Complex Work in Law Departments
Author: Lori D. Brazier and Richard G. Stock Lexpert June 2005 at p. 99
Law departments and the lawyers in them have been striving to find and deliver complex legal work for their organizations for the last 15 years. With few exceptions, Canadian law departments are not large enough to handle the entire demand for legal and advisory services by themselves. There is always a certain volume of work that is referred to outside counsel in order to handle overflow, because of the specialized nature of the file, or because of geographic imperatives. Yet the balance of inside / outside referrals is too seldom managed as a process and it is rarely a considered response to good demand forecasting.
Law departments participate in annual corporate budgeting. Typically, there is discussion about the required number of lawyers and staff. Perhaps there is also overall budgeting for the use of outside counsel, but this is not always the case in decentralized organizations. The budgeting process is often viewed as inconvenient and amounts to adjustments of prior usage patterns. Apart from setting aside reserve funds for exceptional transactions, litigation or regulatory processes, non-accounting data is not relied on to anticipate demand for legal services. Less than one in five law departments have lawyers and staff who maintain regular time-keeping. Even then, such a form of activity tracking is of very little use in robust demand forecasting.
A good demand forecast contains several variables: the type of legal work (specialization), the anticipated volume expressed as the number of cases / files, and the relative complexity of the work expressed as the mix of experience levels of the lawyers and paralegal staff required to carry it out. Some organizations then express the forecast variables by business unit and by country / region as well. The demand forecast should include provisions for strategic, advisory and training contributions which inside and outside counsel bring to the table.
A good demand forecast will support the budgeting process. But it has better uses. It forces early discussions with users of legal services and clarifies expectations about service delivery. In organizations where there are chargebacks, provisions are made for this. The real benefit is the dialogue and integration of the law department with business units in order to anticipate and respond to regular demand and to manage extraordinary requirements.
The demand forecast should reflect an assessment of the intake and allocation of the legal work to the law department and to its law firms. Partnering agreements, engagement letters and billing guidelines are realigned and streamlined. Finally, a good demand forecast is usually a rolling 3-year plan and is updated each year. It serves as an anchor for hiring and the advancement of inside counsel and
staff and it gives preferred law firms good assumptions about workflow to improve service delivery.
The Complexity of Legal Work
There is little commonly accepted methodology in place to define the relative degree of complexity of legal work and the range of resources needed to respond. Still, the insurance industry has categorized files by severity level based on an array of factors. Professional malpractice insurers have used file categories to evaluate work complexity. Financial institutions have had similar approaches to recovery work, insolvency matters, and lending transactions. More than 90% of the work performed by a law department or by law firms (even by boutique firms) can be readily categorized for complexity.
Over the last five years, banks, corporations and most levels of government have introduced complexity categories to support demand forecasting and its objectives. Defining and describing complexity allows the law department to prescribe the level of experience of the lawyers needed to perform quality work at a reasonable cost. Most work will have two or more levels of complexity ranging from the most simple to the most complex. Each level of complexity will call for a distinct mix of professionals. A preferred staffing profile is prepared for each level of complexity, along with an outline of those tasks that are best carried out by associates of different levels, by partners with different ranges of experience, and by paralegals, students and staff. Partner time on routine matters should be limited to supervision and guidance.
Introducing and requiring law firms to agree to preferred staffing by level of complexity is a significant tool to controlling costs by ensuring appropriate delegation (getting the work to the right level, at the right price). The implications for working in teams and improved project management become apparent. And the groundwork can be laid for developing alternative pricing mechanisms.