Firms Must Base Fixed Fees on Sound Data, Not Guesstimates

As I have noted in prior posts, project management standards are likely to be adopted by law firms lockstep with fixed-fees billing. In a recent guest post to Jim Hassett's Legal Business Development blog, Steve Barrett, former CMO at Drinker Biddle, discusses "three prerequisites to success in implementing alterative fees," which require a level of project management maturity that most firms have yet to achieve. These are:

1. systems to "screen and approve all off-hourly deals and monitor them as they progress";
   
   
2. tools to "rigorously [analyze] the financial outcomes of their past alternative fee client matters, either separately or taken as a whole"; and
   
   
3. the discipline of tracking cost histories so that firms can develop a good understanding of cost patterns (many firms' corporate clients may have better data on litigation sub-unit costs than the firms themselves and will increasingly dictate to the firms the amount they expect to pay for various units of legal work).[1]

What I take away from Mr. Barrett's article is that whether or not firms adopt one project management methodology or another, they clearly need to inculcate certain hallmarks of good project management into their practice, most notably: developing capabilities to measure and monitor their work and have systems in place so that they can access and analyze data on past work and lessons learned. 

Too many firms have not developed knowledge and case information management capabilities beyond memo banks and simple case information tracking. Even where a firm's case management and time and billing software offer some ability to track prior work and estimate the time and cost of future work, most firms do not seem to be using these applications to their full potential. Too often, cost estimates are based on the educated guesses of experienced counsel, which can be valuable, but basing fixed-fees off of an old-hands guesstimates is risky. Law firms need better data, their clients increasingly expect it, and improved project management can deliver it. 

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