Matter Management, Pricing and Profitability

The speakers are Gene Berger (Manager of Financial Planning & Analysis, Dechert), David B. Hobbie (Litigation Knowledge Manager, Goodwin Procter) and Richard B. Friedman (Partner, McKenna Long & Aldridge).

[These are my notes from the 2012 Ark Group Conference: Knowledge Management in the Legal Profession.  Since I’m publishing them as soon as possible after the end of a session, they may contain the occasional typographical or grammatical error.  Please excuse those. To the extent I’ve made any editorial comments, I’ve shown those in brackets.]


  • How Well-Established is their Alternative Pricing Effort? Even with strong senior support, it is an ongoing effort to bring partners around to the concept of alternative fee arrangements. There are pockets of high activity and other pockets in which AFAs are not even on the radar screen.
  • What was most surprising when they started? There were no legacy data to track client satisfaction and repeat business. From a business planning perspective, one panelist didn’t have the legacy data necessary to determine where future business development (including cross-selling) should occur. One firm had to start with basic matter coding (phase/task coding). David Hobbie noted that there were several different types of data that can be useful and you may already be tracking it. For example, they had a robust matter tracking system that proved very helpful for pricing analysis. They have had to augment this with some manual data mining.
  • Where do they start? At Dechert, they build “shells” that have the basic pricing model based on historical data. Each shell includes the following attributes: legal service line, staffing models, matter attributes (size, complexity, location, etc.). They provide this to the partner to fine-tune. Then they track actuals against budget and complete their forecasting o the basis of the budgets. Goodwin purchased Randy Steere’s budgeting tool, which is handled by administrative staff. Lawyers are given simple Excel spreadsheets into which they insert the requested data.
  • How do you track progress? At McKenna Long, they have a portfolio representation (patent prosecution) on a fixed fee basis. They have a collar arragement in place whereby they track the hourly charges. If those charges are within 10% of the agreed fee, then they will charge the actual fee. If the hourly charges are more than 10% above or below the agreed fee, the next year’s fee will be the actual fee minus the agreed fee, divided by two. In order to manage this, they track charges on a monthly basis and have a monthly conference call with the client to see how things are going. This is a method of risk-sharing with the client.
  • How to avoid going over budget? At Dechert, the partners have dashboards that report matter financial data that are updated daily. In addition, they check monthly to see if there are any unforeseen things that have occurred or are likely to occur and need to be addressed. At ReedSmith, they track the variances weekly and then have a 5-10 minute meeting with the responsible partner to discuss these differences and determine if they need to make a course correction in the way the matter is being handled or in the way the client is paying. Do this midstream. Don’t wait until the end of the month or the end of the matter.
  • What non-obvious things should we be tracking? David Hobbie says it’s important to start by asking the lawyers on the matter, what’s driving the cost. With respect to coding, Richard Friedman says to be careful not to include a “general” or “catch-all” code such as “other” because they obscure the necessary detail. This also means that you need the right number of codes that reflect your practice accurately. What’s the best way to validate codes? Do some systematic spot-checking to review the coding and then discuss differences with the partner responsible for the matter.


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