Make More Rain : compensation, expense control

Associate Salary Increases & Firm Margins

Admin — Thu, 04 Sep 2008 17:20:23 GMT

It should come as no surprise to anyone that the most recent wave of associate salary increases have helped to erode law firm profit margins. Whether the wave begins in west coast technology firms, or east coast financial capital firms, its effects are felt beyond big law in the mid-size and regional firms headquartered in the mid-west and southeast. And, with 80% of law firm expense tied up in compensation and occupancy, the impact can be devastating. What is more surprising is the response of law firm leaders in this new economic environment. Reactions run the gamut from slash and burn tactics to taking it on the chin and silently watching margins erode. Formulating a balanced strategy and resisting the urge for an emotional response is critical. Consider the following.

First, is increasing associate salaries is an appropriate response to increased competition for the best talent in your market or just a follow the leader reaction? Associate salary increases typically begin in markets where competition is fierce for not only attracting the best talent, but also keeping that talent as the reality of billable hours requirements hits home. Increasingly, associates are not willing to trade work life balance for a big paycheck. This attitude is not pigeonholed in the bottom half of the law school classes, but pervades throughout. Are there other work life benefits your firm can offer to entice top talent?

Secondly, recent surveys suggest the demand for legal services have declined in the first two quarters of 2008, and making sure your lawyers are properly utilized is essential to maintaining profitability. As margins become slimmer, there is no room for unproductive associates taking up space. But are associates really the problem? Most associates have little control over the projects they are assigned and virtually no ability to generate new business. They, like everyone else in the firm, rely on the rainmakers to generate enough billable hours to support the business. Before taking a defensive posture and eliminating positions, look for ways to improve your business development efforts. Are you effectively cross-selling your services to existing clients? Do you place enough emphasis on developing new business and in the right sectors?

Lastly, in today’s competitive marketplace, passing increased costs on to your clients is rarely an option. Even in big law, where clients were thought to be less price sensitive, general counsels are scoffing at increased rates as a result of higher associate salaries. Can you blame them? That doesn’t mean you have lost the ability to control your average rates. The next time someone asks you for an alternative billing arrangement, consider the request an opportunity to control your own destiny. Look for ways to strengthen the value proposition, improve practice management at the matter level, and increase leverage.

Can you avoid the impact of associate salary increases? Not likely. But focusing on the positive economic aspects of your business, rather than going on the defensive, may help you roll through the downturn and leave you prepared for the eventual upswing.

- Rick Rawls

Management Report Do's and Don'ts

Admin — Mon, 01 Sep 2008 17:21:00 GMT

I was recently asked to speak at a conference on the topic of management reports and how firms are using them to help run their businesses. It is a topic that I have been fortunate enough to gain a lot of insight into over the years. Often I am handed a stack of reports and asked to help the firm automate them or to come up with a package of reports to use as their “reporting package”. Most firms spend a lot of time and resources building their reports to look a certain way but spend little thought into the way that they are used and the actions they expect them to drive.

Any firm can generate data, but to be able to use this data to help model, analyze, and improve their business the firm must approach reporting with a more consistent process. Currently, I see many firms looking at information that could be best described as “interesting”. Interesting information is not the same as useful information. In order to take full advantage of the information available to them a firm must:

• Understand the business drivers of a law firm
• Identify what is controllable
• Establish reasonable goals and relevant metrics

Once the proper mindset has been established and goals have been set, the law firm can move forward with building a set of reports that identifies the best opportunities to reach these targets. The most important part of developing these reports is to keep them focused on the specific drivers of the goals and not get lost in the “noise” of the data. A common misconception is that having more data available improves the management process. In fact, the danger of information overload is just as great (or greater) of a problem as not having enough data or the wrong data. As Jack Trout says in his book Trout on Strategy, “Knowledge is power only if you can separate the important from the billions of data swirling around you”.

In the end, reports need to be catalysts for action. Reports by themselves do not make any difference in performance of a firm, rather they should serve to initiate improvement. By setting up a plan from the outset and then setting up reports to manage towards that plan the firm will become more efficient and consistent in their approach. Reports do not need to be complex to be useful, but they do need to speak directly to the questions being asked, providing clear direction quickly and succinctly.

- by Derek Schutz

Managing Law Firm Health Care Cost

Admin — Thu, 28 Jun 2007 17:29:00 GMT

The health care plans offered to law firm employees and principals have to be competitive. As a people business, this isn’t an area you can shortchange. Nevertheless, we are talking big bucks, and health care cost needs to be managed. The Juris Law Firm Economic Survey conducted in 2006 found that across the board, 40 percent of midrange law firms do not competitively bid health care plans. Without competitive bidding, costs are not likely to ever decline. Your costs are going in the other direction—up! You can just about guarantee two-digit increases year after year.

As for the 40 percent of law firms who do not get competitive bids, my guess is that it is a matter of “out of sight/out of mind”. They don’t competitively bid simply because they never consider the issue until its renewal time. When that happens, it is too late. No one is going to let their plan lapse while they look for a better deal. If your health care plan renews each January, you need to be shopping in June. Have your HR person or Administrator put health care shopping on their calendar at least six months in advance of the renewal date for your existing policy. From experience I can tell you that shopping your plan, especially if you have not been doing so on a regular basis, will produce more partner income.

Secondly, don’t ignore the opportunity for savings through making small changes that will not significantly impact participating individuals. Small reductions in co-pays and deductibles add up to big overall dollars. The predominance of two-income families today means that people place their family coverage with the employer offering the lowest employee cost to add family coverage. That makes it prudent for you to require some employee contribution for family care.

Adding health care savings accounts, on the other hand, can increase benefits for the firm’s people without increasing the law firm’s health care cost. Only about 25 percent of law firms surveyed have made the effort to add health care savings accounts. One of the benefits of outsourcing payroll to ADP or other equivalent payroll providers is that they make handling things like health care savings accounts easy.

Law firm surveys like the annual Juris Law Firm Economic Survey provide a blueprint for things you can do to improve financial performance and better control expenses like health care. They do that by shedding light on what others are doing. With that in mind, let me remind readers that Juris’ current survey will be put to bed after June 30. You still have a few days to participate. If you do, you will automatically receive a free copy of the survey when published. That is a $495 savings, but the ideas you will pick up to improve financial performance within your firm will be the big payoff. Ask your accounting person or administrator to complete the survey today by going to http://www.jurisinsight.com/2006survey.

Morepartnerincome.com is sponsored by Juris, Inc. 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.

Alternatives for Law Firm Remote Access

Admin — Fri, 18 Aug 2006 17:24:00 GMT

By Guest Author Barry Lancaster: Juris, Inc. Senior Director of Client Services

Citrix® technology has been used by law firms as an effective method of providing legal professionals and administrative staff with remote access. The question is, “Are newer technologies making Citrix obsolete?”

Virtual Private Networks, VPNs, now allow firms to set up secure direct access to their network over the Web. For “office-like performance,” VPNs require a broadband Internet connection. What is different today is that home Internet users and law firm branch offices now have broadband access. Likewise, most hotels offer broadband services. Many towns and coffee shops offer free broadband services. In addition to broadband access, dedicated phone line connections between law firm branches and the firm’s main office are now moderately priced and provide even better data transfer quality. Today, if you are working from home, on the road, or in a branch office, quality high-speed connections are now readily available and inexpensive. That high-speed accessibility for users outside the office has made the VPN approach an alternative to Citrix.

In addition to the direct network connection alternative using VPN technology, there are a growing number of developments making Citrix less essential. An increasing number of the applications used by law firms now offer a browser version, for example. Smart Client technology (under Microsoft® .NET) and similar new technologies coming from the browser side of the fence are starting to show up in law firms. These Smart Client products are designed for easy direct access over the Web. Smart Client applications (including, for example, the Juris, Inc.’s attorney dashboard application, MyJuris®) use security services to protect data, providing full confidentiality over the Web.

There are advantages and disadvantages to the various technologies, including Citrix. However, changes in connection speeds and software designs make it appropriate for you to re-evaluate Citrix on a recurring basis. Depending on your particular circumstances, you may find that you can improve office-like performance for your traveling and remote team members while also lowering IT-related cost.

Lower cost is always nice, but it is the potential for productivity gains that should drive your decision.

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.