Emerging Approaches to Law Firm Profitability
Stuart Dodds, David J Parnell, Hélène Russell, Peter Lane Secor, Rupert Hawke, Paige Keith, Manish Khandelwal, Ariela Tannenbaum, Katherine Thomas, Srinivas Vadali, Thomas Van Der Moere, Zev J Eigen
Emerging Approaches to Law Firm Profitability is the ideal tool to assist with the implementation of innovative business practices, providing essential guidance for those seeking new means of maximizing their firm's capacity.
Table of Contents
|About the authors||xi|
|Chapter 1: Law firm economics 101 – understanding the business of law||1|
|The basics of law firm profitability||2|
|Watching the revenue line||3|
|Challenging the status quo – part one||5|
|Profitability: a meaningful measure?||7|
|Challenging the status quo – part two||8|
|Chapter 2: Accounts receivable, billable hours, and collections: the end game or a starting point?||11|
|The regular financial review||13|
|Look back or look ahead? Differentiate between lagging and leading indicators||14|
|Understand and optimize pricing||15|
|Beware of “analysis paralysis”||16|
|Change is hard, but it’s worth it||16|
|Chapter 3: Better, faster, cheaper – why clients expect law firms to know about process improvement||19|
|What is process design and improvement?||20|
|Where to start with your first process-related project||21|
|Appendix 1 – Further reading||28|
|Appendix 2 – Process map of making a cup of tea||29|
|Appendix 3 – Process improvement methodologies||30|
|Appendix 4 – Fishbone/Ishikawa diagram||31|
|Chapter 4: Fully loaded or not?||33|
|Cash vs accrual||34|
|Standard cost vs actual costs||34|
|The cost-only method||35|
|Fully loaded method||36|
|Chapter 5: Developing and defending a profitability model||39|
|Include partners in the development of profitability models||40|
|Use a case study for the initial roll out||42|
|Indoctrinate partnership regularly and consistently||43|
|Acknowledge limitations of the model||45|
|Chapter 6: In favor of a client- and product focusedprofitability analysis||47|
|Client and product profitability – developing a methodology||48|
|Client and product profitability analysis||51|
|Considerations for developing a profitability methodology for clients and products||52|
|Measurement period basis||53|
|Reconciliation of the profitability model to the general ledger||54|
|Cost rates (standard vs full)||56|
|Response to case study||60|
|Design of the profitability model||61|
|Chapter 7: Better business plans – a blueprint for strategy realization||67|
|Sector overview and opportunities||73|
|An ungraded client list with descriptions:||76|
|Marketing strategy and practice development||78|
|Prospecting and client development||79|
|Synergies with other practices||81|
|Discussion and analysis||85|
|Chapter 8: Insourcing and its commercial attractiveness in boosting profitability||89|
|Insourcing is on the rise||89|
|There are significant potential cost savings from insourcing||90|
|Busting misconceptions about insourcing||91|
|How insourcing works in practice||92|
|Chapter 9: A model to gauge and understand fee-earners’ performance||95|
|An illustrative approach||95|
|Applying the Boston Matrix to fee-earner performance||96|
|Costing a fee-earner||96|
|Using the Boston Matrix in practice||99|
|Chapter 10: A data scientist’s perspective on law firm profitability||101|
|The fastest of fast horses: improving collaboration with relational data||102|
|The new car: closing the gender pay gap with SaaS||107|
|Chapter 11: Combining newlaw and established law to create profitable business strategies||111|
|Appropriate fee arrangements||115|
Stuart J T Dodds is co-founder and Principal of Positive Pricing, which provides pricing and legal project management strategy and implementation advice to the world's leading law firms. He was previously Baker McKenzie's director of global pricing and legal project management; prior to joining the firm, Stuart conducted a similar role at Linklaters, having previously worked as a management consultant for 17 years. He is an accredited Certified Pricing Professional (CPP), Accredited Legal Pricing Professional (ALPP), sits on a number of industry-related advisory bodies, and is a Fellow of the College of Law Practice Management.
DAVID J. PARNELL
David J. Parnell is an author, speaker, Forbes and American Lawyer Media columnist, and the founder and principal of True North Partner Management, a partner-level legal search and placement firm. Along with his experience in private placement, he has previously worked in-house with the likes of Intel, Xircom, and DreamWorks SKG. Complementing his Forbes and ALM columns, his work can also be found in publications such as The American Lawyer, Huffington Post, Venture Capital Post, Fox News Magazine, Lawyerist, Law360, Bloomberg, Australasian Lawyer, NBC News
Helene Russell of TheKnowledgeBusiness specializes in helping organizations to grow and improve profitability, by helping them to understand and improve their knowledge systems. Helene is the author of the Law Society's Knowledge Management Handbook and Legal Monitor's Practical Projects in Legal KM. She teaches open and in-house courses in knowledge management and also offers coaching, mentoring, and advice. She also runs Knowledge Network UK, the only regional knowledge sharing and networking group for law firm KMers in UK. Helene has spoken extensively on KM for Ark, Butterworths, UWE, Bristol Law Society, Allice, and at Knowledge Network UK, and has written regularly for Managing Partner Magazine. After a decade as a solicitor with a major regional firm specializing in clinical negligence defense litigation, eight years in knowledge management and having recently obtained an MBA with distinction, she has a unique, deep understanding of how knowledge flows helps law firms and professional services organizations.
PETER LANE SECOR
Peter Lane Secor is the director of strategic pricing and project management with Pepper Hamilton LLP. Mr. Secor concentrates on legal project management with a focus on improving efficiencies through shared management responsibilities, strengthening communication and making value transparent. His expertise includes client/matter profit analysis and providing partners with performance evaluations from a financial perspective.
Rupert Hawke is the managing director of the UK's Cartwright King Solicitors, having originally joined the firm as finance director in 2007. Holder of a business degree and a qualified management accountant, Rupert spent much of his career working for a large multi-national organisation before applying his wide-ranging experience and business acumen to the legal sector. He has overseen significant expansion at Cartwright King, which now has 19 offices nationwide, that he has contributed to with his development of management information systems and grasp of the modern business environment. Rupert is also the author of many articles advising on management within the legal sector.
Paige Keith is a business executive with extensive experience leading financial and accounting operations of law firms, including planning, reporting, billing, tax compliance, and accounts payable. Before becoming a chief financial officer at Hawkins Parnell Thackston & Young LLP, she spent 15 years in various management roles responsible for developing and implementing strategic initiatives. She has also overseen client relations and the delivery of legal services, emphasizing the design and integration of consumer-centric business models and technology. Paige studied at Southern Methodist University in Dallas, Texas, where she earned an MBA from the Cox School of Business and a BS in mechanical engineering with biomedical specialization.
Manish Khandelwal has an extensive range of management expertise and practical experience covering IT outsourcing, offshoring, procurement and business transformation. He has led various multi-million pound outsourcing and IT enabled change programs helping clients achieve the most from their sourcing and IT transformation initiatives. His areas of expertise include end-to-end management of outsourcing programs, procurement life-cycle management, contract management, supplier selection and management, change management, stakeholder management and relationship management. He has worked in delivery and pre-sales, led supplier sales teams and has a strong techno-commercial understanding of the offshoring business.
Ariela Tannenbaum is the CEO of Advanced Financial Analytics, a consultancy firm focusing on enhancing law firms' profitability. She has over 25 years of top tier leadership experience working with global Fortune 500 companies, instilling the financial intelligence and discipline used by the most successful organizations in the world to drive performance at law firms. Prior to establishing Advanced Financial Analytics, Ms. Tannenbaum served as executive vice president of finance at one for the largest companies in the world and global head of finance of its $2 trillion investment management subsidiary for over 14 years.
Katherine Thomas helps legal service providers across the world grow, adapt and increase profitability with her company Katherine Thomas Consulting. With a reputation for strategic thinking combined with a large dose of pragmatism, she advises on strategy, sales, client development and the launch of new products and services. Now a consultant, speaker and coach, she previously established and led the well-known UK newlaw business Vario, a legal services provider with an emphasis on flexibility, for commercial law firm Pinsent Masons. As a result, she has a deep understanding of how alternative approaches to legal services delivery can increase competitiveness.
Srinivas Vadali is a seasoned consultant and C-suite advisor with more than 17 years of experience in shaping strategy and delivering major change and transformation programs. He has expertise in commercial services, sourcing, business case/financial management, transition and location strategy. The focus of Srini's work is to help clients improve the value delivered by their business services arrangements, establishing in-house and outsourced shared services and using technology to drive organizational change and improvement in business performance. His client base over the last 17 years has included wide range of financial services institutions, including a premier stock exchange, commercial insurance, retail and core banking.
THOMAS VAN DER MOERE
Thomas Van Der Moere is the chief financial officer at Neal, Gerber & Eisenberg LLP, a Chicago-based law firm with over 140 lawyers, where he oversees the financial operations of the firm including the areas of xii About the authors accounting, treasury management, planning/analytics/business intelligence, practice economics and strategic pricing, financial systems, and new business acceptance and risk management. Tom has expertise in professional service firm administrative and financial management, performance and compensation analysis, financial and operational analysis and modeling, strategic planning, process development and re-engineering, firm/project profitability and risk management, and business intelligence. He also has significant financial experience with public and private companies in professional services, energy, and manufacturing industries. Tom has an MBA from the University of Chicago Booth School of Business and an MS in Accounting and Business Management from the University of Tulsa.
ZEV J. EIGEN
Zev J. Eigen is the founder and chief science officer of Syndio, and a data scientist focused on AI and machine learning applications in HR, labor and employment law, and legal services broadly. He was honored as one of the Financial Times' 10 most innovative lawyers in 2016, as a FastCase50 Innovator of 2016, and as one of "40 Under 40 Rising Legal Stars" by the National Law Journal. He is frequently quoted in the media as an expert on big data solutions, predictive analytics and machine learning, especially as applied to HR and legal services and products.