Project and knowledge management, legal costs and the wild-cards

 

ProjectManagementFeatureProject management has been a hot topic in the legal context over the last few years and many law firms have taken steps to introduce project management techniques into the conduct of their legal matters. This move is seen as a tangible step towards embracing the ‘new normal’ of the changing landscape for legal services, where clients are seen to expect ‘more for less’.

What is project management?

To put simply, project management is the discipline of initiating, planning, resourcing, implementing and monitoring the completion of specific tasks.

There are many models of project management with varying numbers of phases (most often four or six). Generally it involves:

  • an initiation phase, which, in a business context, would be the stage at which the project is thought up, while in the legal context you can think of it as the engagement of a law firm by a client;
  • a planning phase, in which each step to be taken to bring the project to conclusion is laid out and broken down into separate tasks, timelines and responsibilities and resourcing is established;
  • the implementation phase, during which the steps and tasks identified in the planning phase are performed by those individuals responsible for them, within the timeframes set down in the plan;
  • the monitoring phase, which, in many respects, overlaps with the implementation phase and involves the monitoring and control of the progress of the project against the plan, ensuring that tasks are performed in accordance with the plan and the timeframes established and that updates are made to the plan to accommodate unanticipated issues that may arise during implementation; and
  • finally, the closing phase, once the project has been completed, which focuses on capturing and analysing the experiences and learnings from the project, so that similar projects in the future can take advantage of the knowledge gained by the team.

Within the project management framework it is also important to consider interrelated matters such as appropriate technology, document management, communication (internal and external), reporting and knowledge management; all essential components of a successful project. For example, knowledge management is a significant component because it ensures that appropriate knowledge, whether experiences, processes or documents, are captured, documented, organised and made easily accessible, which will result in new efficiencies, economies of scale and competitive advantage.

Why law firms?

By imposing the structure of project management techniques over legal matters … personality and matter management issues will be addressed and, hopefully, controlled.

Lawyers are skeptical and autonomous creatures with strong abstract reasoning skills, a sense of urgency and endless self-criticism. These are all traits you want in a competent lawyer but, unfortunately, these are also the traits that will make them move with urgency to progress your matter, to think about every possible pitfall of the case and analyse them tirelessly, but not necessarily in a very consultative style. These are also the factors that can cause timelines to slip and costs to blow out, even if it’s all done in the name of ensuring that you receive the best service possible.

By imposing the structure of project management techniques over legal matters, it is suggested that many of the above personality and matter management issues will be addressed and, hopefully, controlled. The matter will be planned, issues will be laid out well in advance, the spotlight will be focused on the most salient aspects of the case, work will become more efficient and streamlined and will progress along the planned timelines, resulting in better communication, greater transparency and reduced costs without compromising quality.

Pricing

The introduction of project management at law firms is also likely to have a long term effect on the pricing of legal services. If learning from project managed legal matters is collated and analysed and knowledge is captured, organised appropriately and made easily accessible to all lawyers, over time, law firms will be able to identify cost patterns and use the information to confidently and reliably price engagements and even step beyond the much maligned hourly rates (once enough data has been compiled).

But my legal costs are still going up!

… law firms implementing project management and reducing the cost of conducting matters will not be the miracle tool …

Of course, law firms implementing project management and reducing the cost of conducting matters will not be the miracle tool for for reducing legal costs for business. In the course of my profession, and also my private life, I have the privilege of being exposed to people from the business world, from the very top executives to the front line employees and in-house counsel. Over the years I have collated and distilled an interesting variety of corporate anecdotes that may go a long way to explain why legal costs are still increasing in some organisations, even in a climate where hourly rates have been largely flat for some years now and significant discounts have been extracted from law firms.

First, many companies that have been at the forefront of encouraging law firms to employ project management techniques to increase efficiency and reduce costs, have themselves been less than consistent in utilising those same techniques when running their own projects. I have heard many stories of significant corporate projects taking off without any, or with less than appropriate, planning, unecesarily resulting in complex, and expensive, legal issues that could have been avoided by proper project planning.

Second, many companies conducted repeated redundancy programs over the last few years focusing on achieving a flatter corporate structure, resulting in the disappearance of many middle management roles, considered unnecessary in the new structure. During the same process, many companies have also shed employees who have been with their respective organisations for a long time. I have been told repeatedly that losing many of these people had a very strong effect on companies’ ability to perform at an optimum level. Due to a lack of proper project and knowledge management history, a significant amount of experience and institutional knowledge has been lost during these redundancies and the loss of middle management compounded the effect of this loss by an inevitable reduction in the supervision of more junior staff who does not necessarily have all the required experience and knowledge. Consequently, I am told that at some organisations errors and mistakes occur more frequently than before, again, resulting in complex, and expensive, legal issues that could have been avoided by proper planning and supervision.

Third, many companies have moved away from using a single ‘trusted’ legal service provider to a panel system, whereby a varying number of firms are engaged to be on a legal panel and work is sent to the various panel firms as determined by the person responsible for the allocation of legal work. I am told by various in-house counsel that the ‘panel system’ was born out of business pressures to reduce costs and the application of traditional procurement principles (the suitability of which for legal services has been brought into question), including a focus on encouraging price competition, by tendering panel positions and pitting law firms to compete with each other for those positions. However, it is arguable that, by splitting the legal work, companies do lose the benefit of the economies of scale that could otherwise be offered by a law firm. It also means that law firms doing the work, depending on how often the panel is tendered and rotated, may still be coming up to speed on their new client’s business and thus may be working in what can only be described as a vacuum, inevitably increasing the costs of doing business and potentially outweighing the presumed benefits of competitive pressures. Some in-house counsel also noted the growing complexity of managing legal work across a number of firms as a distinct negative.

… your law firm cannot magically reduce your legal costs, but they can help provided that you also take appropriate steps …

One in-house counsel offered up an interesting analogy based on his own experience, which he called ‘an inexplicable, yet true, golden rule’: ‘when you have more providers for a service, overall you are likely to spend more money than if you have less providers’. He then shared what he considered to be an analogous manifestation of this strange ‘golden rule’, with a story about his personal credit cards. He noted that there was a time when he had four cards, but now he has only one. For reasons he was never able to ascertain, he used to spend much more money when he had four cards than he does now with only one in his wallet …

Thus your law firm’s rates may have plateaued and you may have negotiated significant discounts, but your legal spend is up because there may be more mistakes within your organisation resulting in legal issues that need to be briefed out and the savings you extracted through holding rates down and discounts may be outweighed by the factors noted above.

In conclusion, your law firm cannot magically reduce your legal costs, but they can help provided that you also take appropriate steps.

Law firms also have their work cut out for them and project managing matters is but just one small piece of a very complex puzzle to profitability and survival in the long-term.

The ‘new normal’

Law firms also have their work cut out for them and project managing matters is but just one small piece of a very complex puzzle to profitability and survival in the long-term.

For example, there is plenty of anecdotal evidence of law firms treating knowledge management as an entirely disposable, discretionary overhead. During the economic upheaval of the last few years many law firms have experienced significant reduction in headcount and resourcing devoted to knowledge management. This real-world development contrasts sharply with processes inherent in truly living the ‘new normal’, including project management, which are heavily dependant on a healthy knowledge management function.

Then there are the two primary costs drivers of law firms: salaries and premises. Salaries are perhaps the most complex of these two. I say this because solutions for controlling the costs of office space are at hand and are capable of implementation in the medium-term, even if largely ignored … for now.

Salaries on the other hand are more vexed, partly because the commitment and costs involved in obtaining a law degree and partly because society has developed an age-old system whereby prestigious professions are rewarded by above average returns for their skills, and the very often incredible long hours worked in order to provide the high quality of service expected of them. This in return attracts the best and brightest, which is critical if the high standards of a profession are to be maintained.

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