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Understanding Your Firm’s Business ---------- Figuring Out What Makes Your Firm “Tick”
Sally R. Gonzalez ©2004 Baker Robbins & Company
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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? © 2004 Baker Robbins & Company
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I want to add value to my firm It’s too hot to go outside
Why are you here? I want to add value to my firm I’m just curious! I want to understand where my job fits It’s too hot to go outside © 2004 Baker Robbins & Company
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What do you think your managing partner is worrying about?
Pop Quiz! What do you think your managing partner is worrying about? © 2004 Baker Robbins & Company
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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 © 2004 Baker Robbins & Company
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Why the disconnect? © 2004 Baker Robbins & Company
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How-To’s… Tips from the Pros
© 2004 Baker Robbins & Company
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Read External materials Internal materials
Legal Trade Press for major countries the firm practices in Non-legal press (magazines & newspapers) Books Internal materials Business plans Marketing pitches . © 2004 Baker Robbins & Company
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Listen Internally Externally Attend management meetings
Attend practice group meetings Attend internal education seminars Externally Local peer groups Conferences Seminars © 2004 Baker Robbins & Company
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Find a mentor Target one or more approachable individuals
Openly request their help Negotiate the boundaries (time, topics, duration, etc.) Stick to the rules © 2004 Baker Robbins & Company
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Barter Form focus groups Host brown bag lunches with lawyers
Offer to speak at meetings you’d like to listen in on © 2004 Baker Robbins & Company
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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.” © 2004 Baker Robbins & Company
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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. © 2004 Baker Robbins & Company
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“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 © 2004 Baker Robbins & Company
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Understanding… The market place
What-to’s… Understanding… The market place © 2004 Baker Robbins & Company
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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 © 2004 Baker Robbins & Company
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Average size of top firms grows
Average # lawyers in top U.S. firms 754 815 886 962 1,085 1,220 1,294 1,338 1996 1997 1998 1999 2000 2001 2002 2003 754 815 886 962 1,085 1,220 1,294 1,338 1996 1997 1998 1999 2000 2001 2002 2003 Source: The National Law Journal. © 2004 Baker Robbins & Company
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Global expansion continues
Number of lawyers by country – 250 Largest US Firms - 500 1000 1500 2000 2500 3000 Eng Fr Ger Belg Italy Pol Rus Spn Czech Swed Switz Other 500 1000 1500 2000 2500 3000 Eng Fr Ger Belg Italy Pol Rus Spn Czech Swed Switz Other 79 79 28 28 39 39 36 36 14 14 20 20 9 9 15 15 5 5 7 7 4 4 7 7 Number of offices are listed in red Number of offices are listed in red Source: The National Law Journal. © 2004 Baker Robbins & Company
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Pace of mergers slows 35 Mergers in 2003 v. 82 Mergers in 2001
Includes only mergers where smaller firm had at least 5 lawyers. Source: Hildebrandt International © 2004 Baker Robbins & Company
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Number of dissolutions increased
Near record number of law firm dissolutions in 2003 20 failures Many were high profile Few were economically driven © 2004 Baker Robbins & Company
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Firms focus on 3 key areas
Practice Management Professional Development Operational Efficiencies and Outsourcing © 2004 Baker Robbins & Company
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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 Watch for, and attend, seminars sponsored by local ABA © 2004 Baker Robbins & Company
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Understanding… Your firm’s positioning
What-to’s… Understanding… Your firm’s positioning © 2004 Baker Robbins & Company
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The legal service value pyramid
5% Bet-the- Company High Low Value Focus Low High Price Sensitivity 20% Expertise/Reputation 75% Bread and Butter Commodity Q: What tier is your firm targeting? © 2004 Baker Robbins & Company
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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 © 2004 Baker Robbins & Company
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Understanding… The firm’s clients
What-to’s… Understanding… The firm’s clients © 2004 Baker Robbins & Company
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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? © 2004 Baker Robbins & Company
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Tomorrow’s client base
Has the firm targeted new clients or market sectors? © 2004 Baker Robbins & Company
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Understanding… The Culture
What-to’s… Understanding… The Culture © 2004 Baker Robbins & Company
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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” © 2004 Baker Robbins & Company
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Remember: Culture trumps all
© 2004 Baker Robbins & Company
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Understanding… Law Firm Economics
What-to’s… Understanding… Law Firm Economics © 2004 Baker Robbins & Company
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It’s all about… PPEP © 2004 Baker Robbins & Company
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PEPP is simple… Profit PPEP = # of Equity Partners
© 2004 Baker Robbins & Company
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PPEP = (L)x(BR)x(R)x(U)x(M)
What drives PPEP? PPEP = (L)x(BR)x(R)x(U)x(M) 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) © 2004 Baker Robbins & Company
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Hygiene vs. health factors
PPEP = (L)x(BR)x(R)x(U)x(M) Health Factors (increase revenue) Hygiene Factors (control cost) © 2004 Baker Robbins & Company
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Managing to PPEP Increase Leverage Improve Utilization Raise
Billing Rates Realization Margin 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 culture client relationships type of marketing activities staff mix perceived value of work indirect fee-earning cost career development pricing competition value/rates management processes performance expectations and feedback staff retention salary costs and cost multiple type of clients organizational structure partner attitude quality assurance © 2004 Baker Robbins & Company
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Finding out more… Get conversant in the topic Read the tea leaves
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 © 2004 Baker Robbins & Company
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Understanding… What Law Firms Do
What-to’s… Understanding… What Law Firms Do © 2004 Baker Robbins & Company
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Law Firm Value Chain © 2004 Baker Robbins & Company
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Law Firm Value Chain Supporting The Practice Managing The Firm Doing
Work Managing Staffing Getting Exceeding Expectations Managing The Firm Managing The Firm Exceeding Exceeding Getting Work Staffing Work Doing Work Managing Work Getting Getting Staffing Staffing Doing Doing Managing Managing Work Work Work Work Work Work Work Work Expectations Expectations Supporting The Practice Supporting The Practice © 2004 Baker Robbins & Company
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Law Firm Value Chain Supporting The Practice Managing The Firm Doing
Work Managing Staffing Getting Exceeding Expectations Managing The Firm Managing The Firm Exceeding Exceeding Getting Work Staffing Work Doing Work Managing Work Getting Getting Staffing Staffing Doing Doing Managing Managing Work Work Work Work Work Work Work Work Expectations Expectations Supporting The Practice Supporting The Practice © 2004 Baker Robbins & Company
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Law Firm Value Chain Exceeding Expectations Supporting The Practice
Managing The Firm Doing Work Managing Staffing Getting © 2004 Baker Robbins & Company
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Law Firm Value Chain Supporting The Practice Managing The Firm Doing
Work Managing Staffing Getting Exceeding Expectations Managing The Firm Managing The Firm Exceeding Exceeding Getting Work Staffing Work Doing Work Managing Work Getting Getting Staffing Staffing Doing Doing Managing Managing Work Work Work Work Work Work Work Work Expectations Expectations Supporting The Practice Supporting The Practice © 2004 Baker Robbins & Company
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Law Firm Value Chain Supporting The Practice Managing The Firm Doing
Work Managing Staffing Getting Exceeding Expectations Managing The Firm Managing The Firm Exceeding Exceeding Getting Work Staffing Work Doing Work Managing Work Getting Getting Staffing Staffing Doing Doing Managing Managing Work Work Work Work Work Work Work Work Expectations Expectations Supporting The Practice Supporting The Practice © 2004 Baker Robbins & Company
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Underserved Processes
What can technology do? Underserved Processes Indirect Marketing Direct Work Finished Client Billed Time & Charges Recorded Deliverables Prepared Project Managed Opened Proposal Inquiry Received Conflicts Cleared Delivered Started Team Assigned Legend: Work processes Copyright, Michael Farrell Group, 2002 © 2004 Baker Robbins & Company
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How can technology help?
© 2004 Baker Robbins & Company
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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? © 2004 Baker Robbins & Company
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Improving management productivity
Exceeding Expectations Supporting The Practice Managing The Firm Doing Work Managing Staffing Getting “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. © 2004 Baker Robbins & Company
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Integrated design for BP flow
© 2004 Baker Robbins & Company
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Fragmentation rules today
Fragmented solutions targeted at specific processes Inconsistent data models create barriers to information flow Productivity suffers Effective business decision making suffers © 2004 Baker Robbins & Company
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Aligning information & processes
Information Assets Clients Process Logic Projects Work required • Getting Work • Staffing Work • Doing Work Skills and expertise • Managing Work Performance measures © 2004 Baker Robbins & Company
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Blocked information flows
Doing Work Getting Work Staffing Work Vendor A Vendor B (?) Vendor C, D Managing Work Vendor E, F © 2004 Baker Robbins & Company
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Aligned information flows
Getting Work Staffing Work Doing Work Managing Work © 2004 Baker Robbins & Company
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Improving lawyer productivity
Exceeding Expectations Supporting The Practice Managing The Firm Doing Work Managing Staffing Getting © 2004 Baker Robbins & Company
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a “Google-like” Search
Enterprise Search… Eternally seeking… a “Google-like” Search © 2004 Baker Robbins & Company
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Enterprise Search… Results federated from multiple sources & ranked
© 2004 Baker Robbins & Company
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Enterprise Search… Finding the words and concepts the lawyer wanted
© 2004 Baker Robbins & Company
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Bringing it all together...
© 2004 Baker Robbins & Company
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Value matrix for planning
to the Firm 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 Ease of Implementation High © 2004 Baker Robbins & Company
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Plotting your projects
Value To The Practice Low High Ease Of Implementation High © 2004 Baker Robbins & Company
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Aligning projects with value
to the Firm Low High Field of Dreams Distraction Field of Gain Field of Pain Ease of Implementation High Copyright, Michael Farrell Group, 2002 © 2004 Baker Robbins & Company
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Value matrix for your work
To The Practice Low High Ease Of Implementation High © 2004 Baker Robbins & Company
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Sorting priorities If you’re confused about the value dimension, use the matrix as a prop for a dialog with the right people © 2004 Baker Robbins & Company
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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 © 2004 Baker Robbins & Company
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QUESTIONS? © 2004 Baker Robbins & Company
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