Traditional law firm management efforts put financial discipline only in the hands of a few. Those bean counters sat in the back office working tirelessly every month to cobble together month end reports that were then distributed to the lawyers. There was very little actionable information surfaced to the top. An attorney would review the numbers, check the box and go back to working on another matter. This highlights how ineffective traditional reporting was and continues today at many law firms.
How about other areas of revenue and profit leakage? We hear our clients complaining about poor time entry hygiene. Lawyers bill their time at the end of the month or lawyers write off time without giving it a second thought.
The madness has to change, and the CFO is the leader of this movement. In late 2022, BigHand produced the survey results "Maintaining Profitability in a Global Recession." We may still be waiting for the recession, but it's clear firms "are expecting partners and lawyers to take more responsibility for the profitability of each client and of every matter," and the CFO must lead the way. Here are some simple steps:
- Educate the lawyers: Lawyers went to law school to solve complex problems, however, simple finance was not part of the curriculum. The CFO needs to take ownership of this initiative by setting up routine communications about Key Performance Indicators. Use BI dashboards to make people aware is not enough. The CFO and team need to provide lawyers with greater awareness and understanding of key financial metrics. Drive home the message about the impact of: delayed billing, discounts and write-offs. Provide lawyers with the tangible and quantitative impact.
- Facilitate the education with routine internal meetings from the office of the CFO. Host a monthly recap of the prior period using your BI dashboards to tell the story. Visualizations with charts and graphs and, if your culture is ready, a list of good and bad actors. Ensure your good actors are being rewarded for helping you promote the message and carrying the torch across the firm.
- Mandate: The CFO must gain buy in from the executive committee to hold people accountable. In the areas of time entry, billing and collections, the firm must make this a critical element in the performance management review. It's deceptively simple to accomplish this task with the daily information that business intelligence brings to the forefront. Make the practice group leaders and billing attorneys responsible for the behaviors of their department, office and team. Factor this into the annual review by providing clear objectives and the impact of missing the targets. This is change management and it's critical to the long term success of your business.
Next steps:
- Define the 3-5 health metrics that you are looking to sustainably improve over the next 12-18 months
- Schedule a meeting with your BigHand BI consultant and discuss the current state of your business and the objectives you've set for the next 12-18 months
- Work collaboratively with your BigHand team to create the awareness initiative and the medium through which you will promote your message
- Invite the BigHand consultant to your next firmwide or departmental retreat to review the benefits of financial health planning and to create greater awareness of the metrics
