Competitive intelligence and specifically peer group benchmarking has been growing in importance as law firms increasingly adopt traditional business practices. This post is one of several summarizing information garnered from the September 2006 Benchmarking Symposium held in Nashville, Tennessee.
Understanding the Importance & Power of Legal Surveys was the title of PricewaterhouseCoopers’ presentation at the September 2006 Benchmarking Symposium. While their presentation slides are not generally available, Laurie J. Lieb, PWC’s Director of Law Firm Surveys, indicated that she would make them available to attendees. I have noted below some of the key points made during their presentation. For more information about PWC’s benchmarking programs or to request a copy of their presentation, contact Ms. Lieb. You can reach her at 623.561.8481 or laurie.j.lieb@us.pwc.com.
Why are surveys important? PWC noted the following key reasons:
- It gives the law firm a sense of its place in the market compared to peers.
- It provides the firm with insights for making strategic decisions such as expanding into new areas or practice areas.
- It points to opportunities to improve performance by disclosing weaknesses compared to similar firms.
One of the helpful tips was the speaker's point that not everyone in your firm needs the same benchmarking information nor do you have to settle for a one-size-fits-all survey report. As I understood the speech, PWC can custom design survey reports to fit a law firm’s needs. With that in mind, the speaker suggested that you find out the needs of the functional and practice management members of your firm: 1. where you are currently blindsided; 2. what do you need to know? PWC also pointed out that you can control the focus of information needed:
- Firm-wide by geographic area
- Office level by location
- Practice group comparisons
- Your custom peer group
The point is benchmarking is detective work; it is market intelligence.
Participating in surveys can be costly because of the drain on law firm resources. With that in mind, the firm should determine carefully which surveys it will participate in. Certainly you should follow PWC’s advice and consider the reputation of the survey vendor—and today you have the option of going with a vendor that extracts survey information automatically, substantially eliminating the labor and billable hour drain of participation on the law firm. PWC will introduce its data extraction option in 2007.
PWC has two off-the-shelf flavors of survey offerings. Their Law Firm Statistical Survey (LFSS) is the more mature one. The LFSS program was started in 1957 and has a consistent base of participants. The total number of firms participating in 2006 was 180. PWC’s standard surveys are aimed at large firms, those generally characterized as BigLaw. The statistical survey is unique for its focus on expenses including staffing ratios and functional area cost.
Their Billing Rate & Associate Salary Survey program was initiated in 2000 and for 2006 had three hundred participating law firms. Three fourths of the participants are in the AmLaw 200. Its focus has traditionally been on billing rates and associate compensation but in 2005 PWC added other revenue drivers. They have the ability to provide office level and practice group benchmarks. The introduction in 2007 of a new data extraction tool will give firms the option of eliminating the labor intensive participation of the traditional survey format.
As noted by the PricewaterhouseCoopers representative, there is always a small group of firms (perhaps 5%) that are unusually concerned about confidentiality, security and antitrust considerations. The well established vendors have procedures in place for confidentiality and security that all but that small minority of firms consider adequate. As for antitrust, there are safe harbors. For example, the following safe harbors currently apply for shared fee-based information:
- Conducted by a third-party
- Data that is three months old
- Minimum of 5 firms in a peer group
PWC follows the safe harbor guide and adds others as well. It is worth noting that the safe harbors represent a conservative approach. One you would expect from PWC’s Big Four position among CPA firms. Technology lets us capture and return more current information. That does not automatically mean an antitrust problem exists. Likewise a group of three versus five may be perfectly okay with regard to some data.
There is significant value from benchmarking to participating law firms and in the end it is the law firm that has to sign off on the acceptability of the vendor’s confidentially and security measures. Likewise, the firm has to decide that it may participate in the benchmarking process without violating antitrust laws.
Other benchmarking providers speaking at the symposium included Juris, Inc., Redwood Analytics and CitiGroup Private Bank. Juris Insight service is targeted at midsized U.S. law firms. Redwood, PWC, and CitiGroup are primarily targeted at the largest, 250-attorney to 300-attorney law firms.
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.
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Filed under Benchmarking by Tom Collins
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