Hegelian View of Legal Project Management

The practice of law in western countries is being refashioned in a radical and unprecedented way. The changes are partly driven by technology, but to a large extent are being driven by the demands of the market. In particular the “legal mystique” has evaporated and sophisticated users of legal services now expect a high degree of transparency.

 The classification of the philosophical concepts of thesis, antithesis and synthesis has been attributed to Georg Hegel.  In essence, the thesis is the proposition or state of affairs, the antithesis is the reaction to it (often an over-reaction) and the end synthesis is a resolution of the two extremes, and often the starting point for the next cycle. One could point to numerous examples of the operation of this paradigm throughout history, for example, the “hippie” counterculture of the 1960’s may be considered as a reaction to the strait-laced environment of the 1950’s, and the subsequent culture of the 1970’s and 80’s sat somewhere in the middle of those two extremes.

In the legal services sphere, the last forty years was the Golden Age of time costing. The original concept of firms charging clients based on time spent on work for that client, in effect a user-pays system, was in theory, fair.  It seemed reasonable that a difficult and demanding file, or a difficult and demanding client, should be charged more. Over time though clients have begun to resent strongly being charged for six minute increments recorded indifferently on a time sheet. Specifically, clients feel that there is a total disconnect between the charges and the actual value that is added.

The main factors that led to this state of affairs may be summarised as:

  1. Lawyers place very little importance on the process side of legal work. Traditionally law schools have trained lawyers in substantive law and the curriculum has not included “processes” such as project management. For that reason many lawyers regard administration and process work as “not real legal work” and therefore not deserving of their attention. The reality is that clients view the service provided on a holistic basis; therefore the delivery of a superior legal work product may still result in an unhappy client if there has been poor communication and particularly if the client has received a surprise when the final invoice was rendered. It is not unreasonable for clients to expect an execution plan which prescribes the scope of work, who will do the work, how long it will take to execute and what it will cost, and for the client to also expect to receive progress reports against the execution plan, with recommendations for remedial action if work falls behind. In other words, clients want basic project management principles to be applied to the work. Ideally, the client will be involved in the formulation of the execution plan and embedded in the execution so there is an alignment of objectives
  • The loosening of advertising restrictions has led to lawyers becoming more competitive and aggressive. Often this aggression has carried over into billing practices and the daily chargeable hour targets set for employee lawyers. The result is that, for junior lawyers, the time sheet has become an end in itself and promotion usually turns more on an assessment of hours charged and realised than on the efficient execution of work. When one is blithely recording time on a sheet it can be easy to justify researching and pursuing every minor point which crops up (“leaving no stone unturned”) without regard for how material the point is for the client.
  • Increased specialisation has also meant that on complicated transactions or projects a lawyer only sees a limited number of squares on the chess board, resulting in he or she only being interested in his or her work input and not the totality of the project or the ultimate objectives of the client.
  • Finally, there is the inherent unfairness in a system that rewards slow workers. Time costing practices provide very little incentive to pursue increased productivity through disciplined work practices (including avoidance of duplication of effort by junior staff) or the use of technology.  It would be trite to observe that there is scant alignment of objectives between the client and the professional service provider.     

The push by clients to lower their legal spend has mainly come from the larger corporate clients who have the market power to insist either that external legal work must be executed in a more disciplined fashion or, more bluntly, that external fees must reduce. In the USA the reduced legal budget of major corporate clients has resulted in large law firms adopting Legal Project Management (LPM) practices. Firms have pursued efficiencies in a bid to preserve their profit margins despite lower gross fees. Similarly, in Australia many clients perceive that large firms have “strangled the golden goose” and clients are demanding lower fees and increased efficiencies through LPM, outsourcing and the use of technology.    

We are now approaching a nadir in terms of the bargaining power of law firms. The current situation is the antithesis of the work practices of the last forty years.

What will be the synthesis?       

Part of the efficiency push is a drive to commoditise as much legal work as possible, resulting in fixed fees for particular chunks of work. For more complicated work however, as much as time costing may be on the nose, it remains (to mis-quote Churchill) the worst method of costing, except for all the others. Time costing remains, in theory, a fair basis for charging if the work is discharged competently and efficiently.  Therefore there can be a continuing role for time costing as the basis upon which a firm sets the fee it will charge for a specified scope of work.

But it is a mistake to think that LPM will always equate to lower fees; the fees may in fact be higher if the scope increases (or creeps). LPM enables the client and the firm to consider any additional fee on a timely, scientific basis, in contrast to the current situation where often the client only discovers that the initial “estimate” has been exceeded significantly when it receives the final invoice.

Similarly if a client expects a firm to be “lean and mean” in the allocation of resources to a job, there is a case that a “Stand-by rate” (cf. shipping or construction contracts) should be payable if the client fails to perform its obligations on time, for example, failing to provide due diligence materials on the day stipulated or failing to respond to a draft within the time agreed. The client should also be prepared to pay a fee for the project management necessary to deliver the work efficiently (note: for an optimal result this work may not be performed by a senior practitioner and it may even be a task for a non-lawyer).  

A functional relationship may also require an in-house lawyer who is briefing out to be prepared to empirically evaluate the overall cost/benefit to the company of the work, instead of burrowing down into invoices and treating hours invoiced as specific line items. We should not forget that most senior in-house counsel have gained their early experience in a time costing regime and therefore it is as much of a wrench for them to shed time-based charging as it is for the law firms. Finally, in-house lawyers will need to be vigilant to guard against firms who provide the lowest price as, more or less, a “loss leader”, with the intent that they will make their profit out of variations.  

Put simply, in the future contract administration is going to become a lot more important for both the law firm and the client. Legal engagements will be handled in a manner similar to the engagement of other professionals such as engineers or architects; the days of putting the signed Letter of Engagement on file and never looking at it again (unless there is a dispute), are over.   

It is quite right for clients to insist on the elimination of waste (or “profligate work habits” to quote the American Bar Association). However, the relationship is symbiotic; both sides will need to adopt practices which are conducive to work being delivered efficiently. This will be the synthesis which will unfold over the next decade.

© Law Strategies Pty Ltd 2016

*Peter Dighton is the principal of Law Strategies Pty Ltd., which is a legal and commercial project management consultancy with over 30 years’ experience on international resources projects –www.lawstrategies.com.  Law Strategies provides LPM mentoring to law firms and has developed its own methodology for preparation of Project Execution Plans – “Incogito”

Back to Homepage