global legal trends – using legal project management to .... carla... · global legal trends –...

October 2018

1

Global Legal Trends – Using LegalProject Management to EnhanceFirm ProfitabilityOctober 19, 2018

Carla LandrySenior Consultant, LawVisionAdvisory Board Member – LPM Institute

© 2018 LPM Institute / LawVision. All rights reserved.

Background

• LawVision history

• Work in project management, finance and related areas

5,000+ trained in LPM (half day to two full days)

Adjunct faculty, interactive workshops, online programs

• Approach to / philosophy about legal project management –not just building a budget

Based on input from academic institutions and PMPs

Intentional use of “jargon”

2

October 2018

2


Agenda

• Legal Project Management – What Is It and How Firms areSuccessfully Implementing It

• Trends Driving a New Focus on Law Firm Profitability Levers

• Understanding Profitability to Drive Its Impact

Getting Lawyers Focused on the Objectives ofProfitability, Not Lost in the Methodology

• The ROI on Legal Project Management• Obtaining Partner Buy-In to Implement (“Radical”)

Change

3


Evolution in Law Firm Management

FirmManagement

PracticeManagement

PracticeManagement

ProjectManagement

4

October 2018

3


Legal Project Management –What It Is and Why Legal Organizations

Are Implementing It

5


The Latest News …Legal project management (LPM) has long since ceased to be amarketing buzz word, optional extra or throwaway requirement in anRFP… GCs want, and expect, law firms to have integrated LPM intoservice delivery... Ideally, the methodology adopted will: (a) beconsistent and standardised across a firm’s offices, practice groupsand locations; and (b) integrate seamlessly with the client’s ownprocesses (on the premise that a firm’s role is to make the in-houseteam’s life as easy as possible)… GCs will gradually expect firms tosupply comprehensive proposals for engagements which accuratelypredict the scope of services against a project plan …

- Jan. 5, 2018, Steven Walker, former GC, Guest post for RossIntelligence blog, “Six things modern GCs really want from their lawfirms”

6

October 2018

4


The Business Challenge

• Process complexity• Practice and

administrative silos• Duplication of effort• Risks to client

service• Impact to firm

revenue

“A Non-Sustainable Approach to Managing Matters”7


What is Legal Project Management?

• A process for defining, planning,executing and evaluating matters /projects

• A more proactive, disciplinedapproach to the management oflegal matters which includesapplication of specificknowledge, skills, tools, andtechniques to achieve projectobjectives

• Underlying principle: effectivecommunication and setting andmeeting of expectations

8

October 2018

5


What is Legal Project Management? (cont.)

• “Not rocket science”

• Most lawyers arealready doing some ormost of this – but notalways with formal,organized approaches

• Essentially consistent,repeatable processes tobring more structure,communication,predictability andmanagement to matters

9


Key Elements of LPM

• Upfront discussion of client’s objectives / expectations• Detailed “scoping” of the work – whether for internal budgeting,

an AFA, a quote provided to a client, or optimizing legal spend• Breaking down the work into component parts to staff / manage

the project and develop more accurate budgets• Development of budgets and management of the matter to the

budgets• More active management of the matter throughout

Enhanced project team communication

Enhanced client communications

• Dealing with scope changes throughout a matter• End of matter debriefing / lessons learned

10

October 2018

6

11LPM Business Case for Corporate Legal Departments

LPM Myths and Realities

LPM is perceived as complexLPM is what lawyers already do,

only more systematically andusing the language of business

Source: CLOC Initiative 2018


Myth… A PM spends most of his / her time documentingand updating project plans

Statistic from Wrike.com

Defining and managing the scopeof the work

Making sure all those who need tobe involved are in the loop

Providing status updates

Facilitating project meetings anddiscussions

Communicating meeting minutesand action items

Making sure that risks are addressedon time by the right people

Reality: LPM is 90% About Communication andSpeaking the Client’s Language

90%communication


October 2018

7


What is Legal Process Improvement?

• Legal process improvement is a methodology forrefining legal processes to improve efficiency andeffectiveness to the benefit of the firm and / or clients An approach by which you identify, analyze, and improve

existing processes within the organization to meet new goalsand objectives

• Underlying principle: identifying waste to streamlineprocesses and / or make them more consistent inquality

13


LPI vs. LPM

• In a perfect world – LPI would precede LPM.

• LPI requires more behavior change than LPM somost firms start with LPM, which also has PIelements in it.

• Both can be implemented with baby steps orthrough more significant initiatives.

• Ultimately, both are critical for high quality, efficientdelivery of legal services.

14

October 2018

8


Project Management: Key Elements

People

15


An Intersection of Disciplines

Budgeting / Pricing

16

October 2018

9


• Changing client demands and expectations• Increasing competition for legal work• Changing profit equation in law firms

Trends Driving Law Firms to UseProject Management Approaches

17


Trends Driving Law Firms To UseProject Management Approaches

• Changing client demands and expectations – pressureto lower costs / increase predictability Dissatisfaction with historic / existing service delivery models of

law firms Pressure on in-house counsel to reduce legal costs – just like

in every other part of their business Expanding role of legal operations and procurement

professionals Project management use in almost every industry / company

so there is an understanding of the benefits it can bring Expectation for increased efficiency without loss of quality

18

October 2018

10


LPM Helps Address the Challenges of the LegalDepartment

Resource utilization improvedAppropriate resource at the right timeBudget to actuals accuracyAlignment between spend and value / outcomesReusable work templates, plans and approachesTrust and transparency among team members

Non-value added (or wasted) timeSurprising outcomes and costsOverall costs and spendTime to completion



Trends Driving Law Firms To UseProject Management Approaches

• Increasing Competition for Legal Work Alternative legal services providers (ALSPs) competing

aggressively for work historically handled by traditional lawfirms

Aggressive price competition from law firms at all levels of themarket

RFPs asking about project management and processimprovement expertise or other efficiency initiatives

Increased need for real differentiation among law firms in a flatmarket

• Changing profit equation in law firms Changing levers to impact profitability Move to matter profitability as partner comp factor Decline of “mid-size” firm advantage

20

October 2018

11


Common Reasons for Write-offs / downs– Often Insufficient Project Management

• Communication Lack of communication at outset of matter to clarify expectations

Assumptions not defined for scope of work

Lack of communication among project team to ensure nounnecessary work done

• Scope Changes Lawyer does not discuss scope changes and impact on budget

when they occur

Client assumed work was in the original budget because scopenot clearly defined

• Budget is prepared but is not used to manage actual timeincurred on the matter / not seen as a “cap” the way theclient viewed it

21


Common Themes in Claims CostingLaw Firms in Risk Management

• Failure to communicate carefully and often• Failure to explain risks and costs• Failure to manage outcome expectations• Failure to document

Source: ALAS Presentation toLawVision Litigation Leaders

Roundtable

22

October 2018

12


LPM Helps Enhance Risk Management

• LPM at its foundation is about getting the outsidelegal team and their client (in-house legal andbusiness contacts) on the same page aboutexpectations, scope of work and manner of work /steps to be performed

• LPM is about simple, proactive documentation ofwork at outset and revisions as the matter evolves

• LPM is about checklists, templates, forms, etc.that create more consistency, save time / increaseefficiency and ensure the legal teams (law firmand client) are on same page

23


Bottom Line

• Clients want: Better risk management Increased efficiency Decreased legal spend and / or increased

predictability

• Law firms want: Satisfied clients for whom they do meaningful work To maintain or increase profit margins in the new

marketplace

• Matters need to be managed more actively toachieve both.

24

October 2018

13


If Implemented Correctly, LegalProject Management Drives:

• Greater value to clients / increased clientsatisfaction

• Improved financial performance and optimization oflegal spend

• Greater collaboration and teamwork – within andacross practices / business units and with insideand outside counsel

• Better morale / esprit de corps• Better training and development of your

professionals

25


Benefits of Legal Project Management

Benefits to Firm / Team• Improved profitability of

matters• Greater client satisfaction• Increased revenues from

clients• Enhanced risk management• Greater differentiation from

competitors• Greater consistency across

offices• Improved teamwork within

project team

Benefits to Law Department / Client• Greater predictability• Improved communication / “no

surprises”• A more managed approach to

legal work• On budget / on time• Greater efficiencies• Enhanced quality of the work /

greater consistency• Enhanced relationships and trust

with outside counsel

26

October 2018

14


Understanding Profitability to DriveIts Impact

27


The Universe of Law Firm Financials

28

IncomeStatement

BalanceSheet

Statement ofOwnersEquity

October 2018

15


A Few Things to Keep in Mind

29

Acknowledge

Identify

Understand


It’s Really a Straight Forward Business …The Hardest Part is Getting Agreement

30

• Revenue

• Expenses

• Profitability

Billable Hours Rates/Pricing Realization

Direct Costs Indirect Costs

Margin Analysis Leverage

October 2018

16


Overview of Profitability Analysis

• Profitability has come under intense scrutiny asrealization rates have slipped and demand growthhas stagnated

• Yet relatively few firms are focusing on truemanagement of profits…although this is changingOutsourcing, resourcing, process improvement,

project management, ….• Analyses can be done at a firm, practice group,

office, client, matter, or individual level These types of analyses can be very divisive

• Agreement around the assumptions used in marginanalysis and consistency of approach are critical

31


Why Perform Profitability Analyses?

32

ProfitabilityAnalysis

StrategicPlanning

InvestmentDecisions

CapacityManagement

Pricing,Compensation

& Accountability

October 2018

17


Allocation Methods - Primary Options

33

Contribution to Overheadand Partner Compensation

Contribution to PartnerCompensation

Fully Allocated Costs

Revenue(Direct Costs)Contribution

Revenue(Direct Costs)(Allocated Overhead)Contribution

Revenue(Direct Costs)(Partner Comp - or Proxy)(Allocated Overhead)Profit/Loss


Sometimes, examples provide clarity

34

October 2018

18


Original Client Team Composition

35

• 4 Equity Partners

• 3 Counsel

• 4 Associates

• 1 Paralegal

Total Hours Logged to Client = 20,000


Client team operating at a loss of $1.5Mper Year

36

October 2018

19


Recommended Client TeamComposition

37

• 1 Equity Partner

• 1 Counsel

• 7 Associates

• 3 Paralegals

Total Hours Logged to Client = 20,000

Same team size, different composition (leveraged model)


Looking at the Equity Partner

• Cost / Hour = $868• Hours Spent on Client = 460• Total Cost of Equity Partner Time on Client = $399,280• Revenue Collected on Equity Partner Time = $266,300• Profit / (Loss) on Equity Partner on this Client = ($132,980)

38

October 2018

20


Yet … the new client team compositionoperating at a profit of $1.2M per Year

39


So Where Do You Start to Use LPM toEnhance Profitability

40

October 2018

21


How Can You Get Started with LPM?

• Identify the reasons to change /issues to address (business case)

• Identify a few champions or firstadopters

• Start with a pilot project—throughapplication to a specific matter ortraining a pilot group

• Communicate the successes widely• Start to build internal organization

and support for implementation

41


What Leading LegalOrganizations Are Doing inLPM

• Conducting pilots with specific practices / matter teams• Building the business case / lawyer buy-in• Building the internal infrastructure – staffing, tools,

templates / KM, etc.• Training lawyers and others in LPM• Instituting roles for legal project managers – part or full time• Using it to win business / enhance internal or external client

relationships• Using it to improve matter profitability / optimize legal spend• Using it to manage outside counsel

42

October 2018

22


What the Leaders areDoing in LPM

• Building or implementing sophisticated technology tools (forbudgeting and / or full project management) to support andfacilitate LPM

• Implementing legal process improvement• Building large teams of legal project managers as “internal

consultants” or training large numbers of lawyers / legalprofessionals to integrate it into their day-to-day practice

• Achieving “high” levels of lawyer adoption / use of LPMapproaches

• Using it to build strong internal teamwork and professionaldevelopment

• Using it to “brand” the firm• Integrating matter profitability into partner compensation system

43


Common LPM Approaches /Disciplines

• Kick-off Meetings• Stakeholder Analysis• Scope of Work Document• Project Plan

Schedule Communications Plan Risk Analysis

• Budget• Scope Change Discussions / Documentation• Lessons Learned

44

October 2018

23


What is the ROI on LPM?

• Firms just beginning to track it.• Metrics used:

Revenue generated / timekeepersOut-of-scope work capturedGains from improving processesWins of client mandates

• Two examples of public success stories: Baker McKenzie – 15 million pounds per annum Littler Mendelson – $5 million per year

45

A potential metric roadmap

• $ revenue generatedby LPM timekeepers

• $ revenue recoveredthrough Out of Scope

• $ revenue of matterssupported

• $ value of newbusiness won due toLPM

• $ savings due toprocess efficiencies

• $ revenue generatedby LPM timekeepers

• $ revenue recoveredthrough Out of Scope

• $ revenue of matterssupported

• $ value of newbusiness won due toLPM

• $ savings due toprocess efficiencies

FINANCIALFINANCIAL• # timekeepers trained• # portfolio/ workflow/

strategic matterssupported

• # client teamssupported

• # practice groupssupported

• # matters supported• # pitches supported• # ‘on demand’

requests

• # timekeepers trained• # portfolio/ workflow/

strategic matterssupported

• # client teamssupported

• # practice groupssupported

• # matters supported• # pitches supported• # ‘on demand’

requests

ENGAGEMENTENGAGEMENT

• # PM technologysolutionsimplemented

• # reusable budget/pricing modelsdeveloped

• # processimprovements made

• # assets developed(e.g. checklists/ etc)

• %age variance tooriginal budget

• # PM technologysolutionsimplemented

• # reusable budget/pricing modelsdeveloped

• # processimprovements made

• # assets developed(e.g. checklists/ etc)

• %age variance tooriginal budget

EFFICIENCYEFFICIENCY

• # client trainingsessions held

• # client accessiblesolutions developed/implemented

• client feedback/satisfaction scores

• # LPM articlespublished

• # LPM conferencepresentations given

• # awards (shortlisted//won)

• # client trainingsessions held

• # client accessiblesolutions developed/implemented

• client feedback/satisfaction scores

• # LPM articlespublished

• # LPM conferencepresentations given

• # awards (shortlisted//won)

EXTERNALEXTERNAL

Appropriate metrics will be driven by firm culture,data, systems and LPM functional maturity

October 2018

24


Questions?

47


Carla [email protected]

202.406.0955

48

Thank You

global legal trends – using legal project management to .... carla... · global legal trends –...

Documents