BUSINESS IMPACT WHITE PAPER SERIES MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS 2014, ADERANT HOLDINGS, INC. ALL RIGHTS RESERVED

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1 BUSINESS IMPACT WHITE PAPER SERIES MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS 2014, ADERANT HOLDINGS, INC. ALL RIGHTS RESERVED

2 MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS For law firms, staying competitive doesn t mean staying in place it means keeping a step ahead. That s why firms increasingly are implementing advanced project management systems. Legal project management enables law firms to effectively manage client engagements throughout their lifecycle. Capabilities typically are delivered via matter management software that works in conjunction with existing systems and processes. The benefits are compelling: increased efficiency, enhanced flexibility to meet client expectations and improved visibility to profitability. This white paper is written for business, financial and technology leaders at law firms who are seeking to take full advantage of technology to improve their firms competitive positioning. The paper explores the key elements of legal project management and associated matter management software, and it demonstrates how advanced tools and processes can be used to achieve tangible profitability benefits. MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS - 2

3 AS THE ENVIRONMENT HAS CHANGED, SO MUST LAW FIRMS INCREASING NEED FOR AFA SUPPORT Aderant s 2014 Legal Technology Industry Survey yielded additional evidence that the trend toward AFAs continues unabated. 70% of firms reported having clients ask for fixed-fee contracts in the past year, and about one-third of firms are more likely to be investing in new technology to support the increasing AFA demands of clients. Nonetheless, AFA-related business still accounts for less than 20% of overall revenues for most firms. The recent global financial crisis and its lingering after-effects have unquestionably altered the financial and competitive landscape for law firms around the world, from North America to Europe and Asia-Pacific. Issues include less predictability in demand for services, pressures on profit margins and more challenging client relationships. Clients Driving Changes Clients are motivated by a desire to lower their legal costs by moving away from the strict billable-hour paradigm, which tended to reward firms who took the longest to resolve a matter. As a result, an increasing percentage of clients are seeking alternative fee arrangements (AFAs), which are more complex billing structures that can incorporate fixed or flat fees, bonus payments and all types of hybrid arrangements. The goal is to better align the interests of clients and firms to handle legal issues in the most efficient manner possible. Nimble Wins Although there hasn t been a push yet to fully eliminate billable hours, the changes do require firms to implement better controls around the establishment and progression of matters, especially the development of accurate price estimates at the outset of projects. Law firms that embrace these changes and adopt more flexible pricing models can improve their chances of retaining existing clients, winning new business and protecting against money-losing engagements. With effective legal project management, firms can turn risk into opportunity. MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS - 3

4 ESSENTIAL ELEMENTS OF LEGAL PROJECT MANAGEMENT Project management solutions help law firms efficiently manage matters to meet the needs of clients without compromising profitability. It s a cradle-to-grave approach that provides uniformity, facilitates planning and coordination and enhances communications. Legal project management consists of four key steps: Plan, Price, Monitor and Act. Plan Price Legal Project Management Act Monitor Plan Planning a matter involves defining the required resources and estimating the number of hours it will take to complete the work. Doing this effectively requires dissecting each matter into phases and then into individual tasks; the more granular the task list, the greater the accuracy. Matter management software facilitates the creation of task lists for each engagement, including date ranges for each task and phase. This enables a detailed assessment of the scope of the project and allows firms to establish milestones to track progress, ensuring timely delivery. Price Once tasks are defined, firms need to develop pricing that s competitive and provides the required margins over the cost of delivering the work. Matter management software helps develop a thorough understanding of the resources required to complete each matter and their associated costs. This includes evaluating the leverage on a matter and how it affects costs and profit margins. From this baseline, firms can analyze various client pricing options such as fixed fees, blended rates or other desired AFAs. MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS - 4

5 Monitor STEPS IN PROJECT MANAGEMENT Plan Dissect each matter into discrete phases and tasks with target completion dates Price Determine required resources and their costs to establish pricing Monitor Check actual results frequently against estimates Act Take corrective actions quickly to maintain schedule and profit margins Once matters have been estimated and priced and the work started, it s imperative that firms closely monitor actual time spent on tasks compared to estimations. This helps to ensure that invested hours don t drift too far from estimates, thereby turning a potentially profitable engagement into a money-losing one. Matter management software facilitates this process by providing a built-in means of recording time spent by phase and by task. It also provides the insight to identify where and when more expensive resources have been used. In addition, revenue can be tracked to estimates to ensure no surprises for clients. All of this provides the ability to assess work-to-date profitability and to identify potential issues as early as possible. Act Monitoring projects is useful only if corrective actions are taken sooner rather than later. If, for example, the hours logged on a matter are becoming excessive, this may indicate scope creep, with the firm s fee-earners doing more than originally contemplated. Dealing with the issue immediately during the project, instead of after the fact, is more likely to have a positive outcome. Likewise, when the anticipated profit margin is suffering because the leverage is not where it should be, proactive firms can act quickly to bring the leverage back within acceptable boundaries thereby rescuing the expected profitability of a matter. MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS - 5

6 EVALUATING MATTER MANAGEMENT SOFTWARE ESSENTIAL MATTER MANAGEMENT FUNCTIONS Matter management software should empower effective project management throughout the entire matter lifecycle. Functions to seek out include quick and easy searches for relevant prior engagements, intelligent planning and scheduling, flexible pricing and robust monitoring that includes the ability to identify firm-wide trends. Law firms have multiple options when it comes to selecting matter management software. Significant differences exist among available offerings, so firms should keep in mind the primary objective: improve their project management processes to drive competitiveness and profitability. This means choosing a matter management software solution that effectively incorporates the key steps in project management. And it also means choosing a solution that s most likely to be deployed successfully and used efficiently. Key questions to consider include: Which functions are must haves? Firms should compare features among offerings to determine which are the most important to them. This process often will eliminate solutions with limited functionality. Does the software offer valuable, fact-based intelligence to guide the establishment of new matters? Look for how effectively it leverages data from successful prior engagements. Does it encompass the entire matter lifecycle? The most effective solutions will excel, not only at establishing new matters, but also at providing the real-time insights needed for effective monitoring. Can it be fully integrated into current firm processes and systems without needing to build additional interfaces? Firms should consider whether the software can be integrated seamlessly and inexpensively and, if not, whether that will create ongoing inefficiencies in the exchange of data. Can the software developer/provider fully support implementation, as well as ongoing client service? Taking the time to do a thorough assessment at the outset will help firms avoid installing software that s missing critical features, requires additional integration expense or creates ongoing operational inefficiencies. MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS - 6

7 ADERANT S DISTINCTIVE APPROACH ADERANT EXPERT MATTERWORKS Drive Profitability from the Outset Leverage Current Processes and Data Manage Alternative Fee Arrangements Proactively Monitor Projects Aderant s Expert MatterWorks TM solution is embedded into our leading Aderant Expert practice and financial management system. This approach helps to ensure that our clients achieve the full benefits of effective matter management and realize significant project management improvements. By working hand-in-hand with existing systems and processes, Expert MatterWorks provides users with a fact-based way to manage projects from beginning to end. It accesses existing data, such as pricing calculations from time and billing applications, to ensure consistency, helps quantify non-billable time and partner productivity, and is also rich with advanced functionality, such as what-if scenario analytics that help you determine the optimal mix of resources and define the true impact of staffing decisions. Key elements of Expert MatterWorks include: A disciplined, fact-based model that leads to smarter decisions, increasing the likelihood of profitable engagements Ability to profitably plan new matters by building on proven processes and successful engagements, and automatically emulate actual rates, phases, tasks and other key data Robust pricing capabilities to ensure that fixed-fee, capped-fee and other hybrid pricing arrangements reflect realistic costs Continuous, real-time insights into the progress of projects, letting users resolve potential issues early enough to reduce the chance of cost overruns, time delays and other problems This insightful, disciplined model leads to smarter decisions, increasing the likelihood of efficient, successful and profitable engagements. Comprehensive Functionality Expert MatterWorks provides a full suite of functions that lets firms implement comprehensive project management processes. Search: Search lets firms find relevant previous engagements that meet specific criteria. Users also can create and search for time-saving templates. Plan: Plan lets users quickly incorporate part or all of prior matters into the current project, or alternatively they can build phases and tasks from scratch then populate them with resources as a mass update. Firms also can estimate disbursements, reducing the risk of mispricing due to forgotten additional costs. MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS - 7

8 Schedule: Once hours are assigned, schedule lets users assign date ranges to phases, tasks and resources. Date estimates can be as granular as required. Users can assign the same duration to all components of a phase or task, or alternatively they can assign dates at the resource level and build upward. MatterWorks Schedule Screen Price: Once a plan is built, the software calculates the resource cost and sources the standard billing rate. The pricing function allows for assignment of special client or matter rates or for sourcing of a rate set. Users can apply fixed fees at the matter, phase or task level, while rates can be modified and premiums or discounts applied. MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS - 8

9 Monitor: Once a matter is opened and assigned to an estimate, the actual hours, cost, revenue, profitability and disbursements can be tracked against the estimate. Alerts are issued when results fall outside of firm-established variances and progress reports can be generated. MatterWorks Monitor Screen Groups: Firms can group similar matters. This enables reporting at the group level, providing additional visibility into trends, issues and problems that extend beyond a single matter. Workflow and Extracts: The workflow function facilitates the approval of estimates before they are sent to clients. Once approved, firms can generate formal client proposals and extract key data to an Excel spreadsheet for internal use. NEXT STEPS Law firms face a new reality: a difficult environment where growth is challenging, clients are more cost conscious and profits are getting squeezed. Legal project management is becoming an important new tool to address these issues, with some firms even appointing a pricing manager to help plan new matters. Legal industry technology providers have responded with matter management software designed to facilitate the establishment, pricing and planning of matters. The best of these solutions leverage existing systems and data to enable more accurate upfront estimates, while providing the flexibility to accommodate the AFA demands of clients. For firms seeking to increase profitability, the right matter management software can be an intelligent and transformative investment. MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS - 9

10 ABOUT ADERANT With more than 35 years dedicated to delivering practice management solutions, Aderant is the world s largest independent legal software provider offering comprehensive practice and financial management solutions for law and professional services firms of all sizes worldwide. With more than 3,300 clients, their products and services are designed to help securely, effectively, and profitably manage your firm and gain a competitive advantage. From case and financial management to business intelligence, CRM to legal calendar and matter management, Aderant offers a wide suite of legal software solutions to optimize operations, protect assets, and increase the bottom line. Ultimately, the focus is to help manage, grow, and protect businesses with innovative, proven solutions that are backed by superior service and ongoing support INFO@ADERANT.COM 2014, Aderant Holdings, Inc. All Rights Reserved EXP_WP_ _P_Matter-Management MATTER MANAGEMENT: THE GROWING DEMAND FOR MANAGING LEGAL PROJECTS - 10