Enhancing Legal Operations by Integrating LPM Techniques with Matter Management, E-Billing and Financial Analytics
This article was first published in the October, 2016 ILTA Financial Management White Paper which can be found at http://epubs.iltanet.org/i/742458-fm16/11.
For over 25 years, in-house lawyers have been using matter management systems (MMSs) to store matter-related information, track critical financial and performance data, automate invoice processing, and report project progress/status. An MMS is typically employed to relieve in-house counsel of some of the administrative tasks associated with managing outside counsel. These tools have been enhanced over the years to incorporate a broad range of features and functions, many primarily focused on vendor management, to where they are now often referred to as enterprise legal management solutions.
Law departments have tried to use MMSs to support vendor collaboration and build trust between in-house lawyers and outside counsel, but this has not turned out to be effective because this is not the purpose of an MMS. What general counsel are seeking is behavioral change, not just efficiency gain and spend control; thus, in-house counsel and outside lawyers should turn to legal project management to achieve greater client satisfaction.
The Limitations of an MMS-Only Approach
MMSs are based around the core concepts that outside counsel management should involve front-end budget development, key matter data capture and auditing for compliance with outside counsel guidelines. This approach has several limitations:
It assumes that outside counsel can budget effectively, which may or may not be the case, and that outside counsel is not delegating the task to an associate or paralegal who lacks the skill and knowledge to itemize the matter’s time and resources.
It fails to acknowledge the administrative investment of both in-house and outside counsel if the budget is poorly conceived (i.e., if more changes require evaluation and approval).
It does not take into account that lawyers rarely engage with an MMS, so data input is typically performed by administrative personnel rather than those most familiar with the engagement.
It assumes that outside counsel’s budget includes work not compliant with outside counsel guidelines, necessitating a burdensome bill auditing, write off and appeal process.
Data analytics is all the rage. Software vendors, consultants and legal process outsourcers (LPOs) have developed and are actively promoting tools promising better management of legal matters and improved outside counsel oversight. With its ability to capture myriad financial and performance information, manipulate them in ways once requiring an incredible amount of man-hours and present them in a dashboard view to aid in visualization of challenges and opportunities, one would think data analytics was the ultimate management solution. And yet Mitratech’s 2015 “Catching the Wave” white paper shows that only 36 percent of firms with over 40 attorneys, 22 percent of firms with 10-39 attorneys and five percent of firms with one to nine attorneys are using legal analytics software. If analytics can be used to transform the interactions of in-house and outside counsel who participate in legal operations, why is it so rarely used?
The underlying cause of lawyer dissatisfaction with practice support technologies such as an MMS is their overreliance on the data within them to provide desired behavioral change. Having tools to aid in financial analytics does not support vendor collaboration; nor does it build trust between in-house and outside counsel. The process is merely reactive, only aiding decision-making once the damage has already been done. It is like asking the doctor to treat only your symptoms rather than the underlying disease. What cure allows us to achieve desired operational excellence?
One answer lies in a renewed focus on people and process via legal project management (LPM) coupled with improved data capture and financial analytics.
The Irrational Belief That Process Improvement
Is the First Step
Most people understand that process improvement initiatives will provide a positive outcome. Six Sigma, Agile, Lean, TQM…the landscape is full of false prophets claiming these techniques can achieve lower labor costs and mitigate risk. The reality is that not every lawyer or law firm has the skill, expertise or time to apply these techniques and dissect an engagement. Implementing process improvement requires a team that is ready, willing and able to invest the time necessary to focus the microscope on their delivery methods to identify waste and opportunities for improvement.
According to Lambert and Rueff in “The Power of Legal Project Management”:
“While both process improvement and project management offer great opportunity for legal professionals to improve their service delivery model, improve client retention, and win more new business, to date, more lawyers are adopting project management approaches first because it requires less behavioral change. To implement LPM, you do not have to be convinced of the need to undertake an entire overhaul of a type of legal work as would be done through legal process improvement (LPI).”
While process improvement offers techniques for determining the best way to carry out a work process, LPM offers a straightforward step-by-step improvement methodology that can be employed in any matter (litigation or transactional) to define, plan, execute and evaluate projects (i.e., matters). LPM does not require the unraveling of all processes associated with the delivery of a legal service, but instead ensures the lawyer or team develops an accurate, realistic budget and actively manages the budget, schedules, staff and deliverables throughout the life of the matter. LPM applies more discipline to the initial engagement with the client and encourages timely monitoring to ensure that the objectives of the client are satisfied.
LPM: It Is Much More Than Efficiency
LPM is a method for improving efficiency in the management of legal matters. Yet many still believe it is nice but not necessary, particularly when compared to the value behind matter management, e-billing and financial analytics. Most in-house lawyers believe the cost savings to be realized by an MMS overshadow the potential savings of LPM. How can the impact of soft dollar efficiency compare to that of hard dollar cost savings?
Thinking of LPM only in terms of productivity and efficiency gains completely misses the point. LPM is more than just doing things better; LPM is about changing the underlying dynamics of the relationship between in-house and outside counsel. Let’s look at this in the context of the three main stages of good legal project management:
1 – Development: Identify client needs and develop a project plan. This allows us to do a better job of communicating with the client upfront to set expectations, clarify project details and define parameters. Better scoping avoids misunderstandings and ambiguity of work to be performed. All of this upfront work is critical to the development of a reliable budget, which not only provides the client with clearer expectations of potential legal spend (and therefore with the ability to make strategic decisions about the defense or prosecution of matters), but also serves as a management tool for the team who will work on the matter. Just as important, development leads to cost savings by identifying non-value-added activities for which general counsel will not pay.
2 – Execution: Implement the client’s goals and communicate status. Execution done well results in significant savings by removing waste, such as high cost, low value and duplicative efforts. Proper execution also builds trust between the client and firm. The relationship changes from one of wariness and cynicism to “management by exception,” where only significant deviations are the focus of client managers. Execution further reduces cost by reducing the time spent overseeing project resources.
3 – Closure: The measurement of client satisfaction determines the degree to which services meet client expectations. Measuring and discussing work performance reduces costs of the next development effort by accounting for lessons learned, and it forces outside counsel to recognize where they stand in the eyes of the client, which is critical in maintaining a good ongoing relationship.
While designed to achieve performance efficiency, risk avoidance and/or cost reduction, LPM is really about client satisfaction and setting expectations before work begins. Through LPM, the relationship between in-house and outside counsel changes from an audit-driven reactive response to a proactive partnering based on clarity, transparency, confidence and trust.
Matter Management ≠ Legal Project Management
Rather than Lean, Six Sigma or other process improvement methodologies, corporate counsel would be best served by focusing on their most important operational procedures:
- Daily matter administration
- Work allocation
- Oversight of internal resources
- Building trust with external partners.
LPM tools and techniques are the means for doing just that. Unlike data analytics, the LPM discipline is proactive in its approach and specific in its focus on standard deviations that require further analysis and action.
This does not mean LPM obviates the need for MMS solutions. You cannot manage what you cannot measure, and having the tools to store data, measure performance and communicate status complement good LPM processes. LPM is as much about people and process as it is about technology. To focus solely on implementing an MMS (technology) without LPM (people/process) would not provide desired behavioral change.
By way of budget prioritization and for those yet to deploy an MMS, it is best to begin by establishing a solid LPM foundation by creating development, execution and closure policies and procedures. For those who already have an MMS in place, focus your efforts on building out good LPM processes. Consider the following formula for success:
Operational Excellence = MMS (technology) + LPM (people/process)
Adding legal project management will provide a higher state of operational achievement than matter management alone. One without the other is just treating the symptom without enabling the cure. ILTA
Scott Rosenberg is Managing Director and Corporate Counsel of LegalShift, LLC. He is the former senior manager of legal operations at Kraft Foods Group and managing director of Huron Consulting Group’s legal business services division. He is certified as a Project Management Professional (PMP) and in the Toyota Production System (Lean). He can be contacted at [email protected]
David Rueff is a practicing attorney and Legal Project Management Officer at Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, where he works to implement the firm’s legal process excellence initiatives. David is certified as a Project Management Professional (PMP) and in the Toyota Production System (Lean). He can be contacted [email protected]