LegalBizDev

The latest post from Jim Hassett’s blog Legal Business Development.


Task codes and budgeting: What works and what doesn’t (Part 5 of 7)

In our work coaching lawyers about how to use task codes, one of the most interesting innovations we’ve seen was from firms that have created a special code to internally track work that fell outside the scope defined by each engagement letter.  This led to the sixth and final recommendation from our research:   Create an internal code for work that is out of scope.

At the beginning of every matter, lawyers should be asking clients about their goals and expectations so that the legal team delivers what the client needs and is willing to pay for. A failure to get a clear understanding at the beginning of a matter can lead to unnecessary work, strained client relations, and ultimately to reduced realization and profitability if clients refuse to pay their bills.

Anyone who has ever worked at a law firm knows that a clear definition of scope at the beginning of a matter often simply does not happen. Many lawyers are impatient problem solvers and they like to just jump in and start working. In our Legal Project Management Quick Reference Guide, we quote the executive director of an AmLaw 100 firm (who preferred to remain anonymous) about the ambiguities in a typical engagement letter:

The scope of work often contained in our engagement letters is generally no more than one or two lines. Lawyers are missing an opportunity to clearly specify the scope of what is included in each matter and what is not.

And even if an engagement letter is well defined, there is the question of who sees it. A senior executive at a different AmLaw 100 firm (who also preferred to remain anonymous) recently did an informal survey of senior associates during a talk he gave on LPM. He asked very simply, “How many of you have seen the engagement letter for the matters you’ve worked on lately?” Only one in four raised their hands. To put it another way, three out of four of these lawyers had no way of knowing what was in scope and what was not. When this executive later shared those results with a group of partners, “they were horrified.”

Any system that requires lawyers to classify some hours as out of scope starts with a huge benefit, simply by requiring lawyers to be clear about the distinction.

At the beginning of key matters at Bilzin Sumberg, they now post the statement of scope on their intranet, where every team member can review it. Then lawyers are required to record each hour worked under two different codes in their accounting system: one for work within scope and the other for work that falls outside scope.

As Bilzin Partner Al Dotson summed it up:

Keeping the scope of work top of mind has many benefits. The tactic of tracking out of scope work requires:

  • An understanding by all billers to the file as to what the scope of work is
  • An ongoing recognition of the status of the matter and when a task is out of scope
  • An understanding of the protocols to be followed when out of scope work is requested or done

This benefits both the client and the law firm and often is the basis for clearer communication.

The idea of having a separate code for work that is out of scope is directly related to one key goal of the entire task code movement -- to improve cost estimates before similar matters begin:

If the codes are in place for long enough, the firm can start using them for practical purposes. For example, the litigation department may be able to carve out certain components of litigation that are conducive to fixed fee work. They may then be able to go to a client and say, for example, that they will do a series of depositions for a certain fee.

But this isn’t easy. As another interviewee summed it up:

It takes a long time to build a reliable history of transactions. The more often lawyers use this system, the more data there will be and the more useful it will be. At the start, we thought it would enable us to just give our clients an estimate right on the spot, but every experience and every deal is different and has its own story. Not all transactions will develop the way you expect them to happen.

How well are firms using the data they do have? Several noted that there is room for improvement:

Our firm right now does not do such a good job of leveraging the fee data that it has and tracking all the trends. For example, we should have enough data to answer the question of how many hours are typically needed to respond to a motion to dismiss. But this process is usually being done only on an individual basis, where a lawyer will compare a present case to a past case. The firm could be using “Big Data” gleaned from its past experiences more effectively. In fact, that is one of the firm’s current projects. We have perhaps 1,000 cases and matters with phase code information, so there are resources to generate comprehensive data from those cases and matters…. All of that data is in the firm’s hands to slice and dice. Just seeing the range, the highs and lows, would be quite eye-opening.

Based on our experience, we would recommend resisting the urge to “slice and dice” the data and instead focus on a “less is more” approach that makes it extremely easy for lawyers to get the big picture quickly. This could be as simple as a one-page summary for each type of matter listing the total costs of all similar matters in the last few years, with quick comments on any factors that appeared to raise or lower the cost.

The shorter that each summary document is, the more likely it is that lawyers will use it. Several pages of task summaries will have much less impact than one page listing key recent matters and the total cost. Even if people see only the wide variation, it will move the conversation forward.

Of course, even if a firm had a crystal clear understanding of what a motion to dismiss would cost at its standard rates, that does not mean that they can charge that price in the current highly competitive marketplace:

The task code system lets you know what the deal is worth and how it should be valued in an ideal world, but you don’t always bid that. You will often need to bid lower to try to land the business.

Nevertheless, phase and task code analysis can also be helpful in other ways. As one expert put it:

Ultimately, it’s not just a matter of adding up the numbers. The firm can use the data to add ideas and to maintain and increase profitability by learning to work more efficiently.

This series was adapted from the Fourth Edition of the Legal Project Management Quick Reference Guide[1] which will be published this fall.

 

      


A free research report you can’t afford to miss

If you are the slightest bit interested in how the legal profession is changing and what it means to you, I hope you’ve already seen Altman Weil’s recent release of its annual Law Firms in Transition survey. But just in case you’ve been a little busy and missed it, I highly recommend that you download it today. The report costs nothing, but failing to find time to plan for the future could cost you quite a lot. (Full disclosure: LegalBizDev is a strategic partner of Altman Weil, but I would write exactly this same post even if we weren’t.)

The summary of the opinions of 356 managing partners and chairs is just a few pages long and covers a broad array of areas, with insights and recommendations focused on five key findings (p. i):

• Unreliable demand
• Surplus of lawyers
• Inefficient delivery of legal services
• Proactivity as a competitive advantage
• Resistance to change

The first question that appears in the detailed section of the report is, “Which of the following legal market trends do you think are temporary and which will be permanent?” The top three answers were more price competition (95% think this is permanent), focus on improved practice efficiency (93%), and more commoditized legal work (88%) (p. 1). Of course, all three can be addressed through legal project management (LPM).

But when Altman Weil asked the same group “Has your firm significantly changed its strategic approach to efficiency of legal service delivery?” only 44% said yes (26% said no and 30% said changes were “under consideration”). To put it another way, the majority of firms know what the biggest challenges to their future are, but they are not doing much to address them.

Personally, I think the true problem is much worse, and that most respondents exaggerated their efforts when they answered this question. I spend my life talking to law firm leaders about what they are doing to increase efficiency, and my guess is that the percent of firms that have made significant changes is closer to four percent than to 44.

The gap between what firms should be doing and what they are actually doing has existed for years, and the survey also dug into the details of what’s behind the problem. Authors Eric Seeger and Tom Clay concluded, “The biggest impediment to change, identified by 64% of law firm leaders, is that partners resist most change efforts” (p. vi). As a long-term strategy in a profession where client demands are changing rapidly, that’s a great way to insure that your job will be in danger.

The survey results include considerable documentation of the trouble that is already here, and of more trouble around the corner. For example, another question asked, “Which of the following activities is your firm proactively initiating to better understand what clients want?” (p. 9). I found the results particularly interesting because last fall, Altman Weil’s Chief Legal Officer survey asked for the client perspective on the exact same list of activities: “Rate the value to your law department of the following things law firms can do to better understand your organization.”

Comparing the answers revealed that many law firms are wasting their time doing the wrong things. “Conversations about matter management efficiency” ranked second in value for clients but only fifth among the things that firms were actually doing. “Post-matter reviews” ranked fifth for clients but was number 9 out of 10 for law firms. Of course, both of the factors that clients rated highly are key elements of LPM.

Meanwhile, some of the things that law firms are doing with their marketing time and money are of very low value from the client perspective. “Law firm participation in industry groups and events” ranked #2 for law firms, but #8 for clients. And “visits from law firm management” was #4 for law firms, but finished dead last in value – #10 out of 10 – in the eyes of clients.

In summary, this free report includes the best available data on what your competitors are doing in a wide variety of areas, including staffing, headcount, and pricing. So what are you waiting for? Download the complete survey now and turn directly to the sections that matter the most to the future of your career.

      


Task codes and budgeting: What works and what doesn’t (Part 4 of 7)

The 12 experts were interviewed were far from a random sample. We purposely chose people who were leaders in this area. But even among this group, most recommended that firms should use phase or task codes selectively rather than on every matter:

Probably about 30 percent of our firm’s cases are phase coded at this time. The firm requires phase coding for all new matters involving two of its largest clients, because these clients require budgets by phase for all their matters.

Only about 10 percent of our matters are coded, but they represent 35 percent or so of the dollar value, mostly in litigation. And as many as three-quarters of the cases that are task coded are done so at the direction of the client, while the other one-quarter are done at our direction.

This is not done on a firmwide basis, but rather only when the need arises. So if a particular client has a large portfolio of cases or matters and wants its time tracked, the firm will track that time. The firm is, however, considering making the use of phase coding mandatory for certain types of cases.

In fairness, some of the experts we interviewed do think task codes should be used for every matter:

My firm task codes everything. My team is responsible for setting up the task code system, deciding what codes should be used, eliminated, and added. The finance people have roles in loading the task codes in the system, the information systems people use them for reporting, and the lawyer-facing people are looking at task codes and how they interact with the work the lawyers are doing. At first, there were lawyers who were reluctant to do this, as they didn’t have clients who required task codes. But now we make the process as easy as possible with lots of training, the use of pull-down menus, and so on. Eventually, even these reluctant lawyers need a robust data set, and it’s interesting to me that they see value when they see a number based on this data.

Another interviewee was not as far along in the process but was optimistic about the future:

I am helping to lead the firm’s efforts to induce all partners to use our template and task code system. In 10 years, the picture will be quite different, as nearly all partners will use it.

But most of the people we interviewed are still facing an uphill battle getting lawyers to use task codes:

Attorneys are slow to change, except when a client insists on it.

The biggest problem is still lawyers’ resistance to change and many clients’ continued acceptance of chronological billing rather than task billing.

There should be a great deal more use of task codes at the firm but many lawyers object to it.

I am impressed that the idea has strong support from the firm’s management. But it’s still hard to get attorneys to do what they need to do.

I try to encourage the use of task codes but feel that I must pick my battles.

Given these realities, we believe that the best practice at this time is to use codes selectively, in the areas that matter the most:

We don’t use task codes on every matter but we do emphasize their use on any fixed fee or tight budget matters.

Our firm’s leaders definitely understand the importance of Task codes and budgeting, but they don’t want to take punitive measures against partners who don’t use them. The process must start at the grassroots and build upon success. We have only one shot to get this right.

Another recommendation from the experts we interviewed was that firms should limit retrospective analysis of past matters. While some firms begin by creating a database of the costs of past matters, most of the people we talked to felt it was not worth the effort:

Our firm does not go back into old closed files and try to assign task codes in retrospect. That just isn’t possible on any realistic basis. Not enough value will be added.

There is no effort to look at historical matters, only current matters, and not all of those.

The firm decided not to go back in time and look at past cases and code them. It was not deemed worth the effort, but the firm is making a concerted effort to code all present and future cases.

Aside from the amount of time that it would take to code past matters, there is a second reason not to invest in this: The whole idea of the LPM movement is to find ways to reduce costs by working more efficiently. Why devote resources to studying what things cost the old way when the same time and energy could be invested in finding new and better ways of doing things?

This series was adapted from the Fourth Edition of the Legal Project Management Quick Reference Guide which will be published this fall.

      


Tip of the month:  Find the balance between too little planning and too much

When Andy Crowe studied the characteristics of 5000 project managers for his book Alpha Project Managers, he found that effective managers spend more than twice as much time planning as ineffective ones.  Lawyers often like to jump right in on a new matter because they “have no time to plan.”  But a little time devoted to planning upfront can save an enormous amount of time later.

The first Wednesday of every month is devoted to a short and simple tip like this to help lawyers increase efficiency, provide greater value to their clients and/or develop new business. For more about this tip, see our Legal Project Management Quick Reference Guide.

      


Task codes and budgeting: What works and what doesn’t (Part 3 of 7)

The third conclusion from our research was that firms should train lawyers and staff to use the codes.

Whatever system is used, many experts have written about the problem of accuracy. Keith Lipman is the president of Prosperoware, a legal technology firm that created Umbria, one of the best known legal process management software packages. In a 2015 blog post entitled “The Task Code Conundrum” he wrote:

The problem with all these codes is that a significant number of lawyers don’t use them accurately. Anecdotally, I’ve been told on many occasions that 60 to 80% of time entries have inaccurate codes.

Ken Grady, one of the most widely quoted experts in LPM, has worked both in-house, as the general counsel at Wolverine, and on the law firm side, where he currently holds the position of Lean Law Evangelist at Seyfarth Shaw. He is unenthusiastic about task codes, in part because:

Self-reported data, especially when it involves things like measuring time spent on tasks, is notoriously unreliable…. We have to make sure each timekeeper is well-trained in how to apply the codes to work.

Similarly, several of the experts we interviewed described problems of inaccurate coding, including these eye opening examples:

I did an analysis of a certain type of litigation, where partners thought that analyzing the task codes would be very helpful. Instead, I showed the partners that the L100 codes, which are supposed to be used for trial preparation, were used during the week of trial…. The lawyers explained that secretaries at the firm picked the task codes…. I told the partners in a different matter that it was just not possible for a case to have the amount of effort in a particular category that the task codes indicated. They said that when the secretaries reach some pre-assigned limits for the amount of time in a particular code, they just stop using that code and start using another code. If a secretary knows that, say, the L330 code will always be fine to be used, he or she will just keep using it. They just dump time there. That makes the results really inconsistent.

Several of the people we interviewed, however, reported that accuracy can be increased if time is taken to train lawyers to use task or phase codes properly:

When we first started using task codes, we had problems with consistency. Five lawyers who attended the same meeting sometimes coded their time five different ways. That is not happening anymore, because now at the beginning of every project everyone involved discusses all the possible codes, to put everyone on the same page.

Different lawyers have widely different views of the application of the ABA task codes, so when they are used, we have to have meetings in advance to explain their use.

If it appears to my group that time is not entered correctly, we re-educate the lawyers on how to do it.

For present cases, lawyers can’t enter their time without task codes. If we see a sign of “garbage entries,” it is part of my job to hold discussions with the group involved to make sure that we get better data.

Some lawyers do give us “junk data” or refuse to participate, but lately that number has been fewer than five percent of our attorneys. We do have some lawyers who use task codes that are obviously incorrect or irrelevant, so we explain the proper use of task codes to them and this usually corrects the problem. We have met with many attorneys in person and we have emailed many secretaries to show them how this should be done.

The role of staff should not be ignored. A number of firms we’ve spoken to have trained admin staff to save lawyers time by entering the codes for them, and they have reported that this not only saves lawyers time, it also increases the accuracy of data entry.

 

In a review of a draft of this article, Peter Secor, the Director of Strategic Pricing and Project Management at Pepper Hamilton, emphasized this point:

Secretaries and billers often work on time entry edits. That group is key… they need to understand the value that codes can add. I just cannot emphasize that enough.... We have developed cheat sheets for certain engagements on which task codes to use for what. We have also have cheat sheets on the practice group level, including how narratives should be worded so we can data-mine the cost of a particular type of deponent or specific motion.

In a related development, the Association of Legal Administrators (ALA) has released a draft of a set of codes entitled UPBMS (the Uniform Process Based Management System) system to clarify and standardize legal support operations roles and responsibilities.  (Note that the P in the title refers to processes, replacing the T for tasks in the lawyers’ code set.)  The codes are scheduled to be finalized in the summer of 2016.

The head of the committee that developed these codes, Bill Mech, a principal at ofPartner Consulting Services, notes that:

One reality often overlooked is that a lawyer never practices alone. They are supported by numerous administrative personnel including legal secretaries and paralegals.

An important area of innovation is re-engineering the role of legal secretaries and other support staff to identify new ways to leverage their knowledge and experience as well as manage operating costs.  For example, Mech has worked on several projects with nSource, a provider of legal consulting, technology, and managed services, in which they utilized an early version of the ALA UPBMS codes to perform functional analysis of legal support staff roles, aimed at improving processes to better meet clients’ needs.

At the end of the day, the value of the data collected with any kind of coding system is based on everyone using the same terminology in the same way. Note that this is true whether one uses UTBMS codes, UPBMS codes, or simple English language task titles. Many legal accounting software packages can make this easier by enabling “forced” categorization of time entries according to a preset list of categories defined by the matter manager. While this alone will not eliminate miscoded time entries, it goes a long way toward improving accuracy.

 

This series was adapted from the Fourth Edition of the Legal Project Management Quick Reference Guide, which will be published this fall.

      



Click here to safely unsubscribe from "Legal Business Development and Project Management."
Click here to view mailing archives, here to change your preferences, or here to subscribePrivacy