THE NEW NORMAL NOT SO NEW ANYMORE
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1 THE NEW NORMAL NOT SO NEW ANYMORE NOVEMBER 2013 First published in The 2013/2014 Lexpert CCCA/ACCJE Corporate Counsel Directory and Yearbook
2 TABLE OF CONTENT The Tipping Point...1 The Not-So-New Normal...1 The Changing Legal Landscape in Response to these Client Demands...2 What are Legal Project Management and Legal Process Improvement?...3 BLG Adroit: Lean Project Management and a Case Study on the Application of LPI by Borden Ladner Gervais LLP...6 LPM or LPI, or Both?...7 About the Authors...9 Borden Ladner Gervais S.E.N.C.R.L., S.R.L./LLP...9
3 1 THE NEW NORMAL NOT SO NEW ANYMORE By Patricia A. Olah and Andrew Terrett THE TIPPING POINT We are now five years past the on-set of the 2008 Great Recession. That protracted event served as a tipping point in many industries, and the legal industry was no exception. The new normal 1 that emerged in the business of law after 2008 was a seismic shift in the balance of power between the large purchasers of legal services corporations, and the sellers of legal services law firms. With corporations facing significant continuing pressure on revenues, C-suites everywhere increased their focus on and commitment to cost-cutting, cost-control and cost-management across their organizations, and their in-house legal departments were no longer exempt. [C]orporate clients have become stingy. Until recently, pricing pressure barely existed for premium legal services. Decades ago, clients would receive a bill with only a lump sum and the statement for professional services rendered. But today, big corporations, facing pressures of their own, have clamped down on legal expenses. They have beefed up their in-house legal staffs and perform much of the work themselves. They are demanding that for routine assignments like document discovery, work be sent to outsourcing firms and contract lawyers rather than given to expensive associates. And they ask for discounts or capped fees. 2 And as Bruce MacEwen recently said in an interview with Bloomberg Law clients have changed their behaviour econ[omics] 101 the supply and demand curves have shifted for keeps I think. 3 THE NOT-SO-NEW NORMAL In the now not-so-new normal, corporate clients globally have increasingly been demanding that their legal service providers control costs and deliver value (initially, law firms interpreted their clients demands for value to mean, in essence, to do more work for less money). In the last few years however, this has translated into client demands for their outside counsel to: Deliver the work on time and on budget (schedule and cost predictability) Manage the work in a more efficient manner (redesigning work flows) Price and conduct the work on a more transparent basis Collaborate with the client in the design of the work plan Exhibit innovation in all aspects of service delivery 1 See, e.g., Welcome to the Future: Embracing the New Normal, Paul Lippe, March 19, 2010 ( 2 Mass Layoffs at a Top-Flight Law Firm, Peter Lattman, The New York Times DealBook, June 24, ( 3 June 27, 2013 interview of Bruce MacEwen, publisher of Adam Smith Esq., by Bloomberg Law ( weil_gotshal_layoffs_start_of_wave_video/?utm_source=maestro&utm_medium= &utm_campaign=weekly_ )
4 2 NOVEMBER 2013 THE CHANGING LEGAL LANDSCAPE IN RESPONSE TO THESE CLIENT DEMANDS These client demands, in virtually all major global markets, have given rise to a changing landscape in the business of law. There has been growing interest in the adoption of new legal service delivery methods: Legal Project Management Legal Process Improvement Applying technology (e.g., to budgeting, automated document production, intelligent e-discovery) Alternative Fee Arrangements Legal Process Outsourcing And the adoption of these various methodologies by some forward-thinking law firms has led them to gain market share in 2012, contrary to the prevailing trend of stagnant or shrinking market share. For example, BTI Consulting Group recently reported in its The 2013 BTI Client Service 30 report that 67% of the 30 U.S. law firms corporate counsel rank as delivering the absolute best client service gained market share based on client service. 4 The corporate counsels surveyed for this list described the best performers as those law firms who 5 : 1. Understand their client better than any other not just understand, but show the best understanding 2. Exhibit new approaches in staffing, billing, strategy, technology and communications 3. Redefine how the process of legal services is delivered taking a new look at how work gets done and points of client interface with the goal of streamlining 4. Educate individual clients on company-specific needs and issues highly customized briefings and tools 5. Provide new, high-powered client-centric educational forums and networking opportunities events where clients speak to each other more than listening to law firms speak 6. Build project management systems from the client perspective bring the client into project management ensuring a client-centered experience 7. Engage in client outreach to bring client thinking and feedback into the culture of the law firm up to three levels of client feedback conducted by independent third parties, leadership and relationship partners. We have highlighted three of the above seven indicators of best client-service factors. Factors 2 and 3 equate to Legal Process Improvement, and Factor 6 equates to Legal Project Management. Thus, this survey is telling us that Legal Process Improvement and Legal Project Management are not viewed by clients solely as the means to satisfy their demands for cost control and value, but are considered to be best-in-class client service elements. This, in our opinion, means that the application of Legal Process Improvement and Legal Project Management methodologies in the delivery of legal services are not mere passing trends, but have become a client expectation and, therefore, an imperative for those law firms who seek to retain and grow their businesses. 4 Client Service Leaders Buck Trend Gain Market Share 7 Lessons from the BTI Client Service 30, January 9, 2013, BTI Consulting Group ( 5 Id.
5 3 WHAT ARE LEGAL PROJECT MANAGEMENT AND LEGAL PROCESS IMPROVEMENT? Legal Project Management Project management, based on internationally recognized project management standards, is a systematic process for designing, developing and implementing management strategies for executing a project of any nature 6. Over the last few years, these principles have begun to be formally applied by an increasing number of law firms in (among other countries) the U.K., the U.S., Canada and Australia to manage their legal work and the budget for that legal work, hence the term Legal Project Management ( LPM ). There are now many consultants offering LPM training to lawyers 7, countless books, articles and blogs are devoted to LPM 8 and the PMI 9 has a Community of Practice devoted to LPM 10. One well-known LPM consultant defines LPM as follows: Legal project management adapts proven management techniques to the legal profession to help lawyers achieve their business goals, including increasing client value and protecting profitability. 11 We prefer to define LPM in more concrete terms: LPM is a framework that delivers to lawyers the ability to: a) know what needs to be done, when it needs to be done, and who is doing it; and b) bring the legal work in on-time and on-budget. LPM methodology is most often applied to complex matters, or those with multiple parts or phases. In applying the LPM methodology to a client s matter, the shared goal is to develop a detailed project management plan that defines and manages the scope of the legal project, as well as time, cost, risk, communications and quality. The LPM methodology includes: identifying project objectives and underlying business drivers; clearly defining the scope of the work and creating a comprehensive task-list of all tasks that must be completed to achieve the project objectives; 6 The Project Management Institute ( PMI ), a not-for-profit professional organization for the project management profession, offers a range of services including the development of standards, research, education, publication and training. The PMI has published A Guide to the Project Management Body of Knowledge ( PMBOK ) (Fifth Edition, 2012), which defines project management as the application of knowledge, skills, tools and techniques to project activities to meet project objectives. 7 E.g., LegalOnRamp ( LegalBizDev ( Lexician ( Legal Project Management Limited ( LawVision Group ( Edge International ( 8 E.g., Legal Project Management: Control Costs, Meet Schedules, Manage Risks and Maintain Sanity, Steven B. Levy, DayPack Books, 2009; LPM 2012 and Beyond: Legal Project Management Grows Up, Paul C. Easton, December 28, 2011 ( blog/2011/12/legal-project-management-grows-up.html); 3 Geeks and a Law Blog ( 9 Id. At footnote 6 above. 10 The Legal Project Management Community of Practice, a community of practitioners who have a shared interest in promoting project management in the legal world ( 11 The Legal Project Management Quick Reference Guide, Jim Hassett and 13 contributing authors, LegalBizDev, Chapter 1, p. 6, Third Edition, 2013.
6 4 NOVEMBER 2013 establishing detailed plans for the project schedule (the timeline), key milestones and key deliverables; assigning team members to the specific tasks, and clarifying their roles and responsibilities; identifying project risks, and developing risk-response contingency plans; creating realistic budgets with improved budget predictability; managing and controlling the project scope, schedule and budget; and developing an appropriate communication plan with clients regarding status reports, budget and risk events and, where required, developing an approval process for changes to project plans and budgets. One of the key factors driving the adoption of LPM is the rising client backlash against the billable hour pricing model, considered by clients to be inconsistent with their best interests as it rewards inefficiency, and the growing client interest in alternative fee arrangements ( AFA ) such as fixed fees, capped fees and risk-reward sharing fee models. LPM offers the critical tools to assist lawyers in accurately scoping and pricing their services under an AFA (essentially creating a detailed work plan and budget) and then managing to that plan and budget in a more disciplined manner than lawyers have traditionally practiced in the past. In our view, LPM is still in the early stages of adoption and is by no means a standard as yet. We believe that what will truly spur change in the legal industry is vocal and constant client demand for their legal service providers to adopt LPM as one means but not the sole means to delivering better client service. A corollary to LPM is Legal Process Improvement. Legal Process Improvement Process improvement is a method for refining processes to improve efficiency and effectiveness to the benefit of both the organization providing the goods or services and the purchaser of those goods or services. It is a combination of Lean and Six Sigma process improvement methodologies which originated in the manufacturing sector: Lean is a methodology pioneered by Toyota motor corporation in Japan; Lean aims to eliminate waste and centers on preserving value with less work; Six Sigma is a methodology developed by Motorola; Six Sigma aims to eliminate variation by identifying and removing the causes of defects. Legal process improvement ( LPI ) adapts parts of these two methodologies to the legal services industry. LPI methodology is most often applied to high volume, recurrent legal work, but it can be applied to any type of legal matter. In applying the LPI methodology to a specific type of matter, the shared goal is to improve collaboration, communication and efficiency in the delivery of high-quality legal services. Through LPI, lawyers can identify, pursue and deliver efficiency gains by streamlining core processes that are the basis of that work, and then partner with their clients to customize the improved process to meet the specific client s needs. The traditional technique of the Lean Six Sigma process improvement methodology is DMAIC (pronounced de-may-ik), an acronym for: Define, Measure, Analyze, Improve and Control. Define: conducting voice of the client interviews with law firm team members and client team members to gain insights into their respective concerns, expectations and views regarding the work process what works well, and what isn t working as well, and from the client s perspective, also (and most importantly) asking about their specific objectives and their definitions of value and success ;
7 5 Measure: identifying and documenting the current work process by decomposing the work into each of its individual tasks and setting all the tasks out in a process map (a flow chart) and, where possible, collecting data to measure the efficiency level of the existing process; g better client ovement. g processes to fit of both the the purchaser Lean and Six ich originated Analyze: conducting brainstorming sessions (known as Kaizen sessions, a Japanese term for continuous improvement ) to identify waste (those steps or tasks that do not directly add value to the end product or service delivered to the client) and areas where efficiencies could be gained; Improve: standardizing and streamlining the new service delivery process, including the creation of specially designed templates, checklists, technology tools, etc., and then documenting the new process in a new process map; and Control: training the law firm and client teams in regard to the new, optimised process; and then managing and monitoring that optimised process, including the use of ongoing, thorough data capture to ensure improvement has been achieved and to develop historical information on cost for use in future fee quotes. Example of a Process Map: FEATURE ARTICLES 3 ongoing, thorough data capture to ensure improvement has been achieved and to develop historical information on cost for use in future fee quotes. Example of a Process Map: Steps in an Interpretation Grievance (Labour & Employment Group) Start Lawyer Provide notification to client (Notice to Arbitration or Grievance) A01 Has been referred to Arbitration Lawyer See/File Notice of Arbitration A02(c) Lawyer Pick from List of Arbitrators A03 Toyota motor ate waste and Has NOT been referred to Arbitration Don`t Like Arbitrator Like Arbitrator Lawyer by Motorola; entifying and Advise on How to Deal with Grievance A02(a) Settle Lawyer Don`t Settle Lawyer Negotiate Alternate Choice of Arbitrator with Union A04 Go to Page B ts of these two methodology egal work, but applying the shared goal is ficiency in the I, lawyers can streamlining d then partner ocess to meet Sigma process ed de-may-ik), e and Control. Assist Client with Settlement Agreement A02(b) Union Drops Grievance Copyright Borden Ladner Gervais LLP, Confidential. Examples of Waste in law firms: Pursue Arbitration Examples of Waste in law firms: Disagree Default to Minister of Labour Appointed Arbitrator Over-processing Inefficient distribution of case information or materials Involvement in unproductive regular Over-production and frequent internal meetings Over-processing Inefficient distribution of case information or materials Involvement in unproductive regular and frequent Over-production internal meetings Delivering a more detailed report or memorandum than what the client wants or needs Too much time spent on non-critical tasks Agree FEATURE ARTICLES Delivering a more detailed report or memorandum than what the client wants or needs Too much time spent on non-critical tasks
8 6 NOVEMBER 2013 One of the most well-known and earliest law firm pioneers to adopt LPI based on Lean Six Sigma techniques is the U.S. firm Seyfarth Shaw LLP. 12 Seyfarth began its SeyfarthLean program in 2005, long before the global financial crisis. SeyfarthLean is a distinctive client service model that combines the core principles of Lean Six Sigma process improvement techniques with project management techniques, all utilized across the entire firm in all practice areas. Thus, the SeyfarthLean model advocates the adoption of both methodologies to improve client service and value. BLG ADROIT: LEAN PROJECT MANAGEMENT AND A CASE STUDY ON THE APPLICATION OF LPI BY BORDEN LADNER GERVAIS LLP At Borden Ladner Gervais ( BLG ), we began investing in the development of LPM for our lawyers and other professionals in 2005, and in 2011 BLG established a formal program, named BLG Adroit: Lean Project Management, to further support the adoption of both LPM and LPI across the firm. Through the BLG Adroit program we have been raising awareness across the firm of how LPM and LPI can assist our lawyers and other professionals in providing better client service and value, developing proprietary tools for budgeting and for managing the matter and the budget for that matter, rolling these tools out across the firm in training sessions, and providing one-on-one more in-depth training and support in the use of the LPM and LPI methodologies and these tools on an as-requested/as-needed basis. We are also working with groups of lawyers within many different practice groups to facilitate the application of the Lean Six Sigma LPI techniques for specific client matters or specific types of matters. One process improvement project we recently undertook was for a large client of the firm for whom we handle their portfolio of personal injury lawsuits. Here is the feedback we received from the BLG partner responsible for this legal work and the lead member of the client s team: BLG Partner: I didn t feel the process was broken, but I did realize that as in any relationship, as more time passes, we stop talking to each other about things that may be bothering us, but the irritants are still there and just aren t being talked about. The voice-of-the-client interviews were conducted by project facilitators who were not part of the BLG service team or the client team, which made it a more comfortable way for all of us to talk about our respective views, concerns, needs and requirements. The Kaizen session was really collaborative, and allowed us to openly and comfortably discuss, in partnership with our client, what could be improved and how it could be improved. By having the client participate, as a partner it really makes you committed to carrying through on the adoption of the agreed solutions. We ve even taken the entire project further, and every 45 days we have a call with the client to discuss how the process has been working... we re truly committed to the concept of continuous improvement. 12 Seyfarth Shaw LLP has offices across the U.S. and has recently been expanding into Asia. Counsel for many of the world s largest companies recognized Seyfarth Shaw in 2013 as the leading law firm in the U.S. for using innovation to deliver legal services mapped to client needs according to The BTI Brand Elite 18, the annual study from BTI Consulting Group which tracks the strength of law firm brands based on client interviews (
9 7 I ve also come to realize that many of the tools and techniques I ve learned about in this project, which was related to a portfolio of recurring work, can be applied to more complex one-off types of legal files as well, for example, planning the work, scoping the work, conferring with the client about their needs, requirements, their views on how they want the file handled, budgeting, etc. To me, the most important thing I learned from this process is how critical it is to build trust with our clients, and that the best way to do that is to focus on communication open, clear and frank discussions, at the outset and throughout the matter, to learn what it is the client wants and needs. It s surprising how you think you know, but you don t really know until you ask, and then listen! Client: My relationship with BLG was fine, not broken but as in-house counsel, we are always looking for ways to increase the value we receive from our external counsel. So we decided to accept the invitation from BLG to join them in conducting a process improvement project relating to the personal injury portfolio of work BLG handles for us. The voice-of-the-client interviews were an excellent way to convey my views, concerns, needs and requirements to BLG, and I was particularly impressed with the fact that BLG also wanted to hear the views of my own clients, that is my internal business unit personnel. However, I was doubtful that these busy people would be willing to take their time to participate. I was surprised and pleased to find that indeed they did want to participate, that they enthusiastically shared their views, and that they were gratified to know that BLG wanted to hear from them. At the Kaizen session, we all realized very quickly that the areas of concern identified by both my team and the BLG team were essentially the same, just from different perspectives. And our collective discussion of the issues and the solutions was a very collaborative affair, with one person coming up with the seed of a solution, another person then contributing more to build-out the idea and all of us together fine-tuning it. This was truly time well-spent, and the new process we created together really does provide me, the client, with greater value. LPM OR LPI, OR BOTH? Some commentators have been considering which of LPM and LPI should be pursued first by law firms. Carla Landry of LawVision Group LLC recently wrote that of those persons who responded to that question, most said the most logical order of things would be LPI then LPM 13. She also reported that Jeffrey Carr, Vice President and General Counsel of FMC Technologies summed it up nicely when he commented that the order of adoption is not relevant because they are two different things, that LPI is about designing a process LPM is about operating it and that many firms focused on LPM first because it s easier and to be very cynical consistent with the inefficient cost-plus business model [i.e., the hourly billing model] that has prevailed for so long What s Wrong With This Process? Why Are So Few Lawyers Willing to Assess How They re Delivering Legal Services, Carla Landry, May 7, 2013 ( 14 Id.
10 8 NOVEMBER 2013 Other commentators have publicly debated whether law firms are better off expending their time and efforts on LPI rather than LPM, with those advocating LPI saying that LPM is necessary but not sufficient to drive improvements in law firm productivity. Project management brings discipline to a process, but is not about improving a process over time 15. Those advocating LPM have said LPM, when implemented well, focuses on being effective more than being efficient. Obviously, firms and practices will do well to address inefficient processes; removing waste is almost always beneficial. However, most practices need more than waste removal, more than process improvement. They need effectiveness. They need to do the right things and then look at doing those things right. 16 And as LPM and LPI become more familiar to the legal industry, these two methodologies are becoming somewhat merged under the nomenclature of LPM. As Jim Hassett put it in the most recent edition of his book The Legal Project Management Quick Reference Guide 17 : Purists may argue that some of the best practices in this book should be classified as process improvement or knowledge management or communication or finance or something else. We don t really care what you call them; we just want to provide easy access to ideas that can help you achieve your business goals in a profession that is changing faster than ever before. Collectively, the adoption of LPM and LPI by law firms will benefit both clients and their law firms, as these methodologies will: Increase the predictability of fees Improve the accuracy of cost estimates Improve the management of matters, budgets and AFAs Create more collaborative and productive relationships between clients and law firms Improve realisation rates and profitability We believe that the use of both LPM and LPI in the legal services industry will only grow with time, as more and more law firms will have little choice, as more of their clients begin to insist that their legal service providers begin to behave like other service providers by delivering the work on time, more efficiently, more transparently and with greater cost predictability. We also believe that LPM and LPI are distinctly different methodologies, utilize distinctly different tools and techniques, and lend themselves to different types of legal work. As such, there is a need for both in the legal industry. However, regardless of the semantics, and regardless of whether firms should start first with LPM or LPI, it s a journey. And as one commentator put it: the point is to get started somewhere. 18 For those law firms and clients who understand that LPM and LPI drive better client service, we are confident that they will continue to thrive in the now not-so-new normal. 15 Legal Project Management Versus Process Improvement Which Drives BFC?, 3 Geeks and a Law Blog, June 6, 2012 ( 16 Is LPM a Technique? Is It Process Improvement?, Steven B. Levy, June 6, 2012 ( 17 Id. at footnote 11 above. 18 Id. At footnote 13 above.
11 9 ABOUT THE AUTHORS Patricia A. Olah is National Co-Leader of BLG Adroit and BLG s National Lean Project Management Counsel. She is a seasoned lawyer (member of the New York State Bar), a graduate of the Project Management Program at Villanova University and is currently working towards her Lean Six Sigma Green Belt at Six Sigma Academy. Patricia has over 25 years of commercial law and litigation experience in Canada, the U.S. and internationally, including the management of large projects and processes as a practicing lawyer in a U.S. law firm and as an executive in-house legal counsel in Canada. Andrew Terrett is National Co-Leader of BLG Adroit and BLG s National Director of Knowledge Management. He is a qualified solicitor (member of the Law Society of England and Wales), a certified Project Management Professional by the Project Management Institute and holds a Lean Six Sigma Green Belt (and is currently working towards his Black Belt status) from Six Sigma Academy. Andrew has over 15 years of experience working on large complex project and process challenges in professional service firms. Patricia and Andrew combine their legal experience and training in project management and Lean Six Sigma methodologies in guiding, supporting and training BLG s professionals, as well as BLG s clients, in the application of project management and process improvement methodologies to legal services. BORDEN LADNER GERVAIS S.E.N.C.R.L., S.R.L./LLP BLG is an integrated national firm that provides a broad range of legal solutions to clients, and has over 750 lawyers, intellectual property agents and other professionals in offices in Vancouver, Calgary, Toronto, Waterloo Region, Ottawa and Montreal.
12 Calgary Centennial Place, East Tower 1900, rd Ave S W Calgary, AB, Canada T2P 0R3 T F Montréal 1000, rue De La Gauchetière Ouest Suite 900 Montréal, QC, Canada H3B 5H4 Tél Téléc Ottawa World Exchange Plaza 100 Queen St, Suite 1300 Ottawa, ON, Canada K1P 1J9 T F (Legal) F (IP) ipinfo@blg.com (IP) Toronto Scotia Plaza, 40 King St W Toronto, ON, Canada M5H 3Y4 T F Vancouver 1200 Waterfront Centre 200 Burrard St, P.O. Box Vancouver, BC, Canada V7X 1T2 T F Waterloo Region Waterloo City Centre 100 Regina St S, Suite 220 Waterloo, ON, Canada N2J 4P9 T F F (IP) Patricia A. Olah T F polah@blg.com Andrew Terrett T F aterrett@blg.com Calgary Montréal Ottawa Toronto Vancouver Waterloo Region Lawyers Patent & Trade-mark Agents Borden Ladner Gervais LLP is an Ontario Limited Liability Partnership. blg.com PRINTED IN CANADA BD
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