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Law Firm Profitability: People, Process & Technology

Posted by Carly Wilson on Thu, Apr 04, 2019

Law Firm Profitability: People, Process & Technology

by Carly Wilson / April 4, 2019

The BigSquare team spent a few days in Chicago at the end of March as a sponsor at the ARK Group's Profitability Conference. It was a great event with many educational sessions and networking opportunities. This is the second year we sponsored and attended and are headed back to the windy city again at the end of this month to sponsor their BI event.

While the conference was about the entire profitability cycle: people, process, and technology, the biggest of those three that was discussed during the sessions and panel discussions was people. We heard many times the importance of remembering that law firms are made up of people and you need communication to foster good trusting relationships as the basis for a successful firm.

Building a Profit Culture

legal profitabilityDuring the first session of the day, the key note address, we heard from Tim Corcoran. He touched on the topic of building a profit culture in your firm. Everything starts with the lawyers. First thing you need to do is motivate the lawyers to work efficiently to not only help their clients but all clients throughout the firm.  What you must decide is what type of culture you want. If you want a profit culture, pay and motivate your lawyers for a profit culture, because if you are paying for a productivity culture that’s what you’ll get. It’s the responsibility of management to align what’s good for the partner with what’s good for the partnership.

So often we hear that the lawyers are resistant to change… its not that. It's that management can not convince them the better path. Tim reviewed five stages of adoption to help build a profit culture: Measure, Monitor, Manage, Master, Motivate. Pulling from his very well put together presentation here's a short overview of those 5 points:

Measure
  • Have framework
  • Elements & measurement in development
  • Firm-wide consensus in progress and/or achieved
Monitor
  • Profit frameworks embedded in financial systems
  • Targeted education
  • Selective profit metrics accessible and shared with partners
Manage
  • Analyze underlying drivers of profit
  • Educate partners to improve actions
  • Timekeeper best practices training
  • Sporadic communication
Master
  • Proactively address improvement opportunities
  • Take action on specific partners/clients
  • Calculate margins for AFA quotes
  • Intense communication
Motivate
  • Incorporate data and matter profits in partner compensation
  • Actively remove clients with low profitability
  • Devise long-term strategy with profit targets

Law firm profitability

To sum it all up Tim provided a compensation rule, "It's the responsibility of management to align what's good for the partner with what's good for the partnership." No model is going to be perfect in all scenarios, but finding what gives us the best model to drive efficiency and effectiveness is key. Management has to keep in mind that different contributions from different partners matter. You ultimately want people to be successful in different areas to help make a well rounded and successful law firm.

 

 

The other speakers were all fantastic. They touched on various profitability topics, had very interesting panel discussions, and shared case studies. As a sponsor our team enjoys the professional atmosphere that allows for education and networking opportunities with so many great legal professionals throughout the legal industry. The networking breaks gives us time to catch up with old clients and friends and make new connections as well.

The conference topics highlighted the changing scope of legal profit. The sessions examined what law firm profitability truly entails, as well as addressed the continued evolution and how firms are marshaling their resources to provide the necessary framework, metrics and leadership to manage the business of law more strategically, and profitably.

Law firm profitability is such a hot topic right now. For this reason, we focus on many profitability insights on the BigSquare blog in addition to legal BI, law firm analytics, and law firm reporting. Profitability modeling varies firm to firm in approach and methodology, it's not a one-size-fits all solution. There are many ways to define profitability, while we can't specifically say one is perfect, there are best practices to help guide firms in the right direction to come to a conclusion that works best for them.

Technology without adoption is a hobby

BigSquare is the leading provider of Business Intelligence for law firms and professional service organizations.  We focus exclusively on law firm reporting, law firm BI, law firm profitability and law firm analytics.

 

Key Profitability Metrics for Law Firms Cheat Sheet

 

Tags: Law Firm Profitibility Key Profitibility Metrics Profit Drivers

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