Lawyers, who have been traditionally passionate by the words power, will need to become passionate about numbers as well: productivity must be fully embraced as crucial by the entire team.
If you can’t measure it, you can’t manage it. (William Edwards Deming).
In December we review our results. We list what we have left unfulfilled and what we really want to achieve next year. At the end of the year it is impossible to get around the inevitability of numbers and the law business is no exception: either in large firms or lawyers in isolated practice, it is necessary to look at that unprecedented year and draw lessons to prepare for 2021. Like in any other business area, management practices are essential to ensure lawyers profitability.
In law businesses, profitability results from turning time into money and is inseparable from the productivity of the lawyer, the most relevant indicator of performance of that activity. What metrics are important to analyse in order to measure productivity in a law firm?
First of all, the utilization rate: how many working hours are effectively chargeable to clients? Just divide the hours worked by the billable hours to find a percentage that should be close to 100%. This will not be the case where the lawyer unduly takes up his time with administrative tasks, for example.
By splitting the hours of work recorded and likely to be presented to the client by the hours actually charged, we obtain the realization rate. This may be affected by pricing problems and mitigated by suppression of hours in the elaboration of fees, duplicate work situations or customer dissatisfaction with the results achieved.
Thirdly, the average time to receive the fees. This one has a double function: first, measuring the productivity of lawyers in terms of their efficiency and effectiveness as the average time to pay the lawyers bill is the true client satisfaction indicator about the services provided. On the other hand, accounts receivable balances can also be indicative of uncoordinated billing team (discrepancies, inefficiency of the billing process, etc.).
These metrics should be monitored throughout the month and analysed on a monthly, quarterly and annual basis, either isolated or by comparison with transacting homologous periods, in order to establish trends and patterns. Therefore, it is important that the technological solution allows for simple and straightforward reporting. In this way it will be possible to detect the causes of the lack of productivity: what flaws in workflows are affecting the delivery of services to the customer? Is the existing technological solution adequate to record working times and effective description of tasks performed?
This model of law practice management represents an aggressive change towards advocacy standards, but it is a powerful tool to face the current market context, to present competitive advantages and to guarantee an informed decision making (in terms of hiring resources, setting prices, creating departments, geographic expansion, equipment acquisition, etc.). The key to change is an administrator dedicated to managing the law firm or a lawyer who accumulates management functions: being able to get out of the eye of the hurricane of his activity, he is able to analyse at what point is the pursuit of his objectives and, ultimately, of his strategy. This is how to lead a law firm to be driven by key performance indicators.
Lawyers, who have been traditionally passionate by the words power, will need to become passionate about numbers as well: productivity must be fully embraced as crucial by the entire team. It is essential that the organization, small or large, is aligned with the strategy, objectives, performance indicators and metrics to be monitored that are contained in a dashboard – the true guide tool for management and the starting point for internal communication on this subject.
It is crucial, after a year marked by teleworking, to make teams aware that the importance given to measuring their work also results in the possibility of being able to value it properly and sustain the pricing policy practised, rather than being a control measure. The satisfaction of the teams, the way they are praised for their efforts and encouraged to overcome difficulties is the ideal ecosystem for the stability needed for productivity.
Traditional time recording can be used for much more than charging clients: it is a source of information that can expose organization weaknesses and serve as a starting point for process improvement. To increase productivity it is not important to architect the perfect business plan for the office of the future; the future is here, today, at the beginning of a year that is predicted to be difficult for small and medium-sized businesses that are less prepared. It is even more difficult for those who are not used to being lawyers, managers, strategists. Increasing profit is much stronger than cutting costs, reducing technology budgets or training goals – it is about well managing the best asset of a law firm: the time of its lawyers.
(2021, January 25th). Medir a produtividade: os desafios na gestão da advocacia in https://jornaleconomico.sapo.pt/noticias/medir-a-produtividade-os-desafios-na-gestao-da-advocacia-691848