What Are You Trying to Measure and Why?

This session is entitled “Objective Business Strategy: What Are You Trying to Measure and Why?” The panelists are: Doug Doerfler (Chief Financial Officer, Stinson Morrison Hecker LLP), Stuart Kay (Director, Global Business Systems, Baker & McKenzie), and Timothy B. Corcoran (Corcoran Consulting Group)

[These are my notes from the 2013 Ark Group Conference: Business Intelligence and Analytics in the Legal Profession.  Since I’m publishing them as soon as possible after the end of a session, they may contain the occasional typographical or grammatical error.  Please excuse those. To the extent I’ve made any editorial comments, I’ve shown those in brackets.]

NOTES:

  • How does the Choice of Metrics Affect Behavior? Stuart Kay started as a lawyer working on a fixed fee basis. This taught him to be “super efficient.” Doug Doerfler’s firm rewards lawyers for business origination, so this tends to make lawyers compete more for new business. Tim Corcoran noted that the compensation model absolutely drives behavior: if you compensate for new business, you’ll get a lot of subpar new business; if you compensate for current business, you won’t get any new business.
  • How to Show the Value of Your Support Service? Measuring how much you spend is straightforward. Showing the return on that investment is harder. Stuart Kay believes that if you “took out” the KM team, there would probably be little impact on the bottom line today. However, down the road there will be an impact. This has happened time and time again in law firms: there is an initial push for KM that results in a new KM system. If it runs reasonably well, it is taken for granted. When there’s a market downturn, it’s easy to reduce KM staffing because the firm doesn’t realize the value embedded in creating and maintaining that KM system. Then a few years down the road, a partner realizes that they cannot compete for lack of a well-running KM system, so the firm begins to invest in KM again.
  • If You Had All the Necessary Tools, What Would You Measure? Doug Doerfler says that he would measure cross-selling success and attorney investment in marketing efforts (are those marketing dollars being spent wisely?). Stuart Kay would like to be able to make better use of the available data. For example, he would like to generate more reliable forecasts rather than just “guesstimates.” He would also like to measure based on a scorecard. This could include measuring attorney satisfaction. Tim Corcoran would measure both short-term and long-term profit. He would also like to improve quality (reduced cycle time, reduced defects in work products). Finally he would measure lawyer satisfaction and voluntary departure rates. Above all, he would measure client retention rates.

 

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Breaking Strategic Groups Out of IT [#ILTA11]

The speakers in this session: (i) John Alber (Bryan Cave), (ii) Timothy Corcoran (HubbardOne), (iii) Gerard Neiditsch (Mallesons) and (iv) Jeffrey Rovner (O’Melveny).

[These are my notes from the International Legal Technology Association’s Conference 2011.  Since I’m publishing them as soon as possible after the end of a session, they may contain the occasional typographical or grammatical error.  Please excuse those. To the extent I’ve made any editorial comments, I’ve shown those in brackets.]

NOTES:

  • Why is this Issue Important? Changes in the marketplace, in how infrastructure and applications are managed, changes in staffing models, changes in pricing and client expectations — all of these factors cause firms to consider new ways to achieve a competitive advantage.
  • Consider Two Extremes for Discussion Purposes. One extreme is an enormous IT department that handles everything that has any technology function. The other extreme is an extremely lean IT operation, that keeps the basic operations in order, is reponsible for architecture and basic apps, but many of the specialized functions (e.g., client-facing technology, marketing technology, litigation support, practice support, etc.) are distributed throughout the firm. Which is the better approach, or should your firm aim for a hybrid? The answer lies in the problem you’re trying to solve. Are you trying to achieve the lowest possible cost? For example, a distributed model may lead to overlaps, duplication and inefficiencies. Alternatively, a consolidated group may be monolithic and sluggish. Mallesons is optimizing for agility. This has implications for how they approach legal practice AND technology.They are doing this in order to be able to respond rapidly to changes in their clients and in the environment. As a result, they are focused on specialized initiatives that are technology-enabled. The IT department then imposes discipline to ensure that there is no duplication of effort across the firm.
  • Considerations Applicable to Both Scenarios. Nimbleness, creating/supporting and R&D function, duplicative technology, duplicative personnel, career paths, IT discipline and project management. Gerard Neiditsch reminded the audience that even if you create separate “tiger teams” or skunkworks, be sure to recognize the contributions from the rest of the IT organization (the “performance engine”). Otherwise, you run the risk of losing the best people from your performance engine operations. In a similar vein, Jeffrey Rovner reminded the audience that whether you’re dealing with a skunkworks project or a performance engine project, be sure to recognize every single member of the team who made that possible. Just like the credits at the end of a movie, it’s important to acknowledge everyone who contributed to the success of the project.
  • The Importance of Reintegration. John Alber and Constance Hoffman at Bryan Cave frequently consider whether a group that has been broken out of the IT department should be reintegrated with the main IT department to ensure the overall benefits accrue to the firm and to avoid unnecessary duplication or silos of capability.
  • Consider the Extent to Which a Group is Tied to Revenue.Timothy Cororan noted that being tied to revenue can preserve a group (and give it legitimacy within the firm), but it also changes the expectations of the group. (One panelist noted that fee-earners can go to the golf course because meeting clients on the golf course is supposed to contribute to the top line.) Gerard Neiditsch also observed that if you have a group that you intended to spin out of the firm altogether (perhaps even to sell the technology and the team to another company) you should keep that in mind when you first start planning to create the group.
  • Consider Visibility. Creating a separate team can be a means of providing viability inside and outside the firm with respect to that team and its projects. John Alber noted that when they created a group focused on alternative fee structures, members of those teams started attending client meetings and internal client meetings. Jeffrey Rovner includes IT and library personnel in his KM meetings to ensure transparency of projects across functions. Gerard Neiditsch’s project managers are involved in every project in order to promote efficiency across the firm.
  • Career Path.Gerard noted that it can be hard to attract top specialist talent if they are concerned that they are buried in a large department and won’t have appropriate visibility. Tim suggested that by encouraging personnel to work across teams and departments, you can foster a cross-pollination of good ideas and best practices. John said that when you spin groups out of IT, you create additional opportunities for people to learn how to be better managers. However, Gerard said that you most likely will have to pay more to personnel who assume additional management responsibilities. Jeff and Tim both cautioned against creating new groups just to separate personnel who are having trouble getting along. This is an issue that requires better management. Separating them just perpetuates the problem, but on an inter-departmental basis.
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Help Law Firms Deliver Value (ILTA09)

Shift happens — even in law firms. Are you ready? That’s the question that kept surfacing at the ILTA09 conference last week.

You’d have to be living under a rock not to have noticed the impact of the economy on law firms and their clients alike.  Thankfully, ILTA09 didn’t just remind us of the bad news all around.  The conference did something more helpful — it provided information and real examples of how lawyers and technologists around the world are rising to the challenges of the shifting landscape.

While I’ve provided some fairly detailed reporting of several ILTA09 sessions during the course of the past week,  I want now to take a step back and try to convey some general themes that emerged across sessions.  My first focus is on delivering value.  This theme was launched officially with a keynote address by Richard Susskind entitled, “The End of Lawyering?”.  Over the course of his keynote address and panel presentation, he made the following points:

  • If law firms are serious about addressing client concerns regarding the rising cost of legal services, those firms will have to increase efficiency radically.  In order to manage costs, clients are going to have to consider collaboration with other clients and thereby share costs.
  • The best way to reduce costs intelligently is to start by analyzing your current costs of delivering services.  Once firms break down service into its component parts and price those parts, firms can then experiment with finding cheaper ways to provide those components.  This may mean sub-contracting the work or moving it offshore, for example.
  • One way to reduce costs is to standardize services (e.g., creating model or standard form documents). Going further, you can systematize or automate those services (e.g., by using document assembly tools).  Once automation is complete, a firm can then package these services and make them available online to clients, who can use the packaged services as and when needed.  The example Susskind cited was Wilson Sonsini’s contract generator for start ups.  He described packaged services like this as a means for firms to “make money while you sleep.”
  • Central to rethinking how we deliver services more efficiently is disrupting the current business model and deploying disruptive technologies in our firms.  However, while these disruptive technologies will give a firm competitive advantage, Susskind believes that most firms don’t seek this.  In his experience, firms are more concerned about suffering a competitive DISadvantage rather than having a competitive advantage.  In other words, they are more worried about being left behind than blazing a new trail.
  • Here are the top 10 disruptive technologies  Richard Susskind identified:
    • Automated document assembly.
    • Relentless Connectivity.  (Clients expect 24/7 availability, so lawyers need to use online tools to provide a continuous online presence.)
    • Electronic legal marketplace.  (Like on ebay, clients will have better pricing information and will be able to auction/bid for legal services.)
    • e-Learning.  (Laws schools are beginning to use online simulation tools train students for modern legal practice circa 2009 not 1980.)
    • Online Legal Service. (There are many English public sector websites that offer online legal guidance, so you don’t have to hire a lawyer.)
    • Legal Open-Sourcing. (Some legal resources are now gathered and offered free of charge.  This trend will grow like wikipedia.)
    • Closed Legal Communities. (More clients will form online communities to collect and share legal know-how.)
    • Workflow & Project Management. (Automation and enhanced project management can improve margins on high volume, low value work.)
    • Embedded Legal Knowledge. (More systems will embed compliance requirements, thus removing the need for separate legal advice.)
    • Online Dispute Resolution. (Moving dispute resolution online eliminates the expense of having to meet in a physical location.)

At a later session, Fred Krebs (President  of the Association of Corporate Counsel in Washington, D.C.) spoke about the ACC’s Value Challenge, which is based on the premise that it is the clients that define what constitutes “value” in legal services.  He started by pointing out that while overall costs to corporations have increased by 20% during the past 10 years, their legal costs have risen by 75%.  In order to address this imbalance, the members of the ACC have issued the Value Challenge to counteract what they describe as the “perverse incentives of the billable hour.” The Value Challenge aims to help corporate counsel manage costs by increasing transparency in the process for setting prices for law firm services.  Their hope is that this will bring about more efficiency and cost predictability.

Moving from theory to action, we then heard from some firms that were taking concrete steps to address the new economic realities.  One firm that has moved significantly down this path is Bryan Cave.  As John Alber and Connie Hoffman told us over the course of two sessions, they have spent significant time analyzing their services and business processes and now believe they know what it really costs to deliver services to clients.  With this data in hand, Bryan Cave can model the impact on price by changing the components of service (e.g., what happens if you change the staffing?).  Along the way, they created an online tool to help with this analysis and then licensed that tool to Redwood Analytics, who now provides it to other firms.  (This is another example of what Susskind calls “making money while you sleep.”)  Bryan Cave has also rethought how to conduct a due diligence review and created an online tool that streamlines the due diligence process.  They have been able to push due diligence work down to less expensive personnel while ensuring quality through a training component embedded in the tool.  In addition, they are providing transparency by allowing clients to obtain reports on demand regarding the process and cost of the due diligence effort.

On the subject of transparency, Mallesons in Australia has blazed a new trail with Mallesons Connect.  As described by Gerard Neiditsch, this new extranet application gives clients real-time information regarding lawyer activity, progress against project goals, and fees incurred.   It also provides information on billing history and outstanding invoices.  In the process, Mallesons learned that this transparency can have unexpected benefits.  Besides keeping everyone accountable, Mallesons discovered that once their law department clients saw the invoice information, they were able to expedite payments.

If your firm would like to rethink how it delivers value to its clients, the panelists advise you to start by analyzing your business processes.  Using a simple Gantt chart,  identify the components and dependencies of your process.  Once you really understand the workflow, introduce simple technology to help automate parts of the process.  If it works, extend it.  If it doesn’t work, learn from it.  Throughout this process, however, don’t forget the advice of Steven Levy, as quoted by one of the panelists:  “Technology cannot replace thinking. Automating broken processes won’t make us smarter; it can make us stupider faster.”

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For more information on delivering value to clients, see the following resources:

My post on a prior talk given by Richard Susskind and its implications for law firm knowledge management.

David Hobbie’s Caselines posts on Richard Susskind’s keynote address and the related panel presentation.

Andrew McLennan-Murray’s summary of Richard Susskind’s keynote and panel presentation.

Susan Jacobsen’s post on the the ACC Value Challenge session at ILTA09.

ACC’s resources on Leveraging Knowledge, including specific measures taken by various law firms.

[Photo Credit:  dasmart]

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