Archive for the 'Alternative Billing Arrangements' Category
In legal knowledge management and IT circles, the concept of Legal Project Management as a discipline has been a hot topic for the last two years. In marketing circles, … not so much. Amidst client development programs, service offering launches and the support and evaluation of new business opportunities, few law firm marketers seem to be thinking about how firm processes and technologies can reshape the fundamental value proposition of a firm.
But lawyers and marketing professionals who are thinking about how to reposition their firms to thrive in the future should consider the role Legal Project Management can play in that effort. Differentiating a law firm is harder now than ever before. The market is converging. The gap between the top firms and the rest of the playing field is widening. The firms at the top are getting the choice matters and are cherry picking the talent. There are few areas in which the rest of the field can still compete…. with one exception.
Firms of any size have the opportunity to demonstrate their unique value to clients by working more efficiently. Legal Project Management (LPM) principles provide the framework around which to do this.
LPM applies traditional project management concepts to the control and management of legal cases or matters. As explained by Jim Hassett in the July/August issue of Managing Partner (subscription required), there are eight elements of LPM:
- Setting the objective and defining the scope
- Identifying and scheduling activities
- Assigning tasks and managing the team
- Planning and managing the budget
- Assessing risks to the budget and schedule
- Managing quality
- Managing client communication and expectations
- Negotiating changes with clients
These elements are inherently part of any case or matter. The difference with LPM is that these steps are managed in an ongoing and consistent way. From a marketing standpoint, that translates into the following opportunities:
- Enhanced Client Communication. Survey after survey reveal that client communication (or lack of it) is a primary driver of corporate decision making when it comes to hiring a law firm. With LPM, law firms have the tools they need to stay responsive and address issues in a proactive way with clients. LPM provides the tools for planning and managing a budget. It allows you to better manage quality. It also allows you to address unanticipated changes that invariably occur during the course of most matters.
- Demonstrate ROI. The consistency that LPM brings to the table means there is an opportunity to demonstrate a quantifiable return on investment to clients — something very few firms have mastered successfully. Consider having the ability to conduct a post-matter client debrief in which you can evaluate the actual costs incurred against the original estimated budget, and then using that hard data to discuss ways in which you and the client might be able to improve management of a particular type of matter in the future.
- Alternative Fee Arrangements. As we all know, everyone wants AFAs, but few people know how to put them together confidently. Fewer still know how to do so profitably. LPM provides the tools to effectively looking at the true cost of a matter, and the tools for better managing the matter during the project.
LPM as a discipline has the opportunity to make a lasting impact on how lawyers do business. But we all know change is slow to come, particularly if left up to the lawyers alone. Marketing professionals should get involved with their knowledge managers, IT and pricing colleagues to help drive this change.
TechnoLawyer’s BlawgWorld (free subscription required) had an interesting item a few weeks ago about how LegalZoom is beta testing a concept that would allow it to offer its legal services through small firms under the LegalZoom brand. It’s fraught with ethcial complications, which were outlined by the blog’s author Richard Granat on his eLawyering Blog.
From my perspective, LegalZoom is merely emblematic of why law firms need to reevaluate the way the offer legal services.
For those unfamiliar, LegalZoom provides commoditized business services for flat rates. You can do everything from forming your LLC to filing a trademark. They provide easy to understand descriptions of the requirements for filing. They walk you through a series of questions to help you fill out the required forms. They will even call you on occasion to point out facts that will help you make sound decisions without the advice of a lawyer.
For example, I recently used LegalZoom to create an LLC in California. They called to ask me what day I wanted to file, noting that if I filed before a certain date I would be assessed a tax in 2010. If I filed after that date, I wouldn’t be assessed the tax until 2011. They didn’t advise me on what to do, they merely read me the rules.
In sum, LegalZoom has taken an area of the law that can seem onerous and has demystified it by making it easy to understand.
Legal ethicists and regulators will have the last call on whether this constitutes practicing law. For lawyers practicing in this area, the onus is on them to show what added value they can bring to the table that makes the one-on-one service worth the cost of admission.
That’s not a bad thing. It is just different and it’s a reflection of how the practice of law needs to change to provide better service.
At the center of the discussion about building a value-based law firm is the topic of fee arrangements, specifically the desire to move away from hourly based billing toward alternative fee arrangements.
Although firms seem to be taking baby steps toward “value-based” billing models, it is clear –with apologies to Mark Twain—that reports of the death of the billable hour are an exaggeration.
It seems even well-intended parties on both sides struggle to turn a philosophical interest in value-based billing into an actionable arrangement upon which both sides can agree.
The ACC’s Susan Hackett, in response to my June 9 post on Legal OnRamp called “Alternative Billing Baby Steps,” noted, “I’d love to see both firms and departments defining value upfront in more ways than on an hourly basis, and doing the hard work of planning and executing the staffing and work models that deliver value as it’s defined by the client and leveraged by the firm. I would rather see value structures that make the hourly business model in firms obsolete.”
Susan is right in that real change won’t happen until there is a commitment at the firm and client level. The challenge, of course, is that this is hard work that impacts staffing, compensation, technology infrastructure, business processes, recruiting, professional development and more. That’s a lot of change for any organization, let alone a partnership-structured law firm.
To start moving in this direction, value-based billing needs to be integral part of a law firm strategic plan and integrated into a broader client relationship management program. Only then will law firms prioritize value-based billing and be able to create an actionable strategy to start moving toward the end game.
I propose three simple steps to get started. They are not new or particularly revolutionary. They also aren’t hard, but few firms are doing them in a way that is moving them toward the result they want to achieve.
1. Listen to your clients. Identify the general counsel that are looking for institutional change in billing.
2. Define the end game. What is specific, ultimate goal for the law firm and the client?
3. Create an actionable plan that will allow you to move toward this goal in an incremental way.
By starting with the end, both sides know what success looks like. And, it will keep firm’s from mistaking baby steps for the end game.
In 2007 I left my position as firmwide marketing director at Heller Ehrman. At the time I certainly knew the firm was in trouble, but I never once believed the challenges it faced would be insurmountable.
I feel like Pollyanna saying this now, but I believed in Heller’s core values, in the integrity of the partnership. At the end of the day, I thought that would be enough to turn the firm around. Lest anyone say differently, it was a good firm made up of high-quality people.
Heller’s unfortunate legacy likely will be how its implosion served as the first tremor of a seismic shift across the legal industry. In the three years since leaving, I’ve watched from the sidelines as Heller closed its doors. I saw other law firms around the country struggle to stay afloat. I’ve witnessed the layoffs of thousands of lawyers and professional staff during the toughest economy of my lifetime.
Leaving Heller also gave me a new perspective on the legal industry, enabling me to regain the objectivity I once prided myself on in my first career as a legal journalist. Based on my own experience, as well as in conversations with partners, knowledge managers and marketing executives from law firms and legal departments around the country, several themes emerge:
1. Inefficiencies are rampant throughout all functions of law firms. Silos across firms result in duplicative efforts among individual lawyers, offices and practice groups.
2. Corporations are more sophisticated buyers of legal services than they have ever been in the past. As evidenced by initiatives such as the ACC Value Challenge, clients are leveraging their buying power by demanding more from their outside counsel.
3. Disruptive technologies will force law firms to change their business model. In-house lawyers understand this, but law firms are late to the game.
Even today the economy shoulders most of the blame for the struggling legal market. But for law firms, the financial crisis is merely symbolic of Dorothy pulling back the curtain on a weak wizard trying to keep his reign over a kingdom transforming before his eyes. The wizard behind this curtain is a business model that promotes inefficiency, fears innovation, and denies a client base demanding service levels few firms are able to meet.
To be sure, exceptions exist for every rule. A number of firms do address these challenges head on, but it is a slow process.
For all these reasons, Law Firm Transitions was born. My company, Legal Vertical Strategies, believes value-driven legal service models are the future for law firms.
As a principal at LVS, I have the unique opportunity of working with both buyers and sellers of legal services—law firms and legal vendors.
I plan to draw upon that experience to help drive the needed dialogue to define and implement these changes. Along the way, we’ll talk about best practices for driving revenue and growing client relationships.
I certainly don’t have all the answers and hope you will join the conversation to share your thoughts and advice as well.
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