The six habits of the best run law firms
Only the dead fish follow the stream
”The new ERP solution should enable our firm to:
Identify opportunities and win engagements with both new and existing clients;
Improve our talent, resource and capacity management in order to optimise the utilisation, development and satisfaction of our people;
Plan, manage, bill and follow-up our engagements more efficiently and effectively;
Integrate our document management solution, with our business management solution, and thereby improving our knowledge management processes, as well as our order to cash processes;
Implement more efficient back and front office processes in order to optimise cash flow, and free up resources for real value- adding work;
- Provide decision-makers on all levels in our organisation with role-based real time business intelligence."
One could easily imagine that the quote above was taken from the ERP Project Charter of one of the global Management Consulting Firms, organisations well known for their relentless focus on realising business benefits based on more efficient business processes, and building structure capital using best-in-class enterprise software technology. The quote is however a blend of Critical Success Factor statements copied from recent ERP Project Charters from three different leading law firms. These firms are acting proactively to address the “New Normal” in the Legal Services industry, and will most likely be better equipped than less proactive industry peers to compete for the best talent, the most profitable clients and the most attractive engagements.
Adjusting to the new normal
Five to10 years ago you would not hear of many law firms appointing CMOs and implementing Enterprise CRM technology. The common perception was that business was won and clients were retained using good old-fashioned methods. As long as the clients were happy, pricing, billing and profitability were not issues. In a similar fashion, you would not see many law firms appointing CEOs from outside the Legal industry, or giving their other C-level Officers (e.g. their CFO and CIO) the trust and authority they would typically enjoy in other professional services verticals. The New Normal has changed all that. Law firms were used to competing fiercely for the best and brightest local talent, but to protect market share and profitability today and tomorrow they need to compete just as fiercely in all areas and aspects of their business. Market consolidation, Alternative Business Structures (ABS), as well as globalised competition, commoditisation of legal services and a transition to fixed fee engagements in general is changing the game. Inefficiencies and lack of business intelligence are no longer good enough. Law Firms have realised that they need to run their business using similar business models, applying the same best practices, implementing similar streamlined processes, and best-in-class enterprise technology as other Professional Services Organisations (PSOs).
The six habits of excellence
Deltek’s long experience as a strategic partner to PSOs, and law firms in particular, has helped us identify six “habits” that both the best run PSOs, and law firms, have institutionalised in their business culture.
1. Strategy without execution is hallucination
Good Business Leaders love to strategise. A well-planned Executive off-site meeting, in a really nice setting is great for fostering creative discussions, and could more often than not result in some really inspired strategic thinking. The next step is to implement the strategies, perhaps by compiling a couple of Powerpoint slides, which are communicated in an all- hands meeting. Done deal, right? Excellent Business Leaders love to execute. They know that execution is key, and that execution is also the most difficult part of running a business. Implementing a strategy takes dedication, consistency, focus, hard work, and a holistic approach to setting the goals, coaching the players, and keeping score.
2. Sing when you’re winning
Few firms have the luxury of thriving on retained business and walk-in business alone. Identifying and winning new business opportunities is more important, and at the same time harder than ever before. Implementing consistent, and successful business development processes, targeting both prospective and existing clients is crucial. Good Business Leaders win great business opportunities and hit their sales targets more often than not. Excellent Business Leaders win great business, excel in managing their pipeline, and not only hit their sales targets; they also nail their forecasts!
3. In Warren Buffet we trust - all others pay cash.
Good business leaders plan, monitor and follow-up their P&L Statement. Excellent business leaders put just as much focus on their cash flow and balance sheet. In order to implement world-class processes and business practices, you need to get your people to truly understand the importance of a strong consistent cash flow, and a tight control of your WIP (PSOs are typically in the “Fish” industry rather than the “Wine” industry from a WIP perspective...). Better processes, better policies, and better systems will help you decrease Order to Cash, DSO and Debtor Provisions.
4. Luck is what happens when preparation meets opportunity
Good Business Leaders follow-up on key metrics such as utilisation, realisation, yield and average billing rates of their staff. Excellent Business Leaders implement proactive planning of existing and prospective client engagements in order to optimise both the short-term resource planning, and the long-term capacity planning within their organisation. Not only does this maximise the revenue and profitability of clients and matters (as you ensure you have the right staffing on all engagements), it also helps your organisation know when to hire or refocus talent.
5. Change is cool
It is a popular belief that no one likes change. If you’re used to billing your engagements on a Time & Materials (T&M) basis, other price models such as Fixed Fees, Value-based, Success-based or Incentive-based pricing, T&M with Cap etc. do not really seem very simple and straightforward. Estimating your work, accepting calculated business risks, billing according to approved milestones or set dates, this all seem quite difficult and tedious, right? Good Business Leaders react to change, sometimes reluctantly. Excellent Business Leaders see that change could create new opportunities, and seek to address change in a proactive way. When an existing industry paradigm is disrupted; creative and agile people will embrace the new opportunities in that market. If your organisation can; execute more efficiently, estimate and follow-up more accurately, and invent and sell new fixed price offerings – you will be able to beat the competition in totally new ways.
6. Information Is not knowledge
Today’s PSOs possess vast information repositories. Information is stored in numerous different places within the organisation: physical archives with folders and binders, notepads, individual laptops and mobile devices, document management systems, email servers, intranet sites, and various enterprise software solutions (ERP, CRM, HR/ Payroll etc.). The issue is however that the information is often not accessible to the people who need it in a timely manner. It may lack relevant context, it may exist in many different versions and is never consolidated, it is mostly historical and can’t be used to predict future events, and it is typically scattered in all the various “information silos” described above. Good Business Leaders implement traditional financial reporting solutions and knowledge management initiatives in order to collect and structure information and try to convert it into usable knowledge. Excellent Business Leaders take a holistic approach to knowledge management and business intelligence by implementing processes and systems for social collaboration, master data management, enterprise search across data sources, proactive alert systems, and role-based real time business intelligence tailored for the requirements of decision makers on all levels of the organisation.
A brave new world
Depending on how you approach it, the “New Normal” could be the best thing or the worst thing that have ever happened to you and your firm. Things will never be the same again, but Industry specialists such as Deltek can help you realise measurable business benefits based on enterprise software technology – fully integrated solutions that are purpose-built to address the key success factors of Professional Services Organisations.
A recent ROI analysis study conducted by Nucleus Research showed that:
• Ease of use combined with strong industry-specific solution capabilities enables Deltek’s clients to significantly increase general employee, accounting staff, and manager productivity.
• Deltek’s clients are able to grow organically or by acquisition without making a corresponding increase in accounting and IT staff.
• Role-based analytics capabilities and dashboards helps Deltek’s clients significantly improve visibility and business insight.
• Purpose-built and automated support for business processes helps Deltek’s client significantly streamline financial management processes and accelerate billing.
• Industry-specific functionality and Business Intelligence capabilities help Deltek’s clients significantly avoid both initial and on-going IT costs.
New technology is not the only answer, but failing to investigate the potential benefits of new technology is business malpractice.