Working in Taiwan as an American attorney provides an interesting perspective on the practice of law in the United States. I'm always amused by the debate over "alternative billing" that flares up from time to time in the States. In Taiwan, fixed-fee billing is the norm, not an alternative lifestyle. Taiwanese legal consumers expect fixed-fee billing and are, generally, uncomfortable with hourly billing. This has required that I give increased focus to building models based on past time and expense records to improve the accuracy of my estimates.Project Management standards and methodologies provide powerful, well tested tools for planning, tracking, and documenting work--all very important if you want to profitably offer your clients fixed-fee options.
Because of this, I've long felt that project management standards are likely to be adopted lockstep with fixed-fees billing.
Ron Friedman recently posted to his Strategic Legal Technology blog an article titled Fixed Fees at Last? in which he discusses a recent article on the topic published in Corporate Counsel. He wrote the post over a week ago, so my mentioning it is hardly timely. It does, however, give me an opportunity to recommend Friedman's excellent blog to those who haven't already discovered it. It also provides an excuse to get on my soapbox and remind those advocating for alternatives to the billable hour of the importance of project management to their cause.
In the article Friedman discusses, two prominent lawyers[1] argue that fixed-fee billing offers advantages to both law firms and their clients and they mention the importance of project management to the success of fixed-fee billing programs. Friedman rightly notes that the emphasis on project management is what distinquishes this article from the reams of paper and countless bytes dedicated to the alternative billing debate over the past 20 years. Here is the articles' section on project management (emphasis added):
PROJECT MANAGEMENT
Communications between the law firms and the client on a continuing basis will be the key to fixed-fee success. Law firms must develop project management capacity that combines sensitivity to quality with sensitivity to productivity. The time invested in a project will be managed as the project proceeds, rather than discussed after the fact. It will require that firms, like corporations in fiercely competitive environments, learn to do more with less: the real definition of productivity. By the same token, in-house law departments must also develop project management capacity (and productivity measures for in-house lawyers) that mirrors the firms' efforts: focusing on working seamlessly with the outside firms to ensure efficiency on the merits. For both in-house and outside lawyers, connective technology (e.g., general and specific deal documents, databases, or general and specific litigation documents) and selective outsourcing to third parties can help drive real productivity.[2]Soon after this article was published in Corporate Counsel, the Wall Street Journal published a front-page article highlighting how, in response to the recession, corporations were increasingly pushing their outside counsel to enter into flat-fee contracts.[3] Paul Lippe, founder of Legal OnRamp, continues the discussion today in an article published in The American Lawyer. Lippe begins with a reality check, noting that "[m]oving away from the billable hour is no more inherently transformational than moving to the metric system would be. It may be a milestone of change or it may be a catalyst for change, but in and of itself it is not a huge change, just as re-defining a yard as a little less than a meter won't make anyone taller, richer or better looking."[4]
After very briefly sketching out the primary arguments against billable hours and a few points in its defense, Lippe points out what I hope would be obvious: that it is studying and engaging clients that brings value to new billing arrangements and that "[g]reat firms and great relationships can deliver great value in either method; mediocrity can survive in either as well."[5] I think Lippe gets to the crux of the issue, however, when he writes "[i]n my view, 'the unexamined billing system is not worth living,' and the biggest problem with the billable hour is that it leads to pretty non-rigorous self-assessments by firms and unproductively vague conversations between lawyers and clients."[6] We've now come full-circle. These recent additions to the attorney-billing debate should underscore the importance of legal project management in determining the best billing model for a given client's matters.
Just as the unexamined billing system is not worth living; you don't know what you don't measure. Law firms should neither experiment with new billing models nor accept the status quo without first gathering sufficient data on the processes by which they deliver legal services, measure their efficiency, and become proficient in estimating their time and resource requirements. This is where implementing project management standards and methodologies can help. I see legal project management, therefore, as a prerequisite to implementing an alternative billing model. Fixed-fee advocates should, therefore, be natural allies to those pushing for better project management in the legal environment.
[1] Ben W. Heineman Jr., former General Electric Co. SVP & general counsel, now distinguished senior fellow at Harvard Law School's Program on the Legal Profession, and William F. Lee, co-managing partner of Wilmer Cutler Pickering Hale and Dorr. See Ben W. Heineman Jr. & William F. Lee Two Veteran Lawyers Say Now is the Time for Fixed Fees, Corp. Couns., Aug. 24, 2009, available at http://www.law.com/jsp/article.jsp?id=1202433261281 (last visited Aug. 31, 2009).
[2] Id. at http://www.law.com/jsp/article.jsp?id=1202433261281&thepage=2
[3] Nathan Koppel & Ashby Jones, 'Billable Hour' Under Attack: In Recession, Companies Push Law Firms for Flat-Fee Contracts, Wall St. J., Aug. 24, 2009, at A1.
[4] Paul Lippe, The Billable Hour: Is it Really Doomed?, American Lawyer, Aug. 31, 2009, available at http://www.law.com/jsp/cc/PubArticleCC.jsp?id=1202433422584&The_Billable_Hour_Is_It_Really_Doomed (last visited Aug. 31, 2009).
[5] Id.
[6] Id.
Paul, great post.
I'd be interested to hear if you believe PM practices in Taiwan are more advanced than those in US legal - would imagine so. Thanks in advance.
Thanks Brett. Regarding project management in Taiwan, I would say firms in Taiwan are not much better than U.S. firms. One of the problems I see with fixed-fee billing in Taiwan is that there is often a race to the bottom when it comes to pricing, which can lead some firms to cut corners and take a "good enough" attitude in terms of the amount of time that would be spent on research and contract review and drafting.
Part of the issue is that legal services are not as valued in Taiwan. This is especially true with preventative/proactive services. Project Management can help firms compete by better understanding and optimizing their work processes, which can help them better communicate their value to existing and potential clients. It also provides the information needed to profitably offer various retainer options. But I don't see many firms here engaging in such self examination.