Law Firm Financial Leaders on Emphasizing Profitability with Lawyers

Zach Rausch, Director of Financial Planning & Analysis at Fisher Phillips and David Rueff, Chief Practice Group Solutions Officer at Baker Donelson discuss how they emphasize profitability with their fee earners to improve their firms' financial health. 

Zach: At Fisher Phillips, they've been doing profitability way before Redwood, probably in Excel and, because of the evolution of that over the past 30 years, it has been tied into the compensation system. So, in some way or another, we have profitability metrics that we look at, we have revenue drivers we look at and those are actually tied into some of the bonus plans for our attorneys. So, when I came on and joined Fisher a couple of years ago, it wasn't very difficult where I had seen some other firms trying to get profitability to be part of the picture, trying to get that book in the attorneys to hold them accountable for some of these metrics that have the firm's best financial incentives in mind.  

With the profit module that we've invested in, it's going to make it easier for us to put that front and center - in front of our attorneys on a real time basis and automate it. So that will be great. 

I would say that's been the biggest thing, which is tying into the compensation system as much as you can, be strategic about what you do, what you tie into the compensation system - only things that the attorney based on their title, can control. But again, think big picture. What are we trying to get at profits per equity partner? Then, work backwards in designing that compensation system. 

David: Like Zach, profitability is a significant element of compensation. So, you've got attorneys that are motivated, and understand we do training on the things that are going to undermine your profitability and your engagement. They’re aware of those triggers and are working with our finance team to try to implement reporting and things like that, so that they can monitor that more closely. 

Also, from a management standpoint, we have department operational directors that basically are a COO for each of our practice departments. They have goals for growth, they have goals for profitability of their department, they have goals for reducing write-offs and write-downs. So, one of the things that our team works with those on department Operational Directors to do is to develop reports and increase the visibility of the department Operations Director as well as the attorneys in that department on a regular basis about write-downs and write-offs that are having a major impact on profitability. Because of those efforts last year, we had one department where we were able to reduce the write-downs and some runoffs by 20%, between 2022 and 2023. So, it's really a collaborative effort not just at an individual matter level or client level, but also at a department level.

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