Magnifying documents. Minerva Studio/Fotolia. |

In legal departments across the country, managers are finding operational savings to become more cost efficient and profitable. And some of these savings come from spending less on outside counsel,making business for law firms more competitive than ever before.

And with new technologies and new people, some law firms are seeking to replicate legal departments' success in taming spending. But many are finding it's not as easy as just as creating budgets and pricing agreements. At the “Model Behavior: Winning with Pricing & Legal Project Management After 2007” session at Thomson Reuters' “16th Annual Law Firm COO & CFO Forum,” law firm financial managers shared the pitfalls that hinder many of these efforts.

For them, there are some not-so-obvious reasons why law firms' attempts to reign in or better forecast spending fail—and oftentimes it's not for a lack of trying.

|

It's a Proscriptive, Top-Down Approach

When Christopher Ende was managing director of pricing and project management at Goodwin Procter, he tried a few times to implement a firm-wide budgeting policy. “But every time we tried something proscriptive, it failed,” he said. “We went in and said, 'Every matter will have a budget whether a client wants it nor not,' and it was a complete nightmare.”

Ende, who is now law firm pricing, solutions, and panel management leader at General Electric, said that such an effort took “a lot of resources” at the firm because his team had to constantly check who was complying with budgets. There was also pushback from the firm's managers. “I had partners looking at me, saying, 'I can't believe I'm spending money on you to harass me for a budget I don't even want,'” he said.

The failures taught Ende an important lesson: When implementing data-driven budgeting and pricing, it's necessary to build from the bottom up.

“At Goodwin, what worked really well was the incredibly simple approach of baby steps, of being available as a counsel” to teams who were interested in implementing budgets or forecasting for matters, he said.

Through building relationships and credibility with firm staff, Ende slowly built demand for his budgeting and pricing services.

What also helped were the simple budget reports Ende sent out periodically to different teams within the firm. “We just sent a simple alert to the teams: 'You're 25 percent through your budget' or something.” Soon, attorneys were asking why and how they were going through their budget so fast, and what they could do different next time, he recalled.

|

Pricing Structures and Budgets are Complex

After getting buy-in to start creating budgets and forecasts, Greenberg Traurig's pricing team hit the ground running.

“When we first got into pricing and doing analytics and getting into the data, it was kind of like 'Revenge of the Nerds,'” said Matthew Beekhuizen, chief pricing officer at Greenberg Traurig. “But I think at first we were a little too sophisticated, a little too complex.”

Beekhuizen recalled one of the first projects his team handled, a “complex multi-district litigation that was going to be under an annual cap fee.” Here, they “came up with a project plan” that “had a little over 500 different sub-tasks” that covered “every possible contingency in that case.”

For the pricing team, the plan was an example of their skill and ability. But for the attorneys, it was a significant burden standing in the way of their case work. “It was too much for the attorneys; it was overwhelming,” Beekhuizen said. “It was more work managing the plan than actually doing the work.”

But it wasn't the only time the pricing team got ahead of their attorneys. Beekhuizen recalled another situation where his team developed a budget for a large litigation matter that priced out each required task. “And we had about 100 tasks. But there's this paradox: The more you get into the more details, the more you miss.”

The firm realized there were tasks they hadn't planned for popping up every few months. “Basically, it was a constant negotiation over the work and pricing for all of those new tasks that we didn't have in the forecast processes,” Beekhuizen said.

The lesson in both these situations, Beekhuizen added, is to keep budget plans simple and flexible, allowing the attorneys to easily understand and execute the budget without having to reassess or review their work on a constant basis.

|

Pricing Teams Are Only Focused on the Financials

Creating flexible budgets, however, may be more of a challenge than creating complex, detail-orientated budgets in the first place. But that is usually only true for financial professionals who have little experience or knowledge of how law firms work.

For Linda Novosel, chief pricing and legal project management officer at Steptoe & Johnson, it's imperative that pricing and financial managers at law firms “understand client relationships, how to build those relationships, and how the practice works.”

And this is not just because this understanding can create more responsive budget and forecast legal costs. These professionals can then speak the same language as attorneys and understand what attorneys want and need to hear. “If you go into it with just a financial perspective, the lawyers aren't going to respond to you,” Novosel said.

Pricing and financial teams also need to have more than legal knowledge and experience to be successful. It's important to tie budgeting in “with legal project management,” Novosel said.

“You can't have pricing without legal project management,” she explained. “Putting that work plan together is important, but expecting the lawyers to go back to it when they are working on any particular task is just not realistic.”

Magnifying documents. Minerva Studio/Fotolia. |

In legal departments across the country, managers are finding operational savings to become more cost efficient and profitable. And some of these savings come from spending less on outside counsel,making business for law firms more competitive than ever before.

And with new technologies and new people, some law firms are seeking to replicate legal departments' success in taming spending. But many are finding it's not as easy as just as creating budgets and pricing agreements. At the “Model Behavior: Winning with Pricing & Legal Project Management After 2007” session at Thomson Reuters' “16th Annual Law Firm COO & CFO Forum,” law firm financial managers shared the pitfalls that hinder many of these efforts.

For them, there are some not-so-obvious reasons why law firms' attempts to reign in or better forecast spending fail—and oftentimes it's not for a lack of trying.

|

It's a Proscriptive, Top-Down Approach

When Christopher Ende was managing director of pricing and project management at Goodwin Procter, he tried a few times to implement a firm-wide budgeting policy. “But every time we tried something proscriptive, it failed,” he said. “We went in and said, 'Every matter will have a budget whether a client wants it nor not,' and it was a complete nightmare.”

Ende, who is now law firm pricing, solutions, and panel management leader at General Electric, said that such an effort took “a lot of resources” at the firm because his team had to constantly check who was complying with budgets. There was also pushback from the firm's managers. “I had partners looking at me, saying, 'I can't believe I'm spending money on you to harass me for a budget I don't even want,'” he said.

The failures taught Ende an important lesson: When implementing data-driven budgeting and pricing, it's necessary to build from the bottom up.

“At Goodwin, what worked really well was the incredibly simple approach of baby steps, of being available as a counsel” to teams who were interested in implementing budgets or forecasting for matters, he said.

Through building relationships and credibility with firm staff, Ende slowly built demand for his budgeting and pricing services.

What also helped were the simple budget reports Ende sent out periodically to different teams within the firm. “We just sent a simple alert to the teams: 'You're 25 percent through your budget' or something.” Soon, attorneys were asking why and how they were going through their budget so fast, and what they could do different next time, he recalled.

|

Pricing Structures and Budgets are Complex

After getting buy-in to start creating budgets and forecasts, Greenberg Traurig's pricing team hit the ground running.

“When we first got into pricing and doing analytics and getting into the data, it was kind of like 'Revenge of the Nerds,'” said Matthew Beekhuizen, chief pricing officer at Greenberg Traurig. “But I think at first we were a little too sophisticated, a little too complex.”

Beekhuizen recalled one of the first projects his team handled, a “complex multi-district litigation that was going to be under an annual cap fee.” Here, they “came up with a project plan” that “had a little over 500 different sub-tasks” that covered “every possible contingency in that case.”

For the pricing team, the plan was an example of their skill and ability. But for the attorneys, it was a significant burden standing in the way of their case work. “It was too much for the attorneys; it was overwhelming,” Beekhuizen said. “It was more work managing the plan than actually doing the work.”

But it wasn't the only time the pricing team got ahead of their attorneys. Beekhuizen recalled another situation where his team developed a budget for a large litigation matter that priced out each required task. “And we had about 100 tasks. But there's this paradox: The more you get into the more details, the more you miss.”

The firm realized there were tasks they hadn't planned for popping up every few months. “Basically, it was a constant negotiation over the work and pricing for all of those new tasks that we didn't have in the forecast processes,” Beekhuizen said.

The lesson in both these situations, Beekhuizen added, is to keep budget plans simple and flexible, allowing the attorneys to easily understand and execute the budget without having to reassess or review their work on a constant basis.

|

Pricing Teams Are Only Focused on the Financials

Creating flexible budgets, however, may be more of a challenge than creating complex, detail-orientated budgets in the first place. But that is usually only true for financial professionals who have little experience or knowledge of how law firms work.

For Linda Novosel, chief pricing and legal project management officer at Steptoe & Johnson, it's imperative that pricing and financial managers at law firms “understand client relationships, how to build those relationships, and how the practice works.”

And this is not just because this understanding can create more responsive budget and forecast legal costs. These professionals can then speak the same language as attorneys and understand what attorneys want and need to hear. “If you go into it with just a financial perspective, the lawyers aren't going to respond to you,” Novosel said.

Pricing and financial teams also need to have more than legal knowledge and experience to be successful. It's important to tie budgeting in “with legal project management,” Novosel said.

“You can't have pricing without legal project management,” she explained. “Putting that work plan together is important, but expecting the lawyers to go back to it when they are working on any particular task is just not realistic.”