Make More Rain : planning, compensation

Partner Cost And Client Profitability, (Part IV)

Admin — Tue, 20 May 2008 07:00:39 GMT

This is the fourth in a series on partner compensation and client profitability written by Ron Paquette, consultant with Redwood Analytics, now part of LexisNexis. The first article, titled Client Profitability: What Is The Cost Of Partner Time?, was an introduction to the concept of allocating partner cost in calculating client profitability. The second article, titled Partner Cost And Client Profitability, (Part II), is focused on pitfalls of some firms' methodology in allocating costs to partners. The third article, titled Partner Cost And Client Profitability, (Part III) , is focused on basing a partner's direct cost on a "minimum margin percentage". This article is focused on a related methodology: using a "minimum margin dollar amount" to allocate partner direct cost.

Thus far, we have evaluated a number of methods of allocating partner direct costs (compensation) to a client. Since firms have differing long and short term goals, levels of partner compensation, and thought processes about client profitability, we have concluded that there is not one perfect solution for this question, but instead a handful of recommended options.

Minimum Margin $ (or fixed margin $ for firms with closed compensation):

Very similar to the Minimum Margin %, this methodology differs only in that the threshold is set as a dollar value instead of a % of standard rate. Some firms we interviewed think about partner profitability in dollars, stating as an example that each partner should have an annual margin (standard revenue less direct costs) of $100M on their bRate MinimumMargin Minimumillable time (hourly margin is an option as well).

In the example, again we have the same partners but now each is given a minimum annual margin of $100M (or $56 per hour based on 1800 std hours). Since the Rainmaker and the Dept. Manager have fully loaded margins much less than this amount, they are set to the minimum while the Jr. Partner remains at his full compensation level. Notice that with this methodology, while both the Rainmaker and the Dept. Manager are at the minimum threshold, they have different Direct Margin %. While the dollar margin is the same, the higher rate timekeeper has a lower margin %, thus encouraging a billing attorney to use the more junior (or lower cost lawyers) on their matters.

Role	Comp	Std Rate	Minimum Yearly Margin	Minimum Hourly Margin*	Cost Rate*	Direct Margin
Rainmaker	$1MM	$250	$100M	$56	($194)	22%
Dept. Manager	$500M	$200	$100M	$56	($144)	28%
Jr. Partner	$150M	$150	$100M	$56	($83)	44%

*Assumes 1800 standard billable hours expectation

Advantages of the methodology:

It ensures that every partner has a positive margin associated with his/her hours when valued at standard rate. While one may purposely choose to lose money on specific matters through discounting, there should be margin on every hour of time when valued at published rate.
It is simple. Firm leaders need only to decide on one variable that can be based on firm analytics and margins for other titles (e.g. income partners or senior associates).
It is based on the partner’s published rate. While total compensation can rise and fall with firm profits, this relative cost will not fluctuate and this method is in line with thinking about compensation for a partner’s work effort.
The most highly compensated partners will be forced to the minimum margin ensuring they appear less profitable than junior partners, therefore supporting a leverage model.
Multiple partners hitting the minimum margin level will have different margin % if they have different standard rates, further promoting a positive leverage model.

We have to address the weaknesses of this approach as well:

A firm will need to decide on the minimum margin. While strong arguments can be made for a certain threshold, there may still be dissenters.
Each partner who is affected by the minimum threshold will have the same margin (in dollars), leaving discounting as the only differentiator of profit on billable time

Like the Minimum Margin %, the strengths of this methodology prevail over the weaknesses and many firms have found this option easy to implement and easy to gain support for (due to minimal arbitrary decisions). In the final two entries, we will discuss some variations on the two minimum margin methodologies (% and $) and discuss a set of criteria to help a firm determine the pros and cons of each.

Concentration Pays Off For Law Firms

Admin — Fri, 04 Jan 2008 14:00:00 GMT

Now that he is retired, Tom Collins is working on improving his golf game. Rather that working on all aspects of the sport at the same time he is concentrating on his short game starting with chip shots. With the importance of concentration of his mind he sent me the following post.

Time passes remarkably fast and any business, including a law firm, has momentum all its own. In other words, things are happing to fill available time. So if you want to accomplish something new or better, pick just a few things to concentrate on. Pick a lot of things and you are likely to accomplish none of them

For example, don’t plan to cross-sell everything; plan to cross-sell one thing to one category of clients. Now decide how you are going to cross-sell that one thing to that one category of clients.

What is your value proposition—lowest price, proven track record, political contacts, higher responsiveness (quality service), advanced technology, delivering cost predictability, etc?

How are we going to win the business? What key strategy or tactic is likely to produce the best result—one-on-one attorney visits, a team approach, group selling sessions, recommendations by third party, etc.?

What marketing materials or tools do you need to support the strategy?

What is the goal? Who is going to make it happen? What do they have to do to make it happen? What are the milestones for those involved? How are you going to measure results and communicate them? How are those involved going to be held accountable for their milestones and individual goals?

You can repeat the above process two to three (or even five) more times depending on the size and organization of your law firm, but concentrating your resources is the key to success. Keep in mind the Rule of the Fewest. The Rule of the Fewest is an important business concept. It arises out of the understanding that resources are always limited. “Things” not only represent a direct allocation of resources, they also indirectly impact unassigned resources. In business, concentration means the fewest of everything at any point in time—customers, products, distribution channels, transactions, etc. Concentration is “Management Candy” at work, doing the Main (fewest) things with the Minimum (fewest) necessary resources to achieve the objective.

Morepartnerincome.com is sponsored by Juris®. 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.

Law Firm Management ABC's: Training

Admin — Thu, 03 Jan 2008 14:00:00 GMT

Training is based on the KASH principle. The principle conveys that new Knowledge, plus the right Attitude provides new Skills that, with use, become Habit.

For example, if a firm hypothetically decides they want to improve profitability through the purchase of technology that can help measure performance, the first order of business is a dedication to learn the new skill.

Knowledge is achieved only through taking time to learn the new skill. Acquisition of such knowledge must be calculated in the price of the new skill. There is a price in out-of-pocket expense. There is a price in lost productivity. This must be calculated into the price of gaining knowledge.

Attitude determines the length of time that productivity is hampered. With a positive attitude, there is less resistance to change and loss of productivity is minimized. With a poor attitude, knowledge is shielded from those who might gain from it and loss of productivity is inceased. In cases where poor attitude prevails, staff may leave the firm, setting you back to step one.

Skills are acquired through repetition and time. Patience and attitude are key. Patience means not only that those who seek knowledge through attitude and repetition remain focused in the face of frustration. Patience also means directing attorneys that notice of an impending crisis to others seeking knowledge through attitude and repetition (ie support staff) may be better communicated the day before the situation metastasizes into crisis. Any crisis that reduces repetition of a new skill delays the formation of habit and delays return on investment, adding to the price of gaining knowledge.

Habit leads to higher performance by making the knowledge acquired through attitude and repetition applicable without further direction. It is the impetus for your return on investment.

The keystone that holds the entire process together is shareholder buy-in and commitment. This is the dedication to the skill that is fundamental to the successful implementation of new knowledge. Without commitment by the owners, KASH is hindered and the return on investment is at risk for delay or worse, abandonment.

Year End Distributions to Law Firm Partners

Admin — Thu, 20 Dec 2007 19:10:00 GMT

It is probably too late for most law firms, but if you haven’t written those yearend distribution checks yet you might want to read two of Jim Cotterman’s recent blog posts. See his post Balance Sheet Metrics and his post Partners Contribute Hidden Capital. Cotterman is big on new partner buy- ins and instructs law firms to reinvest a portion of profits back into the business.

Cotterman puts it this way:

“Partners should receive a fair exchange for their own labor plus a share of the profit from the labor of others less the following:

LESS investment for growth—new people, offices, practices and markets are often funded out of current cash flow. Since firms deduct these expenses currently they are the hidden capital invested by owners to grow the business.

LESS investment for capitalized assets—items shown on the asset side of the balance sheet when there is no corresponding third party obligation for funding those assets (debt or capitalized lease obligations).

LESS investment in working capital—higher salaries for associates being a prime example of a limited duration cash gap often funded by initially lower equity partner compensation.”

Cotterman is right. The future success of the law firm depends on what you do not distribute. Getting partners to accept leaving something on the table isn’t easy, however. It is made harder by practices that fail to pay departing or retiring partners for their share of the “value” of the law firm.

Morepartnerincome.com is sponsored by Juris®. 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.

Law Firms With Strategic Plans More Profitable

Admin — Mon, 10 Dec 2007 14:00:00 GMT

74% of respondents to the 2007 Remsen Group Managing Partner Survey (part of the 2007 Juris Law Firm Economic Survey from LexisNexis) stated their firm did not have a strategic plan. 89% of those that did believed that a strategic plan had either some connection or a strong connection to improving profitability.

So managing partners understand that planning helps to improve profitability. Why is it that more firms don't have strategic plans?

Ed Wesemann with Kerma Partners has an answer. In an article published by The Law Marketing Portal (can also be read at the Kerma Partners website after free registration), Wesemann gives 10 "inescapable truths about law firms' approach to strategic planning that make the process harder and less rewarding than it should be":

1. Law firms often have trouble agreeing on their core business objectives.

2. Strategic planning is not a democratic process.

3. Mission statements are a waste of energy and enthusiasm.

4. Strategies and tactics are confused.

5. Planning involves precluding options.

6. Too much planning effort is spent worrying about compensation.

7. The obvious is often overlooked.

8. No one is accountable for implementing the plan.

9. Plans are too aggressive.

10. Objectives are not measurable.

1. Law firms often have trouble agreeing on their core business objectives.

The problem of agreement on core business objectives found its way into a MPIE (Managing Partner Idea Exchange) breakout session in the Midwest Managing Partner Forum held in October. A partner wanted to increase the profitability of the firm but also wanted a better work/life balance. Failure to reconcile the two left the partner indecisive on how to proceed on objectives for her firm. Wesemann simplifies the objective: "[i]n any business the primary objective is to increase shareholder value." How you define value will determine what objectives you set.

2. Strategic planning is not a democratic process.

Strategic planning is about vision. Vision requires leadership. Leadership is a function of management. In the business world, a small group of leaders gain input from others, make a decision, then ask others how they should implement the process. With law firms, it is the opposite: the leaders want to work as a democracy, all want to have a say in the decision, and afterward assign a single person to be responsible for implementing the process. Assigning accountability to one individual defeats the purpose - the entire firm must be accountable for the implementation of the plan once adopted.

3. Mission statements are a waste of energy and enthusiasm.

Wesemann argues that firms spend too many hours trying to create a concise mission statement that ends up sapping the energy of the participants and turning the process into a "meaningless exercise". Wesemann suggests picking 5 or 6 statements that represent the core values of the firm. Look here for a good article on writing a mission statement by Joel Rose.

4. Strategies and tactics are confused.

Wesemann found that attorneys want to skip discussions of strategy and go straight to tactics. Strategy dictates direction. Tactics are the types of activities needed to achieve the objectives (look here for a higher level discussion of strategy and tactics). He suggests that attorneys clarify the strategy before embarking on tact.

5. Planning involves precluding options.

Planning involves precluding options, which are counter-intuitive to how attorneys think. Attorneys are taught to maintain options and they tend to bring this mindset into strategic planning discussions. Wesemann argues that each option requires resources and the more options maintained lessens the probability of successful implementation.

6. Too much planning effort is spent worrying about compensation.

Compensation discussions end up derailing strategic plans. Wesemann's suggestion? Focus on increasing the size of the pie, not what portion a person gets. James Cotterman wrote a nice article for Altman Weil's Report to Legal Management examining compensation that can be read here.

7. The obvious is often overlooked.

Firms tend to neglect the basics while focusing on the sexier issues (read: compensation discussions). Issues such as providing good service, having good work habits, charging appropriate fees, etc., should be appraised to see where the firm's strengths and weaknesses lie.

8. No one is accountable for implementing the plan.

Law firms are the best at "voluntary requirements". Wesemann argues that the success of strategic plans rely upon accountability by everyone, which means no opting out if you disagree.

9. Plans are too aggressive.

When firms finally get around to planning, they over-reach and set overly aggressive goals inevitably leading to failure. Keep the goals in line with available resources.

10. Objectives are not measurable.

One of the constant mantras of this blog is that measurement improves performance. Law firms must define what their objectives are and measure their progress towards their goal. Make sure your accounting system has the ability to measure performance in real-time via dashboards with drill-down reporting. Creating the strategic plan is only the beginning. Success of your strategic plan requires benchmarking and continuous measurement so that if your financial objectives are not being achieved, you can adjust your tactics - and stay on track with your strategy.

Morepartnerincome.com is sponsored by Juris®. 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

Part-Time CFOs for Law Firms

Admin — Tue, 07 Aug 2007 17:45:51 GMT

Two interesting conversations occurred recently that are worth passing along. First was a conversation about the process private equity firms go through when investing in a business. They fast track the development of a strategy and they start implementing it immediately. In short order they turn (sell) the business, earning a handsome profit. It was the same business. So what brought about the significant value increase in such a short timeframe? You have the answer; they agreed on a strategy and began implementing it with determination and without delay. Behind that process was a financial manager (a CFO type) who made it all work by keeping everyone focused and on track. They made sure goals were clear, the results were measured, and people were held accountable.

Midrange law firms don’t have the benefit of private equity people with a stake in the game. However, a midrange firm can get the same kick-up in value by adding equivalent professional management to mirror the process that private equity firms go through. Most midrange law firms do not feel they can afford to bring a full time CFO on board. Also law firms are not an attractive venue for highly qualified professional managers because of the limited opportunity to become an equity member of the firm.

The second conversation offered a solution. It dealt with the growing availability of “part-time” chief financial officers, CFOs. It is something new. Some of these seasoned managers are retirees operating as individuals. Others are significant commercial enterprises organized just to tap the available talent for the purpose of marketing their services. To get an idea of what is available, do a Google™ search on “part-time CFO” or check out the web site of B2B CFO. What is driving this trend? It is due to circumstances of our time—graying baby boomers and technology that makes it easier for flexible work arrangements.

For years the consulting community has emphasized that law firms underperform due to inadequate management, especially financial management. Many of the top performing 50 percent of midrange firms can be described as accidentally successful. Even those who go through formal planning processes find their goals illusive due to the lack of time that lawyers are willing to devote to firm management.

Renting a part-time CFO to guide the firm through a “private equity”-type makeover could close the management gap, increasing the income and wealth of law firm partners.

Morepartnerincome.com is sponsored by Juris®. 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.

Law Firm Planning In the Real World

Admin — Mon, 06 Aug 2007 17:40:02 GMT

Two particularly excellent and timely essays appeared in blogs last week. First Bruce MacEwen’s Strategic Planning’s Encounter with Reality, which he was inspired to write when he read How to improve Strategic Planning in The McKinsey Quarterly Premium Edition. The second was a somewhat related article titled Competitive Intelligence for Law Firms appearing on Law.com’s Legal Technology webpage written by marketing blogger Larry Bodine.

Both deserve reading. Planning and performance are closely linked. Good business and competitive intelligence are necessary components for sound planning.

The frustration of law firm leaders with the planning process stems from a basic misunderstanding about planning. The mantra of the successful planner is that the plan is to change the plan. The process is essential, but the leader must understand that while the plan influences decisions, “decisions” shape and reshape the plan. Planning is a continuous process. It requires a periodic formal structure process to make sure everyone is still on the same page, but it is a way of thinking strategically and its use in communicating the playbook to the team is what’s most important.

One of the things I tell those involved in law firm planning is to never write a paragraph when a sentence will do. Likewise, never write a sentence when a phrase will do; never use a phrase when a word will do. A planning document is too dynamic to be embodied in a legal brief. It is a list of triggers, reminders that can be easily maintained and updated as the plan evolves. Assumptions upon which plans are based are merely temporary estimates about the future and thus, objectives are temporary goals. Both have to be adjusted and refined as the future comes closer. New estimates and new objectives have to be made for the future just beyond the horizon.

Without planning, a law firm is simply adrift. It moves along in response to the currents. Success, crises and failure are mere accidents each as likely as the other. Or as others have put it, a failure to plan is to plan for failure.

Is it time to improve the planning process in your firm? If you are looking for a reason, read the post by Gerry Riskin, Doom and Gloom for the legal profession-it’s coming. Good planners can prosper in bad times; bad times for others are just bad times.

Morepartnerincome.com is sponsored by Juris®. 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.

Watch the Middle Space to Achieve Law Firm Objectives

Admin — Fri, 20 Jul 2007 17:25:47 GMT

One of the objectives of planning is to pick where you want to be and then lead the organization there.

The truth is few law firms ever achieve their long term objective. Law firms aren’t an exception. The same underachieved rate exists in the rest of the business world. The question is, why? What makes the difference between those firms that achieve their strategic objectives and those that can visualize but not reach theirs?

The answer is the middle space between the demands of current operations and the need to invest in the business of the future as visualized by firm leaders. You can’t get from where you are to where you want to be by doing the same things you are doing now. And you are unlikely to succeed if you take your eye off the current ball and throw all your attention and investment into the future model.

Few leaders visualize or articulate the transition process to get from here to there. Yet, that is the only road for getting there. It is the middle space between the two, the transition for getting from one to the other, which must be the attention point of the organization. It is the progress along that transition plan that has to be measured against goals and for which people have to be held accountable.

Left uncharted, the middle ground is starved by both the dominant demand of the current operation for resources and investment and the already poorly satisfied appetite for resources allocated to the end objective projects.

The work has to go into getting from here to there. The best example I can give is that you have to build a bridge before you can populate the other side of the river. It is the building of that bridge that leaders must be able to articulate. It is the bridge that must be planned. It is the bridge that must get resources and investment, all the while keeping the other side of the river as a clear objective.

Morepartnerincome.com is sponsored by Juris®. 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.

Reinventing Your Law Firm's Practice Area

Admin — Mon, 11 Jun 2007 17:30:44 GMT

I just finished reading an extraordinary work by W. Chan Kim and Renée Mauborgne based on years of research and collaboration with fellow faculty and students at INSEAD. The French graduate business school and research institute, INSEAD, is considered one of the world’s best. It is particularly known for its influential alumni—a global network of business intellect and power.

The book is Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. While the book is aimed at business enterprises in general, its message should appeal to the entrepreneurial-minded law firm leader.

Law firms compete for the same clients and same work. They compete in the same ways. It is a game of one-upmanship—for one law firm to gain business another has to lose. The authors call this market space the Red Ocean. It is one where law firms ebb and flow in terms of competitive victories and losses. In the Red Ocean no law firms will consistently succeed. Leadership styles are transient. Successful strategies do not continue in perpetuity. Applauded leadership methods fail with changing circumstances. The Red Ocean is a place where victories are only marginal improvements.

A Blue Ocean Strategy (BOS) is one where you stop playing the Red Ocean game with all the other wannabes. It is a strategy where you create a new market, a blue ocean, where you are the only player. It is the notion of reinventing the business, but kicked up another notch. For example, it isn’t a matter of just reinventing how existing legal services are provided to existing consumers of legal services. Instead, it is a matter of reinventing how the needs and wants that give rise to the purchase of legal services are satisfied and inventing ways that those who currently don’t take advantage of legal services can get the benefits. With the Blue Ocean Strategy you get to reinvent the market, not just business enterprise pursuing that market. You get to break out of the box where everyone competes for the same business.

What separates this book from others it that it gives you the framework for devloping and pursuing a Blue Ocean Strategy. Yet, as great as I think this work is, I don’t expect everyone who embraces it to achieve revolutionary breakthroughs such as the invention of the overnight letter by Federal Express. It does, however, give you and your practice team a new way to look at the opportunities for a given practice area. It is an opportunity for fresh thinking that could lead to a dramatic change in what you view as your market and how the needs of that market can be met in new ways with new methods at entirely new value and price points.

Buy the book. Target an area of practice in your law firm as a candidate for radical revision. Select a team and apply the Blue Ocean framework. You just might catapult that practice class over the heads of would-be competitors to a level of success and growth unreachable through traditional one-upmanship style competition.

After reading the book, you will want to add Gabor George Burt’s blog, blueoceanstategy.typepad.com, to your favorite’s list. Gabor, also a graduate of INSEAD, is one of the apostles of BOS and his blog is a valuable supplement to the original work of Kim and Mauborgne.

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.

The One-Person Planner Approach for the Law Firm

Admin — Thu, 29 Mar 2007 17:08:42 GMT

Survey after survey discloses that only about 20 percent of midsized law firms engage in a formal planning process. Yet, the evidence is clear that those that do have a process outperform those that don’t. If your firm is one of the 80 percent without a formal planning process, you still need to plan—to think about the business of the law firm and into what and how do you want the law firm to change.

I previously posted a step-by-step quide for structured strategic planning as a team, but in this post, let’s take a simpler approach—a “one-person planner” approach. How do you proceed as one individual when thinking about the business of the law firm? Start by taking an inventory—what is the nature of the business today and then proceed to what you want it to be and what is required to get there:

What do our clients have in common (who are they)?
What do our clients think of us?
Who are our Partners- professional strengths, people and team skills, business strengths, marketing strengths, aspirations, traits, ages, satisfaction with income level, satisfaction with status quo, retirement goals?
What do our other lawyers have in common (who are they); are they the right people; do we have the right number; are we fully utilzing them; are we training and developing them as we should?
How do we stack up financially—per-partner income, rates, leverage, realization, margin?
How are we growing our business; where does our new business come from?
What is good and not good about our facilities?
What is good and not good about our administrative team?
What is good and not good about our systems and equipment?
Who are our competitors, if any, that really matter?
What are we really good at?
What do clients ask of us that we are not good at?
What are our biggest threats, if any, that really matter?
What are our best opportunities?
What is the firm’s value proposition—what elevator response would we give to someone who asks, “Tell me about your firm”?
Are you satisfied with who and what your firm is? If not, what do you want it to be?
If you are not satisfied, what do you want your value proposition to be—what elevator response would you like to give?
What is keeping you from being what you want to be?
Make a list—what has to change to get where you want to go?
Go back over your list and reshape it into a big picture.
The vision: This is who we are and want to remain or this is who we want to be.
What are the three to five main things that will determine the success of that vision?
What strategies are we going to rely on to achieve those main things?
- What tactics or programs will we implement to support the strategies and who is going to be responsible for what?
- How are we going to measure and report progress?
- How are those responsible going to be held accountable for their delegated role?

Now here is the caveat. Now you have to sell your plan. A one-person planning team can only take the progress so far. You need a consensus for a plan to work. Everyone doesn’t have to agree with every aspect, but they must agree to the destination and the road, the key strategies, for getting there.

I call that consensus “getting on I65 North”. The message I65 North conveys is that we are going north and we are going on this specified road. You can travel at your own speed as long as you are not endangering other travelers or impeding their progress. But you can’t go South, East, or West. If you want to go somewhere else, there are exits along the way.

The truth be told, the easy way to sell your plan is to move to the next level and repeat the process as a team. You’ve gone through the process and, having done so, you are in a position to facilitate the planning process. New light bulbs may go off during the process, but the team is likely to wind up with a plan very similar to the one you scoped out initially. Only this time, they have ownership.

When you plan as a team, you may want to use the strategic planning guide from a prior post or you may feel more comfortable initially by sticking to a modified version of the above one-person planner approach for now.

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.

Law Firm Planning Gone Wrong

Admin — Wed, 14 Mar 2007 18:55:29 GMT

The “plan” must be to change the “plan”! Strategic plans are based on assumptions, and assumptions are inaccurate temporary estimates about the future.

The inaccurate character of assumptions is why planning must be a continuous process. Through that continuous process of changing the plan as the future gets nearer, successful organizations are distinguished by doing the “right things”.

I often wondered why so many consultants to the legal community tend to discredit the value of strategic planning. Rob Millard’s post titled Why Committing to Success Leads to Failure sheds light on the reason. It is because too many law firm leaders they deal with see the “plan” as the end product. It isn’t. It is the planning process, not the plan, that leads to success. Strategic planning is a way of thinking—strategic thinking. The plan must be to change the plan!

The need to continually change the plan is the reason that I emphasize that the tangible product of strategic planning, “the plan”, should consist of words, phrases, and sentences, not paragraphs, pages, and chapters. It is a living document that coordinates and shapes an organization’s actions and decisions and that is changed by those actions and decisions in reaction to an unfolding future. Taking a line from the Pirates of the Caribbean, “It is more of a guide than an actual code”.

Periodically, the organization must come together and revise the guiding product. They must come together to agree on revised assumptions about the future, to identify the changes in the opportunities available to the firm, and to adjust or reaffirm the law firm’s goals. They must agree on the key strategies the law firm will rely on to achieve those goals. Then they must set out the programs and responsibilities for implementing the tactics in support of the agreed upon strategies

Rob Millard wrote: “All too often, I find myself facing blank stares from clients [law firms] who want me to help them to only craft a plan that will lead them to greatness. This is only possible where the future is certain. Which, of course, it is not.” His point is clear. If you unwaveringly pursue a plan based on inaccurate assumptions, you will eventually implement the wrong strategy—you will successfully fail.

Rob Millard’s blog is The Adventure of Strategy. He is part of the Edge International consulting group. For more on this subject, you should also read my previous post, Strategic Planning Will Not Predict the Future, But It will Prepare the Law Firm for It, which referred to an earlier and also insightful post by Millard.

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.

Eight Key Result Areas for Law Firms

Admin — Fri, 12 May 2006 17:35:47 GMT

Peter Drucker identified the eight areas that every business must address through its objectives and control systems. The eight key result areas are:

1. Customer Satisfaction

2. Productivity

3. Innovation

4. Resources

5. Management Development and Performance

6. Employee Attitude and Performance

7. Public Responsibility

8. Profitability

The excellent law firm will set key result goals for each of these areas. It will develop strategies and tactics to achieve its goals. It it will develop methods for measuring actual results against the goals with an objective of making additional changes as needed to achieve and maintain its goals.

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.

Common Sense about Information Technology in the Law Firm

Admin — Thu, 11 May 2006 17:46:26 GMT

John Murdock, a morepartnerincome™ reader and member of Bolt Cumming Conners & Berry, recently sent me a complimentary copy of his book Common Sense on the Information Revolution and Your Job. The book’s co-author Terry L. Crum, previously the Chief Knowledge Officer and Director of Global Information Services for Jones Day, has moved to the consulting side working with law firms in the Information Technology and Knowledge Management areas.

This is a clever book. You need to read it. Why? The authors say it better than I can, and they do it right up front—on page six:

“In working to increase productivity, revolutionaries want to eliminate your job”

“In working to increase effectiveness, revolutionaries want to steal your customers”

Those two objectives are the motivations behind advancing information technology and systems in all businesses, including law firms. If the information and management revolutionaries can find a way to do it, they will replace many of the functions you perform as a lawyer through information and technology. Alternatively, they will replace you with someone better equipped to use information to outperform you. Likewise, if they can find a way to use information to deliver greater value to the customer, they will do it, and in doing so, replace you as the customer’s choice of provider.

When considering a new system or technology in your law office, the authors pose the following question. “How would you feel if your competitor adopted this plan?” If you would be concerned, then the proposed project deserves your serious consideration.

What sets this book apart from being ‘just good’ to being clever is what the authors do next. They take the reader through the uses of information as a competitive advantage as man progressed from the caves to the farms and then to the age of flight. The journey illustrates how the use of information and its forms has changed. By illustrating the difference between the brain, paper, and digital information, they open the reader’s mind to think outside of the box. The authors encourage the reader to consider how information can be used today in new ways and new forms to increase productivity in law firms and the value of the firm’s services in the eyes of the client.

Theirs is a blunt message: You are either one of the revolutionaries or one of the revolution’s losers! The book is available on Amazon.com, or for bulk purchases (5 or more copies) you can e-mail sales@commonsense.biz .

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.

Rebates As Alternative to Discounted Legal Fees

Admin — Wed, 10 May 2006 17:23:00 GMT

Occasionally, circumstances arise that warrant providing a client with a special negotiated deal. One firm we work with had done so with a particularly large client. Part of the negotiated engagement terms was that the discount applied to each particular bill only if it was paid promptly. The discount, however, appeared on the bill showing the net as the amount due.

As you might have guessed, over time the client’s payment pattern slowed down. Eventually, the law firm discovered the client was taking in excess of 60 days to remit payment for services billed. Yet, they always took the discount.

The Juris Client Services team working with the law firm recommended changing from a discount to a rebate arrangement. Under the rebate arrangement, the firm would bill the client at gross (the undiscounted amount). Periodically, the law firm would issue a rebate to the client for the bills that were paid within the negotiated terms.

The rebate approach, which is common in commercial circles, makes a lot of sense as an alternative to the discounted fee approach. It puts the law firm in control to assure that the client is delivering on their part of the negotiated bargain.

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.

Law Firm Managing Partner Compensation

Admin — Tue, 09 May 2006 17:16:18 GMT

A law firm that fills its managing partner position as a right of passage or as a place to park a mediocre partner does a disservice to all partners.

It takes effective management for long-term success. Without effective management, a law firm can only be accidentally successful for some period of time. When something goes wrong (and eventually it always does), the consequences for the poorly managed firms are likely to be fatal. Given the fact that every partner’s income and personal wealth is at risk, managing partners should be selected for their executive skills, and their compensation should reflect the value of the job.

Richard Gray addresses the issue of managing partner compensation in the March/April issue of Law Firm Inc. Gray states that, “It goes without saying that the managing partner's compensation should bear a reasonable relationship to the individual's historic compensation level--and, in all likelihood, should be somewhat higher. No one should take a pay cut to become a managing partner.”

Gray emphasizes that while the managing partner should be among the highest paid partners, he/she should not be the highest. “In accounting, investment banking, and even professional sports, the chief executive is paid well, but the highest pay is reserved for the ‘producers’. Law firms should follow this model, too.”

Personally, I would modify Gray’s statement that “…the highest pay is reserved for the producers” to read, “…the highest pay is reserved for the firm’s star producers.”

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.