Over the last few weeks, I’ve had the pleasure of hearing two presentations by Susan Raridon Lambreth of Hildebrandt Baker Robbins on the subject of legal project management. Her most recent talk was an overview of the state of legal project management, now that we are — according to economists — on the other side of the recent recession. Here are my notes on part of her most recent talk.
Why Legal Project Management Now?
So what’s driving law firms to take a closer look (and even try) legal project management? First and foremost, increasing client demands for greater efficiency on the part of their external lawyers. Given the economic pressures on their clients, law firms are being asked to provide services “better, cheaper, faster.” In fact, Ms. Lambreth reports that many clients now expecting lower costs — not higher — year on year.
A second reason for increased focus on legal project management is the changing profit equation for law firms. Hildebrandt reports that there has been lower demand for traditional legal services and an inability to rely on rate increases to maintain profitability. Coupled with this, there has been increased price competition. Ms. Lambreth gave recent examples of unnamed major national firms that underbid much smaller regional firms in order to win a client engagement. Granted, these may be loss leaders, but they may well indicate a willingness of larger firms to be more creative with their pricing.
There has also been a major change in the role of procurement offices within companies. Law firms are reporting a shift to dealing more with procurement offices, as well as a significant difference in the way client procurement offices request legal services as opposed to how the general counsel requests those offices. In fact, some companies are electing to have chief procurement offices managing both the initial engagement and well as the ongoing management of the cost of an engagement.
This issue of management goes further. Clients are becoming more involved in the management of a matter. Many are insisting that legal services be disaggregated and then “right-staffed” accordingly. For example, start by breaking down a mergers & acquisitions matter into due diligence, Hart-Scott-Rodino issues and strategic counseling. (Obviously, you could break this down further, but this is sufficient for the purposes of the example.) Once this is done, the client might insist that the due diligence portion or HSR portion be handled by lower cost and/or specialized lawyers (inside or outside the firm).
What’s the Upside?
While these trends may be frightening, Ms. Lambreth was swift to point out some of the opportunities. For examples, the “lower value” work may be more amenable to leverage and standardized processes, resulting in improved profits based on lower costs and higher volume. Further, the increasing scrutiny of the components of matters can expose sources of risk that may have been hidden by traditional work methods. Now, we have an opportunity to see these risks clearly and then improve law firm processes in order to minimize these risks.
The emphasis on non-hourly billing (alternative fee arrangements) and legal project management also opens up opportunities for law firm knowledge management. As lawyers take a closer look at how they management their matters, they should begin to understand that enhanced lawyer training and better knowledge management should allow firms to deliver services in a more efficient, effective and safe manner.