In the February, 2008 Managing Partner Magazine, a case study was published regarding the international firm Herbert Smith, who recently implemented a financial management system that focused on measuring performance.  The case study mimics everything we promote on More Partner Income and thus deserves highlight.

The study begins with a quote from William Thomson (Lord Kelvin), who said "if you cannot measure it, you cannot improve it".  They may have done well to also quote "don't reinvent the wheel", since most of the sweat put forward in devising their system is already developed by software vendors such as LexisNexis.  It is the process, though, that bears note.

The firm adopted a "phased approach" to implementation that focused on basic needs first, then expanded to add functionality as the basic needs were met and a comfort level established by the users.  The firm initially only gave access to the system to the partners and used three phases:

1. Easy access to key financial reports
2. Financial planning and reporting
3. Time recording and "universe" design

The first phase entailed providing easy access to the important financial reports that had previously been distributed on paper.  This not only provided the partners with the information they needed, it helped them become accustomed to viewing this information electronically.

Phase two was focused on budgeting and management accounts.  They also placed some forward-looking indicators of performance and trend analysis.  This helped the firm make future projections through modeling.

Phase three provided real-time information for fee earners, including alerts when time entries were late or incomplete.

In my opinion, phase three should have been phase 1, phase 1 should have been phase 2, and phase 2 should have been phase 3.  However, whatever works is the right solution.  The important thing is that the firm set up their implementation with the highest probability of success by not cramming an entire new method of consuming information to all fee earners at once.  Instead, they focused on getting partners on board first, then eased them into the solution by first getting the most important information (read:  what they had already been getting) to them first.  Then incrementally adding new value to the system until it became an indispensable tool for managing the firm.

When your firm is looking to invest in a software solution: 

• If considering to develop it internally, which will require specialized staff to maintain, make sure you research to see if software vendors have already developed the solution you need;
• When you implement the solution, make sure you do it in phases to ensure adoption by all those who will benefit from it.

We have begun taking submissions for the 2008 Law Firm Economic Survey.  If your firm is interested in participating, please contact Brian by clicking here.

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Nothing in the future is certain, except taxes, death, and that the world will implode from global warming or some other threat that replaces it.  That notwithstanding, Harvard Business Online is boldly proclaiming 9 "sure bets for the future":

1. The Almighty Dollar will share its throne with an Omnipotent Euro.
2. Some currently unregulated financial markets won’t stay that way.
3. Energy will cost a lot. All businesses will have to operate under some form of carbon constraint.
4. China’s and India’s share of world markets will grow. A group of 100-million-population countries, like Turkey and Mexico, will grow faster.
5. Spanish and Arabic will become more important business languages
6. Multiculturalism and multiracialism will reshape cultural identity in both the U.S. and Europe. The Plato-to-Nato story will no longer define America’s manifest destiny, if any.
7. Even as intellectual property becomes more valuable, IP rights will erode.
8. Creative business people will invent new frauds.
9. The aftershocks of the Internet Big Bang will continue. Media will converge. Prices will fall. Devices will proliferate. Profits will be redistributed more often than cards on boys’ night out.

Particularly important, if they come to fruition, are those "bets" dealing with regulation, energy costs, business languages, IP rights, and the deflation of the internet economy. 

• Regulations (typically poorly drafted whether intentionally or not) are treasure troves for litigation and thus opportunity;
• Rising energy costs will impact profits, but again, will be opportunity for those who specialize in related areas of law;
• Business languages will impact costs of doing business and what markets you target;
• IP rights erosion will impact that area of law;
• Technology deflation will benefit firms who invest in it.

Read more here:  Nine Sure Bets For The Future

 We have begun taking submissions for the 2008 Law Firm Economic Survey.  If your firm is interested in participating, please contact Brian by clicking here.

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It is easy to make predictions, but who is brave enough to revisit them to see how well their predictions are holding up?  It's time to be held accountable for my predictions and review the clairvoyant performance to date:

1.The effect of the market "correction" will lead to a rise in bankruptcies and foreclosures.  It doesn't take a mind-reader to make this prediction; nonetheless, there is ample evidence of both.  Bloomberg reported on March 6th that foreclosures are up as owners "give up".  The Boston Globe reported that Massachusetts foreclosures were up 128% in January.   The New York Times reports that bankruptcies were up 18% in February.  No surprises here - clairvoyance rating:  10

2. Increase in mergers and/or lateral movement.  Too early to tell on this one.  Clairvoyance rating:  5

3. Business Intelligence Tools will be showcased more in tech shows.  If LegalTech New York is any indicator, I am dead wrong on this one.  E-Discovery won the day then.  Next week is the ABA TechShow in Chicago - we'll see. Clairvoyance rating:  1

4. Election year lawsuit opportunity due to claims of voters.  This one is too early to tell as well, but given the rising prospect of the Democratic Party getting mired in an election year lawsuit over the Florida and Michigan delegate disqualification debacle, I may give myself points for being in the ballpark.  Clairvoyance rating:  6

5. Calls for the death of the billable hour continue, but to no avail.  I have had to write in defense of the billable hour a few times this year (see posts on January 7th and February 19th) but I certainly see the value in alternative fee arrangements - so long as firms know the cost of their services.  Even so, I feel compelled to respond when others claim that the billable hour is the cause of frustration with clients.  I understand the desire for cost certainty, but trust is the issue to me, not the billing method.  That hasn't stopped many from writing about it (see the posts for the links).  Clairvoyance rating:  10

6. Lawyers won't be lacking for work in 2008 even if economy is bad.  Even though Citibank and Hildebrandt claimed in their 2008 Client Advisory that firms faced a "Perfect Storm" of indicators leading to financial hard times for law firms, reality isn't abiding by their predictions - at least so far.  David Lat at Above the Law ran a survey asking associates what areas of practice were hot and which were not.  Not surprisingly, transactional law, particularly real estate, is lower than it has been the past 3 years.  However, litigation is up, particularly commercial and patent litigation.  The next highest area was bankruptcy.  Clairvoyance rating:  10

Just like any forecast, circumstances dictate some review and modifications of the predictions.  Measure and adjust.  Since I am doing well with both #1 and 6, they stay as is.  I would like to see more return on question 2, but will let it slid until 2nd quarter review.  #3 is in need of some changing but I am holding on to this for at least one more show.  The election year prediction should be broadened to any party litigating anything related to the election.  That includes the Democratic Party if they so decide to self-destruct.  Finally, the calls for the billable hour to die will never die - and neither will the billable hour - so that prediction stays as is.

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Please notice a new change to the blog: on the right hand column there is a poll that asks a question based on a recent blog posting. Please participate - there's a story in the results.

I am also happy to introduce Amy Flaherty as a guest contributor today. Amy, one of Juris' Regional Vice Presidents, is one of our valued colleagues who always scours the internet for articles affecting the legal profession. She came across an article discussing the results of a survey highlighting the need to forecast. I asked if she would reduce her thoughts to writing and she graciously agreed:

KPMG’s recent study, "Forecasting with Confidence: Insights from leading finance functions," highlights the need for more reliable forecasting. The study found that for those companies who actively forecast, only one in five produce one which is reliable. Even so, those 4 others are still more reliable than those who don’t forecast at all.
Although KPMG’s study is not industry specific, the findings can apply to law firms as well as it could any other business. The underlying message is if you want to be able to make better decisions about future direction\growth, you need to take forecasting more seriously.

Here are some highlights and how they relate to law firms:

1. Accurate forecasting enhances value.

Firms with forecasts that came within 5% of actual results saw share prices increase by 46% compared with 34% for others. I believe this is largely due to having the right individuals analyzing accurate data and taking the time to build the forecasts. Doing so will tell you exactly what needs to happen in order to meet your financial objectives. Then you can measure against your actuals to determine whether you are on track to make your forecasted numbers. According to the Juris Law Firm Economic Survey, firms with the highest per-partner income perform well across all key performance metrics.

2. Data integrity is key to producing reliable forecasts.

Firms focus primarily on internally generated data when budgeting and forecasting. They should be using external data as well. You are limiting your analysis if only looking at your own data. Using benchmarking tools like Juris Insight® or the Juris Law Firm Economic Survey will provide you with competitive information needed to analyze numbers and produce more reliable forecasts.

3. Practice of Forecasting.

Respondents pointed to improvement in three main areas to produce more reliable forecasting:

• Automating the forecasting process with technology;
• Scenario planning;
• Rolling forecasts.

Budgeting and forecasting tools will help automate the process of forecasting by pulling in actuals from prior years and tracking prior forecasts. Then firms can test scenarios against actual as well as projected numbers. Rolling forecasts allow you to measure and adjust on a monthly or quarterly basis so that you are not only forecasting on an annual basis, but are consistently measuring your numbers and adjusting your forecasts accordingly.

4. Technology's part in forecasting.

Technology is seen as one of the key tools that could help improve forecasts. However, 40% of respondents rely solely on spreadsheets to produce forecasts. Although there is familiarity and flexibility with spreadsheets, having advanced forecasting software will automate processes and provide more flexibility, creating more reliable forecasts.

Suggestions to create more reliable forecasts:

• Use external market reports and competitive data.
• Update forecasts more frequently (58% do so monthly or more often).
• Make greater use of technology in the forecasting process.
• Hold everyone accountable for their forecasts.
• Require participation across all practice groups.

Amy Flaherty has been with Juris for over 15 years and has been a Regional Vice President for the past 5 years. Before joining Juris, Amy directed the Services and Consulting arm of Legal Works, a software integration company based out of Virginia. Amy received her undergraduate degree in Computer Information Systems from James Madison University.

Morepartnerincome.com is sponsored by Juris®. For information about Juris products and services for increasing law firm performance and partner income contact Juris National Sales Center:

877/377-3740, e-mail info@juris.com or go to www.Juris.com.

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