Make More Rain : subscriber content, disaster recovery

The Structure to Structured Planning

Admin — Tue, 07 Jun 2005 17:47:55 GMT

Planning is a continuous process - one that shapes performance and guides decision-making but is, also, shaped by the decisions that get made.

Once the strategic plan is developed, each major department or practice area should go through the same planning process and that planning process becomes input into the firm-wide plan. Which comes first the chicken or the egg - in this case, the strategic plan or the operational plan? The answer is each shaped by the other. Since planning occurs continually, it is impossible to tell.

Three important rules for successful planning are:

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, and facilitate frequent updating.
The structure is a critical part of the process. You can't make assumptions about the environment in which you operate without first identifying the environment as it currently exists. You can’t set strategies without first assessing your strengths and weaknesses. You can't plan and organize resources without first identifying your mission or goal and the strategies and tactics for getting there.

The structure for the strategic portion of the planning process that I have successfully used throughout my career includes nine main sections to be followed in order of the sections. The nine categories are as follows:

1.0 Nature of the law firm (or activity, i.e., practice area or department)

2.0 Environment in which the firm operates

3.0 Opportunities/Capabilities (SWOT)

4.0 Assumptions about the future

5.0 Objectives-Mission/Strategic Thrust

6.0 Policies/Procedures (changes or new ones needed)

7.0 Strategies - How we are going to achieve objectives

8.0 Priorities and schedules for programs, new resources required, measurements

9.0 Organization and delegation

To facilitate easy maintenance of your plan, each page should start with a heading similar to that shown below. The heading is designed to facilitate replacing an earlier page or segment with an updated segment, without the necessity of replacing an entire document with a revised version. The heading, also, facilitates discussion by referencing a file number, page number and revision date.

			This	Replaces
Planning Unit:	Firm-wide	File	1.0	1.0
Subject:	Nature of business	Date	5/23/05	2/13/05
		Page	1 of 3	1 of 3

I have attached a planning outline complete with subsections. However, you need to customize subsections to fix the needs, size and complexity of your particular law firm. Use no more subsections, no more words, and no more pages than are necessary to accomplish the job. The job is for the planning team to devote its time to thinking about the future and unifying the team behind a mission and plan for the future. It is not to produce a literary work. The finished document should use words and short phrases versus paragraphs. For example, the planning team may conclude, based on its objectives, that the firm needs to add non-equity (income) partners to its employee mix. The plan may simply list among other new policies needed - “non-equity partners”. The planning process need not take the time to spell out the details. That duty can be assigned to a partner whose job it will be to develop and get approval for the details. The planning team's job is to plan, not to “do”. The planners need to keep the process moving and not get lost in the details.

Planning is a discovery process. Sometimes, it is a discovery of the obvious and sometimes, it breaks new ground. The one thing you can count on is that we are far more likely to get there if we know where we are going and how we are supposed to get there. I refer to that as I65 North. I65 North is a reminder that the law firm business is a journey and the leadership’s job is to get all of the firm’s people traveling in the same direction.

Client Satisfaction Questionnaire

Admin — Thu, 12 May 2005 17:03:00 GMT

The attached client service questionnaire is a form that I particularly like. I have not copyrighted the attached document so you may reproduce it, modify it, and use it as you choose. I would encourage you to add, delete and modify individual questions as you feel appropriate for your firm. With that having been said, I think the four essay questions at the end are the most important—especially the questions "what do you like best and least?". Second, I would encourage you not to turn this document into a marketing tool. For example, don’t list practice areas and ask the client "if in addition to work we are doing now, do you have other needs in any of the listed practice areas?". The minute the client judges your questions to be marketing oriented, the survey loses creditability in their eyes. There is no need to.

The questionnaire will give you a reason to personally contact every client. It is that contact with the client that gives you the marketing opportunity:

· If a client indicates he/she would recommend the firm, you have the opportunity to call, thank the client and, of course, ask, "What else can we do for you?"

· If a client complains, you have the opportunity to call and make things right. While you are establishing your "accountability" and "customer concern", you are developing a relationship that is likely to lead to more business and can certainly turn a bad reference into a positive one.

· If the client doesn’t return the questionnaire, you have the opportunity to call and ask why? Then handle the call as appropriate for either a complaint or a reference.

Remember even complaints are good. They give you the opportunity to communicate with your client. Without communication, you cannot develop a relationship. Recurring business is built on relationships. People do business with people with whom they like doing business.

eBilling: Blessing or Curse?

Admin — Wed, 11 May 2005 17:16:16 GMT

Jay Hennessy passed along the following advice for morepartnerincome.com readers:

Electronic billing or “eBilling” is a fact of life. If you haven’t done so already, get used to it. It is not a matter of “if” or “how”, but of “when” and “how much”. Contrary to what you may have heard (or experienced), eBilling can be a blessing. By embracing it and learning how to operate successfully within the parameters, your firm can significantly enhance its position with some of your most important clients. On the other hand, if you resist the eBilling juggernaut, you might just get steamrolled.

Any law firm representing large corporations or insurance companies knows the drill. You receive notice from your client (for example, XYZ Company) that you must soon begin to submit your billing electronically. Along with, or shortly following receipt of the notice, you receive a document titled something like, “eBilling Guidelines for XYZ Company”, which includes instructions and rules for you to follow in submitting your bills to them. In most cases, the document also refers you to a third party that actually collects the bills for XYZ Company (we’ll call them eBilling Vendor) to obtain more detailed instructions on the actual mechanics of bill submission. The eBilling Vendor’s instructions say that you must submit your invoices in the “LEDES 2000 Standard”.

It’s time for a reality check. Often, problems occur through no fault of your own, but because of issues at the client, the eBilling Vendor or, quite often, in their communication with each other. It takes a while for them to shake out the new process. In the meantime, your firm is likely to suffer. To minimize the negative impact of this change on your firm, your staff needs to check and re-check to ensure the client and eBilling Vendor have your approval on a specific matter, or ensure that all of your timekeepers and their rates are set up correctly. Unfortunately, learning the ins and outs of eBilling for each client is an evolutionary process, but you can speed the process by understanding some important points. 1) Understand the client’s billing guidelines and follow them. This is often easier said than done, but with the right tools your chances of reducing adjustments and rejections and getting paid much faster are far greater. 2) Ensure that your staff is competently trained in the processes and understands the details of each client’s requirements and idiosyncrasies. 3) Working with the eBilling vendor, test, test and test before you have to submit your first bill.

Of course, if your billing system doesn’t support LEDES 2000, you have a serious problem on your hands. But supporting the standard is only the beginning. As you test your submission process, surprise surprise, you are likely to discover something they didn’t include in their instructions -- that “you will need a slightly modified LEDES 2000 format for XYZ Company”. Even if your billing vendor supports LEDES 2000, how will they respond to your need for a “slightly modified format”?

Because requirements for electronic billing are likely to come from your largest clients, you need to be prepared. Don’t be caught unable to meet your clients’ mandated requirements. You need to find out if your billing software will handle all of the LEDES standards and whether they accommodate modified LEDES formats and even completely unique "corporate-specific formats” at a reasonable cost. E-billing is not an option. Major clients will require it and you can take advantage of e-billing to speed up collections from all of your clients.

Jay is a Vice President at Juris, Inc. and wanted me to let you know all LEDES formats are built into the Juris system. Juris, Inc. also maintains a downloadable on-line library of modified LEDES formats and will develop new corporate-specific formats without charge. In addition to LEDES and unique formats, law firms can automatically e-mail Juris bills in PDF, rich text and other formats to all or selected clients.

As Jay explains it, “From the beginning of electronic billing, Juris, Inc. made the decision that its products should enable the law firms to meet their clients’ requirements without added cost.” That is an exception. If you don’t have Juris, you may be unable to meet your clients’ demands or alternatively you can expect to shell out some serious dollars every time a client of yours demands an electronic bill or changes their electronic bill format. Juris, Inc. is also in the process of rolling out a compliance capability that pre-audits your draft bills against the client’s rules and requirements thus eliminating the chance that your bills will be adjusted or rejected.

Policies & Procedures

Admin — Tue, 10 May 2005 17:32:51 GMT

Policies and procedures are ONE WAY STREETS that direct people to move in a particular direction. The planning process must include the question: what policies and procedures are hurting us and what new ones are needed to help us?

I’m reminded of the newlywed who decides to cook dinner for his new wife. First, he cuts the pot roast in half. His new bride is surprised and asks why? He replied, "That is the way my Mother always cooked a pot roast." A few days later, the son was visiting his mother and asked why. She explained, “Son, we didn’t have a pot big enough for a roast to fit without cutting it first.”

A leader’s job is to encourage the team to question policies and procedures that don’t make sense or don’t appear to be helping. The right policies and procedures can help, but the wrong ones hurt.

P. S. Notice how times have changed. I have the husband, not the newlywed bride, doing the cooking!

Working with the Law Firm Business Model to increase income

Admin — Sat, 19 Mar 2005 22:59:27 GMT

I began my career as a CPA with Price Waterhouse, so I can easily work with the Law Practice business model as traditionally expressed. I am, of course, referring to the formula developed by David Maister when at the HarvardBusinessSchool. It was first published in the July/August 1984 issue of the American Lawyer magazine.

Maister's formula is:

NIPP = (1 + L) x (BR) x (U) x (R) x (M), where,

NIPP = Average partner income

L = Leverage (ratio of associates to partners)

BR = the “blended” hourly billing rate

U = Utilization (client hours recorded)

R = Realization (revenues divided by “standard value” of time recorded)

M = Margin (partners' profits divided by revenues)

What I have discovered is that it is just about impossible to explain the model in classic terms to the people who most need it to steer the law firm to higher per partner profits. The model expresses the fundamentals to determine law firm profitability and it is a sound road map for effective day-to-day financial management of the firm.

What people do understand, and understand quickly, is the same model illustrated in more traditional financial statement form versus mathematical terms. Consider the model in those terms as illustrated below:

You can recreate the model for your firm (or for a single practice class) in much greater detail once you understand the model. The model will show you what happens when you change any of the factors that determine profitability. Try it. I put the above simplified model in an Excel spreadsheet that you can download here. Change any of the factors to see the effect on per partner income. For example, what happens if you make changes in how your fee earners track time worked that result in increasing utilization from 1831 to 1900? Most timekeepers do a poor job of accurately reconstructing their billable time at the end of day. Those interruptions regarding client business that occur throughout the day frequently fall through the cracks. Plug those cracks and see what happens to income. Likewise, change your blended rate and gage the impact. There is more than one way to increase your effective or blended rate. For example, you can increase your effective rate with a price increase, through better and timelier renegotiation of rates with existing clients, by changing your engagement letter to provide for minimum time increments - 15 minutes, 20 minutes, etc. When working with your model, don’t forget that the margin percent will increase when you make improvements that do not increase cost. Picking up an hour per week in extra billable time per timekeeper, because of improved accuracy, doesn’t increase cost. That means the increased revenue drops directly to the bottom line, increasing the margin percent.

Learn to manage your firm by focusing on the indicators that will lead you to higher partner income.

Concentrate on what matters for Better Cash Flow

Admin — Wed, 16 Mar 2005 23:53:53 GMT

Every firm would like to improve cash flow.

One simple approach to getting better results is to implement a system that helps focus resources on the areas that can have the most impact on results. This doesn’t mean necessarily the “worst” performers (i.e. slowest billing attorney, slowest paying client or vendor with the worst terms). Instead, you should segment these groups into categories based on their materiality or impact on the firm’s cash flow. Usually, it’s fine to establish 3 groups – groups A, B and C. Once done, you put your time and effort into the A group, with less time and effort on B, and maybe little or none on group C.

Let’s say you have 20 billing partners. You intuitively know some of the billing attorneys are better than others about getting their bills out quickly, but you never really have ranked them based on the total dollars that each bills. So, you decide to focus your efforts to reduce WIP by finding out which attorneys need the most improvement. Using billing system data, you rank each attorney by average monthly fees billed AND by average days to bill and split them into three groups:

Group A — >10% of the firm’s fees

Group B — 5% to 10% of the firm’s fees

Group C — < 5% of the firm’s fees

You, then, decide you want Group A billers to get bills out in 20 days or less, Group B 30 days or less and, Group C, you won’t worry about pestering unless they are 60 days late on billing.

Then rank each attorney for groups A, B and C by how quickly they typically bill. Group A might look like this:

Attorney 1 — 17% of annual fees and 45 days average days to bill

Attorney 2 — 12% of annual fees and 15 days average days to bill

Attorney 3 — 11% of annual fees and 28 days average days to bill

For Group B, you only have 1 attorney who takes more than 30 days, and she bills 7% of the firm's annual revenues, and in Group C, no attorney failed to meet the requirement.

Based on your criteria, you can now focus your efforts on 3 attorneys who manage 35% of the firm’s billings. Develop an action plan to get these 3 individuals billing in 10 to 15 days and think of the huge improvement on cash flow!

For collections, simply apply the same sort of process by grouping your clients into A, B, C groups based on their percentage of fees for the firm. Then further segment these groups, based on 6 months to 12 months payment history, into “always on time 30 days or less average days to pay", “mostly on time or 45 days or less average days to pay", and “always late 60 days or less average days to pay".

By doing this segmentation, you could focus your collection efforts on a small percentage of clients which will have a big impact on collections. For your “A” group, you could formulate a completely different communication process to make sure bills are paid on a more timely basis.

You can use A, B, C type segmentation to manage just about anything for better results. The bottom line is to measure performance, focus on the things that have the most impact on the element of performance being measured, and then put 100% effort and thought into improving performance for the more focused group.