The recent economic downturn forced many law firms and in-house legal departments to keep a closer eye on the bottom line.
But keeping costs down requires good project management — a well-established practice for engineering and consulting firms and any companies or organizations that undertake large projects, yet project management is 'virtually unheard of within law firms,' according to Brian Armstrong, executive vice-president and general counsel at Canada’s first private-sector nuclear generator, Tiverton, Ont.-based Bruce Power LP.
'It’s probably because no one has ever seriously challenged the way firms handle major litigation or transactions where clients essentially write a blank cheque and accept the premise that it’s going to cost what it’s going to cost,' he says. 'But that’s not going to be an acceptable way of doing business going forward because in the current economic environment, we’re getting pressure to make costs more predictable — if not entirely predictable.'
That’s certainly the case at Bruce Power.
Gone are the days when Armstrong could hire an external firm to handle a big litigation file on behalf of the company and simply tell the CFO and CEO that the case is 'too complex to forecast' a fee and that Bruce Power would have to pay whatever it cost when the bills were rendered.
'That’s not going to be good enough any longer. I’m not going to be able to get approval for a piece of major litigation unless I’m able to predict costs with a great deal more certainty than in the past,' he says.
The move toward greater predictability of costs has developed over the past decade, but is
now 'acutely being felt in in-house law departments across the country and across North America,' according to Armstrong.
'Part of that is the result of the recession, but part is a change in attitude in most business organizations toward how much they spend on legal matters and the desire to be more rigorous in their budgeting.'
He explains that at Bruce Power, a major piece of litigation or large transaction ought to be regarded as a project — and in fact will be in the not-too-distant future.
'We will manage it like any other project. We will scope it out initially, determine the work involved, what we’re trying to accomplish, what major functions have to be performed and in what order and to what extent they’re interdependent — and figure out the resources required,' says Armstrong, who practised law as a senior partner with Smith Lyons (now Gowling Lafleur Henderson LLP) before joining Bruce Power as general counsel in 2000.
'We would then figure out how long it will take for each task to be completed, to what extent the various functions overlap with one another in terms of scheduling — and put all of that on a flow chart. We then would be able to identify project cost and develop a budget that would enable us to come to grips with the whole thing.'
But on larger, more complex commercial cases, 'it’s not unusual, and often the case, that there will be a project manager appointed to a file,' says Jeff Galway, a partner in the Toronto office of Blake, Cassels & Graydon LLP, whose practice focuses in part on corporate-commercial litigation.
He explains that a junior associate within a firm can be assigned as project manager, but that role is typically filled internally by the client by someone who knows what steps need to be taken in the decision-making process during the various stages of litigation.
'Project management is not only to be used as a tool to keep costs down, but as a way to keep a file handled on an efficient basis and proceeding forward in a proper fashion,' explains Galway, who acknowledges that given 'the greater focus today on cost issues surrounding litigation, firms are also trying to get a better handle on costs upfront.'
He sees the role of the project manager as ensuring 'external counsel is getting what they need from the client and that the right people know what’s happening so that decisions can be made on a timely basis. In a litigation, it’s to outline the various things that need to happen at every stage, from the commencement of a claim to the trial or settlement — and make sure external counsel and the client are on track.'
While some of the larger Canadian firms assign 'mid-level' partners to oversee deals, transactions and complex litigation cases, none so far have embraced project management as extensively as has U.K.-based firm Eversheds LLP, says Richard Stock, the founding partner of Catalyst Consulting, which provides management consulting services to corporate and government legal departments.
'If you ask them, Canadian firms will all say they have project-management capabilities — though they may not use the terminology —to provide detailed estimates by phase and task, by who’s going to do it and how much it’s going to cost. But there’s too often a big gap between what people generically say they do and what they really do and what they really have in terms of tools.'
By tools, he means the formal training and skills necessary for effective project management, along with collaborative budgeting software that enables clients to sign off on the scope, spending and status of a specific file, especially those that are complex.
'You can ask law firms whether they have these programs, which of them are interactive, which clients use them, what proportion of their clientele use them, what training they’ve done to use them — and can you actually see the software, the skills, methodology and the results,' says Stock.
'If they use an off-the-shelf product, have they customized it? That’s important, since there are differences in managing the phases and tasks between litigation files, deals and transactions.'
Armstrong believes that all law firms or corporate legal departments should incorporate project management into their operations. But if they don’t, he sees an opportunity for independent consultants to develop and market that service for them.
'Law firms could be quite interested in talking to somebody who could project manage a large piece of litigation for a fee.'
Nevertheless, he believes that project management skills should comprise the training for lawyers.
'When I went to law school, nobody ever thought of a piece of litigation as a project that had to be managed, brought in on budget and on schedule,' says 67-year-old Armstrong, who earned an LL.B. (since changed to J.D.) from Osgoode Hall Law School in 1968.
'I’m old enough to remember the days when not all cases were done on the basis of an hourly rate. Many of them were value-built — you looked at what the outcome achieved would be worth to a client and agreed on a fee. If it was a terrific settlement reached in a short period of time, there was value to the client in avoiding lengthy litigation and time spent, all of which would be factored into the fee.'
Times are different, and with growing demands on law firms to be businesses as much as they are legal services providers, Stock says they all should have in-house project management capability.
'If you had 40 lawyers in a litigation practice, there could be two at the partner level designated as project managers, and other lawyers would be obliged to go to them to get their budgets and plans signed off.'
Through efficient project management, he says, a firm could provide clients with detailed budgets for any file involving more than 25 hours of legal work, which represents as much as 90 percent of a firm’s revenues. (An estimate would suffice for work below 25 hours, he adds.)
Still, Stock estimates that fewer than 10 percent of Canadian firms with more than 50 lawyers have made a 'formal, explicit commitment' to project management.
Nevertheless, he believes that more firms will embrace project management as a 'cost-effective business tool,' in part the result of the Eversheds of the world raising the bar and also because major corporate clients, such as those from the banking, insurance and energy sectors, will put increasing pressure on their own legal departments to reign in spending.
'The next frontier for serious cost reduction will be managing the scope and resources of work deployed to external counsel,' says Stock.
'But I believe law firms would be more profitable if they manage projects and get clients to sign off on estimates and make them accountable to the specifications of work outlined on a file.'
'It’s about doing business differently.'
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