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Digest 17

We are glad to present you the 17th issue of the St. Petersburg International Legal Forum Digest and let’s keep in touch!

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We are glad to remind you that registration for the V St. Petersburg International Legal Forum is open. Representatives from Russia, Germany, Italy, France, Belarus, Kyrgyzstan and other countries have already registered.

The topics of the anniversary St. Petersburg International Legal Forum continue the discussions of the previous year while also considering the particularities of the current situation. The business programme 2015 includes over 50 discussion sessions within 7 thematic tracks:

  • International Law/ Rule of Law
  • Private Law
  • Corporate Practice / International Trade / Protection of Competition
  • Litigation and Arbitration Practice
  • Smart Society
  • Cultural Heritage / Public Interests / Ecology / Standards of Legal Profession
  • Investments / Finance

Agenda is already available on the website.

See you on May 27-30, 2015!

Innovation, Project Management, and KM in the Newly Competitive Legal Market

“Lawyers risk of the “be careful what you ask for, you might get it” syndrome”

Ron Friedmann

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This article was first published by the GCResearchClub.com as GCRC Interview: Ron Friedmann from Fireman & Company — Whole Interview (18 Oct 2013)

Abstract: The 2008 economic crash causes a legal market sea change. The previously insulated market of large law firms is now competitive. Large firms struggle to win new business. This is beginning to drive innovation, including project management and better use of knowledge management.

Our latest interview is with Ron Friedmann, a lawyer by training who has spent over two decades working in the legal market. He has extensive experience as a legal market consultant, senior manager in large law firms (CIO at Mintz Levin and practice support at Wilmer Cutler), and marketing professional at two legal market software companies. Ron currently works at Fireman & Company, a legal industry-focused management consulting firm, as well as blogging on his professional website, Prism Legal Consulting.

You work in particular for innovative law firms and corporations. We certainly talk a lot about law firms having to be more innovative in the modern market. How important do you think innovation is in the law today, and how much do you think this is driven by clients?

With demand flat and with clients now having many other purchasing alternatives — from bringing work in-house to using smaller regional law firms, new-model law firms, and alternatives such as LPOs or companies like Axiom — General Counsels can put a lot of pressure on law firms. Some specifically ask for innovation.

In this era of scarcity, firms that want to compete for business will have to innovate. It’s no longer enough just to be a good lawyer, or to have a range of practice areas. I think firms must offer innovative services to create more value, perhaps even to survive and prosper.

But it’s not clear how much that is happening yet. Some firms can perhaps avoid doing so: those at the high end in the US, and the Magic Circle firms in the UK, will be able to coast for some time on their brand names. At the opposite end, some firms operating in long-competitive practices have been very innovative. But there’s a vast middle ground of Am Law 100 and 200 firms that I look at and wonder, how are they are going to survive.

So we’re now in in a period when clients can be increasingly choosy. You see signs that some firms recognize this. They are building new practices, becoming more dedicated to project management and pricing and so on. But I think we’re just at the beginning.

Do you think the main innovations are solely to do with project management and pricing, or are there other innovations?

There are others. If you look at the traditional law firms that have innovated, the two that really come to mind are Littler Mendelson, which is a Labour law firm, and Seyfarth Shaw, which also has a big labour law practice. Seyfarth Lean received tremendous publicity for their process improvement. And Littler has won awards for using technology to manage high volume employment cases. Littler also recently released a Neota Logic-driven interactive adviser freely available to businesses to help them assess the impact of the new Affordable Care Act, also known pejoratively in the US as ‘Obama Care’.

It’s interesting that you mention Seyfarth, because we were looking at them the other day. This idea of process management, and process mapping as well, seems to be becoming a big area. How much do you think a lot of legal expertise is going to be going into these online Lean programme systems?

The Lean Programmes are not necessarily online. That said, Seyfarth does have a group of legal technology experts who do innovative work. I know Andrew Baker, who heads that group, and he’s shared a bit with me. So I know the firm is definitely backed by serious bespoke technology, but Lean is a lot more about how lawyers practise.

In general, however, you find resistance to change across the board in large law firms. Lawyers as a whole resist changing how they work. It’s always a question of person-to-person or “hand-to-hand combat” to encourage lawyers to change.

It’s not enough just to have new technology; lawyers have to change the way they work. They have to change the way they service clients, and Seyfarth and Littler are certainly way ahead of many other firms.

There are of course other innovations coming from outside the traditional firms. For example, a new-model law firm like Clearspire, which has a different structure than most law firms, is built from the bottom up to take advantage of technology. It shows what is possible.. The changes we have seen to date in the overall market, however, are still in the margins, which is surprising to me.

One of the big areas where change is already happening — and this is very much client-driven — is billing. Many argue that hourly billing is starting to wane as the main model. How much do you think General Counsels in particular are driving this demand from clients for alternative fee arrangements?

GCs are driving quite a bit of the change in pricing because they’re demanding better deals and more value. They struggle, however, with what ‘more value’ means, and too many GCs are still satisfied with a discount as opposed to changing the structure of the pricing. Some firms, seeing the writing on the wall, are taking the initiative and offering alternatives.

If you look back two years you might have found literally half a dozen large law professionals focused on pricing. Today there are two hundred, and they’ve formed their own group under the auspices of the Legal Marketing Association. Members range from mid-level finance managers to senior pricing ‘tsars’ who regularly interact with clients and partners.

The rise of the pricing professional is driven primarily by clients demanding alternative fee arrangements, but it’s also it’s driven in part by firms recognising that they have an opportunity to differentiate and to win new business.

Yet distinguishing cause and effect is difficult. Firms receive RFPs demanding AFAs, so they start offering it. But the data in the legal market — when you look at surveys — suggest that real AFAs, where there’s a different structure and different risk sharing arrangement rather than just discounts, are still a relatively small per cent of the total spend.

Do you think with billing, a lot of the focus goes on the actual cost that billing racks up, or do you think a lot of it’s also to do with the changing way in which lawyers work, in that they’re working more transparently so that clients know what they’re getting for their money, even if they’re still paying quite a lot for that service?

Transparency is absolutely part of the impetus behind legal project management, especially when, as you say, it’s still more traditional billing. It’s about clients agreeing to plans up-front. In effect, they’re saying, “We don’t know how much this should cost exactly, but let’s see a budget and let’s see evidence that you’re actually managing the matter and putting together a plan and then following the plan”. So legal project management is one way to improve the traditional billing model and create some more transparency and efficiency.

Project management and budgets though, are still new and still evolving. For example, twenty years ago, when I was in-house at a law firm, a partner and I put together a very simple — with the then-available technology — budgeting tool. When we talked to litigators about budgeting, they were just mortified at the idea that anyone would even consider a budget. Their reaction was “First, why would I bother with a budget, and second, even if I could think of a reason to do so, there’s just no way I could predict enough to put one together.”.

My view then and my view now is that a plan is a plan and we know the plan is surely going to be wrong, but it communicates what you think at a given moment in time — it’s a way to communicate about likely events. When you compare actuals to budget, you start learning where you guessed wrong, where unexpected events developed and now, here’s what those variances mean going forward. It’s a discipline that some lawyers have had all along, not always manifested in formal plans, but in their way of thinking and their way of managing cases. Some have been pretty good at it, with or without formal tools, but for many partners in charge of matters, their version of “running” a matter is chaos.

LPM is a way of trying to standardise running matters, irrespective of the billing arrangements, in a way that is more systematic and more transparent, and also more logical and specific in assigning resources.

Resource allocation can improve because as lawyers start budgeting, they may realise, “Well, do we really need a seventh year associate here? Can we have a third year associate? Does this even need a lawyer or can a legal assistant do the work? Is this work really necessary?”

The formal planning also helps lawyers see if perhaps they are over-investing in the work. For example, as a partner puts a budget together, she may see, for example, seven depositions planned. Seeing it on paper might cause both her and the client to say, “Well do we really need to do those seven depositions, maybe five are enough”

Tangible project management has obviously been around in most industries for a long time, but it’s only now becoming more explicit, certainly as a way of making a matter more obviously project managed. What kind of project management do you think the legal industry, as it is, is looking to take up now, because obviously you get different types?

I’ve helped one of my clients as a subject-matter expert, on a consulting basis, develop legal project management software. In thinking through functional requirements, I’ve been involved in many discussions with law firms about their requirements for day-to-day legal project management. Lawyers want straightforward tool that helps them track day-to-day how the matter is going.

So legal project management is going to be at the opposite end of the spectrum from the industry that invented project management, which is construction. Construction project managers can make good use of tools like Microsoft Project. That software is complex, designed to handle multiple dependencies. I don’t know a lot about construction, but, you don’t want the pipes arriving or the electrical systems arriving before you get to a certain point in having poured concrete. The sequencing of materials and specialist labor is highly dependent, one step to the other.

The dependencies in legal matters are not nearly so intricate. A lot of work happens in parallel. To be sure there are dependencies, but they’re not that complicated to track. For example, you’re not going to start preparing for trial until certain things happen and people in the team sort of know when that is through the ordinary course of communications. Legal project management will be lighter weight than in other industries and designed more around monitoring key tasks.

Within all of these projects, do you think the in-house lawyer can become the kind of project manager?

I don’t see that and I’m not sure that’s a model I would aspire to if I were a General Counsel. In-house counsel may need to become project managers for the work they do in-house, but if I’m a GC retaining a law firm, what I want to do is have confidence that my law firm has a project plan, see evidence that they’re tracking against that plan, understand when the actuals deviate and what that means and why. But I don’t want to have to be the project manager — that’s why I’m paying someone else. The expectation is and should be that law firms will take care of that and share some of the project management outputs, if you will, with the client.

Technology obviously ties into project management to an extent. How do you think, within every project, the client or their GC can employ technology to make sure that the project being done by the law firm and being managed by the law firm can be made more accessible and transparent to them?

The market is still struggling. From experience in the legal market and with legal technology, I see too often that Lawyers risk of the “be careful what you ask for, you might get it” syndrome.

For example, in the early days of electronic billing, in-house counsel asked for too much information and they got it and they weren’t able to do very much with it. There’s a cost to providing information for the provider and there’s a cost to consuming information for the person requesting it. I don’t think we’ve arrived at a state yet where we know the right amount of sharing.

If I’m doing Project Management, do I think it’s a good idea for a client to have complete transparency? I’m very much an advocate of transparency but that doesn’t necessarily mean the client should want to know everything, every day. Tools will emerge to share high-level indicators of how a matter is going, showing if certain key tasks are being accomplished, and, if it’s a traditional billable matter, being accomplished within the budget that was set. If there are any variances, reports will show why. And the ‘why’ may be unexpected developments. Or the ‘why’ might be, “well, we just didn’t do such a great job estimating, and we’ll try to do better next round”.

In project management there are a lot of questions about the right level of information to expose to a client and how much vetting to do internally before sharing. If you’re doing traditional billing, we know that law firms will review the amount of hours and may do write-downs or adjustments. Do you want to share information prior to that type of review and adjustment process?

Long-term we’ll see portals of various kinds, or extranets, deal rooms, call it what you will, where clients will be able to see how their matters are going. The vision I’ve had for a very long time would be that if I’m the large corporate law department, I would run my own portal and I would get data feeds from all my law firms and the data would be standardised, and I could suck that data in from across my law firms and present it as a single portal internally. I’m not sure how many people share that view, though. The idea being, again, even if I only have a panel of six firms, and if I’m dealing with each of those six firms, do I want to have to log into each of those six firms to see how they’re doing? Or can I have a single place where I go and see how matters are progressing, across my six-panel firms. So long term, I see project management reporting across firms consolidated in one place for the client.

© 2014 Ron Friedmann. All rights reserved.


Coming in the next issue:

The next issue of the Digest to be launched on 28 January will feature the continuation of the article of Ron Friedmann dedicated to innovative approaches towards project management in a law firm, as well as will keep you informed about the V SPBILF news.