In this second of three related posts, we consider whether clients’ increasing efforts to control outside legal spend forces their outside counsel to “cut corners.” Are firms being forced to compromise service quality and integrity in order to meet client price points? Are Legal Project Management (LPM) and Legal Process Improvement (LPI), which are supposed to foster efficiency and cost-effectiveness, actually having the paradoxical effect of pushing law firms past “doing more with less” to the point where it becomes acceptable “to do less with less?”
Maybe You’ve Got a Point There
This is not a frivolous concern. LPM is a client-oriented control mechanism intended to help both clients and law firms exercise better operational and financial control over budgets, outside legal spend, the impact of unexpected events, and other unpleasant and costly surprises that pop up as matters progress.
Ideally, all this controlling is supposed to be accomplished without compromising the quality and value of the legal services delivered. However, as we noted in our last post, there’s the rub: it is indeed a stiff challenge to reconcile cost-containment pressures with quality and value-conferred.
Lawyering: How To and How Much?
LPM’s mission is to translate the goals of efficiency, predictably and cost-effectiveness into a consistent set of lawyer processes and behaviors. LPM suggests that the parties pay a lot of attention not only to how lawyers do their lawyering, but also to how much lawyering they do. In other words, work processes and work scope end up being equally important in managing legal costs.
Does “Working Smarter” Equate to Losing Money?
Although LPM’s fundamental purpose is not to reduce the amount of legal work being billed on a certain project, undeniably sometimes it clearly does exactly that. Meticulous case management does in fact often result in tight reins on project scope, less duplication of effort, and fewer do-overs. In other words, less time billed. Sometimes, therefore, application of LPM methods may indeed result in less revenue generated, thereby threatening to put a dent in firm profitability.
This is a touchy subject for law firms. Historically, firm lawyers have parried allegations of greed and runaway billable hours by reminding clients that they are obligated to pursue perfection. To try to minimize every risk. To expend every effort on the client’s behalf. Indeed, they claim such comprehensive lawyering is their ethical responsibility, and that to do anything less exposes the client to potential risks and therefore is tantamount to malpractice. Corner-cutting clients, they argue, expose themselves to undefined or unmanaged risks when they impose cost or work scope limits on outside counsel.
Cost of Risk, Risk of Cost
But is it the law firm’s job to decide how much risk a client should accept? As a matter of both business and legal judgment, in-house counsel quite often assume the risk of not having their outside counsel turn over every rock if the cost will make no sense.
For example, it obviously is not worth paying outside counsel to conduct $100,000 of research in order to reduce $20,000 of potential risk in a matter (although historically law firms have happily done so). Or consider an M&A deal where the acquisition target has, say, 40,000 contracts. Perhaps, due to the need for speed or pressures to control costs (or both), in-house counsel instructs outside counsel to review only the first 100 contracts (or the 100 highest-dollar contracts, or a random sample of 100 contracts) to see if any “doom darts” fly out. Yes, by limiting the review, in-house counsel does indeed assume the risk that there may be problems lurking down there in contract 22,673. But weighing the costs and benefits of paying for more lawyering versus the foreseeable risks is the client’s right, not the firm’s.
“Cutting Corners” vs. “Overlawyering”
The corollary to the “we must provide perfection at all costs” argument is that every lawyer is unique, that every matter he or she handles is unique, and that every case or transaction should be designed afresh from the ground up. And so we hear the perfectionists speak dismissively of “commoditized” legal services or derisively of clients who are willing to “cut corners on quality simply to save a few bucks.”
Clients counterpunch by complaining long and loud about firms’ “overlawyering” and their tendency to “constantly re-invent the wheel,” not to mention “training their junior lawyers on our dime.” This kind of sparring and name-calling can create plenty of acrimony, but it never resolves the whole quality-versus-cost debate.
A better argument for clients is that careful budgetary resource allocation does not require all legal work product to be judged by the same quality standards. As one general counsel told us, “When it comes to addressing the full spectrum of our legal needs, ‘perfection is the enemy of good.’ Today our cost-benefit analyses of various matters are very sophisticated. It is not cutting corners to apply our limited dollars as cost-effectively as we can, and when we consider various forms and levels of service delivery, we are definitely not blind to the stakes and the risks.”
In our final post in this three-part series, we will explore how law firms and their clients can better collaborate to align the amount of legal service provided with the cost of those services.