Home -> Law Blog Directory -> Legal Marketing & PR Blogs -> Legal Business Development

Legal Marketing & PR

: Legal Business Development

Project management and alternative fees (Part 1 of 3)

By Jim Hassett

After I reviewed the results of our survey of alternative fees, I came to the conclusion that the single most important factor affecting profitability for alternative fee projects will be project management training.  I believe this so strongly that my company has made a significant investment in developing project management workshops and webinars that are specifically designed for lawyers.  (At noon today, I will teach a project management workshop to a group of senior partners at a 200 lawyer firm in the Midwest.)  Today?s post is the first of three based on what our survey report says about project management.

When law firms decide to increase efficiency, one of the first things they must do is to improve the way legal matters are managed.  Here?s what several decision makers said about the management process:

We need to be better managers of what we do for clients.  If law firms do not take the lead in getting clear agreements with clients about the work we are expected to do, what the client will be doing, and then manage our resources carefully to meet those agreements, we will be doing the same work for a lot less net income.

For most of the past decade, I was a senior executive at a publicly-traded real estate company, and I like to say that the two most important people we had in the company were the estimator and the project manager. Law firms historically have had no one play either of those roles. It?s very dangerous to move into a world of fixed fees if you don?t have somebody who?s capable of estimating and you don?t have somebody who?s capable of project managing it.

Partnering with the client is the key; that?s what makes it work, whether the fee arrangement is alternative or not. But when it is an alternative arrangement, [firms] particularly need to track our progress as we go and manage to the agreed arrangement, always with top-flight legal work as the standard.

But it is not easy to teach lawyers to be managers:

One skill that lawyers are way, way behind on is project management ? bidding, monitoring, and managing ? because they?ve never had to do it. It?s an untapped area, and they could learn a lot from going to work for a construction company for a while.

When you go to these other types of arrangements ? fixed fees, partial fixed fees, contingent fees, partial contingent fees ? it becomes imperative to keep track of [budgets].  [Lawyers] don?t know how to do that [and] they don?t want to do that. And truthfully, our systems make it hard to do that.

Lawyers are not known for being the greatest project management folks in the world.  If they are going to try alternative billing methods, they have to be able to deliver what they are offering.  This is a fundamental change in the industry, and lawyers will have to improve their project management skills in order to succeed in this area. 

It seems like a large number of lawyers do not know how to manage.  For the first x years of their existence, the more hours that got charged, the more money they made. And so they?ve never really had to manage [effectively].

It can be tough for some firms to do alternative billing, because they don?t know what they are going to do or are not willing to spend the time to plan it.  There?s a built-in bias against it because it goes against the normal course of the way they work.

When I first started working for this law firm, I was anxious to figure out how lawyers did these kinds of things.  I asked, ?What?s your methodology?? and they said, ?What?s a methodology??  The idea runs against lawyers? DNA.  They see every deal as customized and unique.

It really requires you to think about what you absolutely have to do at different stages of a matter and what you can defer without impairing the work you?re doing for the client.

For alternative billing to be successful for both the client and law firm, the partners have to re-think their approach and try to decide the most efficient way to approach matters.  For example, instead of sending an associate off to research 50 issues that could come up in a litigation, you might focus strictly on the small number of issues that are likely to be most important.

Lawyers have been trained to prepare for every eventuality, but with alternative fees they need to think more clearly about staffing, engaging with the client, and attending to billing in real time.

Law firms can learn a great deal from other professions:

Both law firms and clients have a lot to learn about how to make [alternative fees] work well. Other fields have used them and developed methodologies that work; lawyers should be willing to learn from them.  For example, in the world of construction, architects, engineers and contractors have been working on a fixed price basis for a long time. There is a body of learning about how to estimate, how to contract, how to define scope, how to manage changes, how to allocate risk, how to manage fee disputes, and [how to deal with] delays and changes in scope.  It could probably be adapted to the legal profession, without our having to go through the long history of disputes, litigation and losses that the construction industry did to get to their current state.

Some firms are taking the lead in developing this new body of knowledge:

We are incredibly focused on project management, and the client reception to this has been fabulous. They don?t [usually] hear law firms talk about project managing and putting tools in people?s hands. I do think that a movement towards alternative fees without a cultural shift, and putting tools in partners? hands to manage projects effectively will have dire economic consequences to law firms. It?s a lot easier to come up with an alternative fee than it is to teach somebody to project-manage.

This post was reproduced from The LegalBizDev Survey of Alternative Fees which may be purchased online for $395 per copy (with volume discounts available) or by calling (617) 217-2578.   

Full post as published by Legal Business Development on January 06, 2010 (boomark / email).