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Noise, signal, action: how lawyers can get better at estimating (and other aspects of practising law)

Lawyers are just as poor at predicting the future as economists.  In his book ‘The Signal and the Noise’ Nate Silver explains and the poor predictive record of economists. Recently Jim Hassett penned an interesting post which pointed out a similarly poor record of lawyers.

Jim explains that a number of surveys in the U.S. show that law firm leaders consistently misunderstand or misinterpret leading key economic indicators and have a poor record of predicting their effects on their practice.  For example, the Altman Weil 2013 survey asked law firm leaders whether they expected their realisation rates to go up or down during the coming year:  67% of respondents said up, 9% said down and 24% said no change.  We won’t know the result of this prediction until the end of the year, however, as Jim points out, in the past four years a majority of the survey recipients expected the realisation rates to go up when in fact, according to another survey, in each year realisation ‘continued to decline, reaching historic lows’.

In fairness, estimating macro-economic trends and their effects on business is not easy.  It should however be somewhat easier to assess and analyse data closer to home.  As noted in my previous post, in a typical law firm lots of data ‘noise’ is generated during the daily grind of ‘business as usual.’  If lawyers were to investigate this data properly they should be able to identify important signals about how their business is performing.

Some noise, a signal and corrective action

Typical ‘noise’ found in law firms is generated by things such bidding for work at unrealistic rates which later leads, inevitably, to writing down bills.  What might be the underlying signal here?  Once the signal has been deciphered, how should law firms respond?

Leave aside for the moment the obvious (and all too frequent) occurrences where firms know they bid for work at unrealistic rates but feel they need to do so anyway ‘just to get some revenue in’ (not a good strategy in the long run). Why, even when firms believe they are not discounting significantly, do things often appear out of kilter almost as soon as the legal work starts?

The answer is that, fundamentally, most lawyers are not especially good at scoping and estimating.  Once again, they are not alone in this. We all have a tendency to be optimistic about our capability, and believe that tasks can be done more quickly, with fewer resources and at less cost than is actually the case.  This trait of human nature is well known and widely recognised.  So the first thing lawyers should do is acknowledge the trait exists and that they also possess it.  The second thing they should do is identify methods and techniques which can help rein-in the rather endearing trait of being over optimistic.

Project managers will often use structured approaches for estimating.  For example, a technique known as three point estimation requires task estimates for ‘best case’, ‘most likely case’ and ‘worst case’ scenarios.  Once these are acquired it is then quite straightforward to calculate an ‘expected case’ estimate.

Project managers will also keep record of what actually happens during a project.  During the project review the team will be taken through the ‘actual case’ data and asked to provide some context about it, explaining what worked well and not so well during project execution.  Over time, if enough ‘actual case’ data is collected, people can use this data as a base reference point and express their estimates in terms of probabilistic outcomes.

Structured methods

This is just one instance where a more rigorous project based approach could help lawyers. Generally when I think of project or process based techniques, I think in terms of methods and systems rather than innate skill.  People do of course become more skillful estimators with practice, but their skill really lies in being able to apply, and on occasion adapt, a method which offers greatest chance of solving correctly the problem under consideration.

There is nothing particularly difficult or novel about techniques such as three point estimation, and they have been proven to work in other industries.  However, despite increasing prominence of legal project management, I think we still have a long way to go before most lawyers use techniques such as these as a matter of course.  Why is this?

A great idea – just not for me

I have heard Richard Susskind explain that often after one of his talks, a lawyer in the audience will come up to him and say that everything he has heard him say makes sense ‘but I just don’t think it would work in my practice area’. According to these lawyers Richard’s ideas and suggestions (which include legal project management) always seem to be applicable to other practice areas, not theirs.  Lawyers are trained to distinguish between differing sets of circumstance, so perhaps this approach to suggested change is to be expected.  However in the face of mounting evidence it becomes increasingly harder to explain why techniques which have been successful in other industries should not be applied to law.

I’m sure that all of us who have been promoting change in the legal profession have similar stories to tell.

We already do something like that anyway

When I first started out with my own consultancy, the managing partner of a law firm I saw said to me ’we already do what you suggest, we just call it something different’.  Naturally I wanted to find out more and so the conversation went something like this:

Me: Do you use template documentation to help you plan your matters (projects) and capture end of matter (project) review comments?

Managing Partner: No, we don’t use templates as such.

Me: But presumably you must capture your end of project review comments?

Managing Partner: I am sure we do sometimes.

Me: Do you hold matter (project) reviews regularly?

Managing Partner: Not all the time – it really depends on the matter…

I have since had a number of similar conversations with practising lawyers.  An oft repeated view seems to be that effective matter management is achieved by ‘applying common sense’ and end of matter reviews are done sometimes, when the lawyers deem them warranted or when particular clients insist.

Effective project management requires more than common sense alone

I am on record as saying that most successful lawyers must be applying some basic project management techniques –  even if they do not recognise what they are doing as ‘project management’.  However, let’s be clear: there is a significant qualitative gap between what might be called the implied project management capability of practising lawyers and the more explicit (and higher order) capability of professional project managers.  It is clearly unrealistic to expect busy practising lawyers to spend time acquiring the knowledge and skill set (let alone the experience) of professional project managers.  Nevertheless it seems equally clear that, generally, lawyers’ project management capability needs to be improved.

One of my favourite definitions of project management is that it is ‘organised common sense’.  Arguably, lawyers apply their common sense (one hopes) but without this being exercised in an organised and consistent manner.  We all like to think we apply common sense.  But it is quite a step to claim that intermittent doses of common sense alone equate to applying processes consistently and which are organised, structured and designed to help achieve defined outcomes.

It seems to me that many lawyers still need to work harder at identifying signals from the noise, interpreting the signals correctly and then taking appropriate action.  They need to develop their ability to look at their business objectively.  They need to identify where the problems lie and be honest with themselves about what it is they actually do (techniques such as value stream mapping are particularly good tools for this kind of exercise).  Once there is open acknowledgement of the underlying problems, measures can be taken to improve performance.  Adopting and adapting standard methods proven elsewhere, such as three point estimation, will usually be the best way to start.

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