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Legal Project Management

Where the rubber meets the road
2/19/2013

Scott Preston & Ryan McClead

Legal Project Management (LPM) provides a framework of accountability, transparency, predictability and ultimately less cost. If you are interested in a more consistent, repeatable, and continually improving practice of law, LPM is for you.

Image [cc] – “Burning Rubber” – Lori Hersberger

Legal Project Management
Where the rubber meets the road
Table of Contents
Legal Project Management, why now? .......................................................................................... 1 The Tipping Point ............................................................................................................................ 2 Client Needs ................................................................................................................................ 2 Partner Concerns ......................................................................................................................... 3 Legal Project Management 1.0 ....................................................................................................... 4 Legal Project Management 2.0 ....................................................................................................... 6 Planning and Budgeting .............................................................................................................. 6 Execution ..................................................................................................................................... 7 Monitoring and Controlling ........................................................................................................ 7 Conclusion ....................................................................................................................................... 9

Legal Project Management, why now?
Project Management, which has been around since the 1950s, is defined on Wikipedia as “the discipline of planning, organizing, motivating, and controlling resources to achieve specific goals”. Lawyers have been performing these functions as they relate to delivering legal services since the beginning of the profession. They plan matters, delegate responsibilities, mentor their subordinates, and ensure that each legal project is completed in a manner that will please the client. A select few lawyers have used general-purpose project management software, such as Microsoft Project, to manage their matters for years, but most project management in the legal sphere is still performed by instinct. Attorneys rely on their vast experience to guide management decisions, which has always worked well. Or at least, has always worked "well enough". Unfortunately, the hourly billing model actively rewards inefficiency. If it takes fifteen hours to complete a task that should have taken five, then the inefficient lawyer has just tripled revenues. In such an environment even those attorneys that are inclined to actively manage their projects have no incentive to improve their management techniques and the profession as a whole has no impetus to evolve. We may have continued indefinitely down this path with attorneys managing projects "by ear" and raising their rates ten percent annually, but the economic downturn in 2008 provided a much needed wake up call to the industry. Over the previous decades many of our clients have begun to implement quality assurance and efficiency measures like Six Sigma and LEAN borrowed from manufacturing industries. When they began to feel the effects of the 2008 downturn, they started to assess their service providers just as they had themselves. They began to demand the same levels of quality, accountability, and efficiency from their legal service providers in the name of controlling costs. Many law firms responded in the only way they knew how: they discounted their services. They took a percentage off of their hourly rates; they wrote off expenses that they had traditionally recharged to the clients; they pretended that the task that had taken them fifteen hours to complete had only taken them five; they laid-off non-essential workers, then less-essential workers, and then, in some cases, attorneys. Five years later many firms still act as if the old way of doing things will return just as soon as the economy turns around. However, a recent report co-written by Citi Private Bank and Hildebrandt Consulting based on surveys conducted by Citibank and Thomson Reuters Peer Monitor states: … it is time to let go of any lingering notion that the industry will revert to the boom years before the Great Recession anytime soon. With profit growth and other financial indices reaching lower setpoints in the past four years, we anticipate that the current state of the industry will remain the norm for the foreseeable future.

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Gone are the days of one-line billing "for services rendered" and they are never likely to return. In order to survive in this new world law firms must be accountable to their clients, providing greater transparency, price predictability, and open communication. In this environment the 'ad hoc' project management that lawyers have done for years will no longer be sufficient. Practicing law in the "new normal" will require a mature and systematic approach to Legal Project Management (LPM).

The Tipping Point
There is no longer any doubt that the legal market has fundamentally changed in recent years. Every firm felt the weight of their clients’ demands and responded in whatever way they were able: cutting rates, cutting expenses, making promises, and often begging for work. We believe we, as an industry, have reached a tipping point where client demands for better price predictability, reduction of risk, better communications, and an overall transparency of service will require a systematic and consistent approach to providing legal services. Firms that choose to continue to rely only on customer loyalty and brand recognition will begin to lose out to those who open up the process to their clients and embrace the greater consistency and predictability of LPM. However, LPM is not simply a tool that improves the client experience. It can also ensure that partners’ needs are more consistently met as well. Partners are concerned with many of the same things they always have been: How to get new business?; How to make the client happy so they’ll return?; How to limit risk to themselves and the firm?; and ultimately, How to make a profit doing it? Legal Project Management addresses both client and partner needs.

Client Needs
Price predictability A fee schedule explaining when and how work will be billed, both as a function of time or hours, as well as cost or dollars The budgeted price, or the total cost to the client Openness provides a means to trust but verify what the law firm is doing Improved communications, including real time status reports

How LPM Can Help
Deliverable by: - developing a project plan - allocating resources to that plan - keeping the plan current - tracking and monitoring progress against the plan

Price certainty

Transparency

Communication

Deliverable by: - tracking and monitoring progress against the plan - sharing progress with the clients on a regular basis - controlling costs

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Partner Concerns
Getting Business Improved process and increased quality of service will increase partners’ ability to get business.

How LPM Can Help
Clients are asking for improved efficiency from law firms. - RFPs are asking about efficiency initiatives - RFPs specifically include questions about using project management - project management enables greater accountability Understanding the client’s main concerns (price, transparency and communication) and delivering on those points will go a long way in keeping clients satisfied. Performing an After Action Review is a good way to focus on areas of improvement from the client’s perspective. Partners who are able to provide a project plan, an accurate budget and an ability to deliver services on budget will gain the trust of their clients. Using a project management tool to actively manage a matter will provide greater control and understanding of the entire process of delivering legal services. Planning and budgeting will help the partner understand, at a high level, how profitable a new matter can be. Tracking efficiency and productivity as the project progresses will improve the likelihood of maximizing realization in the current project and improve the planning of future projects, thereby increasing efficiency (and profits).

Client Satisfaction

Partners want to make sure that the client is happy with the service they are receiving.

Return Business

Partners want to do everything they can to maximize the likelihood of working with the client in the future. Partners want to control and limit risk.

Outcome / Limiting Risk

Realization / Profit

Partners want to make sure they are making a profit on the work they and their teams are performing.

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Robert Brunson, a partner at Nelson Mullins who has been using Microsoft Project to manage complex litigation for more than ten years, provided his view on using Legal Project Management: “LPM provides a framework of accountability, transparency, predictability and ultimately less cost. By creating a plan at the outset, client and counsel are forced to consider the many different paths and outcomes of a particular piece of litigation, including consideration of staffing alternatives such as virtual law firms or offshoring in advance of the work, which could potentially lend itself to these alternative staffing options. This dialogue often leads to a better engagement by the client in important details early on, details that can be the seeds of unwanted surprises which so often frustrate clients and sour the professional relationship.” While the points illustrated above are obviously not the only points of concern between a partner and his or her client, they are central to every engagement and are the points most frequently discussed by General Counsel. Meeting the price is important, but more important is the opportunity to have meaningful discussions with a client about the progress of their matter. All of the points and discussions outlined above are inter-dependent and when done correctly lead to trust.

Legal Project Management 1.0
Even before the economic slump a handful of legal technology vendors recognized an opportunity to help firms better understand and budget for their non-hourly billing or Alternative Fee Arrangements (AFA). AFAs are not new to the legal industry; contingency and fixed fee pricing have been available for a long time, but in recent years there has been a significant increase in AFA requests from the client side. Corporations have begun to push back on the standard annual increase in lawyers' billing rates. They want not only better pricing, but better communication and a better understanding of the amount of time and effort spent completing individual tasks. Attentive vendors have started adding AFA planning and budgeting functionality to their existing software solutions, or in some cases writing new solutions from the ground up. These rudimentary systems have quickly garnered the label Legal Project Management software (LPM 1.0). While Project Management as a discipline has had nearly 60 years to mature and develop, the application of PM principles and techniques to the legal environment is still very much in its infancy. Traditional Project Management can be thought of as a stool resting on three iterative and overlapping developmental stages: Planning and Design, Execution, and Monitoring and

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Controlling. For our purposes in LPM we call the first stage Planning and Budgeting rather than Design. All attorneys believe that they execute, monitor, and control their projects already, but many will concede that they do not plan or budget adequately. Consequently, Planning and Budgeting is the clear low hanging fruit of LPM 1.0 and vendors have focused most of their efforts where they believe they can most easily gain a foothold. LPM 1.0 promises to provide firms with three new abilities: (1) The ability to create baseline preliminary project plans or templates; (2) the ability to create matter specific budgets based on prior client work that can be used to win new client work; and (3) the ability to compare alternative staffing scenarios, which will allow the firm to produce the same work product at a lower cost to the client while still making a profit for the firm. Unfortunately, most of these first generation LPM products struggle to balance the development of project plans that are detailed enough to create accurate budgets without being so complex that they slow the budgeting process to a crawl. Many of them have trouble modeling a firm's prior work to develop project plans for future work, because phase and task codes available from past matters are not accurately or consistently recorded. And while alternative staffing scenario analysis sometimes makes it possible to reduce the cost of services to the client, it does little to help the firm better understand the process or arrange their staffing levels over time. In contrast to the Project Management three-legged stool, LPM 1.0 is a one-legged stick chair. It can hold up as long as the project is otherwise perfectly balanced, but the slightest wobble sends the project swiftly to the ground. Legal projects are rarely so well balanced. The greatest plan and budget in the world is often out of date as soon as the matter begins. Attorneys must “work the plan” and adjust as they go. If they don’t actively manage and adjust resources throughout the course of a project, then successful completion of a matter or even successful achievement of today’s immediate goals may be nothing more than coincidence and will certainly not be easily repeatable. LPM 1.0 with it’s focus on Planning and Budgeting is a good and necessary step, but on its own it does nothing to reduce the risk of bad outcomes, cost overruns, time delays, or client dissatisfaction. Additionally, it does nothing to improve the firm’s efficiency, or to increase the transparency and quality of communication between the firm and the client. The next generation of Legal Project Management software (LPM 2.0) extends and expands on the Planning and Budgeting capabilities of earlier products, and it includes tools to help with Page 5

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the Execution and Monitoring and Controlling stages of Project Management. Personal beliefs to the contrary, most attorneys do not execute, monitor, or control their projects any better than they plan and budget for them. LPM 1.0, with its focus on Planning and Budgeting is a great introduction to the concepts of Project Management, but LPM 2.0 fills in the missing pieces.

Legal Project Management 2.0
Before we delve too deeply into the new aspects of LPM 2.0, it may be valuable to take a step back and explore the stage that LPM 1.0 attempts to address.

Planning and Budgeting
After a new legal project opportunity is defined, planning begins to determine the full scope of the project. This is done by defining the desired outcome for the project and developing a Work Breakdown Structure (WBS) that will ultimately lead to that desired outcome. The WBS defines any major objectives and project phases, and then breaks those down into discrete tasks required to meet the objectives and complete the phases. Once the desired outcome and list of tasks is established, the project manager can determine the necessary resources and levels of expertise required for each task, as well as any resource constraints that might impact the outcome. Those constraints might include expertise (Do we have the right people to do the work?), or time (Do we have the capacity to complete the project on time?), or technology (Do we have the right systems in place?). Legal Project Management Page 6

Budgeting is intended to provide a realistic estimate of the eventual costs to the client as well as considering the firm’s expenses. The project manager assigns individual people, or resources, to specific tasks identified in the WBS, and then estimates the amount of time each task should take to complete. This is where the various alternative staffing scenarios come into play. By experimentally adjusting the degree of leverage on a particular matter (i.e., pushing work to the lowest cost performers who can adequately complete the work while meeting all other project completion criteria), the firm can reduce the cost of its services for the client, better compete with other firms on price, and potentially increase their own profits. The promise of LPM 1.0 is that these steps, in conjunction with the work a firm is already doing, will be enough to meet client demands and maintain business, but in reality, it is in the next two stages that the proverbial LPM “rubber meets the road”.

Execution
The Execution stage is where those who were assigned tasks during Budgeting interact with their tasks. Execution may seem the most intuitive and simple of the stages, but it is this stage that will be the most difficult for firms to embrace, because quality Execution requires a wholesale change of attorney mindset from meeting hourly requirements to completing assigned tasks. This, more than any other aspect of Legal Project Management, most fundamentally cuts against the established practice of most firms. Hourly goals determine bonuses, equity points, promotions, office selection, and nearly every other aspect of an attorney’s professional life within a firm. In LPM 2.0 efficient quality work beats quantity work every time. This turns conventional law firm “wisdom” on its head. While convincing firms to drop their existing pay structures and adopt a new model is way beyond the scope of this paper, and we absolutely do not expect such a change to take place immediately or to happen easily, we do expect it to happen eventually. The benefits of a task-based system of execution far outweigh that relic of a bygone era of plenty, hourly targets. Those benefits are realized in the final stage of LPM 2.0.

Monitoring and Controlling
By systematically focusing on task completion, rather than hours worked, this final stage can produce accurate project status reports and track financial projections to ensure that the project is on schedule and within budget. With real time, up-to-date task information it is also possible to produce ongoing budget to actual variance reports, for both time and costs, which can be shared with clients or used for internal evaluation and efficiency improvement. Until we begin to attribute work to tasks, reporting budgeted to actual work is a manual process involving the deconstruction of time entries and/or the reliance on phase and task codes, which in the past have proven unreliable. Monitoring task completion also provides a context for the work being done. The client can look through agreed upon tasks and get a much better sense of how a project is progressing. This transparent process builds trust with the attorney and eases Legal Project Management Page 7

the pain should the project run into unforeseeable stumbling blocks or cost overruns. For the attorney this eventually becomes a much more intuitive way to work. No one gets up in the morning thinking, “I need to spend 4 hours and 6 minutes on this, and 2 hours and 24 minutes on that.” They think, “I need to complete this task, and when I’m done with it I can begin on the next one.” In the traditional hourly work model, After Action Reporting and Analysis, should they be done at all, are little more than personal assessments of “how we did” or “where we need to improve”. They are at best subjective analyses heavily influenced by personality and politics. A change in focus to task-based Execution and Monitoring will provide hard statistical data, allowing firms to continually improve their processes and procedures, and to correct or reward their employees based on actual work performed and tasks completed. Over time clients will begin to see improvement in the firm’s delivery of legal services, efficiency and productivity should increase and costs should come down. In addition, this process of tracking tasks and closely monitoring results has implications for several other aspects of practicing law, including: Managing Risk – As soon as a firm begins working the perfect project plan, reality intercedes and the plan must adapt. Tactics may change as they learn more about the project; and resources change as the workload fluctuates. Timing constraints and requirements may change as a client's needs evolve. Without task-based execution and monitoring, the partner has no control or oversight of the impacts these changes have on the project and no ability to effectively keep the client informed about the impact of these changes on timing and costs. Improving Workflow – By accurately tracking task completion firms will have a much better understanding of the “bottlenecks” currently slowing project completion. Resources can be brought to bear on specific areas giving the team an opportunity to navigate troubled waters more effectively. Resource Management - The most valuable (and expensive) resource a law firm has is its attorneys and support staff. For decades law firms have added headcount on an annual basis, irrespective of any real analytics to support that decision. Many believed that even if the work wasn’t there immediately, they could always raise rates later to make up the gap. By incorporating the execution and monitoring phases of LPM into a firm’s standard operating procedure, the firm can start to truly understand how it actually works and begin to intelligently “right size” its workforce. Defensibility - The execution phase, because it memorializes who did what and when, provides an audit trail of exactly how a project was worked and completed.

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A Universal Project Plan - By incorporating the execution phase into an LPM solution, firms can manage and monitor projects that include external resources. This might mean pushing work out to lower cost centers (for example outsourcing e-discovery services) and tracking their progress, or it might mean allowing a client to follow the progress of the project plan (to an agreed upon level of detail). Improving Future Project Plans – By tracking task performance firms will have a much better ability to streamline workflow for future work as well as improve project plans for future use. This makes each iteration of the project plan more accurate than the one before and greatly simplifies the creation of new project plans. Improving Experience Databases – A complete LPM system tracks individual performers’ execution of specific tasks, which can provide detailed information about who within the firm has experience performing which specific tasks and how much experience they have. This information can be leveraged by various knowledge systems and “KnowWho” databases. Identifying Professional Development Opportunities – The complete LPM system tracks not only the tasks that individuals complete, but also the time it takes to complete a task. This provides valuable insight into Professional Development and continuing education opportunities.

Conclusion
By now it is obvious there will be no return to the glory days of an ever-expanding legal market and steadily rising hourly rates. Legal Project Management, in its earliest incarnation, awakened many firms to the need for better project planning and greater control over budgets. But it also put a heavy burden on partners to ensure delivery of services at an agreed upon price without providing them any mechanism to control the process. The second generation of Legal Project Management, by incorporating task management and monitoring and control mechanisms, now gives the partner a more effective way to deliver services on time and within budget. LPM 2.0 makes it possible to catch problems as they are happening, not weeks after they’ve already occurred. It improves communication with clients by being inclusive of the client and making the end-to-end process as transparent as possible. This gives clients an opportunity to have meaningful and contextually relevant discussions with their attorney, greatly increasing the level of trust between them. In shifting from a time management paradigm, in which attorney hours are often captured days or weeks after the work has been completed, to a task management paradigm, where preLegal Project Management Page 9

assigned tasks are checked off as the work is done, LPM 2.0 leverages technology to provide contextually appropriate support resources to attorneys at the precise moment that they are needed. This leads to a better use of resources, time, money, and ultimately to a better understanding of the legal process for both the client and the attorney. Legal Project Management in its more complete form, incorporating all three stages: Planning and Budgeting; Execution; and Monitoring and Controlling, provides many benefits to clients, to attorneys, and to firms. By far the most important benefit to everyone is a more consistent, repeatable, and continually improving practice of law.

Scott Preston, Executive Vice President of ERM Legal Solutions.
ERM is dedicated to assisting law firms and corporate legal departments quickly and painlessly respond to the historic changes facing the industry. Our history delivers on a fundamental objective – increasing profits by increasing efficiency. spreston@ermlegalsolutions.com http://www.linkedin.com/in/scottapreston http://www.twitter.com/@sapreston

Ryan McClead, Manager of Knowledge Systems, Fulbright & Jaworski, LLP
Ryan has spent a decade advocating for and implementing, policies, procedures, and tools to improve the flow of knowledge and information across the firm. He works interdepartmentally to find logical and technological solutions to problems plaguing individuals, departments, and the firm at large. He is a regular contributor to 3 Geeks and a Law Blog at geeklawblog.com. rmcclead@fulbright.com http://www.linkedin.com/in/rmcclead http://www.twitter.com/@rmcclead

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