Project Management for Attorneys

Following up on last week's post discussing LegalBizDev's survey of AmLaw200 decision makers, Legal Technology News highlights a crucial component in the evolution of alternative billing:

Project Management in the legal profession.

No one would argue that attorneys currently manage projects every single day. But that's not the same as Project Management. Anyone who's dealt with any sort of construction, from home remodeling on up will agree with the following from the LTN article:

"According to the chairman of a firm with more than 800 lawyers, "... in the world of construction, architects, engineers, and contractors have been working on a fixed-price basis ... for a long time ... There is a body of learning ... about how to estimate, how to contract, how to define scope, how to manage changes, allocate risk, how to manage fee disputes, delays, [and] changes in scope [that could] be adapted to the legal profession."

That's Project Management.

One reason it's important to single out Project Management as crucial to the success of alternative billing is because it is a key skill set in which most attorneys have not been trained.

In fact, not only have they not been trained in it, many lawyers have been encouraged to do just the opposite.

"As a CFO of a firm with more than 1,500 lawyers explained, most lawyers have worked their entire careers under the billable hour model, in which "the more hours that got charged, the more money [they] made. And so they've never really had to manage [budgets]."

Crafting accurate estimates, clearly defining changes in scope, and providing timely discussions about change-orders are the keys to success with "fixed price" billing.

Which raises the very interesting idea of a legal career track specifically for Legal Project Managers, such as the initiative being undertaken by Orrick, Herrington & Sutcliffe.

And, short of a fully committed in-house project manager, it would seem to make sense for attorneys to be trained in the fundamentals that many other industries exercise when it comes to bidding and executing fixed-rate services.

The LegalBizDev Survey

As far as buzz words go, 'alternative billing' is a phrase that is close to the point where the words themselves start to lose real meaning.

Because 'alternative billing' as a concept in the abstract is pointless without acknowledging the vast history of the billable hour, from which any 'alternative' billing must emerge.

Which is why LegalBizDev's recent survey may be an important tool. Their survey is a collection of in-depth interviews with chairmen, senior partners and C-level executives at 37 of the largest law firms in the US about their past use and future plans for alternative fees.

As we discussed earlier, tossing around the term 'alternative billing' is worth little without including real world tools and methods to craft, implement, and track alternative fee structures.

And the LegalBizDev survey is consistent with this opinion, setting out to identify the underlying fundamentals that will make alternative fee structures work for both sides.

Highlights from the survey include:

• Last year, the 100 largest law firms in the US generated approximately $7 billion in revenue from alternative fee arrangements.

• Every single participant said that the use of alternative fees will go up, but there were dramatic disagreements about how much.

• When different firms say they are offering alternative fees, they may in fact have radically different business models and offer totally different types of deals.

• There are nine types of billing arrangements that are most commonly used: risk collars, fee caps, fixed fees for a single engagement, fixed fee menus, portfolio fixed fees, retainers, success fees, holdbacks and full contingencies. These terms are defined in the complete report, along with advice on when and how to use each fee structure.

Positive response to the survey includes:

• “Momentum is building in the marketplace for new ways of charging for legal services. Jim Hassett's new survey summarizes valuable insights from AmLaw 100 decision makers about how the market is changing and what will and will not work in the future.” – Harry Trueheart, Chairman, Nixon Peabody

• “The billable hour’s market share has peaked.. [and] alternative fees are here to stay... This type of sea change in law firms’ fundamental revenue model is a once in a career event.... [This book is an] impressive contribution to defining the 'state of the art' in the land of alternative billing.” – From the Foreword by Bruce MacEwen, Adam Smith Esq.

• “Morgan Lewis is a huge proponent of alternative fee arrangements for both litigation and transactional matters. In the LegalBizDev Survey, senior partners and executives from some of the largest firms in the country talk frankly about what does and does not work. This groundbreaking work provides indispensable guidance that will help clients to understand what their options are and, hopefully, increase their receptivity to breaking away from the billable hour with alternative paradigms and new ways of doing business.” – Richard G. Rosenblatt, Operations Partner for the Labor & Employment Group, Morgan Lewis

The survey is not inexpensive, but it looks like worthwhile reading.

Survery predicts increased hiring. Or does it?

Many in the blogosphere have latched onto a survey released last week by Robert Half Legal stating that 26% of attorneys polled indicated that their firms expect to increase legal professional headcount in the coming year.

While we hate to rain on anyone's parade, a closer look at the numbers doesn't support a whole lot of optimism.

First, let's look at the flip-side of the survey. While 26% said their firms expected to increase staffing, 67% anticipated no change. In other words, more than two thirds of respondents said headcount would remain flat.

That means the profession as a whole is looking at another year with two thirds of employers contributing to the current backlog of unemployed lawyers and new associates.

In fact, the press release touting the study discusses the difficulty firms currently face when they actually do post job openings, because they are overwhelmed with candidates.

"But locating the best candidates may be difficult, the survey results suggest. Forty-one percent of respondents said that it is challenging to find skilled legal professionals in the United States, despite high unemployment rates. Volkert noted that a single legal posting can generate several hundred resumes. "The sheer volume of applicants often makes the process more complicated for hiring managers," he said. "As a result, some firms and departments are relying more heavily on their professional networks, internal referrals and specialized recruiters to identify the best candidates for open roles."

But the real reasons to temper optimism are the results of the same survey from previous years.

It's neither surprising nor encouraging that in better financial times more than half of attorneys surveyed in 2004, 2005, 2006, 2007, and early 2008 expected increased hiring.

What is discouraging, though, is last year's survey. Dated March 26, 2009 -- well into the recession and a mere six weeks after Black Thursday, when law firms across the country began slashing jobs -- the survey found that 25% surveyed anticipated hiring in 2009.

"MENLO PARK, CA -- Despite a down economy and layoffs in the legal field, one-quarter (25 percent) of lawyers interviewed recently said their organizations would be adding personnel in the next 12 months."

Essentially the same number that reported in the affirmative this year.

Unfortunately, we know how last year turned out.

Microsoft Expands Legal Process Outsourcing Initiatives

Legal process outsourcing is one of the more flexible, adaptable trends in the business of law, as it can be applied to tasks as small as individual contract review or as large in scope as all-encompassing departmental or litigation support.

Well, this one is large.

Microsoft recently announced that they are outsourcing multi-jurisdictional legal support work, including legal research.

Why is this significant? Because this is an expansion of Microsoft's earlier test programs with LPO, which means they found the experience efficient, productive, safe, and valuable.

And that is a serious endorsement from one of the most dominant companies on the planet.

Microsoft dipped a toe in the LPO water five years ago when they began outsourcing associate-level IP and patent renewal work to qualified, international attorneys.

If they dipped a toe in the water five years ago, they're wading in now. Because this new agreement is branching out to general legal support work, operating separately from the IP and patent work.

According to Legal Week, "News of the outsourcing comes after Microsoft cut its legal budget by 15% over the last two years, leading to a 5% reduction in headcount. Before the cuts, Microsoft's legal department had an annual budget of $900m (£570m) and 1,050 staff, including 450 lawyers."

Microsoft's arrangement with Indian firm CPA is similar to the legal process outsourcing utilized by mining company Rio Tinto, which involves a team of 18 lawyers handling tasks such as contract review, drafting and legal research.

And this seems to be the sweet spot of legal outsourcing -- utilizing lower-cost yet fully trained international attorneys to complete the more redundant associate-level work, from one-off projects to scalable endeavors featuring teams of attorneys.

Associate Hiring Part II

Following right on the heels of last week's post is a timely first-person account of a recent law school graduate who was not offered a position.

With the backlog of legal hiring, it's not a surprise that the ranks of the no-offers are swelling.

But when those left frustrated and unemployed are coming out of Harvard Law, it puts the difficult situation in a different, more desperate light.

The author offers advice to other Harvard Law no-offers, while confirming the underlying fundamentals that are squeezing all recent grads, summer associates, and laid-off associates:

"1. It’s not our fault. The economy changed unexpectedly, and things are tough all over.

2. In fact, as Harvard graduates, we have more opportunities. Most people encountering employment challenges in this economy are in worse positions than we are.

3. The loss of Biglaw opportunities means we may find something else from which we derive immense satisfaction, and which we may never have otherwise pursued.

4. People with offers but no start dates are in a poor position as well. Even those with deferrals of specified duration face the possibility of an unexpected deferral extension, or even an outright retraction of their offer. In fact, with things as bad as they are, there’s really no guarantee that even those who manage to start work won’t find themselves laid off somewhat soon. Biglaw right now simply doesn’t offer the degree of security it used to offer. Everybody is in the same boat."

It seems safe to assume that five years ago the author of this article would have been offered exactly the job he/she trained for and expected.

Instead, he/she is both a participant in -- and a victim of -- the log jam of future lawyers feeling the reverberations from the Fall of 2008.