Make More Rain : planning, operations

Why the Year End Collection Push is Not a Best Practice

Admin — Tue, 09 Sep 2008 16:38:57 GMT

It is that time of year again, at least for the early starters, when the legal industry begins its preparations for the year end collection push. The push has become an industry standard and buzz word over time. Each year countless hours are put into collecting massive amounts of receivables every December in order to meet targeted numbers. Although it is a foregone conclusion that there will be a year end push for most law firms, is this really a best practice?

The “ideal” approach with respect to legal industry inventory management is to have a continual billing and collections push year round, so everyone can enjoy the holiday season without worrying about making a budgeted target for collections. Although ideal, given the history of the industry, this is unfortunately a practice that will take time to implement. Even if that happens, the remains of the year end push might still have legs. For most firms both lawyers and, more importantly, their clients are used to and expect a year end push. It is a behavioral pattern that is established and therefore not going away anytime soon. That said there are negative ramifications to such a practice and a few firms have recognized this and smoothed out their collection pattern.

Client Behavior

The first obvious detriment to a year end collection push is the impact on client behavior. If clients expect a year end collection push then they are less apt to pay within a consistent, timely manner. Some clients even have said to relationship attorneys who have tried to smooth out the process, “Why pay now if I know you are just going to look for more in December.” In fairness to the client I would probably hold on until December as well. For example, if my mortgage company let me pay all of my mortgage payments in December, I would do so - which brings me to my next detriment of the push, the Time Value of Money impact.

Time Value of Money

A dollar today is worth more than a dollar tomorrow, so everyday a firm does not collect on a receivable they are foregoing the opportunity of re-investment. In my previous mortgage company example, I would take all of the money I owe the mortgage company invest it in some sort of portfolio that would give me a return on that money which would go straight to my pocket instead of the mortgage company. That is the same thing that occurs with the year end collection push within the legal industry: Investment income is left on the table as receivables age.

Aging Inventory

The next 2 problems are more internally focused within each firm. Not only can the collections push can have a negative impact on client behavior, it can as well with attorneys . A colleague of mine wrote a blog back in June on “Valuing your Firm’s Inventory” which I encourage everyone to read as it outlines how, as receivables age, the likelihood of realizing the original amount of those receivables diminishes. Since attorneys also exhibit the behavior of letting work age before it is billed, and billings age before they are collected, the probability of billing or collecting the original work/bill amount goes down.

Other obvious detriments include the ability to know where you are to your budgeted numbers as the year goes along, and how to budget for next year given a lack of information on your collections; a final drawback of the year end collection push is the impact on the age of your inventory. In the graph below, you can see three years worth of inventory pushes. There is a significant drop in balance each December (as depicted in the bar graph), but you can also see a spike in the age of inventory. Why does this occur?

I ask many of the firms I work with and they almost always point to the answer: At year end, with pressure to make budgeted goals, most of the collection effort is on receivables that firms know they can collect and are more recent in nature. Therefore, the older inventory that has been aging over the years continues to get older and may get to a point where it is completely uncollectable. This is an unfortunate side effect of the collection push and one that should be accounted for in any inventory management strategy.

Although I have gone over many reasons why the year end collection push is not a best practice, I am not blind to the fact that it is not easy to make a quick switch to a continual inventory management process. So given that the “ideal” practice is not a readily accessible current option, are there things firms can do to prepare and approach the year end billing and collection push to try to maximize its result while working on the before mentioned strategy shift ? The first suggestion is start billing early –nothing earth shattering. With most firms you see an upward trend in periodic billings in October and November. That trend should start in the 3^rd quarter, and those firms that have a more gradual collection slope in the last few months also have an increased slope in billings from August until November. The easy explanation to this is that billing is a more controllable portion of the inventory cycle than its counterpart. In the example below, you can see such steep a slope in each of the prior 2 year end pushes where as in the last year that billing was much more gradual and steady as the end of the year approached.

The natural benefit is that by getting the built up WIP out the door in a timely manner will give you the ability to focus on collections for a longer period.

The firms that I have worked with who have had the most success with respect to WIP management are those that have some stipulation on billing in a timely manner when it comes to their partner compensation. Knowing that many firms cannot simply switch their compensation system on a dime, this type of action is not widespread, but it is a proven method. Each firm has seen an improvement in inventory management when a portion of partner compensation has been tied to that driver. “Compensation” in this regard can be defined as a direct input into the partner compensation equation or, alternately, can equate to monetary “fines” for late billing and/or collections.

It may be inevitable within current industry conditions that December will be the month with the most collections. Again, it is in the best interest of the firm to change the status quo and begin collecting earlier and in a timely manner. Not only will you be able to have a better idea of where you will stand to budget sooner, but it will set your firm up for budgeting the next year. Still, if focus can be put on opportunity balances (those that have aged past an expected pay time) early in the process it may help avoid the side effect of the ever aging inventory. Those older balances can have the focus early on and perhaps generate collections while in December the focus can shift to the more readily available receivables.

I certainly hope that as time goes along the year end collection push will lose its luster as a buzz word and be replaced with continual inventory management. At the end of the year the firms that take this to heart just may see increased realizations, additional investment income, and perhaps most importantly a little more piece of mind that you are on target and can enjoy the holiday season.

- Posted by Russ Haskin

Does A Cult Of Personality Dictate Your Firm Strategy?

Admin — Fri, 23 May 2008 07:00:53 GMT

David Maister wrote an article in 2007 related to the conditions that confront firms who face strategic changes (Are We In This Together? The Preconditions For Strategy). In it he wrote of four types of personalities:

Type 1 is the solo operator who values independence, wants to make little investment in the future, but is willing to bet on his (or her) ability to catch fresh meat each and every day. I call this the Mountain Lion approach. “Pay me for what I do today (or this year.)”
Type 2 is the individual who prefers to act in coordination with others, but doesn’t like to invest (or defer gratification) too much. I call these people (collectively) the Wolf-Pack. “If we act together we can kill bigger animals, but it had better pay off soon or I’m joining another Pack!”
Type 3 is the individual who wants to be independent, but is interested in building for the future by investing time and resources to get somewhere new. Such people remind me of Beavers building dams to provide a home for their (own) family.
Type 4 are individuals who want to be part of something bigger than they can accomplish alone, and have the patience, the ambition and the will to help the collective organization invest in that future (He references humankind, Ants and Bees as possible personifiers - I'll stick with Ants).

One of the things that draws me to this article is that I can identify people in the firm in which I worked in all the above types. The Mountain Lions were the highest producers and top originators; the Wolf-Pack were those who lived off the fat of the Lion's spoils and could churn out work; the Beavers were those who just did the work and quietly practiced law; the Ants were those who just went along with what was decided and never had much input or care into the direction of the firm.

The dynamics led Lions and wolves to form alliances and complain of the ants. In spite of the work ethic of the ants, they lost clients, had poor billing practices, and always ended up being the worst performers in the firm.

Thus, most initiatives failed in our firm. When decisions needed to be made, lions and wolves teamed up against ants. The lack of unified purpose left a conference room thick with self-preservation and under-the-breath animosity. Maister summed it up nicely:

It is hard to identify and create buy-in for what “we” (i.e., the firm) should do if there is no strong sense of “we” — a mutual commitment and sense of group loyalty and cohesiveness. Similarly, it can be meaningless if the members of the firm are not committed to go on a journey together into the future.

Problems result when a cult of personality forms around some in the firm (typically the lions). Left unchecked, the lions gain an air of invincibility and management becomes practically impossible. On the other hand, poor performers are a drag on the firm and lack of accountability can tear apart a firm. The only impetus to change can end up being a a dip in profits and/or a lion or wolf going to another firm. Both of these events are bad times to begin a discussion of change.

It would be unwise to deny that changes need to be made to adapt to the changing economy. There is little reason to expect the economic down cycle to end soon. The real estate boom is being replaced by the volatile commodities boom (energy and food). Globally, businesses are transitioning into "defense mode"; ie, shrinking investment, laying off employees not directly related to long-term strategic goals, hoarding money. Law firm cash flows lag, on average, 160 days. You may not feel it today, but soon your cash flow will be affected.

How will your firm adapt? There are many blogs talking marketing and business development ideas. This month alone there are several who have discussed marketing and client development:

Bruce Marcus, May 17th: NO PAIN, NO GAIN (Is The Marketing Return Worth The Risk?)
Kevin O'Keefe, May 22nd: Effective presence marketing via blogs and social media
Bruce MacEwen, May 12th: Who's On Your "Red Team?"
Tom Kane, May 20th: Full-Time Client Feedback Person - The Next Trend?

Though counterintuitive to some, maintaining or even increasing spending on business development during market downturns can lead to more profitability (RVs, Bananas and Recession-Proofing the Law Firm, Marketing Advice for Lawyers During Economic Down Cycles). One thing should be certain: maintaining the status quo should be off the table.

Anthony Cerminaro (BizzBangBuzz) wrote of a top ten list of obstacles to making changes in his post Overcoming Resistance To Change:

Procrastination;
Well-meaning naysayers and apologists;
Fear of failure (defeatism);
Impatience;
Waiting for the whole plan to be in place;
Lack of self-confidence or cultural intimidation;
Inflexibility or lack of adaptability;
Trying to do it all yourself;
Lack of forethought or concentration;
Lack of necessary skills or talents.

His post also provides suggestions to overcome the above.

To effectively create positive change in your firm, you must first determine what changes need to be made. This requires a thorough understanding of your current position and requires some forethought into what should be your firms strengths and weaknesses going into the next few years. Then a plan needs to be devised that will address the weaknesses and take advantage of the strengths based on the opportunities showing up in the marketplace. Measurable performance indicators need to be established that further your plan. Then the difficult part: gaining consensus.

The dynamics of your firm will dictate the direction you go and the ability to form a consensus to act. The degree of success in getting the lions and wolves on board will determine whether the plan will ever gain favor. The degree of accountability placed upon everyone may end up being the deciding factor.

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.

Law Firm PEPP "Bubble" To Burst?

Admin — Fri, 09 May 2008 07:00:24 GMT

Since 2000, law firm PEPP (profits per equity partner) have increased on average 11% for Amlaw 100 firms and 8% for Amlaw 200 firms. Some observers fear that, like other markets that have sustained growth periods at or near double digits in the past 10 years, the law firm partner profit "bubble" may soon burst as well.

Looking at Amlaw 200 data, PEPP increased by 2% in 2001. In 2002, the increase was 7%. 2003 saw an increase of 11%, 8% in 2004 and 2005, and 10% in 2006.

This increase doesn't only apply to Amlaw 200 firms. Looking at the differences from 2005 and 2006 for the top respondent firms in the Law Firm Economic Survey by Juris Inc. and LexisNexis, respectively (the only two years available), firm PEPP increased 11%. It is likely that most firms in the mid-market and small market increased incomes by respectable if not similar percentages over the same period.

What can you do to prepare for a stunt in the growth (or decline) of PEPP? Bruce MacEwen posted an article May 5th on his blog Adam Smith Esq., titled A "Bubble" in PPP? that looks at some short term ideas to help "mitigate the downward trend" and predicts a change in the las firm business model over the long term:

Short term ideas:

Redeploy lawyers in troubled practice areas to healthier ones;
Use the opportunity of "shared pain" with your key clients to get closer to them;
Adroitly stand by while the normal waves of attrition take their toll;
Build or at least safeguard capacity in selected practice areas that you anticipate will emerge strongly from the downturn;
And always, always, keep a sharp eye on costs--although, truth be told, you don't have much material flexibility here. You're not moving your offices to Brooklyn and you're not paying less than market for partners and associates.

Long term predictions:

the billable hour, lamented by many but eliminated by few, will eventually replaced with a more "value-based" model, though MacEwen stresses that he is not "holding [his] breath" on this;
the traditional associate/partner model changes to include more non-equity partners and more contract attorneys;
at least fundamentally, "the core processes by which law firms manage cases and deals must and will change" (ie, more project management, more team philosophy centered around practice groups to become more efficient).

Ultimately, MacEwen believes that due to increased demand (at least for Amlaw 100 firms), finding work won't be the problem. However, he sees the traditional model as being unsustainable based on the limits placed on things such as productivity (>2,400 hours?), rates (>$1,000 per hour?)and realization (>100%?). Because of this, if PEPP does suffer a downturn for an extended period of time, the long predicted changes to law firm dynamics may happen.

If this occurs in large law firms, it is incumbent on smaller firms to adapt quickly. The predictions above are all point towards efficiency that allow firm profits to increase through efficiency rather than increased rates and worked hours. Much has bee written about the "unmanageability of law firms". Despite this, firms have continued to make exceptional profits - due in no small part to their enviable margins. With good management, law firms can see profits that far exceed anything that firms receive currently. And if partner profits start decreasing, your firm will be in crisis - just as it is not a good idea to go to the grocery store on an empty stomach, it isn't a good time to contemplate an overhaul in processes during a crisis.

Much of the allure of smaller firms is quality service at a lower price. Some large firm partners charge rates in excess of $1,000 per hour. If large firms realize they can offer similar services at lower prices and still increase profits, smaller firms can be squeezed out of the marketplace.

Think Walmart. As Walmart entered the scene, small businesses were unable to compete based on their lack of purchase power. Walmart could offer more product selection at a lower price. Home Depot and Lowes did the same to small hardware stores. The small shops that survived did so by using their secret weapon - customer service and personal engagement. Still, you won't find many of these shops who don't struggle on a monthly basis and have to watch as their clients often come to them for advice, then go to Home Depot to buy the big-ticket items.

For small and mid-size firms to compete in this changed environment, they will have to embrace workflow efficiencies that meet or exceed that of the larger firms - and use their "secret weapons" of personal engagement with clients and responsiveness. However, without the fundamentals of an efficient business in place, your firm will suffer under the weight of your processes.

There will always be individual clients available, but more dependable sources of income often come from business clients and their leaders. These clients are already demanding more cost certainty. If larger firms are able to provide this value to business clients first at a price that isn't so different than yours, your firm may be in trouble.

The time to act is now.

Developing A Goals-Based Strategic Plan With Financial Focus

Admin — Wed, 02 Apr 2008 07:00:42 GMT

Goals-based strategic planning takes a different tact than a "basic" strategic plan in that there is a singular focus by which the firm sets goals. Focusing on financial goals is more manageable and attainable than the comprehensive strategic plan, but requires attention and accountability nonetheless. Aspects of goals-based planning include:

Identifying key performance indicators that affect profitability
Developing goals for each indicator
Develop a budget based on the goals
Forecast earnings based on the budget
Measure and adjust

Identifying key performance indicators that affect profitability - The key drivers to profit include leverage, rate, realization, productivity, margin and cash flow. Firms may also want to include other indirect drivers such as client development (relationship building), "firm citizenship", etc. that may not have a direct impact on profitability, but are part of the core values that the firm holds.

Developing goals for each indicator - goals are particular to each fee earner but in total should reflect the financial targets for the equity partners. Each goal should reflect the capabilities of the fee earner and the realities of the market. For example, productivity targets may reasonably be set to 1,800 hours per year but setting the hourly billing rate at $350 may be unreasonable for a second year associate who works exclusively in insurance defense. Set goals that are attainable.

Develop a budget based on the goals - Budgeting simply states your goals in a measurable way. Fee earner budgets measure your productivity; client budgets measure your efficiency; expense budgets measure your spending.

Forecast earnings based on the budget - Forecasting models your budgets so that you can predict the results. It isn't enough to just state goals. Forecasting allows you to see what the bottom line will be if you meet your goals. If the bottom line isn't what you wanted, adjust the budgets until the forecast is agreeable. Most businesses forecast annually with quarterly reviews. During the quarterly review, the forecast can be adjusted based on the actuals. If business is thriving, you can increase your forecast - if business is down, you can reduce the expectation set in your annual forecast.

Measure and adjust - like anything else you implement in the firm, you must measure performance and be willing to adjust if needed.

We have begun taking submissions for the 2008 Law Firm Economic Survey. If your firm is interested in participating, please contact Brian by clicking here.

Developing a "Basic" Strategic Plan For Law Firms

Admin — Tue, 01 Apr 2008 07:00:14 GMT

The Free Management Library has some good information related to developing a strategic plan. The site lays out several models that can be implemented for both profit and non-profit businesses. The focus of this post is the "Basic" strategic plan. This is also the one that most firms use when developing a strategic plan. The process includes:

Identifying your core purpose or "mission statement"
Determining the goals that align with that purpose
Determine the methods you will use to reach those goals
Create action plans to implement these methods
Measure, adjust and modify as needed.

Identifying your core purpose or "mission statement" - this is the part that starts and sometimes ends the process. Firms can easily get bogged down in determining the language for the firm's "mission". If you look around at other's mission statements, you can find that they pretty much say the same thing - client-driven, quality, service, honesty, integrity, seeking justice, etc. Be careful how you draft your mission statement - you will be judged by the words you choose; by your clients, your employees and your competitors. The mission statement is the "big picture" so it needs to encompass everything you want to accomplish with the strategic plan. Answer these 4 "whats" (adapted from The Lawyer's Guide To Strategic Planning by Thomas C. Grella and Michael L. Hudkins) and compress it into a single statement:

What areas of practice are our focus?
What is our goal in representing clients?
What market segment do we serve?
What are our core values?

Determining the goals that align with that purpose - the goals are the metrics against which you will measure success. Most people think of setting long-term goals. I think for smaller firms, you should pick short-term goals with long-term objectives. This is especially true when looking at financial goals, but with any change you have to set goals that are attainable in the short term. Since strategic plans should be reviewed annually, you can set new goals next year. It is more important that they are aligned with your core purpose than comprehensive.

Determine the methods you will use to reach those goals - the methods used to reach your goals require a review of all your processes. Processes that are inhibiting your ability to reach your goals need to be eliminated. While you are at it, those processes that are inefficient should be streamlined. If you do not have a clear organizational chart, this would be a good time to develop one.

Create action plans to implement these methods - who are we kidding here? Attorneys creating action plans? It isn't hard to see why firms get lost in the process. However, you have to set benchmarks to measure success or failure. The action plan is the blueprint for success that you follow based on the processes set up to reach the goals that align with your core values. One idea for an action plan (again from The Free Management Library) requires the following to be addressed:

The goals to be accomplished;
How those results will be achieved
Who is responsible for achieving the results
When will the results be achieved (timeline)
What is the status of the goal (with an as of date)

Considering that action plans will have a short-term negative impact on productivity, many firms will not want to do this. Understand the purpose and create your own method of accountability. Some consultants do not promote action plans, but promote organizational focus to implement the plan. Additional staff are needed and focus placed on them to ensure that processes are in place and functioning. If it works, stick with it. If it falters, you need to implement things that work. How will you know if it falters? Through measuring performance.

Measure, adjust and modify as needed - measurement improves performance. In this case, measurement will hold people and processes accountable so that you can modify the processes and mentor the people (to the extent you can). The largest issue I have found in firms that enact change isn't necessarily the processes - people eventually get used to processes. It is the accountability. It is imperative that there is buy-in by the principals or else plans can easily falter and a large investment in time and money is wasted. If the firm is even-handed and consistent in its application of the plan, positive results will ensue.

Law Firm Strategic Planning - An Overview Of Models

Admin — Mon, 31 Mar 2008 07:00:13 GMT

When some talk of strategic planning, they are talking about retreats and consultants, about mission statements and long term goal setting. Strategic planning can be all of this - however, it doesn't necessarily have to be a complex document that takes weeks or months to develop.

In a more simpler form, strategic planning consists of reviewing the current environment, setting goals to improve it, and implementing them, measuring performance along the way. How you get from "review" to "do" is the focus of several posts this week.

There are several different "models" of strategic plans. Some listed on The Free Management Library include:

"Basic" Strategic Plan - this is the plan typically implemented in firms that invest in developing a strategic plan;
Goal-Based Model - this model is more focused on goal setting and performance metrics relating to meeting the goals;
Alignment Model - this model is targeted to driving the organization to align itself with the firm's mission;
Scenario Model - this model uses scenarios to help identify strategic issues and goals;
"Organic" Model - this model focuses on embracing the shared values and evolving the plan through the continual dialogue that will hopefully eventually increase the values that are shared.

74% of the respondents to the 2007 Law Firm Economic Survey from LexisNexis stated they did not have a written strategic plan. However, 89% of those who did plan said that there was a correlation between their plan and income. What is your firm's plan?

For a look at reasons why strategic planning has been a problem for law firms to implement, look at an earlier post on the subject: Law Firms With Strategic Plans More Profitable.

Maister Offering Book Free To Managers

Admin — Wed, 05 Mar 2008 08:00:59 GMT

David Maister, management consultant and author of several books, has made an offer on his website to give a free copy of his book, Strategy and the Fat Smoker, to a senior executive or managing partner of your firm. Maister in 2006 declared that law firms are unmanageable - could his "Give a Copy to Management" campaign be a sign that he has regained some hope?

In larger firms, at least, there are strong indicators of more management - the number one indicator being skyrocketing per partner income. Law firm consultants know that the service industry model is enviable. There are no fluctuations in price due to factors beyond their control (such as gas prices). The main cost to the law firm is also a source of its revenue.

The main obstacles to improvement in management are the firm owners who don't want to follow the key drivers that affect income (usually due to entrenched "firm culture" no one is able to alter). In any other company this would be the fatal flaw that calls in the Grim Bankruptcy Trustee. In law firms, the margins are typically good enough to deceptively cover the lack of attention to these drivers until a preventable event occurs that causes a firm to split or fail.

However, many are predicting change in the fortunes of law firms. Interest rates are above 4%. Firms who otherwise wouldn't necessarily see a difference in their bottom line by not measuring performance may soon see falling incomes and may not know about it until it becomes a crisis. The signs are everywhere and many firms are taking note. It is to these firms that Maister's book is so important a read. Tom Collins has written about Maister's book in the October 25th, 2007 post The Strategy Problem in Law Firms.

You can take advantage of this offer by clicking here. Do it quickly. The offer is only good for the first 100 eligible senior executives or firm managing 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.

Best Of More Partner Income: Strategic Planning Will Not Predict the Future, But It Will Prepare the Law Firm for It

Admin — Fri, 29 Feb 2008 08:00:50 GMT

"Best Of More Partner Income" highlights some of the best posts over the three years of its existence. This article was originally posted on August 14, 2006 and is titled Strategic Planning Will Not Predict the Future, But It Will Prepare the Law Firm for It:

If you don’t believe in strategic planning, you must read Rob Millard’s post Creating Prepared Minds. His post includes an excerpt from an article by McKinsey & Co.’s Eric Beinhocker titled Creating Strategy in an Unknowable Universe.

Breinhocker gets it right. If you think strategic planning is about predicting the future, you are dead wrong. If that is why you are not doing it, you need to revisit the issue. Assumptions (predictions) are inaccurate. If you get one right, it is just the luck of the draw. The first rule of the planning process is that you must plan to change the plan. As the future gets closer, you continually change your expectations and reactions to it until you arrive on target.

Planning gets the entire law firm team playing from the same play book. It prepares the team for the future and capitalizes on its opportunities. Rob’s post is a must-read that may inspire you to read Beinhocker’s entire article.

Chance does favor the prepared mind. Top performing firms do it. If you want a good reason to start, consider this reason: more than an eight fold difference in per-partner income. [The 2006 Law Firm Economic Survey] . . . discloses that the top performing 25 percent of firms earn more than eight times the per-partner income of the bottom 25 percent. That seems to be a good enough reason to start.

Three important rules for successful planning include:

The planning plan must be to change the plan. Strategies are temporary targets based on inaccurate assumptions and estimated capabilities.
The planning document should consist of words and phrases to facilitate frequent updating.
The structure is a critical part of the process.

The structure for the strategic portion of the planning process that I have successfully used includes nine main areas to be addressed by the planning team in the order listed. The nine subject areas are:

1. Nature of the law firm (or activity, e.g., practice area or department)

2. Environment in which firm operates

3. Opportunities/Capabilities (SWOT)

4. Assumptions about the future

5. Objectives–Mission/Strategic Thrust

6. Policies/Procedures (changes or new ones needed)

7. Strategies–How we are gong to achieve objectives

8. Priorities and schedules for programs, new resources required, measurements

9. Organization and delegation

For more step-by-step suggestions, reread the earlier post The Structure to Structured Planning. I also suggest a reread of Consensus Building for a discussion of the role of the structured planning process in building a consensus, i.e., preparing the mind to deal with an uncertain future in pursuit of a common vision.

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.

More Ideas in Disaster Recovery For Law Firms

Admin — Wed, 27 Feb 2008 08:00:08 GMT

Last week I wrote a post on planning for business continuity during unexpected interruptions in operations. Ari Kaplan of Ari Kaplin Advisors wrote an article on Law.com that also addresses disaster recovery. He tells of a miserable experience trying to recover data from a cracked hard drive when his child pulled his laptop to the ground when tugging on the power cord (an experience I have narrowly escaped many times with my children).

He shares some tips he received from Jeffrey Brandt on protecting yourself from what he terms "data armageddon":

Centralize Contacts - Keep all critical contacts on your person (ie, on a mobile device).
Remote Data Housing - Host your data remotely. ** I personally don't think this is required so long as you have good, reliable backups that are kept offsite. However, for business continuity, having your data accessible from anywhere has its merits. **
Duplicate Or Near Duplicate Systems - create redundancy in your servers. Replicate them so that if one goes down, another comes online.
Secure Your Backups - keep backups offsite at a secure location. Preferably in a fire-proof vault.
Map and identify your information - this is good advice to corporate clients as well - "in every subsequent litigation [it will have to explain] what happened and why it could not produce data for that specific date range".
Test Regularly - this is one that will bite if not followed. Test your backups regularly to make sure your backup software is working properly.

There are several technologies that take advantage of "universal access" capabilities. For example, LexisNexis has a product called NetDocuments® that hosts and manages email and documents offsite that allows access even from a mobile device.

Kaplan has an answer to those who balk at spending such time and money to protect their data: "Although planning and preparing is not cheap, contact someone who has lived through disaster recovery and he or she will convince you that it is priceless."

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.

Law Firm Game Plan for the Coming Year

Admin — Mon, 17 Sep 2007 17:18:00 GMT

October is almost here, so it is time to lay out the Game Plan for 2008.

As the saying goes, it all starts with a sale; everything else is an expense. Clients (customers) are the only thing that give a law firm the opportunity to succeed. Since it all starts with the top line, “revenue”, that is the best place to begin putting your game plan together. Marketing and revenue-generating activities set the pace. The firm’s legal talent and operational areas must then develop plans in support of and is response to revenue-generating activities.

Here is my checklist for laying out the marketing game plan for a new year:

Branding and Image Considerations
Positioning Considerations
Key Strategies the Firm Will Rely On To Win New Clients
Key Strategies the Firm will Rely On To Retain and Develop Existing clients
Pricing Plans
Media Advertising Plan
News Releases
Newsletters
Direct Mail Plan
Directories-Printed and On line
Printed Material
Key Word Purchases-internet and Internet Ads
Conferences/Organizations/Speaking/Writing
Other Events
Blogs
Web site
Technology
Individual Attorney Plans and Goals

An annual game plan is not a substitute for strategic planning nor is it the budget. Your game plan for the coming years represents operational decisions you are making in order to implement longer term strategies. However, one or two new ideas always come up in the operational planning phase that will reshape strategic thinking. That is the way it should be. When it comes to strategic planning, the plan should always be to change the plan! Strategic planning (thinking) goes on 365 days of the year. Your strategic plan shapes how decisions are made but decisions also shape and reshape the plan. As for the budget, you can’t have one until you have laid out your game plan. Budgets come last. They are financial estimates and targets in support of the game plan.

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.

Five Traits of an Effective Managing Partner

Admin — Fri, 14 Sep 2007 17:20:00 GMT

I ran across a list in my C Drawer titled “Five Traits of an Ineffective Managing Partner.” I don’t remember the source. The list caught my eye originally and then again upon rediscovery because it rings true based on personal observation. However, I decided to turn it around from the negative to the positive.

These five traits are present among the best managers I have known. They are noticeably lacking among those who only hold the title.

They are consistent in their communications, avoiding mixed signals
They are effective at managing change
They exhibit a flexible style when dealing with others
They establish expectations clearly
They manage their own time well

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.

What Keeps Managing Partners Awake at Night?

Admin — Fri, 05 May 2006 17:23:56 GMT

I was reading Patrick J. McKenna’s article in the Edge International Review titled What Keeps Managing Partners Awake at Night. With the exception of the emphasis on globalization, there isn’t much difference between the list for the over-500-attorney firms and the list for the midsized firms.

During the Juris Managing Partner Forum in 2005, participating midsized firms compiled a list of the issues on their minds. Consistent with the large firms, they too are concerned with talent issues, strategic matters, survival of the firm, and the firm’s profitability. I have grouped their concerns as identified during the forum into four categories:

Talent Concerns:

Assimilation of Laterals
Compensation of partners and associates
Inconsistent partner performance
Managing non-billing activities
Managing partner responsibilities and authority
Motivating associates
Practice vs. management
Problem and rogue partners
Quality of life vs. productivity
Talent retention

Strategic Concerns:

Maintaining competitiveness
Managing and sustaining growth
Ownership of clients—firm vs. individual
Service quality
Shared culture

Survival Concerns:

Business Continuity
Conversion of paper to data
Disaster planning and recovery
Succession transfer

Profitability Concerns:

Billing discipline (getting time in, approving draft bills, etc.)
Client intake standards
Collection strategies
Lawyer initiated billing adjustments
Productivity
Profitability

If you share similar concerns, you should find helpful information about all of the above topics on morepartnerincome.com. Use the search function to identify previous posts dealing with your topic of interest. You can expect morepartnerincome to continue to address the concerns of managing partners in midsized law firms. That is its mission.

PS: See anything missing from the above list? Send your addition to morepartnerincome@juris.com and I will send you a morepartnerincome™ hat for your next partner event.

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.

Six Big Picture Trends for Law Firms

Admin — Wed, 12 Apr 2006 17:47:10 GMT

I don’t know how I missed it. Dennis Kennedy posted an insightful look ahead on LLRX.com in December 2005. The ALA’s Legal Management reprinted a slightly expanded version in its March/April 2006 edition.

This is worth your time. Dennis is always on his game and will be a featured speaker at the ALA conference in Montreal.

Dennis’ six big picture trends include:

Mobility and collaboration
Internet becomes a platform
Making better use of what you have
Improved productivity tools
Client-driven technology continues

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.