project management

Why you need a client Engagement Letter and, importantly, why you need to keep it updated: Two recent cases

First off, for those who don’t know differently: in the world of professional services firms an ‘Engagement Letter’ isn’t an expression of love to another. Indeed, for us an ‘Engagement Letter’ might better be phrased as a ‘Pre-nup agreement’!

What is an Engagement Letter and why are they so important?
In the world of professional services firms, an ‘Engagement Letter‘ can generally defined as being:

“A document that sets out the business relationship between a client and their law firm. This letter serves as an agreement between the parties on the terms of their engagement. This includes details on the services being offered, client responsibilities, deadlines and compensation.”

Engagement Letters can include more, but in short they set out:

Exactly what the Scope of Services being provided are
Who is assigned to do what, and
How much the law firm will be paid by the client for doing said Scope of Services.

They are important for two main reasons: (1) on the part of the law firm they set out what the client’s expectations are – thus limiting the potential professional indemnity risk on the part of the firm; and (2) on the part of the client they set out the service standards, the expectations – they hold the law firm to account.

So, for both parties: a properly agreed to Engagement Letter sets out the expectations and assigns the risk – “win/win” as they say.

Two recent case studies
So let’s take a look at two recent cases that evidence just how important Engagement Letters are.

In the first case (a US-based medical case), a [medical] patient was billed US$230K for surgery having previously been advised – in their Engagement Letter – that the cost of the said surgery was estimated at US$1,300.

The Supreme Court in that case held that the estimate was protected by contract law, as no formal extension of scope letter had been issued and so the patient was only required to pay the US$1,300 original estimate.

Lesson Learnt: Send your out of scope (or extension of scope or variation of scope) letter out as soon as you are asked to do something that is not in your Engagement Letter.

In the second case (UK-based legal matter), a properly executed retainer agreement allowed a law firm to keep its agreed £300K fee, even though the bond issue that it related to was aborted.

Interestingly, the judge in the second case, His Honour Judge Paul Matthews, previously (as in a week earlier) made a comment – in reducing costs sought by a receiving party because all of the work was handled by a solicitor claiming grade A rates, that:

“it was not for the paying party to identify which work could have been delegated.”
See here

Lesson Learnt: Engagement Letters need to be properly drafted; but, importantly – get yourself a Project Manager to manage the case so that they can constantly review the work and ensure that any Out of Scope work is immediately communicated.

My 5 hints on how to manage Engagement Letters
If you follow these 5 hints, I think you’ll find you have far fewer issues with getting your fees paid:

The most important thing to remember is to have an Engagement Letter with your client!
Once you have the Engagement Letter, remember that it is not a ‘set and forget’ document. Don’t sign it, then put it in the file and forget it. Keep a copy close to hand and review it daily.
If, at any time, you see Scope Creep happening, send an immediate notification to your client that you are being asked to do tasks outside of the originally agreed Scope of Works.
And by ‘client’ here, I don’t mean the person asking you to do the work, but the person who will be paying the bill (accepting they may be the same).
Finally, if your project is big enough, put a Project Manager in charge of reviewing and managing all of this.

As usual, comments are my own and I welcome feedback.

Have a great week all.

rws_01

Image credit goes to Scott Graham on Unslpash

What 5 pieces of advice would you give your younger self?

My son was born 10 June 2021. Since then, I have been in lockdown for 10 weeks (just starting week 11), homeschooled all of term 3 (currently 8 weeks, start of week 9), have three children under the age of 7 at home 24/7 (including the newborn), and with two working parents to schedule this madhouse around!

All of which is to say, I have been remiss in not blogging for a while, but hopefully you get the picture.

Anyhow, during this time of madness I came across an interesting article by Bhavisha Mistry on the Legal Cheek blog – ‘5 pieces of advice I’d give to my younger self’. Bhavisha is a College of Legal Practice programme committee member trying to help out aspiring lawyers.

Bhavisha’s article got me thinking, ‘What 5 pieces of advice would I give my younger self?’. So, here goes my attempt at an answer:

Expect the unexpected: Having been through the Asian Financial Crisis (1997/1998), the dot.com bubble bust (2001), SARS (2002), the Global Financial Crisis (2008) and now COVID (2019), one thing I can tell you is that the ‘unexpected’ happens on a pretty regular basis. Plan for it and always have a ‘Plan B’, because there are likely going to be more uncertain days than certain.
Back yourself: If you’re starting out in this profession, you’re just about to go through some of the most boring and mundane [very long] days of your life. Having been a massive over-achiever up to this part of your life, you will now go through an apprenticeship that will make you question why you bothered. You’ll hear a lot of comments about “paying attention to detail”. All I can say is:- back yourself and stick with it. There will be challenges. There will be dark days when you question your sanity. But back yourself, because you are here for a reason – and never, ever, be willing to compromise on your personal values to please your peers.
Always be willing to learn new things: While the profession of law probably hasn’t changed all that much since the days of Charles Dickens, the business of law is changing all the time. Always be willing to learn new skills that help you improve how you conduct the business of law – whether that be Legal Project Management (LPM), Design Thinking, AI or whatever fad is still to come our way. Read. Listen to podcasts. Attend webinars/seminars/conferences. And be willing to pay for this if you need to.
Business Development and Marketing are important skills: Following on from 3, know how to market yourself in a P2P (person-to-person) industry is important. Look at your customer buying journey/cycle. See where you need to be and when – and that may be on LinkedIn, but equally it may be having your hair-cut on Saturday when the barber/hairdresser is busy with friendly chat. It could be talking to other lawyers (for referrals), but equally it could mean staying well from them. But having an understanding of this is critical, because it will help you with one of the most important skills you need to succeed in this business: the ability to build relationships with people – both internally [in your firm] and externally.
Budgets are a joke: I’ll leave the best for last, when you start out at a firm you’ll be assigned a budget. That budget is likely going to be 4+ times what you are being paid. It is going to look like a lot of money. You a probably going to think: “If I had that much money I could buy an apartment”. Here’s the thing, these budgets are meaningless. Why do I say they are meaningless? Because at this stage of your career, you’ll have no control over whether you can achieve budget. You’ll have no control over whether you can achieve utilisation. So, if anyone from Finance or Management says you are not making budget, refer them to your supervising partner – because that’s where the buck stops!

As always, the above represent my own thoughts only and would love to hear yours in the comments below.

rws_01

Survey: Top 5 Reasons Clients Switch Firms

If you’ve recently lost a client to a competitor and have been wondering how that happened, wonder no longer. The recently published ‘2020 Future Ready Lawyer Survey: Performance Drivers‘ by Wolters Kluner has the answer.

Surveying 700 in-house and private practice lawyers across the US and EU in January 2020, this is probably the most comprehensive survey post COVID (although most of us were not entirely sure what this meant in January so I look forward to a survey report that has been conducted post March this year).

The Top 5 reasons cited as to why a client might leave your firm are:

The client no longer trusts your firm can meet their needs,
Your firm doesn’t specialise in the area of law needed by the client,
Your firm failed to communicate its value proposition properly,
Your firm did not demonstrate efficiency and productivity, and
Your firm’s leverage was/is all wrong.

And three of these are essentially because you messed up on sourcing, communicating and delivering on your pricing promise.

Take-away top tip: want to make sure you keep clients and keep them happy – make sure you (and your team):

understand(s) your value proposition and are able to communicate this,
get your team’s leverage right [hint: don’t hoard work at the top end just so you can meet budget this year!], and
understand the scope of what you are being asked to do and project manage both the scope and the client expectations (especially if out of scope creep occurs).

Manage this well, and you’ll be three-fifths of the way to keeping your client happy!

Demonstrate Efficiency

As a bonus, think about how you demonstrate efficiency to your client.

Is this by saying you have the relevant expertise/experience so that you can do this faster than others,
Is this by saying you have the appropriate IT systems that allow you to get the job done faster, or
Does efficiency even really matter – should the conversation not be about being an effective lawyer?

As always, these just represent my thoughts and always interested to hear your views.

rws_01

Okay you can keep the ‘Legal’ tag; but it’s just Project Management!

I’ve been ‘white-boarding’ legal matters since my days helping out on front-end major projects back in 1996; so the concept of ‘mapping out’ how a transaction might progress, what may be ‘in scope’ and ‘out of scope’, the approximate amount of time the transaction may take and how we are going to resource it are not new to me. In more recent times (largely following the GFC in 2008) the legal industry has formalised my approach of ’white-boarding’ matters to become Legal Project Management.

While I was never really that sure over the years how Legal Project Management differed from the more general Project Management, I have been assured – on numerous occasions – that there is a difference. When asked how, the most common response I received was that:-

Legal Project Management is the discipline of project managing ‘tacit knowledge’ – as ‘knowledge workers’, while
Project Management is the discipline of project managing tangible products, e.g., the construction of a hospital.

And until the last month or so I thought that was a pretty good answer.

So what changed?

Well, in the last month and a bit I have attended a collective 5 day (2 day and then a 3 day) course on Project Management Fundamentals run by PM-Partners Group here in Sydney.

The two day Fundamentals (essentially, theory) session was outstanding and broken-down into the following nine (9) modules:

What makes projects succeed (and by implication, fail)
The essential project management philosophy
The project life cycle
Project planning – project definition and scoping
Project planning – creating the WBS & schedule
Project planning – estimating
Project risk
Project execution & control
Project closure

In turn, if you were on a course where you learnt all about:

scope creep
the difference between what a risk is and what an issue is (hint, one has happened and the other hasn’t)
how to do a business case and a project plan
the triangle of scope, cost, time and quality
the four dependency types [finish-start; start-start; finish-finish; and start-finish], and
you get to work on creating a Work Breakdown Structure and Estimating (Optimistic, Pessimistic and Most Likely – also looking at the Cone of Uncertainty)

Wouldn’t you think you had been on one of the best Legal Project Management training courses around?

Well, that’s exactly what the two day PM-Partners run Project Management Fundamentals course taught me and I have walked away from that course thinking to myself that you can keep the classify ‘Legal’, at the end of the day it’s project management and it’s this type of project management we need to get better at.

My biggest take-out though?

Understanding the difference between a risk and an issue, because anyone doing pricing should get their head around this because it really is as important (and probably goes hand-in-hand with) as what happens with scope creep [helpful extra tip: want to understand scope creep, look up what happens with the formula: n (n – 1) /2].

Get in touch if you want to hear/find out more, otherwise get yourself on a really good PM Fundamentals course because I can guarantee it will pay for itself!

rws_01

Is your team Gold-plating its services?

Earlier today Kiron D. Bondale posted ‘Avoid Gold-plating Through Agile Delivery‘ on the PM Hut site.

There’s a lot to like about Kiron’s post, and many things in it really resonated with me from a business development perspective, but what I really want to share with you though is this brilliant piece of commentary by Kiron:

“As it is with jewelry, on projects gold-plating is all form with no substance. The increase in costs is rarely justified by the value provided by superficial “bling”.

It could be an analyst adding in requirements which they came up with on their own without ensuring that those are actually required, a developer who introduces a code change or feature they believe is useful without checking with others or a quality control specialist who decides to test above and beyond approved test plans.

Don’t get me wrong – the intentions are usually good and I’ve yet to encounter an instance of gold-plating which was done maliciously. But it doesn’t matter – gold-plating is work creep.”

and ask: “Does any of this sound familiar to you?”

Because I’m guessing that if you are being honest with yourself, it does. And trust me, there’s no quicker death nail in a client relationship than scope creep.

RWS_01

Some reasons why every lawyer should be encouraged to do fee estimates

Fascinating blog post over on the pmhut.com website recently (30 April 2015) by Terry Bunio, Principal Consultant at Protegra, on “Why I Like Estimates” that should be add to the “must read” list of every lawyer and law firm business developer who hasn’t already read it and adopted its principles.

Some of the things that Terry sets out that really resonated with me in this post included:

Estimates make me think through a solution

“When I estimate I am forced to examine project details and technology and think through the deliverables at a detail level and how we would build them. This helps to identify issues early and give the team and client lead time to decide on a resolution. When you discover issues late in the game, your options are limited and client anger usually follows.”

Precisely the same reason why lawyers should be doing cost estimates before agreeing to undertake a matter. It makes you think through what the issue(s) is/are, how you are going to deliver the desired result to the client and what sort of resourcing you’ll need. You should also be able to determine at this time what you cannot deliver to the client.

Estimates create a shared understanding

“…the discussions that occur while estimating are invaluable. These discussions create a shared understanding throughout the entire team.”

Terry is absolutely spot on here. It should also allow you to assign what work the firm will do, and what work will be outsourced (to an LPO) or insourced (to the in-house team). It sets out a task management process from the offset and reduces the risk of scope creep or out of service work being done. QED, if you follow this process at the end of the day you are much less likely to have an upset client.

Estimates allow Clients to allocate post Minimum Viable Product budget to other initiatives

“Clients are not going to reserve large budgets just in case an Information Technology project needs it. Clients have a very limited budget and there are always more initiatives than budget. Allowing clients just to stop projects at any point does not recognize the lost opportunity cost by not starting additional initiatives that could have placed them ahead of their competitors.

Again Terry is right. While lawyers rarely want to get their hands dirty talking money upfront on a matter, it should be kept in mind that money is a limited resource to your client (as it is to your firm) and every dollar your client spends with you is an opportunity cost to the client’s business – vis-a-vis that dollar being spent elsewhere. It should therefore be incumbent upon you not only to ensure that your client understands how much they will likely be required to pay for the matter but also for you to reduce any likelihood of your firm either having to write down time or simply not be paid for out of scope work done by your team.

In short, as Terry writes: “Estimates matter” and going through a robust matter cost estimate process with your client before any instruction to act on a matter should be recommended and adopted as best practice by all lawyers.