While cultural change is beginning to occur across firms, many still place the burden of profitability on Partners. As this BigHand research reveals, 85% (NA), 79% (UK) of respondents said they / their firm hold Partners accountable for how profitable work is to the firm – rising to 90% (NA), 96% (UK) at larger firms (1000+ lawyers). Yet just 18% (NA), 23% (UK) of Partners have access to billings information, and 23% (NA), 23% (UK) to profitability data.
It appears Partners are consistently kept out of the loop – with respondents saying they notify Partners about budget overruns in real-time for only 39% (NA), 35% (UK) of matters. Instead, the top three ways Partners are provided with data on the profit of a matter are post-matter analysis (35% NA, 31% UK), monthly reports (33% NA, 35% UK), and quarterly reports (31% NA, 34% UK).
How can Partners be held accountable for profitability – and have an accurate foundation for routine client conversations - without timely access to budgeting information? Why are Partners not being notified of project overruns if a matter is closed? Who is exploring what has gone wrong and learning important lessons for the future?
Given the extraordinary rate of change in client relationships, especially the rise in AFAs, a routine post-matter analysis should be a vital component of any pricing management. Without understanding which AFAs work best for which matters and/or clients, firms risk making expensive mistakes in client agreements.
In an ideal world, of course, such insights should be available in real-time – not pulled together in retrospect from manual reporting mechanisms. With immediate access to budgeting information, firms can continually track the progress of matters and gain a far quicker understanding of the value of different AFAs.
Firms are extending budget responsibility to Associates, with 85% (NA), 80% (UK) encouraging Associates to have awareness of the profit of a matter – with the trend towards budget responsibility greater within larger firms.
Again, however, only 35% (NA), 37% (UK) are providing Associates with real-time automated reporting per matter. 35% (NA), 37% (UK) rely on monthly reports, and 31% (NA), 35% (UK) on weekly reports.
Incentivizing wider responsibility for improving matter profitability will only work if all lawyers have immediate access to the depth of information required to manage budgets proactively day to day. How are firms expecting to achieve a reduction in profit write-downs and improving profit margins if individuals are not supported with real-time, actionable information? Armed with the right processes and support, teams can become more innovative and deliver additional value to clients.
This was an excerpt from The Legal Pricing and Budgeting Report. Access the full report to dive deeper into the findings from over 800 legal professionals:
A view of the latest legal pricing and matter budgeting trends gathered from 800 senior legal finance roles, Managing Partners, LPM, and Finance Systems roles from law firms of 100+ lawyers in the UK and North America.