“We’ve Cut to the Bone…. Now What?”
I had a conversation recently with a firm leader about cost cutting. He said they’d gone as far with both cost-cutting and rate-cutting as they were able to. Yet clients were asking for more.
His implied challenge — actually, he asked it explicitly later — was, How can something like Legal Project Management help us? There’s not much more we can cut!
To start, Legal Project Management is not about cost (or rate) cutting per se. It’s not akin to trimming salaries or putting think-before-you-copy notes on the copier or taking Morton’s Steakhouse off your preferred provider list. Even legal process outsourcing or moving back-office and high-volume operations to less expensive cities don’t represent great parallels.
All of the things I listed above fall into the not-overspending category. (Trimming salaries falls into a lot of categories, really.) But that’s only one part of the profitability equation — and in my experience, not the most important part.
Once you’ve lowered rates and trimmed expenses, now what? Few organizations can cut their way to long-term profitability. Would GM be profitable today had it only cut costs? Probably not; they weren’t building enough cars that people were buying, and it was taking excruciatingly long times to make even small shifts in direction. They have become much more customer focused the past few years.
They have become more effective at producing and selling cars people want. It’s important that they produce them efficiently as well, but they could have doubled their efficiency producing Hummers and still not sold any more of them.
Effectiveness and efficiency aren’t the same.
Think of effectiveness as doing the right things and efficiency as doing things right. Will doing the wrong thing more efficiently sustain an organization in tough times?
Indeed, sometimes a focus on efficiency can obscure a more valuable and important push toward effectiveness. Successful Legal Project Management means becoming not just more efficient but more effective. LPM done right results in high-functioning teams, understanding true client needs rather than chasing short-term do-now items, stronger communication, skills-building through the years, and more.
A team that gains skills in Legal Project Management will over time not just see a reduction in unplanned write-offs but will have attorneys working both independently and together toward a common goal with less frustration and overlap. There will be fewer dropped balls and last-minute scrambles. People will communicate effectively and more clearly. Clients will be more satisfied because the work they value most is the work the team concentrates on. Attorneys will be happier as well.
You won’t get those results from focusing on efficiency or “tools” (particularly technological tools) rather than project thinking and project leadership. (You won’t get results overnight, either, but you will see the difference within months.)
What’s the Real Issue?
My experience with both clients and practices suggests that too often neither the client nor the firm know how to discuss – let alone quantify – the real issue, delivering value1.
Clients say “cut your rates” in large part because it’s quantifiable and easy to report on. However, reduced hourly rates don’t guarantee additional value. They don’t even guarantee lower overall true costs when played out over a span of years.
I think LPM has a role to play here as well.2
The language of Legal Project Management can help facilitate a deeper discussion between firm and client. I’m under no illusion that this conversation will make the cost-cutting debates go away. However, thinking the Project Leadership way can provide both the means to have a “value” discussion without using that word and the tools to strengthen the win-win relationship between a client and an outside provider. This discussion can help turn “provider” into “partner.”
That’s both effective and efficient.