Legalbill's Archives

Tools for Success

Date: November 15, 2011

By By Nicky Mukerji and Lauren D. Wilkins

Using Project Management Tools for Your Alternative Fee Arrangements

Historically, most attorneys do not have training in business management. However, as Alternative Fee Arrangements (AFA) become more popular, attorneys will need to integrate business management concepts and tools to assist in the preparation, analysis and measurement of these agreements.

Projects within corporations represent temporary endeavors with a defined beginning and end, undertaken to meet goals and objectives. Project management is the discipline of planning, organizing, securing and managing resources to achieve project goals. The project management community has developed tools and techniques to help understand and manage the complex interactions between goals, results and resources. Law firms managing legal matters under AFAs can apply these tools.

The Project Management Triangle

The project management triangle is often used to illustrate that project success is measured by the ability to manage the project so that expected goals are achieved while managing cost and time. Similarly, a successful AFA will enable a law firm to provide qualitative, responsive and cost-effective representation. The arrangement would balance all three parameters to be able to provide the client with efficient and effective legal representation, and make it cost effective for the client as well as the law firm.

Law firms responding to a request for an AFA proposal can prepare a project management triangle to assist in determining if an AFA is right for the firm. It is essential for the firm to determine what the cost of the representation will be. That cost should not be based upon conjecture or speculation, but an accurate analysis of how much it is going to cost to assign one or more attorneys to the project. Costs should not be measured by estimating billable hours. Firms should consider all hard costs associated with putting the attorney in his or her seat and then determining what amount should be charged to the client to realize a reasonable profit margin. The goal is cost-effective representation that ensures customer satisfaction.

Work Breakdown Structure

A work breakdown structure (WBS) is the decomposition of a project into smaller components to organize and define the scope of the project. The WBS concept can be used during the planning of an AFA by identifying all elements to be performed during the AFA execution. Further, each element within the WBS can be sub-divided into activities or deliverables to enable further planning. Firms should be able to identify:

? Activities needed to successfully complete each phase of the representation

? Professionals in the firm best suited to engage in the activity

? Templates and forms to reduce the time needed to perform routine tasks

Having an internal WBS allows for consistency in representation as well as cost management. A typical WBS might include elements such as the litigation plan, estimated profitability, estimated budget, and templates of documents and forms.

Resource Management Plan

Project management focuses heavily on the ability of the manager to choose, train and utilize appropriate resources to meet project requirements. In addition to the legal team, a typical AFA engagement will need management resources to approve profitability models, develop client engagement letters, oversee legal representation, etc. Administrative resources are also needed to monitor costs, evaluate risks and report on progress. Most firms already have these resources in place. In many instances, the law firm billing department can provide the necessary information to track and monitor the AFA.

Resource management plans ensure that management, attorneys and staff understand their respective roles in the implementation of the AFA and also serve as references for future AFA development.

Risk Register

A risk register is a management tool that acts as the central organizational repository for all identified risks and their impact on projects. Law firms operating under AFA arrangements can greatly benefit from a risk register. The risk register documents the impact and extent of risks associated with AFAs. It will also document the steps taken to reduce or mitigate risks and their effectiveness. This collective experience will improve the planning and estimation processes associated with creating new AFAs.

One risk that can be associated with an AFA is adverse selection of cases. A risk register can be used to keep track of the nature of the cases, level of difficulty, time required to close the case and outcome.

Gantt Charts

Gantt charts are bar charts that illustrate project schedules. They illustrate the various tasks, their start and finish dates, as well as their interdependencies. A Gantt chart could be used as an overall scheduling tool for managing the activities associated with AFAs. It can be used to show concurrent activities, deliverable timeliness, as well as tasks that would need to be re-evaluated and re-estimated for future AFA assignments.

Benchmarking

Law firms using AFAs on an ongoing basis should spend time analyzing previous AFAs in terms of qualitative and financial outcomes. Performance benchmarking, used in project management, can be used to develop and measure AFAs against best practice standards. Many firms are new to AFAs and will need to develop benchmarks during the first year of an AFA implementation.

Benchmarking will lead to an organization-wide standard for measuring AFAs and enable the firm management team to develop standards and practices to ensure that future AFAs will yield better results.

These and other project management tools are invaluable assets that will help firms understand and develop powerful AFA solutions for their clients. These tools will also assist firms with implementation, development and measurement of successful AFAs on an ongoing basis.

Nicky Mukerji is the CIO of Legalbill, a Nashville-based Legal Spend Management company. Lauren D. Wilkins is the President of Langlois, Wilkins, Furtado & Metcalf, P.C., an insurance defense firm with offices in Rhode Island and Massachusetts.