Redwood Analytics

This post was written by Brian Taaffe, Sr. Consultant for Redwood -

I attended a conference on driving law firm profitability through financial measurement and reporting (catchy title, eh?!), and as I am sitting there listening to the speakers I am thinking "this is what we have been telling firms for the last 5 years." I am not saying this to make it seem like we [Redwood] are the ones that first suggested it, but more to point out that no one has been listening over the years. And despite all of the comments and feedback received from the audience I am doubtful that any of them will actually effectively implement any of the changes or suggestions the speakers recommended.

At the conference, the speakers discussed the measures that need to be assessed - utilisation, realisation, speeds, leverage, direct/indirect expense. They also discussed at what levels this should be analyzed and how to normalize cost rates - all essential KPIs to measures, but what surprised me was how briefly delivery and presentation of the information was discussed.

After each presentation, the delegates were allowed to ask questions/make comments to the presenters and multiple times I heard "the partners already receive this information', "I have created a dashboard with all of the information you discussed", "I produce monthly packets for each department head", etc. At this point one of the speakers told a story of how he used to go around each month and deliver a packet of financial metrics to each of the department heads. He had been doing this for months and one day when he was leaving the partner's office he realised he had forgotten something. As he walked in (no less than 2 minutes after leaving) he witnessed the partner dropping the packet in the trash. He asked the partner if he does this every month and the partner confessed that he does.

To test whether this was occurring with all partners he decided to not produce reports for any of them. After the next month, he received no comments or question as to why they had not received it...so he did it again, and proceeded to do that for the next months. After 4 months, still nothing. The reasoning behind why the partner threw away the packet was "I really just don't care.'

I don't think this is actually true though. All department heads care how their group performs (well most at least), wherein lies the problem is the delivery/presentation of the information - taking into account the audience. Lawyers are incredibly good at practicing and delivering high quality legal services, but this expertise does not always translate into the ability to analyse data from a packet of information. I think this is overlooked more often than not.

Finance lives in numbers and loves it. Lawyers do not. I come from a finance/accounting background and I see a bunch of numbers on a page and they jump out at me - sometimes even speak to me, telling me the story that exists within the numbers. The average lawyer does not see the same things as I (or many finance folks) do. And on top of that, lawyers have other duties; I would not expect them to sift through pages and pages of statistics that have every possible metric on it to figure out what is going on...isn't that what they pay you for?

So what should firms be doing? Firstly, they should be taking the advice of all the presenters and analyzing all metrics discussed above (and more), but what they present and delivered must be modified. Partners are used to reading information - try creating write up to supplement the packet you send out...maybe a one page summary highlighting clients, matters, lawyers in the R12, YTD, MTD who are underperforming. Also indicate who are the top clients, which ones are bringing in the most margins - analyse whether the top and bottom performers are being cross sold.  The key here is to not just give them numbers, but tell them the story behind the numbers.

Also, make sure to take the time to sit with the partners. Go through their numbers with them, and make sure to do this 1 on 1. This is something I highly stress. Partners are very conceptual and if you explain it to a group of them they will probably immediately understand what you trying to tell them, but when you give them a packet of numbers they may not always know how to interpret it and they will not ask the obvious questions in fear of appearing stupid in front on their peers. Take an hour, or 30 minutes if that's all you have, to take them through the numbers and I guarantee you will get questions that you never would in a group.

I titled this article too much information = too little because I think that is our problem today. Technology has evolved to the point where we are able to access all the information and report upon it, and our first thought is to report on everything that is available. Unfortunately lawyers are not used to this much information so just delivering this is not enough. Along with the packets, reports, dashboards, etc. that you create; you must also follow up with the relevant information. Create a summary or go through the data with them. Analyze the data, not just report on it.