2007 Resolutions for Law Firms

Author: Simon Taylor - Lexpert (January 2007 at p. 115)

If you are in the mood for New Year’s Resolutions, try on some of the following for size. They are at the progressive edge of law firm management thinking.

1. Workflow Allocation

Many firms in Western Canada are busier than they have been for years. Partners in these firms are earning more than they believed possible. There is little impetus for change from the top.

The new generation of lawyers entering the private practice of law, however, has a different mind set, and different priorities than many of the partners in their firms. Mobility is an accepted way to life and 2000 hours per year of grunt work is becoming increasingly unacceptable.

Firms which proactively manage associate career development will gain a competitive edge over those firms that do not. They will retain more of their current crop of associates, finding it easier to recruit in all strata of the market.

Associate career development requires a systematic, planned approach, common in many other sectors, but still relatively rare in private practice. Firms that talk to clients who have already gone down this track will obtain value from this exercise quicker that firms that go it alone.

2. Executing practice group business plans

Many firms are on their third or fourth planning cycle in 10 years. Most have learned lessons on the way. Failure to implement decisions, however, is still endemic to law firms. Practical, imaginative business plans languish because partners are just too busy working on their files. Compensation systems are also frequently out of alignment with the stated desire to be more team oriented. Many practice group leaders find it difficult to achieve the balance between time spent practising law and time spent managing the practice group.

Successful implementation of decisions, however, is essential if the firm is to meet the challenges of the future. Business planning for a professional firm is not an academic exercise; its value only materializes on execution.

If a firm carries out only one resolution this New Year, make it this; to implement the goals and strategies already agreed upon. Do whatever is necessary to achieve this; accept whatever external assistance is required.

Resolutions tend to be easy to make and difficult to achieve. Implementation is no different in this respect to resolving to get fit or learn a foreign language. Get it right, however, and the results flow straight on to your bottom line. That, surely, makes implementation worth the effort.

3. Reducing paper-based systems

Very few law firms have succeeded in significantly reducing their dependency on paper-based systems. Despite all the accessible technologies, many firms give the appearance of increasing the volume of paper used. The cost of maintaining the traditional, paper-based business model increases.

Other industries, however, such as banking and airlines, have successfully reduced paper dependency in selected areas of their operations.

Firms should talk to their clients about their solutions, and work with them to introduce fundamental changes to the firm’s work-flow practices.

4. Stripping out costs from the law firm business model

Law firms today tend to have effective financial management. However, the cost of running the traditional law firm business model increases steadily year by year. To maintain profit levels, some firms in major metropolitan areas find they need to charge out newly called associates at rates ranging from $200 to $250 per hour.

Business clients, however, are more determined than ever to find value for the cost of legal services. There is no let up in the client-driven impetus to justify expense in terms of value received.

Given the above, the traditional law firm business model is struggling in all but the most robust markets. Those firms that succeed in stripping out 30-50% of their cost base, and that share a proportion of those savings with their main clients, will thrive at the expense of those firms which cannot or will not make the changes.

Outsourcing, workflow allocation, compensation systems and following through on SMART business plans all form part of the equation. Innovative firms are already talking to selected clients on how to support such initiatives in their service offerings.

Conclusion

We live in a changing world. Firms which fail to recognize this, and as a result fail to adapt their service offerings to take account of changing circumstances, are unlikely to succeed. More nimble firms, clearly in tune with their clients’ way of thinking, will take market share at the expense of the less nimble.

Likewise, firms that fail to recognize the career aspirations of their young associates will lose too many of them to firms that do.

And yet to change the way a firm organizes itself is enormously time consuming and requires law firm management teams to expend valuable political capital in order to get the necessary changes through the partnership. One way of reducing both is to talk to selected clients who have already travelled down the path. A client-driven initiative to reorganize workflow allocation (for example) is less threatening, and stands a better chance of succeeding than an internal concept developed and promoted without reference to the firms’ clients.