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 LAW FIRM PERFORMANCE – Where to find the edgeNovember 2006 The lament of many law firm partners and managers is that their solicitors aren’t meeting budget. In most firms this analysis of underperformance is entirely quantitatively based – ie, hours, billings, write-offs, collections or any other measure do not meet or better the solicitor’s individual, firm-determined targets. Of course this lament is entirely reasonable. Owners and managers of any successful law firm do the maths on what is required to generate profit. Their effort is concentrated on ensuring each solicitor bills and collects a certain amount of fees. In an increasingly competitive legal market, the differentiator between the firms that will thrive and those that will flop is how this performance is managed. A proactive approach to managing your firm The most innovative and proactive approach to managing the performance of lawyers, practice groups or individual matters is through Business Intelligence (BI). In a nutshell, BI is a research process that enables law firms (or any business) to increase its competitive advantage by intelligently using available data in decision-making. For years, law firms have had the tools, systems and processes in place to gather and analyse internal intelligence. Using a report writer built into their practice management system (PMS) they regularly generate a series of pre-designed reports. Today, this level of analysis is not sufficient to support the operational and strategic decisions partners and managers need to make on a daily basis. BI differs from standard financial management reports in the following ways: 1. Ad hoc vs Structured Reporting BI enables users to easily select the exact data needed, in the exact format users want to see it. Almost every data element in your system is searchable. Ad hoc reports can be saved in a library or modified as needed. Law firm specific BI modules enable users to create and modify reports in seconds. The design and nature of reports generated through the PMS are hard coded into the system. Changes to reports require expensive custom programming which limits user’s options. 2. Warehouse with Cubes vs Database Tables BI methodology uses a data warehouse that draws information from the PMS; the payroll system; excel worksheets and any other source. Data cubes are then created to provide whatever information is required. For the non technically minded the process can be thought of as being a little like a Rubik Cube – selections of different inputs can be presented in the one document. The database tables of a firm PMS limits flexibility in report generation. 3. BI Options vs Report Formats With BI a user can select the report output design for any analysis – eg an Excel spreadsheet. Other options include a ‘dashboard’ option as the hub for making the power of BI accessible to front line lawyers where they can monitor the performance of their matters, their team or the firm across a number of different KPI’s. Again the lack of flexibility of the output from a PMS is a limiting factor. Adoption of Business Intelligence The use of BI as a law firm management tool is well advanced in the United States. In the competitive US market, BI is being utilised and acknowledged as one of the most valuable management tools in law firm micro management. European firms are lagging a little behind the US though there is a definite trend towards increasing adoption of the technology. To date in Australia and New Zealand the use of Business Intelligence is restricted to some of the larger firms. The adoption of new technology follows a familiar path - limited initial adoption due to price constraints; this is followed by improvements in the technology and the delivery which reduces price; eventually there are appropriate price points for different levels of consumer. The adoption of Business Intelligence is now at stage three where there are suitable options for firms of all size. |
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