Looking for a way to provide greater value to your clients? If you’re unable (or unwilling) to explore alternative billing options, one way that law firms are learning to increase the efficiency of their file management under fixed-fee billing is by using project-management techniques, an alternative to fixed-fee billing in some cases.
Under hourly billing arrangements, firms are using project-management techniques to increase effectiveness and efficiency, and are then sharing the resulting benefits with clients. Legal project management employs the following methods, most of which are standard business management techniques.
Scope out the project
Estimate what costs and profitability you expect. How can you complete the project in the most efficient manner? Estimate the time required, staffing mix, and budget.
Set out a project timeline
What are the different phases of the project and expected deliverables and deadlines in the client’s mind?
Determine what the client expects
What outcome is the client looking for? How does the client define success? This can include turnaround time, expected cost savings, certainty of costs, guarantee of performance, budget tolerance, product to be delivered, quality of product expected, and service expectations. Determine quantitative and qualitative expectations. What are the elements of value as the client perceives them? Remember, the client, not the lawyer, is the final judge of value.
Price out the project
Understand the value you are providing and talk to the client about what is expected. Only then can you assign a price to match the expected value. Will you be charging a fixed price, hourly rate, or a hybrid alternative-billing option? Provide the client with different “value packages” to choose from, with different prices attached depending on value and benefits provided.
Execute the project
Devise a plan to implement the project and keep things on track. Assign responsibilities for monitoring performance and ensuring that the project is on schedule and the client is alerted if changes occur in predetermined conditions. Use “change orders” if conditions change, in order to alert client of price changes as the engagement proceeds.
Evaluate the project
Agree upon and set up an evaluation process with the client. How will the client evaluate you on successful completion of the project? How will she or he measure your performance? How is the client defining value, and how will she or he measure and determine it? Regardless of size, your firm still has to estimate a fair price based on value.
Obviously, project management is much simpler for the four-to-ten-person law firm, where most projects will consist of a partner and two or three staff members, as opposed to teams of partners and staff common in a large firm. This is an advantage that small firms have, but whether the firm is large or small, all of the project management concepts above still apply. But regardless of size, your firm still has to evaluate the project, estimate a fair price based on resources used and value provided, and finally perform the work as efficiently as possible in order to make a decent profit, while at the same time optimizing value for the client by meeting their qualitative and quantitative expectations.
Want to learn more about how to increase client value through alternative billing methods or project management? Download a free copy of Alternative Billing Structures In Law Firms here.