Note: Due to the numerous and passionate responses to the first two posts on Cutting Corners, we have added Part IV to the series in which we will highlight the insightful (but profoundly divided) points of view we received from In-House Counsel and Law Firms.
In the first two posts in this series, we considered the typical law firm complaint that such efficiency-producing disciplines as Legal Project Management (LPM) and Legal Process Improvement (LPI) may actually encourage legal “corner-cutting.” Does this complaint reflect a valid concern about threats to quality of service, or is it mainly the cry of pain of firms now caught in a billing squeeze?
Who Defines the Bottom Line?
The hard truth is that the quality-versus-cost debate actually is over. In the aftermath of the global financial crisis and its draconian impact on legal budgets, almost all clients are re-evaluating their definitions of value and quality – with a constant eye on costs.
ln all manner of engagements clients wield the whip hand: they are imposing unprecedented direct constraints on legal spend, as well as pursuing new avenues for addressing basic legal needs more cost-effectively, including alternative fee arrangements, expanded use of technology, convergence programs, pulling more work in-house and sending more work to alternative service providers. As just one example, the latest BTI Consulting Reportnotes that for IP work in 2015, in-house counsel can be expected to aggressively turn to settlements, alternative fee arrangements and efficient new work processes to keep costs in check. The result? A lot less IP-related revenue for law firms, which obviously does not make them happy.
Front End Scoping Beats Damage Control Any Day
However, firms will not improve their profitability by complaining about client-driven approaches to improving productivity and value. Trying to position LPM as a scapegoat by claiming it erodes quality will neither improve service quality nor enhance client relations. The parties will be better served by learning to work collaboratively to define the scope of work and the degree of risk that scope implies. This definition, in turn, will frame the amount of lawyering, billing, and overall legal costs the client will tolerate.
Rather than suggesting that the parties blithely ignore risk assessment in the name of cost savings – now that would be cutting corners — what LPM suggests is that client and law firm jointly scope and prioritize potential risks both at the outset and during an engagement.
After instituting mandatory scoping discussions whenever the legal department assigns work to outside counsel, the General Counsel of a global hotel company found that outside counsel really focused on the client’s goals, chased fewer rabbits, concentrated work to advance the goals, and provided significantly more useful advice. And, not insignificantly, there were fewer billing disputes. The GC noted, “law firms did not take the reigns with scoping even when we asked them to. Instead, we decided to lead the way because upfront scoping is the best practice for effective use of our budgets.”
Once law firms accept that today’s rules of legal engagement no longer support carte blanche lawyering except under extraordinary circumstances, LPM provides a bridge for aligning all parties’ content, cost and quality expectations. Time spent at the outset defining in-scope and out-of-scope activity will both diminish the likelihood of scope creep and result in less surprised and angry client responses if unexpected events threaten the budget later on. And, BTW, it reduces those pesky write-downs and write-offs that erode profitability.
Houston, We Have a Problem
The problem is that most law firm lawyers are pretty dreadful at scoping. Sophisticated scoping involves intensive front end engagement with the client. It also requires the courage to embrace change and examine alternative service delivery approaches, rather than defaulting to the-way-we-did-it-last-time pricing and planning. Yes, good scoping may require a considerable investment of front-end time and effort, but it helps avoid charges of either overlawyering or corner-cutting down the road.
This is because the parties have taken the time to discuss not only project phases, tasks, costs/budgets, and desired outcomes, but also how the client will define quality and value at every step of the engagement. The client – now fully informed – can make informed decisions about what work should be deemed in or out-of-scope. If nasty things happen down the road, a fully-informed client is unlikely to allege malpractice.
Any risks incurred by initially limiting which tasks are undertaken and which are bypassed can be diminished by carefully discussing both the likelihood and the potential impact of alternative courses of action or various unexpected events. Indeed, we know of several instances where firms expressed concern that omitting certain activities might create malpractice exposure, and the clients agreed to indemnify them or hold them harmless for any consequence deriving from leaving certain T’s uncrossed or I’s undotted.
All in all, it makes little sense to blame Legal Project Management either for today’s dramatically altered legal landscape or for the realignment of the bargaining leverage between clients and law firms. LPM is a response to these changes, not their cause. The best way to align issues of quality and cost is to discuss them in detail early and often, rather than have the parties sling great handfuls of mud at each other.