October 2018
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Global Legal Trends – Using LegalProject Management to EnhanceFirm ProfitabilityOctober 19, 2018
Carla LandrySenior Consultant, LawVisionAdvisory Board Member – LPM Institute
© 2018 LPM Institute / LawVision. All rights reserved.
Background
• LawVision history
• Work in project management, finance and related areas
5,000+ trained in LPM (half day to two full days)
Adjunct faculty, interactive workshops, online programs
• Approach to / philosophy about legal project management –not just building a budget
Based on input from academic institutions and PMPs
Intentional use of “jargon”
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Agenda
• Legal Project Management – What Is It and How Firms areSuccessfully Implementing It
• Trends Driving a New Focus on Law Firm Profitability Levers
• Understanding Profitability to Drive Its Impact
Getting Lawyers Focused on the Objectives ofProfitability, Not Lost in the Methodology
• The ROI on Legal Project Management• Obtaining Partner Buy-In to Implement (“Radical”)
Change
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Evolution in Law Firm Management
FirmManagement
PracticeManagement
PracticeManagement
ProjectManagement
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Legal Project Management –What It Is and Why Legal Organizations
Are Implementing It
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The Latest News …Legal project management (LPM) has long since ceased to be amarketing buzz word, optional extra or throwaway requirement in anRFP… GCs want, and expect, law firms to have integrated LPM intoservice delivery... Ideally, the methodology adopted will: (a) beconsistent and standardised across a firm’s offices, practice groupsand locations; and (b) integrate seamlessly with the client’s ownprocesses (on the premise that a firm’s role is to make the in-houseteam’s life as easy as possible)… GCs will gradually expect firms tosupply comprehensive proposals for engagements which accuratelypredict the scope of services against a project plan …
- Jan. 5, 2018, Steven Walker, former GC, Guest post for RossIntelligence blog, “Six things modern GCs really want from their lawfirms”
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The Business Challenge
• Process complexity• Practice and
administrative silos• Duplication of effort• Risks to client
service• Impact to firm
revenue
“A Non-Sustainable Approach to Managing Matters”7
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What is Legal Project Management?
• A process for defining, planning,executing and evaluating matters /projects
• A more proactive, disciplinedapproach to the management oflegal matters which includesapplication of specificknowledge, skills, tools, andtechniques to achieve projectobjectives
• Underlying principle: effectivecommunication and setting andmeeting of expectations
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What is Legal Project Management? (cont.)
• “Not rocket science”
• Most lawyers arealready doing some ormost of this – but notalways with formal,organized approaches
• Essentially consistent,repeatable processes tobring more structure,communication,predictability andmanagement to matters
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Key Elements of LPM
• Upfront discussion of client’s objectives / expectations• Detailed “scoping” of the work – whether for internal budgeting,
an AFA, a quote provided to a client, or optimizing legal spend• Breaking down the work into component parts to staff / manage
the project and develop more accurate budgets• Development of budgets and management of the matter to the
budgets• More active management of the matter throughout
Enhanced project team communication
Enhanced client communications
• Dealing with scope changes throughout a matter• End of matter debriefing / lessons learned
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11LPM Business Case for Corporate Legal Departments
LPM Myths and Realities
LPM is perceived as complexLPM is what lawyers already do,
only more systematically andusing the language of business
Source: CLOC Initiative 2018
12LPM Business Case for Corporate Legal Departments
Myth… A PM spends most of his / her time documentingand updating project plans
Statistic from Wrike.com
Defining and managing the scopeof the work
Making sure all those who need tobe involved are in the loop
Providing status updates
Facilitating project meetings anddiscussions
Communicating meeting minutesand action items
Making sure that risks are addressedon time by the right people
Reality: LPM is 90% About Communication andSpeaking the Client’s Language
90%communication
Source: CLOC Initiative 2018
October 2018
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What is Legal Process Improvement?
• Legal process improvement is a methodology forrefining legal processes to improve efficiency andeffectiveness to the benefit of the firm and / or clients An approach by which you identify, analyze, and improve
existing processes within the organization to meet new goalsand objectives
• Underlying principle: identifying waste to streamlineprocesses and / or make them more consistent inquality
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LPI vs. LPM
• In a perfect world – LPI would precede LPM.
• LPI requires more behavior change than LPM somost firms start with LPM, which also has PIelements in it.
• Both can be implemented with baby steps orthrough more significant initiatives.
• Ultimately, both are critical for high quality, efficientdelivery of legal services.
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Project Management: Key Elements
People
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An Intersection of Disciplines
Budgeting / Pricing
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• Changing client demands and expectations• Increasing competition for legal work• Changing profit equation in law firms
Trends Driving Law Firms to UseProject Management Approaches
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Trends Driving Law Firms To UseProject Management Approaches
• Changing client demands and expectations – pressureto lower costs / increase predictability Dissatisfaction with historic / existing service delivery models of
law firms Pressure on in-house counsel to reduce legal costs – just like
in every other part of their business Expanding role of legal operations and procurement
professionals Project management use in almost every industry / company
so there is an understanding of the benefits it can bring Expectation for increased efficiency without loss of quality
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19LPM Business Case for Corporate Legal Departments
LPM Helps Address the Challenges of the LegalDepartment
Resource utilization improvedAppropriate resource at the right timeBudget to actuals accuracyAlignment between spend and value / outcomesReusable work templates, plans and approachesTrust and transparency among team members
Non-value added (or wasted) timeSurprising outcomes and costsOverall costs and spendTime to completion
Source: CLOC Initiative 2018
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Trends Driving Law Firms To UseProject Management Approaches
• Increasing Competition for Legal Work Alternative legal services providers (ALSPs) competing
aggressively for work historically handled by traditional lawfirms
Aggressive price competition from law firms at all levels of themarket
RFPs asking about project management and processimprovement expertise or other efficiency initiatives
Increased need for real differentiation among law firms in a flatmarket
• Changing profit equation in law firms Changing levers to impact profitability Move to matter profitability as partner comp factor Decline of “mid-size” firm advantage
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Common Reasons for Write-offs / downs– Often Insufficient Project Management
• Communication Lack of communication at outset of matter to clarify expectations
Assumptions not defined for scope of work
Lack of communication among project team to ensure nounnecessary work done
• Scope Changes Lawyer does not discuss scope changes and impact on budget
when they occur
Client assumed work was in the original budget because scopenot clearly defined
• Budget is prepared but is not used to manage actual timeincurred on the matter / not seen as a “cap” the way theclient viewed it
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Common Themes in Claims CostingLaw Firms in Risk Management
• Failure to communicate carefully and often• Failure to explain risks and costs• Failure to manage outcome expectations• Failure to document
Source: ALAS Presentation toLawVision Litigation Leaders
Roundtable
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LPM Helps Enhance Risk Management
• LPM at its foundation is about getting the outsidelegal team and their client (in-house legal andbusiness contacts) on the same page aboutexpectations, scope of work and manner of work /steps to be performed
• LPM is about simple, proactive documentation ofwork at outset and revisions as the matter evolves
• LPM is about checklists, templates, forms, etc.that create more consistency, save time / increaseefficiency and ensure the legal teams (law firmand client) are on same page
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Bottom Line
• Clients want: Better risk management Increased efficiency Decreased legal spend and / or increased
predictability
• Law firms want: Satisfied clients for whom they do meaningful work To maintain or increase profit margins in the new
marketplace
• Matters need to be managed more actively toachieve both.
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If Implemented Correctly, LegalProject Management Drives:
• Greater value to clients / increased clientsatisfaction
• Improved financial performance and optimization oflegal spend
• Greater collaboration and teamwork – within andacross practices / business units and with insideand outside counsel
• Better morale / esprit de corps• Better training and development of your
professionals
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Benefits of Legal Project Management
Benefits to Firm / Team• Improved profitability of
matters• Greater client satisfaction• Increased revenues from
clients• Enhanced risk management• Greater differentiation from
competitors• Greater consistency across
offices• Improved teamwork within
project team
Benefits to Law Department / Client• Greater predictability• Improved communication / “no
surprises”• A more managed approach to
legal work• On budget / on time• Greater efficiencies• Enhanced quality of the work /
greater consistency• Enhanced relationships and trust
with outside counsel
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Understanding Profitability to DriveIts Impact
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The Universe of Law Firm Financials
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IncomeStatement
BalanceSheet
Statement ofOwnersEquity
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A Few Things to Keep in Mind
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Acknowledge
Identify
Understand
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It’s Really a Straight Forward Business …The Hardest Part is Getting Agreement
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• Revenue
• Expenses
• Profitability
Billable Hours Rates/Pricing Realization
Direct Costs Indirect Costs
Margin Analysis Leverage
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Overview of Profitability Analysis
• Profitability has come under intense scrutiny asrealization rates have slipped and demand growthhas stagnated
• Yet relatively few firms are focusing on truemanagement of profits…although this is changingOutsourcing, resourcing, process improvement,
project management, ….• Analyses can be done at a firm, practice group,
office, client, matter, or individual level These types of analyses can be very divisive
• Agreement around the assumptions used in marginanalysis and consistency of approach are critical
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Why Perform Profitability Analyses?
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ProfitabilityAnalysis
StrategicPlanning
InvestmentDecisions
CapacityManagement
Pricing,Compensation
& Accountability
October 2018
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Allocation Methods - Primary Options
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Contribution to Overheadand Partner Compensation
Contribution to PartnerCompensation
Fully Allocated Costs
Revenue(Direct Costs)Contribution
Revenue(Direct Costs)(Allocated Overhead)Contribution
Revenue(Direct Costs)(Partner Comp - or Proxy)(Allocated Overhead)Profit/Loss
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Sometimes, examples provide clarity
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Original Client Team Composition
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• 4 Equity Partners
• 3 Counsel
• 4 Associates
• 1 Paralegal
Total Hours Logged to Client = 20,000
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Client team operating at a loss of $1.5Mper Year
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Recommended Client TeamComposition
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• 1 Equity Partner
• 1 Counsel
• 7 Associates
• 3 Paralegals
Total Hours Logged to Client = 20,000
Same team size, different composition (leveraged model)
© 2018 LPM Institute / LawVision. All rights reserved.
Looking at the Equity Partner
• Cost / Hour = $868• Hours Spent on Client = 460• Total Cost of Equity Partner Time on Client = $399,280• Revenue Collected on Equity Partner Time = $266,300• Profit / (Loss) on Equity Partner on this Client = ($132,980)
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Yet … the new client team compositionoperating at a profit of $1.2M per Year
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So Where Do You Start to Use LPM toEnhance Profitability
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How Can You Get Started with LPM?
• Identify the reasons to change /issues to address (business case)
• Identify a few champions or firstadopters
• Start with a pilot project—throughapplication to a specific matter ortraining a pilot group
• Communicate the successes widely• Start to build internal organization
and support for implementation
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What Leading LegalOrganizations Are Doing inLPM
• Conducting pilots with specific practices / matter teams• Building the business case / lawyer buy-in• Building the internal infrastructure – staffing, tools,
templates / KM, etc.• Training lawyers and others in LPM• Instituting roles for legal project managers – part or full time• Using it to win business / enhance internal or external client
relationships• Using it to improve matter profitability / optimize legal spend• Using it to manage outside counsel
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What the Leaders areDoing in LPM
• Building or implementing sophisticated technology tools (forbudgeting and / or full project management) to support andfacilitate LPM
• Implementing legal process improvement• Building large teams of legal project managers as “internal
consultants” or training large numbers of lawyers / legalprofessionals to integrate it into their day-to-day practice
• Achieving “high” levels of lawyer adoption / use of LPMapproaches
• Using it to build strong internal teamwork and professionaldevelopment
• Using it to “brand” the firm• Integrating matter profitability into partner compensation system
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Common LPM Approaches /Disciplines
• Kick-off Meetings• Stakeholder Analysis• Scope of Work Document• Project Plan
Schedule Communications Plan Risk Analysis
• Budget• Scope Change Discussions / Documentation• Lessons Learned
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What is the ROI on LPM?
• Firms just beginning to track it.• Metrics used:
Revenue generated / timekeepersOut-of-scope work capturedGains from improving processesWins of client mandates
• Two examples of public success stories: Baker McKenzie – 15 million pounds per annum Littler Mendelson – $5 million per year
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A potential metric roadmap
• $ revenue generatedby LPM timekeepers
• $ revenue recoveredthrough Out of Scope
• $ revenue of matterssupported
• $ value of newbusiness won due toLPM
• $ savings due toprocess efficiencies
• $ revenue generatedby LPM timekeepers
• $ revenue recoveredthrough Out of Scope
• $ revenue of matterssupported
• $ value of newbusiness won due toLPM
• $ savings due toprocess efficiencies
FINANCIALFINANCIAL• # timekeepers trained• # portfolio/ workflow/
strategic matterssupported
• # client teamssupported
• # practice groupssupported
• # matters supported• # pitches supported• # ‘on demand’
requests
• # timekeepers trained• # portfolio/ workflow/
strategic matterssupported
• # client teamssupported
• # practice groupssupported
• # matters supported• # pitches supported• # ‘on demand’
requests
ENGAGEMENTENGAGEMENT
• # PM technologysolutionsimplemented
• # reusable budget/pricing modelsdeveloped
• # processimprovements made
• # assets developed(e.g. checklists/ etc)
• %age variance tooriginal budget
• # PM technologysolutionsimplemented
• # reusable budget/pricing modelsdeveloped
• # processimprovements made
• # assets developed(e.g. checklists/ etc)
• %age variance tooriginal budget
EFFICIENCYEFFICIENCY
• # client trainingsessions held
• # client accessiblesolutions developed/implemented
• client feedback/satisfaction scores
• # LPM articlespublished
• # LPM conferencepresentations given
• # awards (shortlisted//won)
• # client trainingsessions held
• # client accessiblesolutions developed/implemented
• client feedback/satisfaction scores
• # LPM articlespublished
• # LPM conferencepresentations given
• # awards (shortlisted//won)
EXTERNALEXTERNAL
Appropriate metrics will be driven by firm culture,data, systems and LPM functional maturity
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Questions?
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Carla [email protected]
202.406.0955
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Thank You