with a marketing background can attest to the importance of differentiation in the marketplace when selling goods and services.  Differentiation is what allows one law firm to stand out from another. But nearly half of law firm leaders cannot point to a single compelling differentiator that significantly elevates their firm above others (p. iii, LFiT).  

Using the old standby “our lawyers are better than theirs” doesn’t cut it anymore.  True differentiation allows one law firm to contrast its services with competing services and emphasize the unique aspects that make its services superior. As Altman Weil writes: “Establishing a credible means of differentiation should be a key area of attention for all firms and each group within a firm” (p. iii, LFiT).  Using the LPM tactic of client communication (e.g., conducting “lessons learned” reviews with clients) may be a good place to start if a law firm wants to identify the ways in which it separates itself from other firms.

(5) Be realistic about how clients perceive the quality of your firm’s services

When it comes to the delivery of client service, perception often does not match reality.  Firms tend to overestimate the quality of their services.

53% of law firm leaders say that their firms are significantly ahead of the competition in terms of delivering client service (p. iii, LFiT).  In summarizing this data, Altman Weil notes: “It is mathematically impossible and logically inconsistent for most firms to lead the pack on these or any other factors.  If everyone’s ahead, there’s no pack to lead” (p. iii, LFiT).

Of course, overestimating the quality of client service likely means that many firms do not take appropriate action to improve the delivery of client service when, in fact, they should.  The tendency for law firm leaders to inaccurately assess client service is highly significant because unsatisfactory client service has consistently been one of the top reasons that clients shift a large portfolio of work ($50,000 or more) from one law firm to another (p. 50, CLO).

*****

In Part 2, we will examine the tactics that law firms use to become more efficient and why the LPM change process has been so slow at some firms.

December 04, 2019

Case study: Building a successful LPM initiative with online tools (Part 2 of 2)

By Tim Batdorf and Jim Hassett

This post concludes our interview with Steve Flaks, the Director of Pricing & Project Management, and Sarah Alford, Manager of Pricing and Project Management at Saul Ewing Arnstein & Lehr.

Q:  In Part 1 of this interview, you mentioned a pilot test program coaching six lawyers in LPM.  Did that initial success help lead to the decision to purchase a license to make our LPM tools available to every lawyer in your firm?

A:  Yes.  We had seen how the tools and templates could be used to speed the implementation of LPM, and we wanted to have them available for all 400 of our lawyers.  Our IT department created an LPM page on our intranet that is very slick and intuitive to use.  Lawyers can see all the different tools and easily identify the ones they need and download them, anytime anywhere.

I don't want to lie to myself and assume that lawyers are spontaneously going to go there all the time.  But it makes it very easy for us to provide each lawyer with the exact tool they need, whether it’s for defining scope, planning a budget, improving client communication, or increasing efficiency some other way.  This LPM home page, backed by over 150 templates, also gives us more presence and credibility within the firm. 

Q:  And recently you both decided to go one step further by enrolling in our Master Certified LPM Coach™ Program.

A:  That’s right.  We wanted to maximize the effects of our own coaching.   One of the challenges in coaching lawyers is quickly being able to identify and access the right documents at the right time.  We both have a high level of understanding of the enormous amount of information that's out there, but we need to get more intimately familiar with the details so that we can access it on demand.

We began by studying your LPM Coaching Guide which is only available to people who enroll in the certification program and to LegalBizDev employees.  In accordance with this program, we’ve been conducting role plays of typical LPM coaching sessions and are now applying our learning by coaching lawyers at our firm.  An LPM expert from LegalBizDev listens to our coaching sessions and then later provides feedback to help us fine-tune our LPM coaching approach.

Q:  I know that you are both in the middle of that certification program, but have you seen any successes yet?

A:  Yes, we have.  The attorney that I (Steve) have been coaching has bought into the concepts, and he has invited us to his Public Finance practice group meeting to discuss LPM. A lot of their work is fixed fee, and now we're starting to formulate how to use task codes to plan and track their budgets.  This will make it easier for everyone to be aware of the run rates and how we are tracking against the budget, so each lawyer on the team can see how they’re doing against the plan. In the future, we expect that much more budget information will be shared with the client so they, too, can track progress.

In addition, when we complete the program, it will be helpful to have the certification behind our names.  It helps the entire effort have more credibility, and it contributes to LPM being woven into the fabric of the firm.

Q:  What else are you doing to make attorneys more aware of your efforts?

A:  Probably the most effective communication was a roadshow we conducted last year in which we went to each of our offices in a kind of educational tour focused on “what is LPM?” and “what does it mean to you?”  We put together a PowerPoint deck that included screenshots of our web page, including some of our favorite checklists.  Then we logged into a live connection and navigated around. 

It was so well received that we are now considering a follow-up roadshow with fresh content.  But before we do, we need to improve the way we document and communicate our own LPM wins.  We’ve also been talking about maybe sending out a quarterly LPM wins report.  

Q:  Have you thought of any other ways to keep LPM and your role top of mind on a regular basis?

A:  I really like the idea of “LPM tips of the month,” because it's an excuse to send out a message and stay in touch and remind them of LPM.  Of course, we started with the 12 tips that are included with the LegalBizDev license, each of which illustrates how a particular template could be useful.  When necessary, we customize them to fit our audience and add new ones.

Q:  To date, do you think LPM has helped your firm develop new business?

A:  Absolutely.  The most obvious impact on new business is when LPM increases client satisfaction.  This in turn increases the probability of new business.  For both existing clients and new ones, we also work closely with the marketing business development teams on RFP responses.   We are seeing a lot more mention of LPM -- project management, budgeting, monitoring, all that kind of stuff -- as requirements in RFPs.  So, in many of our responses, we are talking more and more comprehensively about our LPM team, who we are, what we do, and how we can help.  It is no secret that many law firm RFP responses just give lip service to LPM.  But we are actually doing it, and we have the examples and the infrastructure to back it up.

Q:  Finally, do you have any advice for firms that are just beginning to implement LPM?

A:  Set realistic expectations and get the buy-in of senior management.  Start by finding just a handful of attorneys that you can use as your cheerleaders, attorneys that you think are in the right practice areas and have the right sort of influence within the firm. 

But don’t expect huge results in a very short period of time.  Be patient, and don’t try to do too much too soon.  And when you get good results, don’t be shy about shouting them from the rooftops.