It is being discussed for some time that things should be done differently in the legal profession. But why does this actually need to happen? In this article, we look at Legal Project Management (LPM) from a business and managerial point of view. How does LPM improve the processes between client and lawyer and how do they both benefit from LPM.
In general, there is no client matter that is not being managed. Nevertheless, there are many improvements possible in the management workflow and approach (upfront, during and after). Training of competencies comes to mind, but also instruments such as planning models and reports on execution. The article starts with a short explanation about Legal Project Management.
LPM: Making explicit what was implicit before
LPM is the structured preparation, execution, and evaluation of a matter based on the clients' requirements. The concept provides tools for planning, the offer and the execution of the assignment. After the presentation and client acceptance, the case matter is executed according to the guidelines that are agreed upon in advance. LPM provides tools for reporting deviations and making adjustments in cooperation with the client. When necessary, modifications can be made subsequently.
The next important step, after completion of the case or project, is the evaluation. The lessons learned can be used in order to implement improvements in the working process. This is represented schematically in the figure below. The depth is dependent on the size, complexity, and risks of the matter. LPM is a means, a specific rational approach and not a target. In a lot of cases, project leadership traditionally lies with the responsible lawyer for the case, but there is an increasing understanding of the benefits of LPM and therefore the use of a dedicated or specialized Legal Project Manager.
In this phase, the lawyer examines the assignment of the client and tries to get a clear understanding of what needs to be solved from the client's point of view. Then, there is an extensive inquiry regarding the target that the client wants to reach. By means of illustration: a dismissal for a minor offense can be an unwinnable case, but if the client wants to set an example within his company, this is another case and not a usual dismissal case.
During preparation, the lawyer makes the following points explicit:
The problem: First of all, the question of the client is clearly formulated. In other words: the problem is defined. At this point, the lawyer and client also define the moment the client will receive substantive advice about the case.
The result: This is a clear description by the lawyer of what the client actually wants as the outcome of the assignment. So not the client but the lawyer describes this as accurately as possible in a way the client understands it.
Form: In what way does the client want to receive the progress report and advice from the lawyer? Must it be elaborate advice or a simple email? Does the client prefer working sessions with the legal team or only the responsible lawyer?
Quality: Does the client want outlined advice or is it required to go to great lengths legally? Do we sue all the way?
Lead times and phases: Through the description of the lead times and the various phases of the case, the lawyer gives the client insights into the steps to be taken and the time frames in which the phases and steps can be realized. This way, the lawyer allows the client to see in advance where in the process decisions need to be made. For example: After the preliminary investigation, we sue or settle?
Responsibilities: Who is responsible for what part of the work in the matter?
Risks: By naming the risks in the initial assignment, the lawyer shows where possible setbacks might be foreseen in the process, such as exceeding the time frames. Important to know and communicate is that in this stage, the lawyer has not had any deep insight into the case yet. This also means that no overview of the opportunities and threats of the case can be given yet. It is therefore important to state an explicit reservation. It is important to clearly describe whether and how the threats are included in the stated price. This reservation also stands for issues that arise from fact-finding during the case. If this is not the case, then the consequences thereof should be clearly described.
Price and pricing models: In this part of the assignment and its confirmation, the lawyer should clearly state what is included in the price and also what is not! Under which conditions is extra (not foreseen) work calculated? In the end, the wishes of the client concerning price (un)certainty are taken into account and determines the offered fee model.
The continuum of AFAs provides an overview of established models. You can find a manageable model per phase here. The intention is that everything is combined in a clear and transparent confirmation of assignment. The client is explicitly asked to accept this and the lawyer explicitly confirms it. In this way, the project leader of the case knows whether the expectations are the same on both sides. LPM is applicable for large as well as small organizations. The project leader at a smaller organization is the lawyer himself. If a worked-out approach and issuance of an overall price are not possible during the phase of acceptance, it is it is important to explain how and when this insight will be available (e.g. in a dedicated meeting with the client).
During execution, work is done within the frameworks agreed upon in the preparation phase. In the meantime, the progress of the substance is measured in figures and made transparent in clear reports. The limits of the matter are clear for both parties because there is a well-defined or capped budget; the same goes for the time frame and the available capacity. In the preparation phase, it has already been defined where the focus lies. Divergences that come up when handling the substance of the case are naturally discussed with the client and some adjustments are made where necessary. There is a clear picture of the scope of the case. For additional work outside the scope of what has been agreed upon, a solution is defined in cooperation with the client (postponement, additional budget, etc.). At the end of handling the case, it is assessed whether what was agreed upon in the preparation phase, has been delivered.
After completion, an evaluation takes place and lessons learned are used in order to fur-
ther improve processes and the interaction
with the client for follow-up assignments.
LPM is not a target in itself but rather an instrument for better preparing and managing matters. Use of LPM is, therefore, dependent upon the size and risks of the case.
A large case (dossier) may require thorough preparation and planning. Project leadership potentially is given to a specialized project leader. For smaller cases, it can be much more limited. In this case, the following 5 questions may already be enough, followed by a written confirmation:
What is the required final outcome?
When must it be ready?
Is the following approach accepted?
I estimate that it will take X time against the Y price. Is this acceptable?
Does the client agree to the assignment?
And what do we solve like this?
Procurement of legal services has become considerably more professional in recent years; the expectation is that this professionalization will further increase.
International research of Buying Legal indicates that in 39% of procurement cases, the Procurement department of the company is involved to a larger or smaller extent: http://www.buyinglegal.com
Forward-thinking clients more frequently specify the framework within which a case must be budgeted and phased. They furthermore impose requirements regarding the planning, reporting, and management of the case.
But there is more: Client wishes are often named in the widely available literature. These wishes are outlined in the following chapters:
Value and efficiency
Understanding of the business of the client
Alignment of interests for client and firm (client/legal department)
Surely, when the client asks for other pricing models, the risk of extra work shifts to the law firm without notice. Management and improvement of profit margins are, therefore, handled as the last benefit of LPM.
Value and efficiency
The best discount a firm can offer the client is to stop doing work the client did not ask for. This sounds common, but during the client's search for the lowest hourly rate, he does not always end up with the firm that is the best match looking at the required experience and expertise.
In a nutshell: An experienced lawyer or firm may have a higher rate but can do the job in less time. The overall price (and time frame) of the case (dossier) is lower and the quality higher (compared to the time frame). More on this in my earlier article in this magazine: "A low hourly rate is not always the cheapest solution”.
After ending up with the right party, the delivery of value starts with determining what the client really wants. LPM provides this with a clear project description (scope) for the client in the preparation phase and by making an estimate of the phases and activities, as therefore a good planning. In this phase, it is especially about clarifying why the client started this case and who will do what, and when.
Based on the requested or agreed pricing model, a calculation can be made. Beware: with the usual hours x rate model, it is important for the client that the lawyer works as efficiently as possible. In alternative pricing models, such as Fixed or Capped Price, it is important for the firm itself to realize the agreed-upon results in the least time possible. After all, the firm pays for extra hours. After preparation, the framework in which the case must be executed is established. LPM provides tools for guiding the execution along these lines. Things that are not included and or described in the scope of the project are not done or done only after consulting the client. There is a trade-off between usefulness and necessity. It is, of course, also discussed and clear who will pay for possible the extra hours.
In a long journey, it is more likely that we will reach the destination quickly when we defined the route in advance. The same goes for projects. By determining phases, scenarios, specific activities, and the people involved, the probability that the lawyer and his client have the same view of the project increases exponentially. By coordinating expectations about these steps, the expectations of client and firm are aligned with each other. By talking in advance about uncertainties in the case, possible obstacles on the road also become clear in advance. This means that measures can be determined upfront. In a "start-up meeting", plans and division of tasks are discussed. It is then more clear to everybody what is expected of him or her.
Frequently we notice when drafting the final invoice that the estimate of the quotation was too low. More and more often, the client requires that the firm adheres to the initially declared price estimate, even though it is mentioned in the Terms and Conditions that the actually spent time is charged. Too often when the work is finished, more time is spent than estimated upfront. But due to the often to generic project definition, the client is not aware of this increase in time. It is therefore important for all parties to agree with a transparent understandable project description, where it is made clear which things must be realized by whom and within which time frames, but also what is NOT included in the assignment!
During the execution of the work, the firm needs to inform the client on a regular base about the progress of the case, discussing the plausibility of scenarios in the case, and explaining consequences of choices. This way, there is no room for surprises, and counteractions, adjustments or mitigation can start in time.
The further the case proceeds, the better the next phases can be identified and estimated. There is more information available and uncertainties will be reduced. The following phases, that possibly were hard to describe in detail during the start op the project, are now easier to describe and can be discussed with the client.
The client expects to be -and stay- informed regarding the progress of the case; not only about the content but also about the financial consequences. At the start, it is agreed upon with the client what will be communicated about the most important developments and divergences within the case, how frequently and with whom. In the framework of LPM, communication with all players who are working on the case is key (see orange line in image, page 32). At the start, the activities to be carried out, the goals to be attained, and the framework within which the project must be executed are agreed upon with the client. This is established in an confirmation of assignment or in the case project plan.
A method for the communication during execution is the progress report. This report is sent to the responsible and accountable lawyer on a weekly, preferably, daily available. This report states who have worked on the case and what divergences there are with respect to earlier estimates or budgets. It is a prerequisite that hours worked are filled in daily. Non planned contributions or more time spent are visible in an early stage (instead of when drafting the final invoice). The remaining workload, the number of expected actual hours (fewer v.s. more) becomes clear because of the increased transparency. The progress report becomes a tool to increase grip on the progress of the case and offers and makes clear what to discuss with the client.
The realization of milestones and progress of the project plan is easier to detect because steps are transparent and agreed upon. The uncertainties that have been recognized at the start are replaced by reality. As soon as an 'uncertainty' changes in a 'certainty' it is time to inform the client and when necessary discuss the next steps.
As the plan, steps, delivery, execution, and result are discussed at the beginning of the case it is also very important the review the process when the case is closed. It's very important that the lawyer and client talk about their expectations and the result before the case is definitely closed.
Understanding the business of the client
By clearly determining (during the intake) why there is a case, the underlying facts of the case and how to solve the it, the probability that the process better corresponds with the client requirements will increase. The intake of a case is, therefore, not only about in-depth legal facts but also about the framework in which the assignment is being carried out. It is defining for delivery of the end product. Questions as: do we deliver an academically solid report or does the client want two clear PowerPoint sheets in order to explain or convince his not legally trained Supervisory Board, are very important. Mind that the legal issues are part of the company environment and culture. And, the matter may be just a small part of a bigger company problem that has to be solved. This also determines the form in which the final product must be delivered. Therefore this must be coordinated with the receiving party, the client.
Alignment of interests
When establishing the assignment, financial interests partly play a role and alternative pricing models are more and more requested. A price estimate is more often an implicit Price Cap. It is therefore important to figure out what exactly is expected by the client. If the client agrees with an hours x rate model, the lawyer has to inform him about the risk of exceedances otherwise this can become a risk the lawyer takes. The risk shifts to the firm when models such as Fixed, Capped or Value Pricing are agreed upon.
The interests’ trade-off can go two ways:
When a firm has a stronger position, then the client will weigh the value against the price of the case. If it is the other way around, the firm must ask itself whether it is in the position to finish the job in a profitable way, price pressure taken into account.
Increasing the profit margin
There are not only reactive arguments to be made about managing a case efficiently. It can also have a positive effect on the profitability of a case. By restraining the hours spent, or - in other words - by working as efficiently as possible on a Fixed Price dossier, the overall price to declare remains the same even though fewer hours are spent. This means that the profit margin of the case is increased because the costs are lower than what was estimated in the quotation. These hours can be used in alternative ways, for example in another paid case. But keep in mind that the quality of the case involvement and work at hand must be maintained.
With repetitive activities, the project management structure can consist of models and checklists. Drawing up the models for the first case takes time. But the appreciation for the first and last case remains identical in the eyes of the client.
After developing the models, work can be subsequently done in accordance with the standardized models and only case-specific adjustments need to be implemented.
Value Pricing also offers openings here. The value of a case in the eyes of the client is sometimes much higher than hours x rate. A specialist can add much value to the client in less time. This may justify a higher Fixed Price in order to earn back an earlier investment. Clients recognize how LPM contributes to a better service and budgets are more frequently allocated to LPM activities. This means the time for managing a case is more frequently becoming billable time.
In a market where the client becomes more critical, and more billable work is expected to be done for a lower price, LPM is a sound alternative. LPM offers the tools for aligning expectations in time, money, and quality and the use of frameworks. Where fewer hours are spent - not asked for by the client - the quality of the work is not reduced and is possibly even increased by avoiding unnecessary additions. The hours not spent can lower the price, thus taking into consideration the requirements of the client. However, better coordination serves more goals: The predictability of the case increases, the communication with the client becomes better, the lawyer responsible for the case has a better grip on the progress, and LPM activities are more and more remunerated due to a willingness to allocate budget for this type of work.
About the Hans Schuurman
Hans is consultant and interim CFO and is specialized in process and profit improvement of law firms.
Hans is experienced in leading large improvement projects. He regularly speaks and publishes about the profit model of law firms and the new developments in the legal sector.
As founder of law4ce.com, Hans and his partners improve the commercial, administrative and management processes of law firms.