Innovation in the legal industry has been the reality for most professional services’ firms for decades. Law firms that want to be successful in the future need to apply the business practices of the best-run professional services firms, and drive innovation within the industry.
In a world of new legal business models, decreasing client loyalty, increased competition and ‘new’ price models, firms need a more structured and holistic approach to how to manage a legal business. There are some key areas of change that need to be addressed: improving business performance management, streamlining operations, optimizing compliance processes and winning new business.
Some types of engagements within a law firm are difficult to forecast and plan in an accurate manner. But you can realize substantial business benefits from proactive planning of existing and prospective client engagements and thus optimize both short-term resource planning and long-term capacity planning within your firm. Having the right person (rather than the best person) on the right assignment also maximizes the revenue and profitability of clients and matters, and ensures that your best people are utilized as effectively as possible. Consulting firms have applied proactive resource planning for decades.
Performance dashboards are nice to look at, but even though they are visually appealing, they can be useless unless they’re presenting useful data. But implementing proactive, transparent and holistic performance management is easier said than done. It requires strong data management including:
- Defining your key performance indicators;
- Setting up proactive alert systems;
- Aligning the way you measure your past and present with how you predict the future; and
- Implementing an agile, multidimensional business model, vertically and horizontally across your organization.
The key thing to understand is how to provide decision makers on all levels with accurate role based, real-time business intelligence that helps them address both short and long term business challenges. It is crucial to implement consistent and successful business development processes, target both prospective and existing clients, and explore your cross selling opportunities.
FINANCIAL CONTROL: WATCHING THE PENNIES
The most efficient firms are not efficient because they run a tight ship – they are efficient because they are relentless in their efforts to keep track of where and how they spend money. A flexible and multi-dimensional financial model, combined with activity-based costing, gives you financial transparency on every level of your firm, as well as real-time profitability on your clients and engagements. Financial control tells you exactly where you are and thus helps you plan and navigate forward.
Traditionally, what lawyers have perceived as good relationship management has prevailed over good business practice and cash management. But cash flow should be on everyone’s mind. Your firm needs well-defined and efficient processes for near real- time capture of time and expenses, fast and accurate billing and effective cash collection. Plus, the people negotiating client contracts need to understand that granting favorable billing models or payment terms is just as much a discount as decreasing rates.
If you are still used to billing on a time and material basis, you have likely found that your current business practices would not easily or fully support engagement structures such as fixed-fees, value-based, success-based, or incentive-based pricing. This is a huge issue in the legal industry, because legal is now in a minority of businesses that rely on those revenue models. Law firms must embrace a market-enforced change.
If your firm has already changed the way it measures and bills, you will be probably executing more efficiently, estimating and delivering more accurately, and are beginning to invent and sell new fixed price offerings. You will already be able to beat the competition in new ways.
If your firm can approach every area from a process-led perspective, the ‘new normal’ may be the best thing that ever happened to it.
Sheriasoft is a tech company specializing in the development of dynamic internet solutions for lawyers. For a consult, call +254 723 961 272 or click here
Categories: Legal, IT, Telecommunication