1. Problem: Clients want alternative fee arrangements, especially fixed fees, but each matter is so complex and unique that we don't have comparable ones to use as fee benchmarks.
Response: Consider breaking down matters into sub-parts that may be more comparable across matters, then building a fee arrangement around each sub-part.
This is a difficult issue, which will require perseverance and some experimentation. At this point, firms are still finding their way. What works for one firm may not work for another. Full treatment of this subject is beyond the scope of this discussion, which addresses the information and knowledge strategy aspects of the problem.
By breaking complex matters into their sub-parts, comparability improves. For example, an M&A matter could be broken into due diligence, merger agreement negotiation, antitrust filings/review and closing matters. Historical information about the cost (hours and seniority of timekeeper) to complete each sub-part can be recorded for each M&A matter, together with a description of the sub-part sufficient to determine comparability. Then sub-parts can be compared and analyzed.
How can the needed information be collected? Time entries will need to be coded to identify the sub-part to which each relates. Many time entry software products can be set to require codes. But who will insert the proper codes? As difficult as it may be, the best approach is probably to require the lawyers to enter the codes as part of their time entry preparation. Selective auditing of results would be advisable as well.
As to the codes themselves, the not-for-profit LEDES Oversight Committee administers a set of codes as part of its Uniform Task-Based Management System. These codes were originally established through a joint effort of the American Bar Association, the Association of Corporate Counsel and PricewaterhouseCoopers. There are currently code sets for litigation, counseling and projects, as well as for the specialties of bankruptcy, patents and trademarks. The UTBMS code sets have the advantage of having the input of many practicing lawyers and of being standardized. They have the significant disadvantage of being one-size-fits-all. In addition, some of the code sets are too complicated (29 tasks in the litigation code set) and some may be too simple (4 in the counseling code set). A revised project code set for transactional matters was released in 2007 that reduced the number of codes from 16 to 11.
While the UTBMS codes may be a useful starting point, firms will likely conclude that for AFA and legal project management purposes they need to develop their own codes that address the specifics of their typical matters. It will be important to limit the number of codes for each matter type (to, say, no more than 10) and to make the definitions of the sub-parts as intuitive as possible. Each major matter type will likely have its own set of codes. Lawyer training on use of the codes will be important, as will distribution of quick reference cards. Visibility for the effort should be maintained within the firm, including discussion of the strategic importance of the effort at firm and practice group meetings and circulation of success stories about analyses and fee arrangements the effort has enabled.
Lawyers may resist including sub-part codes in their time entries, especially if codes are not required by the client and will not be reviewed by it. Even where the time entry software makes the codes mandatory, lawyers may not enter the information accurately. It may help accuracy if associates know that reports summarizing their work on each sub-part, together with excerpts from their time entries, are being reviewed weekly by a quality control group that includes the partner in charge of the matter. Reports of partner time could be reviewed weekly or monthly by practice group leaders. Once word gets out that the reports are actually being reviewed, compliance should improve.
In theory, paralegals could also add the codes after-the-fact, although they may not have a sufficient understanding of the matter type to add the correct codes. Auditing and training will be an important element of this approach, but it is likely that its use will be limited to performing a double-check on the lawyers' own code-entry efforts.
As part of devising the initial code set, several completed matters could be selected and the codes inserted into entries on an after-the-fact basis. The resulting break-down of the fee by sub-part and the experience of coding can aid in devising a code set that strikes the right balance between sufficient detail and intuitive task definitions, on the one hand, and an impractical number of codes, on the other.
In addition to using task codes in time entries, key information about each sub-part should also be collected. For example, for a litigation matter, how many depositions were taken and how many witnesses were prepared? For an M&A matter, what special subjects were important in the due diligence review, such as environmental issues or special regulatory reviews? Each practice group should develop the important questions for each sub-part in its matters. This information must be collected from the lawyers who worked on the matter. An after-matter review meeting, as discussed in Problem 3, would be an efficient setting to confirm the answers prepared by a paralegal based on a checklist of questions.
Before embarking on a firm-wide effort, pilot testing within one or two practice groups would be advisable. In addition to providing essential information about whether and how the approach produces useful results, the experience may also yield success stories that aid in acceptance during the firm-wide roll-out.
Assuming that lawyers are sufficiently timely in putting in their entries, the code system can also aid in monitoring a matter's progress against its budget, which is an important element of managing an alternative fee arrangement (and an essential element of legal project management generally). If lawyers are not timely, the firm should seriously consider new policies and software aids to drive towards daily timeliness. Whether or not the firm is concerned with alternative fee arrangements, timely entries are essential to effective matter management (now often referred to as legal project management).