Editor’s note: This is the second of a two-part series examining the practical applications and implications of a value-focused approach to legal services. The first part looked at how firms can ensure they receive value in this model and the second part looks at how firms must manage matters to ensure value for clients.
What do lawyers and general contractors have in common? Nothing yet.
But the idea that the legal profession could look to the processes used by general contractors in completing a job was one raised at an Association of Corporate Counsel Value Challenge meeting in Philadelphia this summer.
Project and process management — in essence the antithesis of the billable-hour model — is a concept being eyed by law firms as they try to ensure they can deliver the efficiency required to make good on their alternative fee arrangements.
A switch to this model will be a “big issue” for law firms given the change in other systems, such as compensation and staffing, that come with it, Altman Weil’s Thomas Clay said. But law firms will have to get over the fear.
Clay said he is advising every client to adopt one of two approaches. They could take a strategic opportunity view and learn how to do this, taking it to the marketplace proactively. The other option, Clay said, is to adopt a strategic necessity approach and be willing to adopt the concept when clients ask for it.
Though it may not be practical to apply a project management system firmwide from the start, it’s possible to get there.
“There is not one single kind of practice that you cannot use an alternative fee on,” Clay said. “We’ve seen it done.”
Moving to a project management style of matter management means lawyers will need to look at projects differently than they do now, he said. There are three basic components to the concept: timeliness, efficiency and meeting the objectives of the project, he said. Knowing the amount of hours a project took tells the firm and the client nothing about how efficiently it was done or whether the objectives were met, Clay said.
Allen P. Waxman of Kaye Scholer, a former general counsel of Pfizer, could take part in the Value Challenge event from both the lawyer and general counsel perspectives. Waxman, in an interview, said the concept of moving toward a process management system is “not rocket science.” It’s a matter of being more purposeful in how attorneys identify and achieve objectives. Lawyers will have to map things out as opposed to bulldozing through projects, Waxman said.
“I actually think the economic realities will kind of demand more of this skill set,” he said.
While it will be valued more highly, Waxman admits the concept of project management isn’t a skill set typically taught to lawyers.
Seyfarth Shaw started looking at how to train lawyers in project management when clients like Motorola, Caterpillar and DuPont were talking about wanting their law firms to adopt the same Six Sigma approach they were using, Carla Goldstein, director of strategic management at the firm, said.
Earlier this decade, the firm brought in a Six Sigma consultant and gave 35 people in the firm “green belt” training in the process management technique borrowed from the manufacturing world.
“We were dying,” Goldstein said. “They came in with these binders of jargon and statistics and numbers and the lawyers’ eyes were rolling around in their heads. We realized the process was what we wanted. The training would never succeed in a law firm.”
Seyfarth Shaw created a project management office in 2005 outside of the information technology department where such operations have typically been created. Over the course of a year-and-a-half, the firm pared down the training, got rid of the jargon and left a lot of the heavy statistics for a few people within the project management office so that most of the lawyers wouldn’t have to concentrate on that aspect. The “Seyfarth Lean” model was put into effect in 2006.
Goldstein said the process wasn’t instantly embraced by all of its attorneys. The project managers work with teams to help facilitate process mapping, she said. They get together in a room and use sticky notes to map out each step of the process to create visuals for the attorneys so they can see how a matter can be parsed out.
Mapping the process includes organizing matters so that younger attorneys know which steps to handle and supervising attorneys know who is doing what and when so that they can focus on strategy. Firms can see whether too many hands touch a document and can streamline that process. They can ensure the right people are doing the right work.
Goldstein and her office have worked with practice groups including real estate, mergers and acquisitions, commercial litigation, immigration, labor arbitrations and several others.
“Not only did we create efficiencies internally,” she said, “but we started to bring it to the clients.”
Once the internal mapping was handled, the firm would take blotter maps to the clients so they could look at the process, know what was expected from all parties and offer suggestions for driving out inefficiencies. The process helps both sides have a clearer understanding of what the matter will cost and shows the client the firm is committed to providing this pricing, Goldstein said.
Getting Lawyers to Buy In
Silvia Coulter, vice president of Hildebrandt’s client development and growth practice, is a Six Sigma green belt.
She said intellectual property lawyers who are engineers understand process methodologies. And there are often pockets of other lawyers who see them as a way to increase work volume.
It’s getting the buy-in from the rest of the equity partners that is sometimes challenging and needs to be done a little bit at a time, she said.
The bottom line with process management is that firms can do more work if they create a way to consistently build and deliver its services. Any type of process improvement requires looking at the delivery process, eliminating waste and decreasing the time it takes to provide the service, therefore allowing for an increase in “throughput,” or the volume of services firms can provide in a given time, Coulter said.
When you build a car, there are always variables like the color or the audio system, but there’s always the same set of base standards, she said. If lawyers can automate documents for a matter, for example, then they can spend their time on the variables. Coulter said automation will play a key role in the future of law firms.
“If we automated, let’s say, most of the delivery and just inserted the variables, we don’t need as many lawyers,” Coulter said. “If we don’t need as many lawyers, then our partners are making more money.”
Once firms understand the process of breaking down the matter into variables and standards, they can then focus on truly effective price modeling, she said.
Staffing and Streamlining
Project management requires law firms to reverse engineer their processes to see how they can be done more efficiently, ACC General Counsel Susan Hackett said.
“It means that all those things that are the same get put into a cookie cutter and lawyers can spend their time looking at what’s different,” she said.
This creates changes for law firms in terms of their talent pools and how they outsource certain matters, she said. Current business models used by firms require all of their lawyers to be deployed at all times to make money, by performing services that create billable hours. If, alternatively, a firm had a smaller roster of attorneys who could work on flexible teams — or a contingent of lawyers who are used on a contract basis — firms could afford to be more efficient, she said.
Hackett said firms need to hire fewer people and then use more paralegals or contract attorneys to float between matters. Even when the market comes back, she said, firms will hire far fewer associates. Clay also pointed to firms hiring fewer associates and looking instead to contract attorneys or outsourcing work in some other way.
Jeroen Plink is chief executive officer of the Practical Law Co. in the United States, a company that provides market intelligence and transaction analysis to business lawyers. He defines value as “a good outcome for a good price.” While most firms can deliver the outcome, getting the price right is tough, Plink said. Most law firms will say a good price is one that avoids them having to write off too much time, but for more and more that is something they have to do. Plink said efficiency is the only way to avoid lost profits.
Drinker Biddle & Reath’s director of business development is currently getting certified in Lean Six Sigma, the firm’s marketing partner, Gregg Melinson, said. He said Six Sigma is”a little heavy” for lawyers. There are a number of ways, he said, firms can create greater efficiency. Technology, outsourcing and client extranets, where firms create Web portals for clients to securely access information about the matter over the Internet, are a few examples.
Melinson said firm leaders may also need to begin re-examining the way they use space. They could model their office space more like consulting firms do, with the expectation that lawyers are spending more time with clients and don’t need as much space as firms typically use, he said.
More than anything, these types of alternative arrangements are going to force lawyers back into gaining a more thorough knowledge of their clients’ businesses, and aligning their interests with those of their clients.
Trust, Melinson said, will have to be a big component of the new approach. •