Blaqwell is a pre-eminent consultancy that advises top law firms on high-level issues, such as strategy, mergers & acquisitions, compensation systems, performance measurement and lateral hiring strategies.
KM/JD Consulting advises leaders of Am Law 200 firms how to improve practice group productivity and achieve real follow-through from lawyers on internal initiatives.
This is a three-part post. Part 1 described what we mean by productivity in the law firm context, why improving productivity is essential for most firms' survival and the importance of metrics for productivity improvements. Part 2 below provides four examples of easy yet very effective productivity improvements that a law firm may consider. Part 3 will provide 20 additional examples in the areas of revenue/profit management, service delivery changes, people management, knowledge management, process management, and technology solutions.
The Management Committee is ready to hear about actions
Having learned at their last meeting why law firms must improve productivity to avoid falling behind, the Management Committee of an Am Law 100 firm with 600 lawyers and over a dozen offices across the United States is meeting to discuss specific actions the firm can take to improve productivity. At the consultant's suggestion, Keith Mayfield, the firm's chairman, has asked the Committee members to bring their ideas for productivity improvement to the meeting.
“I've been thinking we should generate lots more standard forms,” begins Samantha, the chair of the Corporate Department.
“I was expecting that,” replies Keith Mayfield, the firm's chairman. “I think our consultant's going to tell us there's a better way using annotated checklists.”
“I hope we're going to hear about the litigation side, too,” quips Jerry, the Litigation Department chair.
“Not to worry,” responds Keith. “Everything we're going to learn about can apply to all our practice areas. But first, let's finish hearing from this Committee what you think we should consider.”
Measure matter profitability
“With all this talk about making the firm more profitable, what if we had a way to figure out the profitability of individual matters, and then tried to manage our work to emphasize the more profitable matters and analyze the reasons for the others being less profitable?” asked Josh, a real estate partner who is the youngest member of the Committee.
“Add that to the list!” responds the firm's chairman with enthusiasm. “We can flesh out the details after we finish our list.”
Moneyball for lawyers
“Before we go further, though, I want to introduce the newest member of our Finance Department,” adds the chairman. “Tamara has an MBA and management consulting experience. She'll tell you how she's going to help us.”
“Let's think of what I do as something like Moneyball for lawyers,” says Tamara with polite confidence. “We use data and analysis to figure out what we're doing well and not well, and to measure the results of our fixes. We can also do cost-benefit analyses on various ideas to decide which ones will give us the most bang for the buck.”
“Can you give us an example?” asks Jerry, the Litigation Dept. chair, trying to hide the fact that he doesn't see what data analytics has to do with practicing law.
“Josh's idea about measuring matter profitability is right up our alley,” explains Tamara. “We work out a profitability computation at the matter level and run it against last year's matters. Then we develop averages for each practice area and even matter type, ranking practice areas and matter types by profitability. That data alone will tell us a lot about where we're making the most and least profits. By the way, we compute profitability in a way that avoids overhead allocations. Those can distort results and also create distrust of the calculation.”
“Drilling down on the reasons for differing levels of profitability may further inform us whether it's the nature of the work itself or the way we're staffing or managing it,” she continues. “Either way, we can make changes. We may even see that different partners manage similar matters to different results. By investigating those cases we can learn even more about how best to manage matters.”
Developing a productivity metric
Tamara also explains that her group can propose a productivity metric that operates at any granular level – practice group, sub-group, client service team, matter type and even individual matter and partner.
“We can use this metric to monitor the success of our various initiatives, and to hold people accountable,” Tamara suggests.
Chairman Keith adds, “I believe in the old adage that if we don't measure it, we can't manage it.”
“Keith, are we going to start using this productivity metric in our compensation system?” worries Jerry, the Litigation Dept. chair.
“Let's not get ahead of ourselves,” reassures the chairman. “First, we need to gain experience with the metric to see if it works. Then, after we decide on some initiatives, we can use it as a management and accountability tool to measure progress. We may or may not ever push further to use it as a formal compensation metric. Before we did something like that, we'd also all have to have plenty of experience with the metric and buy-in by our partners for its validity.”
During the ensuing discussion, the Committee throws out quite a few ideas. Tamara from Finance suggests a way to find the low hanging fruit – the ideas that will have the greatest impact and be the least difficult to implement. This requires thinking about both potential benefits and the ease of implementing. Analytics and modeling can help quantify the benefits side. For ease of implementing, a useful proxy is the number of lawyers required to make the idea work, translated to a 1-to-5 scale.
For example, matter profitability can be measured without any lawyers and analyzed with the help of only a few. Implementing a program to manage matter profitability does require lawyers on each matter to change behavior in response to the profitability analysis for the lawyer's matters, but failure of one group to act won't hold up progress by another group. This initiative has high benefit, a 5, and easiest implementation, also a 5. With a total score of 10, the idea ranks at the top of the list.
On the other hand, creating a database of information about each matter sufficient to identify similar matters for fee benchmarking, staffing and other purposes requires lawyers to collect that information at the end of every matter. Lawyer foot-dragging on data collection will prevent the entire database from being useful. Unlike the prior example, delay by a few will delay the whole. That kind of project has very low ease of implementation – likely a 1 – although it probably also has high value – let's assign 5. Its total score of 6 justifies proceeding after the easier high value initiatives have been accomplished. Ideas scoring 4 or lower are probably not worth pursuing.
More low hanging fruit
The consultant concurs in Tamara's suggestion about how to prioritize. He proposes three other initiatives for the list that are low hanging fruit. These would be added to Josh's idea of emphasizing the more profitable matters.
Offer temporary discounts to achieve full employment
When a firm has less than 100% utilization – in other words, some lawyers are not fully occupied with client work – the firm can increase revenue without increasing costs by winning work for the unoccupied lawyers at discounted rates – even heavily discounted rates. Successful firms have found ways to offer discounts on a temporary basis without undermining existing client fee arrangements.
When properly managed, this approach can produce powerful improvements to PPEP. It can readily be implemented because it does not require much lawyer input. Identifying available capacity and matters suitable for temporary discounts can be accomplished by practice group leaders. Possible discount levels can be proposed by Tamara's team in Finance.
Communicate better with clients
Instituting a formal process to update clients at regular intervals can reduce write-offs and improve client relationships. For example, by outlining for the client proposed work before it is done, the firm can clarify whether the client in fact wants the work – such as substantial research vs. initial thoughts by a firm expert.
An effective communications tool is a grid that lists names in 4 categories for each step or development in a matter –
- who is responsible for performing it,
- who is ultimately accountable and has final approval authority,
- who should be consulted for input (two-way discussion), and
- who should be informed along the way (one-way discussion).
In some transactional practices this is called a roles and responsibilities chart. The chart can be limited to personnel at the client and the law firm, or can extend to all parties working on a matter.
Organizing communications in this manner can avoid
- duplicative work for which the firm may not get paid,
- work the client does not want (and won't pay for),
- work that is overlooked and leads to an inefficient scramble, and
- work performed contrary to the client's wishes that must be re-done.
A practice group-specific template for the communications program can be prepared by a partner-associate team and immediately used by all lawyers in the group. Progress for the group will not be blocked by the obstinacy of a few.
Expand the use of checklists and playbooks
The consultant explains that checklists and playbooks can be powerful drivers of productivity. Checklists can outline the contents of a type of document. Playbooks can cover steps in a process. Either type can operate at the big picture or the granular level. They allow junior lawyers to take on more work of senior lawyers, with less senior time spent on oversight. This improves leverage, a direct driver of productivity and profitability.
“Aren't checklists more suitable for airline pilots than lawyers?” asks Jerry, the skeptical litigation department chair. “What can you fit on one page that would be useful?”
The consultant elaborates that law firm checklists and playbooks are much more detailed than one page. For example, a checklist for a merger agreement would not only list all the relevant types of provisions, but also include an explanation of the purpose of each provision, how it should work, issues that arise and links to example provisions in actual agreements.
“My prior firm used checklists for lots of situations,” adds Josh, the young real estate partner. “I was on the firm's checklists oversight committee. In commercial real estate we had a checklist for the content of real estate development agreements, and another for joint venture issues.”
“Do you remember what you had for litigation?” asks Jerry, now getting interested.
“We had lots of litigation checklists,” replies Josh. “I remember we had a very detailed checklist on potential commercial causes of action, with summaries of the elements of each cause of action, the statute of limitation and typical situations in which each could arise.”
“Of course, we also had a playbook for the steps to follow immediately when new litigation arose or was threatened, such as the detailed steps for a litigation hold and how to notify insurance carriers,“ continues Josh. “We had a playbook on how to create a discovery plan. We even had a checklist of factors in evaluating the need for public disclosure of litigation.”
“Aren't standard forms even better?” asks Samantha, echoing her suggestion from the start of the meeting.
“Standard forms are like the Roach Motel,” jokes the consultant. “The drafts go in for partner review and never come out. They also never get updated, which is a quality risk.”
“Checklists can ultimately contain all the content of standard forms and more,” continues the consultant. “But even the first draft of a checklist can be useful. Successive revisions can elaborate on various points. Multiple users can contribute improvements piecemeal as they use the checklists. Because it's not prescriptive, a checklist can be created or updated by a single partner-associate team, which gets them into the field quickly. Checklists are also more versatile than forms. They can be used to guide the review of documents drafted by third parties, and can assist senior lawyers in identifying provisions that may be missing from a document.”
For more on checklists and playbooks, see our prior posts, What good is a checklist in a law firm? and How checklists for legal opinions can improve quality and reduce costs.
The role of technology
“I haven't heard anything about technology,” complains Samantha, the corporate head, after the consultant concludes his description of the low hanging fruit. “Aren't tech and artificial intelligence going to revolutionize the practice of law?”
The consultant explains that there are two types of technological innovations for law, and neither represents a quick fix, which is the subject of today's discussion. First, technology can automate and make more efficient an existing process. Second, technology can bring new capabilities. Sometimes it brings both.
Both types of technology require surveying available products and their costs (which can be substantial), analysis of costs vs. benefits, setting up and configuring, piloting and assessing, internal promotion, and training of affected lawyers. These efforts can be substantial, although so can the rewards when it is done right. Technology improvements are best left for our next discussion on the broader list of possible productivity improvements.
The Management Committee is ready to take action
After discussing low hanging fruit and the merits of business analytics, the Management Committee's puzzlement has changed to energy.
“We should initiate all four of the low hanging fruit ideas,” proposes Samantha, the corporate dept. head.
“What if we pilot each one in a different practice group?” suggests Keith, the chairman. “And by applying a productivity metric to measure success, we'll have a story that's easier to sell to the other practice groups.”
Management Committee members responsible for four practice groups quickly agree to start the pilots. Tamara in the business analytics group will devise and monitor a productivity metric for use in all the pilots, as well as the profitability calculation to be used in analyzing matters.
“At our next meeting, we'll discuss lots of other ideas for improving productivity, moving beyond these really easy ones,” concludes Keith.
The Management Committee decided to pursue four easy yet effective productivity improvements:
- Analyze profitability of matters and emphasize those that are most profitable, including researching whether profitability is inherent in the nature of the work or is driven by the way the matter is managed and applying best practices discovered in that research to other matters;
- Offer temporary discounts to put excess capacity to work;
- Communicate better with clients across four categories – who is responsible for performing the work, who is accountable and has final decision authority for it, who must be consulted, and who must merely be informed; and
- Expand the use of detailed checklists and playbooks.
The Committee also heard that in all these situations, the firm should develop a productivity metric to gauge progress and hold people accountable. Business analytics should also be applied where appropriate, such as developing a profitability measure at the matter level.
At their next meeting, the Committee will hear about many other types of productivity improvements.