Getting to LPM
Author: Richard Stock - Lexpert (Nov-Dec at p. 106)
Demanding legal project management from your law firm is only the first step
60% of legal departments use project budgets more often than not
26% of legal departments use project budgets consistently
1% of legal departments were on or below budget for total of matters referred to external counsel
LEGAL PROJECT management and budgeting by law departments and their firms will only take hold once a number of basic conditions are met. The impetus will not be that it saves money for the department. Rank and file members of the law department will take one step forward and two steps back if that is all there is to the LPM program. And law firms have little incentive to convince them otherwise.
There are three basic purposes to legal project management. First, it streamlines the business aspects of legal work because it focuses on time, money and value delivered. Second, it modifies the techniques for work already being done by lawyers. And, third, it better organizes and oversees the work of external counsel. In a nutshell, LPM adds value to the business.
But the GC must be able to extend this concept beyond a mere catch phrase to measurable specifics on six dimensions: (1) controlling the time spent and (2) controlling costs; (3) better preparing the client for unplanned developments; (4) being more explicit about the planning assumptions and their probabilities; (5) allowing project managers to allocate the most appropriate resources; and (6) having clear communications with clients regarding scope of work, service levels, costs and outcomes.
Companies often refer complex legal matters to external counsel. One would expect that the project manager, usually the law firm, would be a partner in all such cases. He or she handles tasks and monitors processes. Inside counsel should assume the role of project leader. This entails communications with the business unit and the law firm, negotiating expectations and keeping everyone focused on the results.
A recent survey found that 60 per cent of legal departments used project budgets more often than not. However, only 26 per cent of them did so consistently. They also said that they were on or below budget only 1 per cent the time for the total of matters referred to external counsel.
Most law firms rely on a collection of improvised spreadsheets to prepare a matter budget by phase and task. Inside counsel need to become more proficient in their estimating and approval skills if they are to converse with external counsel on legal project management. Executing LPM effectively depends on the fundamentals being in place within the law department.
These include a number of components: broad terms of engagement should be signed off by the firms; work intake protocols and a single point of contact are de riguer; the scope of individual matters should be signed off by the legal department; and firms should use the company's planning and budgeting templates.
These must include phases and tasks as in any project. The rule of thumb is to ensure that there are at least eight hours per task to limit the detail and no more than 40 hours per task to ensure enough detail. Inside counsel should then review budgets for adequate task delegation.
At this stage, the matter budget is an imperfect estimate. A review of budgets with seven law firms last summer found that only two provided the planning assumptions at the task level, and none provided a probability factor for each assumption. Law firms will not volunteer this information unless the client requests it. And most law department clients do not.
Invariably, the resulting estimates are a worst-case scenario, making matter budgets a paper exercise. Stephen Levy, author of Legal Project Management: Control Costs, Meet Schedules, Manage Risks, and Manage Sanity, calls for six competencies in legal project management: (1) outcome expressed as a brief definition of success, (2) expectations for the matter from the client's point of view, (3) costs and budgeting, (4) resource allocation dependencies and (5) contingencies and (6) risk.
Effective LPM and budgeting can be part of the normal course of business, if companies have terms of engagement and billing guidelines that make LPM mandatory; matter management systems like Serengeti that can require phase and task budgets before bills can be submitted; thresholds for matter budgets that capture all matters of moderate complexity beginning at 50 hours; and inside counsel who are trained to be comfortable and efficient in managing external counsel.
Finally, law departments will drive legal project management and budgets with their clients when they have a financial incentive to do so. Fixed-fee arrangements as well as hybrid-fee arrangements with a cost-budgeting feature are now in use by some companies. General counsel must attend to the business of law.