How top law firms are transforming their operations by thinking beyond financial reporting
During my recent visit to Denver for the 2018 Aderant Momentum conference, I noticed a common theme as I interacted with attendees at the conference: Many law firm leaders are currently questioning the effectiveness of their financial reporting systems.
This is not the first time we have observed the legal industry seeking out more robust technology systems to streamline their operations — especially considering the flood of legal technology solutions that have entered the market in recent years. In March, an informal poll of law departments at the Consero Legal Operations Forum (where HBR was also in attendance) found 65 percent of participants considered legal spend analytics important, ranking it second among 21 topics presented in the survey. This means it is critical for law firms to keep pace with their potential clients by implementing new technology solutions. In doing so, law firms set themselves up to be far more efficient, organized and better prepared to quickly respond to client requests.
The desire for better, more efficient reporting can and should go well beyond the finance department and the firm’s profit and loss (P&L) metrics. The use of data and analytics software in law firms has evolved so that leaders in nearly every department — human resources, information technology, procurement and other essential business functions — can get quick, interactive insights into their operations. Meeting client demands and answering urgent questions is also top of mind for firms considering new reporting systems. From clients asking about a law firm’s roster of diverse vendors to expecting increased transparency when it comes to the risk firms’ suppliers pose, it is essential to have answers as accessible as possible.
During our session at Momentum, I broke down everyday reporting challenges faced by law firms, as well as how modern analytics dashboards can be a game changer for both the profitability and operational efficiency of the firm.
To distinguish between firms with and without a modern reporting and analytics solution, I presented case studies of how recurring reporting requests play out in law firms. I presented the situations as “cool” and “not cool” when it comes to reporting processes.
Case study #1: Closing the books
It is the end of the month and like clockwork, the executive director of a firm asks the chief financial officer (CFO) if the books have been closed for the last month. She also wants to see the P&L statements for the firm. This regular request plays out quite differently for CFOs in legacy vs. innovative firms.
- Not cool: The CFO spends time looking through disparate systems searching for P&Ls from each department. In some cases, she has to request information from individual department leaders. Once the CFO gathers the information she needs, she sends an email with eight different PDF attachments to the executive director. She then prints copies and leaves them in the executive director’s office.
- Cool: With a few clicks, the CFO brings up a holistic view of the entire firm’s P&Ls for the month within a dashboard. She copies a link to an interactive dashboard and sends it via email, where she tells the executive director that each department’s individual P&L data can be filtered. She spends the time she saves on forecasting spend by department over the next two years.
Case study #2: Tracking diverse vendors
A high-value prospective client issues a new request for proposal (RFP) and one of the questions asks about the firm’s diversity initiatives, including how many third-party vendors are minority or women owned.
- Not cool: Procurement and other departments comb through their current outstanding vendor contracts, using Google to gather information on leadership to compile a spreadsheet containing the ones they think are diverse vendors. Meanwhile, law firm leadership asks why diversity initiatives are not currently in place.
- Cool: With a diversity program that already has concrete goals in place, the team in charge of the initiative produces a report that shows exactly how many vendors are diverse, and how much is spent each month on their services. The firm responds to the RFP with hard data presented visually, showing its commitment to diverse vendors and how their current spend on these services is tracking against the diversity program’s goals.
Case study #3: Continuity through leadership change
A law firm’s partner in charge of tracking leases across the firm’s various offices is retiring, and leadership wants to ensure a smooth transition. Leadership requests copies of the leases so they can house them in a central location for the new partner slated to take over this responsibility.
- Not cool: After a lot of digging, one of the associates that reports to the partner finds a decades-old binder with physical copies of most of the leases. The associate then contacts the property managers at four offices with missing leases, and receives them by fax.
- Cool: The associate pulls up a dashboard that shows each office property and a digital copy of each lease. The dashboard also layers in the headcount for each office and provides other relevant data about the locations. In minutes, the associate gives the new partner access to the system. The time saved allows the associate to review the cases he will be taking over during the transition to a new partner.