©2004 baker robbins & company understanding your firms business ---------- figuring out what...

©2004 Baker Robbins & Company

Understanding Your Firm’s Business----------

Figuring Out What Makes Your Firm “Tick”

Sally R. Gonzalez

[email protected]

© 2004 Baker Robbins & Company

The basics…

All commercial law firms are in the same business

Every law firm, and its business, is unique

Change is the steady state Challenge: How do you figure out

your firm’s unique character and situation?


Why are you here?

I want to add value to my firm

I’m justcurious

!

It’s too hot to go

outside

I want to understan

dwhere my

job fits


Pop Quiz!

What do you think your managing

partner is worrying about?


Hildebrandt International says…

#6 – Managing income expectations#5 – Dysfunctional Practice

Groups/Leaders#4 – Risk management in risky

times#3 – Dealing with problem partners#2 – Flight risk of rainmakers#1 – Loss of key clients


Why the disconnect?


How-To’s…Tips from the Pros


Read

External materials Legal Trade Press for major countries

the firm practices in Non-legal press (magazines &

newspapers) Books

Internal materials Business plans Marketing pitches


Listen

Internally Attend management meetings Attend practice group meetings Attend internal education seminars

Externally Local peer groups Conferences Seminars


Find a mentor

Target one or more approachable individuals

Openly request their help Negotiate the boundaries (time,

topics, duration, etc.) Stick to the rules


Barter

Form focus groups Host brown bag lunches with

lawyers Offer to speak at meetings you’d

like to listen in on


Engage spies

“I used to think I wanted to attend all those top management meetings so I could understand what was really going on in the business. Once I started going regularly, I found that they weren’t the best use of my time. So now I rely on my ED to tell me what I need to know from those meetings.”


Stalk

“I know my ED likes to go for a Starbucks at a certain time each afternoon. If I need to talk about something, I call him at about that time. He usually says “Want to take a walk?” and I get the air time I need with him.


“How to” + “What to” = Success

All of this is excellent advice All of it is a bit vague WHAT do you look for? WHAT do you need to understand? HOW do you apply it to your work? This talk will try to help you plot a

course


Understanding…The market place

What-to’s…


2003 in Review

Economic performance stronger than predicted

Merger pace slowed Dissolutions increased dramatically High value litigation continued to

drive growth Transactions activity recovered in

Q4 03 “Outsourcing” gathered momentum

Source: Hildebrandt International


Average size of top firms grows

754815

886962

1,085

1,2201,294

1,338

1996 1997 1998 1999 2000 2001 2002 2003

Source: The National Law Journal.

754815

886962

1,085

1,2201,294

1,338

1996 1997 1998 1999 2000 2001 2002 2003

Average # lawyers in top U.S. firms


Global expansion continues

-

0

500

1000

1500

2000

2500

3000

Eng Fr Ger Belg Italy Pol Rus Spn Czech Swed Switz Other

79

28 39

14 9 15 5 47 20

Number of offices are listed in red

36

7

Number of lawyers by country – 250 Largest US Firms

0

500

1000

1500

2000

2500

3000

Eng Fr Ger Belg Italy Pol Rus Spn Czech Swed Switz Other

79

28 39

14 9 15 5 47 20

Number of offices are listed in red

36

7

Source: The National Law Journal.


Pace of mergers slows

35 Mergers in 2003 v. 82 Mergers in 2001

Includes only mergers where smaller firm had at least 5 lawyers.

35 41 38 34 49 41

35

55

82

71

47

26

0

10

20

30

40

50

60

1998 1999 2000 2001 2002 2003

Av

era

ge

Siz

e o

f A

cq

uir

ed

Fir

m

0

10

20

30

40

50

60

70

80

90

Nu

mb

er

of

Me

rge

rs

Source: Hildebrandt International


Number of dissolutions increased

Near record number of law firm dissolutions in 2003 20 failures Many were high profile

Few were economically driven


Firms focus on 3 key areas

Practice Management Professional Development Operational Efficiencies and

Outsourcing


Where to learn more?

Talk to your marketing and/or business development people

Read the trade press At least one issue weekly (AmLaw,

NLJ) Sign up for Hildebrandt Headlines

[email protected]

Watch for, and attend, seminars sponsored by local ABA


Understanding…Your firm’s positioning

What-to’s…


The legal service value pyramid

Low

High

Price Sensitivity

Bet-the- Company

Expertise/Reputation

Bread and Butter

Commodity

20%

5%

75%

High

Low

ValueFocus

Q: What tier is your firm targeting?


How to learn more?

Read the firm’s strategic business plans

Talk to practice group/department leaders individually Where are they on the pyramid today? Where do they want to be in the future? Why do they want to get there? What things to they think they need to

do to get there? Note: Expect to get a range of answers


Understanding…The firm’s clients

What-to’s…


Today’s client base

Observing the 80/20 rule Who are the firm’s top clients? What business sector(s) are they

in? What kind of services does the firm

provide to these clients? What kind of services does the firm

want to provide these clients in the future?


Tomorrow’s client base

Has the firm targeted new clients or market sectors?


Understanding…The Culture

What-to’s…


Variety is the spice of life

Wachtel—”If we try to do systems here, people will go bananas”

Linklaters & SAP – one size fits all “Eat what you kill” vs. lockstep Preserving partner “collegiality” Interesting, high value work vs.

profits “Commodity work and proud of it”


Remember: Culture trumps all


Understanding…Law Firm

Economics

What-to’s…


It’s all about…

PPEP


PEPP is simple…

PPEP =Profit

# of Equity Partners


What drives PPEP?

L = Leverage (1 + associate to partner ratio)

BR = Blended hourly billing rate R= Realization (revenues / “standard

value” of time recorded) U = Utilization (billable hours recorded) M = Margin (partner profits / revenues)

PPEP = (L)x(BR)x(R)x(U)x(M)


Hygiene vs. health factors

Health Factors(increase revenue)

Hygiene Factors(control cost)

PPEP = (L)x(BR)x(R)x(U)x(M)


partner delegation skills

volume of work work type better supervision

reporting systems

communication processes

type of work client type change of instructions

type and range of services

type of work culture client relationships

communication processes

type of marketing activities

client relationships staff mix perceived value of work

client relationships

indirect fee-earning cost

career development pricing competition value/rates

type of work management processes

performance expectations and feedback

staff retention salary costs and cost multiple

type of clients organizational structure

culture partner attitude partner attitude partner attitude

quality assurance

partner attitude

IncreaseLeverage

ImproveUtilization

RaiseBilling Rates

ImproveRealization

IncreaseMargin

Managing to PPEP


Finding out more…

Get conversant in the topic Read Maister and other sources

Read the tea leaves Read firm and practice group

business plans/strategies Listen between the lines in practice

meetings Understand your firm’s current

situation and goals Talk to your CFO Talk to your ED


Understanding…What Law Firms Do

What-to’s…


Law Firm Value Chain

Exceeding

Exp

ecta

tions

Supporting The Practice

Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork

Exceeding

Exp

ecta

tions

Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork


Managing The Firm

DoingWorkDoingWork

ManagingWork

ManagingWork

StaffingWork

StaffingWork

GettingWork

GettingWork



Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork

Exceeding

Exp

ecta

tions

Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork


Managing The Firm

DoingWorkDoingWork

ManagingWork

ManagingWork

StaffingWork

StaffingWork

GettingWork

GettingWork

• Promoting the firm• Fostering client relationships• Screening requests for service• Preparing proposals• Estimating scope of work and fees

GETTING WORK

• Promoting the firm• Fostering client relationships• Screening requests for service• Preparing proposals• Estimating scope of work and fees

GETTING WORK



Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork

Exceeding

Exp

ecta

tions

Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork


Managing The Firm

DoingWorkDoingWork

ManagingWork

ManagingWork

StaffingWork

StaffingWork

GettingWork

GettingWork

• Developing skills• Managing opportunities • Tracking availability• Matching skills to new work• Monitoring utilization

STAFFING WORK

• Developing skills• Managing opportunities • Tracking availability• Matching skills to new work• Monitoring utilization

STAFFING WORK



Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork

Exceeding

Exp

ecta

tions

Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork


Managing The Firm

DoingWorkDoingWork

ManagingWork

ManagingWork

StaffingWork

StaffingWork

GettingWork

GettingWork

• Performing analysis• Sourcing knowledge and experience• Reporting time and expenses• Building qualifications and resumes

DOING WORK

• Performing analysis• Sourcing knowledge and experience• Reporting time and expenses• Building qualifications and resumes

DOING WORK



Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork

Exceeding

Exp

ecta

tions

Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork


Managing The Firm

DoingWorkDoingWork

ManagingWork

ManagingWork

StaffingWork

StaffingWork

GettingWork

GettingWork

• Preparing estimates• Managing scope• Controlling budgets• Preparing invoices• Collecting payments

MANAGING WORK

• Preparing estimates• Managing scope• Controlling budgets• Preparing invoices• Collecting payments

MANAGING WORK



Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork

Exceeding

Exp

ecta

tions

Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork


Managing The Firm

DoingWorkDoingWork

ManagingWork

ManagingWork

StaffingWork

StaffingWork

GettingWork

GettingWork

• Keeping the firm integrated• Establishing goals• Allocating resources• Monitoring performance• Reporting results• Tracking development

MANAGING THE FIRM

• Keeping the firm integrated• Establishing goals• Allocating resources• Monitoring performance• Reporting results• Tracking development

MANAGING THE FIRM

• Building practice competencies• Recycling experience• Tracking client satisfaction

SUPPORTING THE PRACTICE

• Building practice competencies• Recycling experience• Tracking client satisfaction

SUPPORTING THE PRACTICE


What can technology do?

Legend:

Work processesCopyright, Michael Farrell Group, 2002

Underserved Processes

IndirectMarketing

DirectMarketing

WorkFinished

ClientBilled

Time &Charges

Recorded

DeliverablesPrepared

ProjectManaged

ProjectOpened

ProposalPrepared

InquiryReceived

ConflictsCleared

ProposalDelivered

WorkStarted

TeamAssigned


How can technology help?


Improved Productivity is Key

Every other element of the Maister model is market constrained

Productivity is the only thing a firm holds entirely in its own grasp to improve

Applying technology to improve productivity is a natural

WHAT ARE INNOVATORS DOING TODAY?


Improving management productivity

“Our use of workload planning and management systems [at Booz Allen] coincided with an increase in productivity of about four to five percentage points.”R Malcolm Schwartz

Chief Financial Officer (former)Booz • Allen & Hamilton Inc.

Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork

Exceeding

Exp

ecta

tions

Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork


Managing The Firm

DoingWorkDoingWork

ManagingWork

ManagingWork

StaffingWork

StaffingWork

GettingWork

GettingWork


Integrated design for BP flow

IndirectMarketing

DirectMarketing

WorkFinished

ClientBilled

Time andCharges

Recorded

DeliverablesPrepared

ProjectManaged

ProjectOpened

ProposalPrepared

InquiryReceived

ConflictsCleared

ProposalDelivered

WorkStarted

TeamAssigned Legend:

Work processes

Learning loops

GETTING WORK > STAFFING WORK > DOING WORK > MANAGING WORK


Fragmentation rules today

Fragmented solutions targeted at specific processes

Inconsistent data models create barriers to information flow

Productivity suffers Effective business decision making

suffers


Aligning information & processes

Clients

Projects

Skills and expertise

Performance measures

Work required

Process Logic

•Getting Work•Staffing Work•Doing Work•Managing Work

Information Assets


Blocked information flows

Doing Work

Getting Work

Staffing Work

Vendor A

Vendor B (?)

Vendor C, D

Managing WorkVendor E, F


Aligned information flows

Getting Work

Staffing Work

Doing Work

Managing Work


Improving lawyer productivity

Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork

Exceeding

Exp

ecta

tions

Exceeding

Exp

ecta

tions


Managing The Firm

DoingWork

ManagingWork

StaffingWork

GettingWork


Managing The Firm

DoingWorkDoingWork

ManagingWork

ManagingWork

StaffingWork

StaffingWork

GettingWork

GettingWork


Enterprise Search…

Eternally seeking…

a “Google-like” Search



Results federated from multiple sources & ranked



Finding the words and concepts the lawyer wanted


Bringing it all together...


Value matrix for planning

Ease of Implementation

High

Valueto theFirm

Low

High Support for firm’s strategies Economic payback Beneficial behavior change Keeping up with competitors Meeting clients’ needs

Investments needed Complexity of work Clarity of requirements Familiarity with technology Required behavior changes Acceptance


Plotting your projects

Ease Of Implementation

High

ValueTo The

Practice

Low

High


Aligning projects with value

Field ofGain

Field ofDreams

Field ofDistraction

Field ofPain

Ease of Implementation

High

Valueto theFirm

Low

High

Copyright,

Michael Farrell Group, 2002


Value matrix for your work

Ease Of Implementation

High

ValueTo The

Practice

Low

High


Sorting priorities

If you’re confused about the value dimension, use the matrix as a prop for a dialog with the right people


Wrap up

Understanding your firm’s business is an attainable goal

Combine the how-to’s with the what-to’s and you’ll have all the information you need

Use the information to set priorities for your work—choosing to invest the right amount of effort in the higher value activities


QUESTIONS?QUESTIONS?

©2004 baker robbins & company understanding your firms business ---------- figuring out what...

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