Filed under Cash Flow Issues, Law Firm Bus Model, Subscriber Content by Tom Collins
Law firms that set objectives, measure performance, and hold people accountable outperform others. And the difference is big. Partners in the top performing 25 percent of midsized law firms earn twice as much as those in the next highest 25 percent.
That was one of the points Stephen Collins, Juris, Inc. CEO, made in his opening remarks before the 300 attendees at the 21st annual educational conference of Juris Users International Group on October 27, 2006.
There are two ways to be successful—by accident or on purpose. Accidents do happen, but accidental success seldom lasts. You lose at life’s lottery just as quickly as you win. What is the old saying—“Easy come, easy go.”
Lasting success is achieved through purposeful determination. The steps for building long-term success as a law firm are the same as those followed by other well run businesses:
Magic happens when people pursue a common set of goals bound together by a core set of beliefs—but it doesn’t happen by accident.
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
Filed under Management by Tom Collins
What top-level metrics should you track? If you are among the 20 percent of midsized firms who have a formal planning process, what you track depends on that plan and your objectives. But regardless, there are six basic metrics that every firm should track:
Productivity or Utilization
Effective (Blended) Rate
Margin
Days of unbilled fees (work in process)
Days of billed fees outstanding (accounts receivable)
Current performance should be compared to prior periods to determine if the firm's financial performance is improving, holding its own, or declining. It should be compared to the firm’s targets to determine if it is achieving its objectives. It should be compared to benchmarks of similar firms. Doing so will most likely indicate areas that deserve attention and that represent lost opportunities.
While I have not included it among the basic metrics, leverage is still the primary factor correlating with per-partner income. For example, in a recent survey, the top performing 25 percent of midsized firms had 2.5 associates for every partner, compared with an average of 1.3 associates for all firms. The chart below appears in the Juris Law Firm Economic Survey of midsized firms for 2005. The chart clearly illustrates the dominant influence of leverage on per-partner income.
If you need help computing any of the six basic metrics, refer to the previous posts linked below:
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
Filed under Benchmarking, Law Firm Bus Model, Leverage by Tom Collins
Without the right environment, the attorneys currently in your law firm can become the lateral hires of the firm next door.
The same working environment that fosters retention of a firm’s legal professionals is also the one that attracts lateral candidates. The main reason laterals move among law firms is because they are disappointed with their own self-development. That bit of knowledge can make your firm an effective competitor for top legal talent.
The working attorney’s role is not enough to retain talented legal professionals. The attorney needs to feel that the firm is investing in his/her preparation to become a well-rounded member of the firm’s leadership. It is more than professional development; it should not be limited to their expanding legal knowledge and experience. It should include learning the business side of the law firm—it is the assimilation process taking an individual from newcomer status to that of an insider/part of the team. It is the conversion process from “just being on the bus” to driving the bus.
How does a firm create such an environment? You start by making professional development a main event for the firm with a holistic approach. Like anything worth doing, it takes planning, organization, delegation, goal setting, measurement and personal accountability if it is to work.
Start by developing a model development track, a checklist or plan for associates based on yearly benchmarks. Those tracks become an extraordinary recruiting tool for the firm.
The standard development tracks should, however, be individualized as needed for each member of the team. Assign responsibility to make sure that each member of the team has the time and opportunity to complete each year’s development track. Put systems in place to measure progress and identify deviations in time to take corrective action.
In addition to continuing legal education, development tracks should include training in leadership skills, relationship development, communications and presentation skills, sales and marketing, and technology. Over the first five years, development tracks should involve the legal professional in all aspects of law firm operations—dealing face to face with clients, taking responsibility as the primary contact for selected clients, participating in business development activities, building their own book of business, functioning as the supervising attorney, handling billing and collection responsibilities, performing new client intakes, participating in decision-making committees, reviewing financial reports (including productivity, work in process and fees receivables), performing management functions related to those reports, gaining an understanding of the financial aspects of a law firm, etc.
A small but increasing number of firms are hiring external coaches to work with their developing associates. Other firms pair associates with partner coaches and mentors. Where the internal approach is used, the compensation and evaluation of responsible partners should include an element related to the completed development activity and progress of their assigned associates.
Legal professionals who are actively growing from year to year both professionally and as law firm businessmen and women are far more likely to become the new generation of leaders in your law firm rather than someone else’s new lateral hire. Development means operating a “finishing school” that will enable a relatively young associate to become a well-rounded professional member of the firm’s leadership.
Filed under HR by Tom Collins
Always keep in mind that the approach to raising per-partner income should be done with long-range considerations. First, determine how the firm stacks up against its peers. Use survey benchmarks like those available from Altman Weil, http://www.altmanweil.com. Take corrective steps where you fall short.
The list below is a reminder of steps that you can take, among others, to increase margin and improve per-partner income.
Steps for Increasing the Firm’s Margin
Filed under Law Firm Bus Model by Tom Collins
The approach to raising per-partner income should be done with long-range considerations. The first set is to determine how the firm stacks up against benchmarks such as those available from Altman Weil surveys, http://www.altmanweil.com. Concentrate on the areas where you fall short.
The list below is a reminder of steps that you can take, among others, to increase realization and improve per-partner income.
Steps for Increasing the Firm’s Realization
Filed under Law Firm Bus Model by Tom Collins
The approach to raising per-partner income should be done with long-range considerations. First, determine how the firm stacks up against benchmarks such as those available from Altman Weil surveys, http://www.altmanweil.com. Fix the areas where you fall short.
The number one item to consider is improved marketing, especially to existing clients. The second item is adjusting leverage to fit the nature of the practice. Third is to engage in structured planning to identify the main things the firm should concentrate on to improve the business over the long term. Fourth is to improve management with focus on the law firm business model - leverage, utilization, rate, realization and margin. That requires a sound business system that provides the business intelligence and tools to keep the firm in line or ahead of its peers at all times.
The list below is a reminder of steps that you can take, among others, to increase utilization and productivity of fee earners improving per-partner income.
Steps for Increasing the Firm’s Timekeeper Productivity—Utilization
Filed under Law Firm Bus Model by Tom Collins
The short-term approach to inadequate profits is to increase price and reduce cost. Unfortunately, that is not necessarily the long-term fix. Consider the movie theater’s escalating cost of popcorn. Volume declines, price is increased; volume declines, price is increased; etc. The result is a continued spiraling down of the business. In the case of the law firm, law firm clients have a choice. If rates rise significantly above the market, they will take the option. Second, for all practical purposes, cost in a law firm consists of people and facilities. Reduce facilities below the appropriate level and recruiting and retention of people is affected. Likewise, clients may begin to question the firm's status and position. Reduce people cost and you are engaging in "factory closings" that reduce the capacity of the firm.
The approach to raising per-partner income should be done with long-range considerations. First, determine how the firm stacks up against benchmarks such as those available from Altman Weil surveys, http://www.altmanweil.com.
Fix the areas where you fall short. If your collection days are longer than your peers, fix it¾invest in technology and/or change procedures. If work in process measured by billing days is excessive, fix it. Likewise, if utilization is too low, find out why. If you don’t have enough work, then either reduce fee earners and staff or preferably get more business. If, however, the problem is underreporting of time, then implement new tools to track and report time as worked, set individual goals, track performance and hold fee earners accountable. After you have taken short-term corrective steps, begin to look for long-term changes in the business that increase income without reducing the long-term value of the business.
The number one item to consider is improved marketing, especially to existing clients. The second item is adjusting leverage to fit the nature of the practice. Third is to engage in structured planning to identify the main things the firm should concentrate on to improve the business over the long term. Fourth is to improve management with focus on the law firm business model - leverage, utilization, rate, realization and margin. That requires a sound business system that provides the business intelligence and tools to keep the firm in line or ahead of its peers at all times.
Over the next several days, l will post a number of checklists of steps that you can consider to improve per-partner income—one checklist for each of the items listed below that were identified in David Masister's law firm business model as income drivers:
Filed under Law Firm Bus Model by Tom Collins
I was talking with a member of a large corporate legal department and was struck by a statement he made. He said, “A law firm’s budget for a case is not just a target, it is a promise.”
Targets are benchmarks, guides, bull’s-eyes from which we measure the distance by which they are missed. Promises are something else. When you break a promise you damage your credibility. You weaken the trust others place in you.
That corporate council’s statement relating how he felt about a law firm’s budget should tell you just how serious corporate clients are about predictability. Predictability is more important than a discount. It is more important than cost. It is more important than a long-standing relationship.
When you give a public company a budget, it is a promise, not a target.
Filed under Blog by Tom Collins
Filed under Law Firm Bus Model by Tom Collins
Managing Uncollected Law Firm Fees and Expenses: Work-in-Process and Receivables
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