Make More Rain : productivity, firm culture

Management ABCs: The Hawthorne Effect

Admin — Tue, 18 Mar 2008 07:00:10 GMT

A method of increasing performance is based on the Hawthorne Effect. Although several of the experiments have been downplayed by social psychologists, the effect that attention has to performance is as true today as it was when recorded at the Hawthorne Plant in the 1920's.

Basically, when attention is given to the performance of an employee, the employee's performance increases. Simply put, measurement improves performance. If you set goals for your timekeepers and don't measure them against the goals, the incentive to succeed is left to trusting individuals to meet their goals.

How well suited is your firm for a loss of a client such as Bear Stearns (or, perhaps, Lehman Brothers)? Gerry Riskin wrote in January to make your firm recession-proof. Some of the factors listed in recession-proofing the firm:

Ramp up frequency of financial reporting (monitor the firm's key finanacial metrics);
Make hard decisions humanely and fast (monitor under-performing timekeepers);
Manage internal expectations (monitor expectations to keep staff motivated and avoid "business as usual");

Each of the above requires attention. Trust alone that the individual timekeepers will respond to economic crises is a recipe for disaster. A better management model is the Hawthorne Effect. Everyone needs to be accountable for results. Let the effect of attention to performance help the firm during difficult times.

The effect of measuring performance brings other benefits. Beyond improving results, keeping attention on profit drivers has the added benefit of opening opportunities - even in bad economic times. As Riskin notes, [w]hile strategy may be more challenging during recessions, if you grasp the nettle, opportunities will arise to enhance your client mix and your talent base.

We have begun taking submissions towards the 2008 Law Firm Economic Survey. If your firm is interested in participating or if you would like more information, please contact Brian by clicking here.

Generation Y Attorneys - Is It Lack Of Motivation, Or A Difference In Focus?

Admin — Fri, 14 Mar 2008 07:00:13 GMT

While sitting on a plane on the way to the ABA Techshow, I was reading the February 2008 issue of the Harvard Business Review. An article titled, Task, Not Time: Profile of a Gen Y Job, caught my eye. I often hear managing attorneys lament the lack of motivation of associates. The article in the HBR may provide a reason for the disconnect - it isn't that young associates are not motivated, but that they may respond differently than their elders to the conventions of work. Where many look to the hours you spend at the office as a measure of productivity, the HBR article suggests that the younger generation looks more to results, or task-based productivity.

Many younger employees find they can complete tasks faster than older workers,perhaps partly because of technological proficiency but even more . . . because they work differently. They spend less time scheduling and are comfortable coordinating electronically. They resent being asked to log hours and stay in the office after their tasks are done, and the idea of face time really annoys them. [Generation] Ys love to work asynchronously - anytime, anywhere. One said during out research, "What is it with you people and 8:30am?"

Does this explanation fit with your experience?

The article suggests ways to devise a better model of how to define work:

Articulate the results you expect - and tie accountability to getting the job done;
Make physical attendance in the office, including at meetings, optional;
Gauge performance on the quality of work performed;
Help managers and employees learn to measure dedication in ways other than face time;
Use today's networking capabilities to allow employees to work from anywhere;
Support the changes by creating drop-in centers

The above also appears to support what Chuck Newton has termed the 3rd wave law firm.

Work/Life Balance May Hinge on Others' Deadly Whims

Admin — Wed, 13 Feb 2008 08:00:06 GMT

I was talking with the driver on the way to the airport last week when the subject of his family came up. He showed pictures of his kids and how they were growing so fast. He then said to me, "don't ever take for granted what you have today - you may not be around tomorrow to enjoy it".

After hearing of the near disaster that could have occurred in Tempe, Arizona as Super Bowl revelers filed into the stadium unaware of the danger near them, I reflected on the fragility of life and the effects one person can have on so many others.

Although important, the purpose for improving revenue and financial performance should be to provide better for yourself and/or your family. Don't let the focus on the bottom line blur the real bottom line. The world is uncaring and unmoved by regret.

It's been said to live today as if it were your last. In college I loved to invoke "carpe diem" to encourage bad habits. The fact is, we can't afford to reflect much when the fate of others are at our feet. However, there is always a moment, however brief, in each day that can be used to ensure that when your time comes, there will be no regret. Time management applies not only to your professional life, but your personal life too.

You can't control when your last breath occurs. You can control what you do while still breathing. Don't ever take for granted what you have today.

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.

Changing Law Firm Leverage

Admin — Tue, 12 Feb 2008 08:00:01 GMT

Much is said regarding the importance of leverage for increasing per partner income. However, changing headcount leverage is not an easy task. There are HR considerations (do new attorneys fit in, do they have the right attitude, will they stay for the long term, etc) as well as existing habits (partners not sharing work). However, based on the 2007 Law Firm Economic Survey from LexisNexis, if your partners can learn to share work, more immediate benefits are possible through billable hour leverage.

The way you get there is through increasing billable hour requirements. Does this mean more work? Hardly. How about just providing blackberries for your fee earners and utilize tools like Juris' Mobility Connector? According to a study from Ipsos Reed, blackberry users recover 54 minutes a day in productivity. That improves productivity by roughly 196 hours per year per fee earner.

Next is to put your partners to work - non-billable work. This year is a critical year for law firms. If in fact we are headed towards an economic down cycle, there will be tighter budgets for clients and that means price pressure on law firms. Relationships are key. Lawyers need to market themselves as not only experts, but trusted counselors. It can't be said enough that if your equity partners are not willing to get out of the office and maintain as well as create new relationships, non-equity partnership may be a better fit.

What to do with the work that is being left on the equity partner's desk? Give it to associates (or non-equity partners). Don't let them become idle! The 2007 survey shows that there is a strong correlation between associate productivity and per partner income. If you have associates already billing at or near 1,800 hours, then it is time to hire new associates. If you want to push that number to 2,000 that is fine, but you don't need to work that hard to make your target profit.

Assuming you have the workload to justify new hires (including taking the extra work from partners who are out building and maintaining relationships), increasing head count leverage is your best bet for increasing per-partner income.

In the above scenario, based on 29 fee earners working 1,610 hours a year, profit per equity partner totals $284,398. Below, just by adding two associates and increasing hours a mere 12 minutes a day (50 hours per year per fee earner), per equity partner profit increases nearly 20% to $340,418.

Just think what the above would be if you gave fee earners blackberries and you recovered an hour per day from each of them utilizing tools like MyJuris Mobility.

Head count leverage is a valuable tool for increasing income but is dependent on workload. If equity partners are not willing to pass work to associates and get out of the office to build and maintain relationships, your firm is leaving both scalability, money and eventually your own talent for other firms to take.

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.

The War For Young Attorney Talent At Law Firms

Admin — Fri, 08 Feb 2008 08:00:58 GMT

Bruce MacEwen writes in his post The Ten Years War something that I have heard from many managing partners: talent combined with work ethic from those in the "millennial generation" (those born after 1980) is difficult to find. MacEwen quotes an article from The McKinsey Quarterly titled Making talent a strategic priority:

"People in this group see their professional careers as a series of two- to three-year chapters and will readily switch jobs, so companies face the risk of high attrition if their expectations aren’t met. The Gen Y cohort, already representing 12 percent of the US workforce, is therefore perceived as substantially harder to manage than its predecessors. As one North American HR director explained, 'The millennial generation doesn’t want to work 100 hours a week. These kids want a different deal; they have seen their parents work all their life for the same company and then get fired. They are not interested in killing themselves for work.'"

Though the above sounds a bit overstated to me (is the threshold to being productive really 100 hours a week?), it hits on the point that many in mid-sized firms experience: the unmotivated young attorney. MacEwen cites the article's suggestions for battling this "ten year war" for talent:

Target talent on all levels - not just on lateral partner hires - look for talent at all levels. People tend to change in the environment they are in - if you have talent at all levels, this will encourage the right attitude.
Communicate your firm's value propositions - it's what motivates behavior, says MacEwen.
Bolster HR - MacEwen takes exception to this recommendation, arguing that "in many firms [HR's] reputation—certainly as a strategic asset—is tarnished beyond salvation". Instead, he argues, have office managers and practice group leaders be the champions of recruiting.

For several years now, the ABA has made a focus on work/life balance, especially considering some firms where partners can work in excess of 2200 billable hours per year. If you agree that work/life balance is important, how do you get young associates to buy-in to the work part?

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.

LegalTech 2008 Wrap Up

Admin — Thu, 07 Feb 2008 22:11:54 GMT

Wrapping up the first major law-related technology show of the year (and my first live blogging event), I have taken some good and bad things with me.

The good:

It's always good to stay in touch with the trends each vendor is promoting. Based on the sessions, I think vendors may have been more reactive than trailblazing - or it could have been that the vendors that were more relevant to the topics in the sessions were prominent. Either way, I think the tone is set for a year of vendors promoting themselves as having the best E-Discovery solution.
If you are an attorney who wants to knock out CLE credits as well as get your head spinning around the hundreds of technology solutions available to meet nearly any need your firm could require, this ain't a bad place to be.
Live blogging is possible in a large tech show with the right amount of focus and determination and hopefully gives readers some value for the toil.
This show is a great place to network if you are any way affiliated with the legal profession.

The bad:

Live blogging without consistent internet connectivity is difficult. I spent my time in sessions sitting with my laptop writing the blog entries in Windows Live Writer (my current experimental desktop blogging tool), then doing a mass post when I got back to the suite where I had reliable wireless access. This is a challenge I can't believe will be remedied without more demand for live blogging and will be dictated by the luck of whether there is good wireless access at the location of the show.
There was precious little focus on financial management in the show (qualification - I am biased). One session on firm profitability (hosted by Thomson West) but that was it. On the other hand, there were 6 sessions with the word E-Discovery in the title alone! I think some wanted to make sure we understood the theme of the show - the beast in the jungle was no ordinary gorilla - it was the many faces of e-discovery.

I hope my fractured writing wasn't too much of an irritant. Please feel free to give me feedback on what you liked, disliked, or would like to see me focus more on in the future.

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.

LegalTech 2008 Day Three - Traffic Eases

Admin — Thu, 07 Feb 2008 18:56:10 GMT

Traffic is much lower this morning. Mostly consultants and other vendors running around the exhibit hall.

I asked some of those walking through about the e-discovery choices they are seeing - it seems that different vendors tackle different things under the banner of "E-Discovery". For some it is as limited as getting headers from a Lotus Notes email so you can track the origination of the email thread.

It is apparent that vendors are trying to find the right formula for selling e-discovery tools to lawyers. And at LegalTech, you will have lots from which to choose.

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.

Second-Class Treatment of Law Firm Staff

Admin — Thu, 17 Jan 2008 08:00:00 GMT

Tom Collins and I were discussing the relationship between legal professionals and non-lawyer employees of law firms. Following up our conversation he sent the comment to post:

I will never forget the time I spent on the site of a one law firm. The entire five-person accounting department shared one windowless office. Desks were pushed against one another. The accounting staff worked in chairs with missing arms, torn upholstery and busted springs. Their mismatched desks looked to be recovered salvage with missing drawers and loose veneer. This was an extreme case, but it is standard operating procedure for many firms to treat their non-professional staff as second-class citizens.

The non-lawyer support staff in a law firm has a lot of influence over the success of the firm's legal professionals—they can spoil the soup. How they feel about the firm is reflected in how they deal with law firm clients and prospects.

Excellence in client services starts with excellence in how the firm treats its own people.

Law Firm Management ABC's: Manage Your Associates

Admin — Wed, 16 Jan 2008 08:00:20 GMT

Management is achieving objectives through others. It's a continuing process of receiving input, processing input, taking action, receiving feedback, and repeating the process. It requires KASH in a real-time environment. It is a cycle of planning, organizing, actuating and controlling.

Prior to 1828, the path to becoming an attorney required not only to obtain a degree, but to serve several years as an apprentice before being able to practice law. President Andrew Jackson changed these requirements to break up the elitist methods of choosing attorneys (only attorneys could choose who the apprentice would be, much like real estate appraisers of today). By the end of the 1800's, apprenticeship programs for attorneys were well in decline and after the introduction of the American Bar Association in 1878, a more standardized formal process to becoming an attorney was introduced (Source: Bar Examination: Further Readings). An unintended consequence of this action was to lessen the importance of mentorship to young attorneys-in-waiting.

Today, the only qualifications (not to lessen their importance) to becoming a lawyer is a good dose of book smarts, focus and an ability to not crack under stress. Law school does much to help you think like a lawyer, but does nothing to help you act like a lawyer. Mentorship helps associates to learn from seasoned attorneys how to act as well as how to best service clients.

Management ensures that the value of mentoring is set as habit, achieving professional objectives not only for the individual, but for the firm. Unfortunately for some firms, management is treated much like strategic plans: either you spend time developing a plan but don't stick to it or you don't do it at all.

Good management starts by receiving input. Actively solicit feedback from your associates. Karen Asner wrote an article for Law.Com (Law Firm Partners Find Out What Associates Really Think of Them) regarding establishing an "upward review process":

Upward reviews give associates the opportunity to evaluate and provide input on the management and leadership performance of partners with whom they regularly work on deals, cases, committees or pro bono matters.

Law firms aiming to create an outstanding working environment for their associates and attract prospective recruits should seriously consider implementing an upward review process.

It's a good bet that associates, if put in a non-threatening environment to speak frankly, would have some pointed views on their plight. Some may be warranted; some may not, but if you want to consistently increase partner income, knowing what associates are thinking can be invaluable, especially if you are considering them as future partners. You don't want to find out after the attorney leaves how disaffected he/she was towards the shareholders. Plus, in an ideal environment, the associates are bearing the brunt of most of the work - you want to make sure they are well incented to be proper representatives of the firm, inside and outside of the office.

Implementing an upward review process is only the start: next, you have to process the input. The management committee or equivalent must review the results and develop a plan of action that will address concerns and further the firm's objectives. Accountability must be delegated to every member of the firm. Clear and concise roles and goals need to be communicated.

Then you must take action. Talking about management and goals is a waste of time otherwise. Taking action means mentoring associates - not only as to how to practice law, but how to act. Mentoring is a way to reclaim the lost art of apprenticeship. Not only will it allow the partners to dictate how the associate acts, but it also creates a bond of acceptance within the firm that the associate is part of the team. That can only help in fostering trust, a central component in management.

Measurement improves results. Always measure the effectiveness of your plan by again receiving feedback. Keep the upward review process going - quarterly, semi-annually, annually, whatever time frame will maximize the effectiveness of the campaign (understanding the resource drain on the review process - you don't want to lose productivity as a result of processes established to improve productivity). My suggestion is semi-annual.

Measure and adjust, then repeat the process. Nothing is gained by doing something only once. Consistency is the name of the game if you want to affect the habits of others. Don't let up, don't get down, never give up. Over the long run, your efforts will be rewarded with a smooth running operation that will scale with your profits.

A Prosperous New Year For Law Firms

Admin — Thu, 27 Dec 2007 19:22:18 GMT

To Law Firm Leaders: Wishing you a Prosperous New Year

As I head into retirement and turn this blog over to those who will carry on in the years ahead, I leave you with two thoughts that, if you take to heart, will mean more partner income for 2008 and the years ahead.

I had to learn them the hard way. They are the core beliefs that have guided me throughout my business career. At least they guided me during the most successful part of that career. It took a while before I came to understand that these two certainties govern the success or failure of businesses—including law firms.

You are always judged by others
Business is a journey that involves constant change.

You are only as good as seen through the eyes of those that judge you. For a law firm, that primarily means your clients, your peers and your employees. But don’t forget all of the others that your success depends on, including vendors and service providers. The only sound business strategy is to pursue excellence. And excellence must be earned through their eyes, not yours. Excellence can only be pursued through change. You either purposely change to improve or the natural forces at work will pull you down to lower and lower performance.

Steering the course for excellence takes measurements. You have to set goals. You have to decide how you are going to achieve those goals. You have to measure your progress, make adjustments and set new goals as you continue to chase the allusive standard of excellence. It is a moving target. It takes constant innovation not to lose the race to others. Rather than stay too long with what has worked in the past, you must diligently simplify, eliminate and reinvent.

PS: Morepartnerincome.com just received Dennis Kennedy’s nod as the Best Overall Law Related Blog and also takes home the Blawggie Award for Best Law Practice Management Blog. Being recognized for your work beats a gold watch every time! Thanks Dennis.

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.

Lawyers Appreciate The Enablers

Admin — Wed, 26 Dec 2007 14:00:00 GMT

Lawyers appreciate the respect of their peers. The practice of law, like most professions, carries a high responsibility with it. Those who work diligently to represent their clients with the integrity and respect for the rule of law are not always appreciated by those who share the same work space.

Take the managing partner, for example. Like other partners, they ascend to their position through the accumulation of work and clients. They are then challenged with the responsibility to manage the practice and "herd cats", often with no additional pay and sometimes with no less obligation to maintain their revenue.

Ascending to the rank of partner is an expression of faith, respect and honor to a lawyer. It means you are highly valued within the firm. On the other hand, ascending to the rank of managing partner may seem like a prison sentence, pulling you away from what you do well to do what seems impossible (just ask David Maister).

It takes a lot to take on the responsibility of increasing firm profitability while having to mediate the special interests of the other owners. Lawyers should appreciate managing shareholders.

By the same token, all those who support lawyers appreciate fairness and respect as well. Something all lawyers shouldn't overlook.

We all know the difficulty in getting work done quickly. Having competent support staff makes lawyers look better. Without painting too broad a brush, for many attorneys crisis is the norm. Staff are constantly challenged by the needs of attorneys that need something now. No matter what they have piled up on their desk, there will be things that have to take priority and many times take up most of the day.

Having support staff you can trust is golden - whether it be in the back office making the numbers work or just outside your office handling your crises.

Don't forget to thank the people who enable you to focus on the practice of law.

Happy Holidays

Admin — Mon, 24 Dec 2007 14:00:00 GMT

As many are still frantically searching for the perfect strenae to offer to their loved ones, I want to wish everyone a safe and Merry Christmas (or whatever holiday you favor). Historically, the holiday we are celebrating has several purposes, most of which tie in to the new year.

In ancient Mesopotamia, the end of the year came with the return of chaos. To battle this, the people would offer their king as a sacrifice to their god, Marduk. The line of thinking appeared to be: We kill the king, he becomes immortalized and then can help our god Marduk battle chaos and give us another year of moderate temperatures without glacial melt (or whatever pressing form of chaos existed for them). Funny how it ended up, however. Rather than killing their king, they would offer a criminal. The criminal would be a "king for a day", dressed in royal garb and treated to all the respect and privileges of the king - until sundown, when he was stripped from his royal clothing and slain. Ostensibly, Marduk wasn't peeved that he received a criminal rather than the king (or had a sense of humor) and granted another year of calm.

The Persians and Babylonians were a bit more friendly, taking only the "switching of roles" part from the Mesopotamians. Every year at the celebration of Sacaea, the slaves became the masters and the masters had to obey them. That had to be interesting.

And, of course, ancient Romans exchanged strenae to celebrate the coming of the new year. There are other variations of the holiday, most notably the adoption of the celebratory mood by Christians. In 350 AD, Roman Bishop Julius I choose December 25th as the observance of Christmas. And here we are.

To whatever extent you celebrate, please don't forget to reflect upon the year and do whatever ritual (short of slaying someone I hope) to fight chaos and bring in the new year with a calm to tackle the opportunities of 2008.

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.

Retained Earnings Prepare Law Firms For Unexpected

Admin — Fri, 21 Dec 2007 14:46:11 GMT

Our political climate is warming to the idea of cutting back on sources of energy that produce carbon emissions. At the same time, energy prices are increasing. This may very well cause a crisis within the next 10 years as our population grows and our ability to provide cheap sources of energy decreases. An estimate by Cambridge Energy Resource Associates claims that $900 billion needs to be invested in our energy infrastructure within the next 15 years. Much of this is upgrading existing power sources - but there is also expansion needed to keep up with demand. Worse, the still unknown cost of expected reductions in carbon dioxide emissions that the world is working hard to mandate isn't factored in this estimate.

We don't have many politically friendly energy sources. Coal, the country's most plentiful and most used resource, is disfavored as a means for energy. Oil is hated for several reasons (though we are increasing our investment in the fossil fuel, as noted later), and there is a better chance to build on the habitat of an obscure endangered species than get a permit to build a nuclear power plant. The remaining "green" choices are either not sustainable for large populations or (at least currently) too expensive to replace exisiting infrastructure without causing serious effects on the economy.

Based on the above, it is possible that energy costs will increase massively in the near future. Then again, we may be stricken by a disease that reduces our population significantly, rendering the energy problem moot. Unforeseen events, the "black swans" that shape our economic and social life, must be considered when making long-term plans.

Is your firm prepared to absorb the costs of an expected or unexpected hit on the economy? Is your firm positioned to take advantage of such a happening?

There is only so much for which we can plan. However, the occurence of the unforeseen cannot be ignored and those who can anticipate and plan for unexpected events are at an advantage - and may save the firm from financial ruin. Think it can't happen to you? Talk to firms from New Orleans who ignored calls for disaster recovery planning before Hurricane Katrina literally destroyed their businesses overnight. Talk to business in New York after the twin towers fell where both life and livelihood were suddenly gone. It can and does happen. And will happen again.

What can be done? First, understand what your firm's strengths and weaknesses are. Do you have attorneys who practice commercial law? Those in Texas seeing an increase in oil and gas business due to increased drilling in the Gulf of Mexico typically would also see an increase in manufactured housing purchases. This means mom and pop brokers making deals and selling paper to finance companies that bring in lots of business, be it financial paper swapping, fraud, bankruptcy, warranty defense or arbitration. Yet the cost of housing has been so low, the recovery of the manufactured housing market hasn't materialized yet. As the lenders get stingy in providing mortgages to those with imperfect credit, costs of ownership will rise to the point where it is likely that the manufactured housing market springs back, with all the related business to catch. Are you positioned to take advantage of this? What are the firms with a large staff of attorneys who focused on real estate going to do now that that business is in a trough? Make sure your firm is diverse enough to absorb market cycles.

Track the important profit drivers - not monthly, but daily. If you don't have time for it, pay someone else to manage it. Have them report to you on a weekly basis to make sure the numbers are within acceptable ranges for your financial objectives. Have them prepare charts and detailed reports before meetings that can be explained to the other partners. Better yet, have these numbers in front of you on a dashboard so you know the story before you get the reports.

Just as you budget for increasing per partner income, budget for business need. To prepare for the unexpected, set aside a percentage of revenue towards a "black swan" reserve (yes, I mean retained earnings!). The percentage is dependent on your assessment of need. Cash flow latency should be a part of the equation. One way to lessen the impact to income is to install tools that will streamline workflow and increase cash flow which can lead to higher margins. Other things would be to review markdowns, effective rate, and collection realization to see where you can improve. This will bring in dollars without having to work harder or use new clients/ matters to fund the reserve.

In the summer of 2000, no one knew with certainty that the end of the tech market boom was about to end. Some could predict it - the Federal Reserve had been increasing interest rates consistently to slow growth - but no one could accurately foresee the fallout and the disaster to the tech market after the inevitable market crash. Those companies that saved their money and didn't distribute all the revenue to shareholders (and were closer to showing a profit) were the ones who survived to buy up the good ideas left behind.

Are you prepared for the unexpected?

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 .

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.

Survey Finds Reliable Forecasting Key to Improving Profits

Admin — Wed, 19 Dec 2007 14:00:00 GMT

Please notice a new change to the blog: on the right hand column there is a poll that asks a question based on a recent blog posting. Please participate - there's a story in the results.

I am also happy to introduce Amy Flaherty as a guest contributor today. Amy, one of Juris' Regional Vice Presidents, is one of our valued colleagues who always scours the internet for articles affecting the legal profession. She came across an article discussing the results of a survey highlighting the need to forecast. I asked if she would reduce her thoughts to writing and she graciously agreed:

KPMG’s recent study, "Forecasting with Confidence: Insights from leading finance functions," highlights the need for more reliable forecasting. The study found that for those companies who actively forecast, only one in five produce one which is reliable. Even so, those 4 others are still more reliable than those who don’t forecast at all.
Although KPMG’s study is not industry specific, the findings can apply to law firms as well as it could any other business. The underlying message is if you want to be able to make better decisions about future direction\growth, you need to take forecasting more seriously.

Here are some highlights and how they relate to law firms:

1. Accurate forecasting enhances value.

Firms with forecasts that came within 5% of actual results saw share prices increase by 46% compared with 34% for others. I believe this is largely due to having the right individuals analyzing accurate data and taking the time to build the forecasts. Doing so will tell you exactly what needs to happen in order to meet your financial objectives. Then you can measure against your actuals to determine whether you are on track to make your forecasted numbers. According to the Juris Law Firm Economic Survey, firms with the highest per-partner income perform well across all key performance metrics.

2. Data integrity is key to producing reliable forecasts.

Firms focus primarily on internally generated data when budgeting and forecasting. They should be using external data as well. You are limiting your analysis if only looking at your own data. Using benchmarking tools like Juris Insight® or the Juris Law Firm Economic Survey will provide you with competitive information needed to analyze numbers and produce more reliable forecasts.

3. Practice of Forecasting.

Respondents pointed to improvement in three main areas to produce more reliable forecasting:

• Automating the forecasting process with technology;
• Scenario planning;
• Rolling forecasts.

Budgeting and forecasting tools will help automate the process of forecasting by pulling in actuals from prior years and tracking prior forecasts. Then firms can test scenarios against actual as well as projected numbers. Rolling forecasts allow you to measure and adjust on a monthly or quarterly basis so that you are not only forecasting on an annual basis, but are consistently measuring your numbers and adjusting your forecasts accordingly.

4. Technology's part in forecasting.

Technology is seen as one of the key tools that could help improve forecasts. However, 40% of respondents rely solely on spreadsheets to produce forecasts. Although there is familiarity and flexibility with spreadsheets, having advanced forecasting software will automate processes and provide more flexibility, creating more reliable forecasts.

Suggestions to create more reliable forecasts:

• Use external market reports and competitive data.
• Update forecasts more frequently (58% do so monthly or more often).
• Make greater use of technology in the forecasting process.
• Hold everyone accountable for their forecasts.
• Require participation across all practice groups.

Amy Flaherty has been with Juris for over 15 years and has been a Regional Vice President for the past 5 years. Before joining Juris, Amy directed the Services and Consulting arm of Legal Works, a software integration company based out of Virginia. Amy received her undergraduate degree in Computer Information Systems from James Madison University.

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