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Almost nine in ten Americans use some form of digital payment. It’s no wonder, then, that law firm clients expect to be able to make payments online. Not only does this make handling bills easier and faster for your clients, but it’s also good for your law firm’s cash flow. Online payments close the gap between the time a client is billed to when that client makes good on payment.
In this article, we’ll cover how your law firm can accept online payments while remaining compliant with applicable law and ethical guidelines. We’ll also note some of the best features to look for in your payment solution software.
Yes! Clients expect law firms to deliver a memorable client experience, which includes making payments quick and easy by offering a variety of payment options. Clients want the flexibility of making payments via credit cards, e-checks, and digital transfer services like ACH. In fact, a recent study found that 40% of clients would never hire a lawyer who didn’t take credit or debit cards.
This variety of payment options is also good for your firm and its bottom line. By offering several convenient payment methods, law firms incentivize their clients to pay invoices faster and completely. When you expand your firm’s acceptable methods of payment, you’ll likely find that you spend less time waiting for checks in the mail, less time hounding clients for late payments, and more time on billable work.
Accepting online payments isn’t complicated, but it does require planning and a little help from technology. It’s not inherently risky for your law firm to accept online payment. Nearly every jurisdiction in the United States has given the green light for law firms to accept credit card payments for legal fees and expenses. But, as with all legal fees, your firm must comply with applicable legal requirements and ethical responsibilities.
In broad strokes, your firm must comply with the rules requiring the separation of client and third-party funds from your law firm’s operating funds. What is the best way to do this? Use payment software developed for attorneys with this exact ethical issue in mind. Without it, your firm might not be compliant.
While your law firm accepting online payment isn’t dicey, using a non-legal payment solution is. These software options often fail to properly handle law firm transactions according to the trust accounting principle noted above as well as Interest on Lawyers’ Trust Accounts (IOLTA) guidelines. The result can be noncompliance, which is bad for everyone — including your law firm’s reputation. The right technology ensures that your law firm has separate operating and trust accounts and ensures that processing fees are deducted from your operating account only.
If you set yourself up correctly, your firm will never have to worry about an inadvertent ethics violation and can focus on delivering exceptional client work.
With the various rules and regulations regarding legal payment, fee collection comes with a host of unique considerations, especially when accepting credit card payments. The right legal payment processing platform will do the behind-the-scenes work for your law firm, ensuring that all online payments accepted comply with the ABA Model Rules of Professional Conduct and IOLTA guidelines.
When picking a payment solution, we recommend looking for the following four features to ensure compliance and improve ease of use.
Not only do clients expect to be able to pay online, but they also expect that your firm will manage their multiple trusts and retainers. Rather than falling short of their expectations, with the proper tools, you can easily manage multiple trusts and retainers under one or many matters and even track them at the client level.
By having the power to track both your firm and client finances in one central place, you can keep an eye on money moving in and out of your firm with complete faith in your firm’s compliance.
Under most state laws, law firms must keep earned revenue and unearned revenue separate. The right payment tool recognizes when payment revenue is unearned (that is, applied to a trust replenishment) and when it is earned (applied to a billing entry) and deposits it accordingly.
You need a legal technology platform that can take an invoice payment and split it between two accounts, keeping your firm in compliance, saving your accounting team time, avoiding mistakes, and raising your collection realization rate. Avoid tools that require you to have either a trust account or an operating account and then require a bookkeeper to determine whether and how to apply and move the funds. That’s asking for human error and compliance woes.
3. Easily manage your IOLTA accounts
You need an efficient way to track multiple IOLTA accounts. With a robust legal platform, you can automatically assign accounts for each client trust so that you can track the flow of money, giving you visibility into where your firm and trust money meet at all times.
4. Apply available funds to pay off client bills automatically
Instead of waiting for that check to arrive in the mail, you can sweep through accounts to find matters with accounts receivable balances and available funds. With this information, your firm can quickly create bill payments and then write checks from your IOLTA account to an operating account. This way, you’re always efficiently applying your client’s money (and making them happy).
If you’re the administrator of a small or midsize law firm, you’re probably wearing a lot of hats. In fact, you probably have a closet full!
You’re overseeing the bookkeeping, ordering supplies, managing the budget, and running payroll. You’re handling equipment and facilities issues. You’re creating and implementing policies and procedures and setting long-term goals. You’re probably also handling the human resources side of the firm for non-lawyers, including recruiting, onboarding, training, and managing administrative assistants and paralegals.
In short, if it’s part of day-to-day legal services operations, and it doesn’t involve the practice of law, it lands on your desk. (There is a desk somewhere under all of the piles, right?) That means when your firm’s leadership team wants to find new ways to increase efficiency and drive law firm profitability, those tasks are automatically yours too.
It’s a daunting task, no doubt. But fortunately, there are legal technology solutions that you can implement quickly so you can demonstrate progress toward your goal. Here’s a list of typical efficiency problems that plague law practices along with some suggestions for how to solve them:
Legal billing is the lifeblood of a law firm. Because it’s so important, it often becomes a tedious process with many steps and approvals. But just because billing is critical doesn’t mean it has to be cumbersome.
Law firms can take the pain out of the billing process with an automated system that streamlines the billing workflow. Look for an e-billing system that allows lawyers to edit bills online — not in hard copy — to avoid the need to print and reprint or track versions of pre-bills. A system that allows reviewers to see previous markups means that bills are approved in less time and eliminates friction in the approval process, getting money into your accounts faster.
No one likes to measure their life in minute-by-minute increments, and lawyers are no exception. But, as you know, time tracking is essential if your firm wants to stay out of the red.
While you can’t eliminate the need for billable hours, you can take some of the pain out of the time-tracking process. Lawyers often don’t record all their time. Sometimes that’s because they’re writing down what they’re doing and don’t remember to note down every detail. Other times that’s because they’re on the go and don’t have their computer open, so they can’t recall the work they did when they get around to recording it later.
To make it easier for your timekeepers to track every billable minute, choose a billing system with a timesheet that integrates with the technology you use. Look for a platform that integrates with your firm’s software, such as tracking the emails that lawyers send in Outlook or the documents they work on in Word. And some platforms have mobile apps that automatically record phone calls, texts, and calendared appointments as billable events.
Lawyers regularly complain that their administrative workload takes too much of their billable time. In addition to billing, lawyers are spending too much time on non-legal work such as looking up matter information for clients and tracking deadlines. It’s difficult to manage a matter when information is stored in hard copy as well as in multiple systems online.
A matter management system can keep every matter detail in one place, from details for parties to all documents, emails, meetings, and calls. The most comprehensive platforms can track the outcomes of calls and meetings and the current budget status of a matter. They can also alert lawyers about upcoming milestones and deadlines. Additionally, they provide a searchable place to store notes about matters, substantially reducing the time it takes to find pertinent case information.
There’s a lot of competition in the legal industry. The firm that responds faster to the inquiry of a prospective client is often the firm that wins the business. Two out of three prospective clients say their decision to hire a firm is influenced by a firm’s responsiveness to their first contact. And when clients are impressed from the get-go, they’re much more likely to stay with your firm.
But manual intake processes create roadblocks to bringing in new matters. And all too often, form submissions from your website may not be a priority in an overflowing inbox.
An online onboarding process can expedite the conflict check process and ensure that you get the right information in the right hands, so you can contact a new prospect more quickly. Some platforms allow you to customize the intake form. Then not only can you route the collected information to the appropriate staff, but you can also automate workflows. This way, you ensure that no steps are missed, assign and follow up on tasks, track the progress of the matter, and smooth the intake process for the client.
Clients often complain that they don’t know the status of their matters. When lawyers don’t keep in touch, clients get frustrated. They call and email your firm’s lawyers, asking them to give them an update. That means lawyers have to drop the work they’re doing and comb through their files to inform their clients. And that means extra frustration for your lawyers too.
A system can make it easier for your lawyers to remember to send emails—without the need for the clutter of sticky notes or calendar reminders. Matter management systems can automate client emails whenever a matter moves to a new stage, so your clients are always in the loop. And they can also meet your clients’ expectations for 24/7 digital access to their case information via a client portal. Happier clients have stronger ties to the firm and are more likely to refer new business your way.
In this environment, it’s critical to make sure your people are happy at work. That means they can’t be stressed with too much work, nor can they be twiddling their thumbs at their desk. Striking the right balance means you need insight into their workload and productivity.
A platform that offers productivity tracking and timekeeper budgeting tools can give you critical insights into your team’s upcoming assignments and deadlines. You’ll be able to see how much time people are billing on certain tasks and projects. Perhaps most importantly, you’ll be able to ensure that tasks are being distributed fairly throughout the firm and reallocate work to avoid overload.
Though no two matters are alike, they still have many documents in common. From retainer agreements to settlement agreements and from requests for production to interrogatories, there’s often no need to recreate the wheel.
A document management system can make it easy to get even greater value from work product by organizing it for creation and reuse. You can set up templates and auto-generate documents with client information built in. Or you can search for a prior work product for a client or a similar project that you can repurpose for a new matter.
Hounding clients about overdue bills is a serious pain point for many firms. Accounting or billing staff have to send manual reminders and call clients who are overdue.
An automated billing system can send out reminders once a bill is overdue and then periodically until the client pays off the balance, eliminating that headache from your billing team’s workflow.
Law firm managers and partners often want quick access to reports so they can make decisions. Pulling together a report that collates all the data and metrics they need is easier said than done when you have multiple systems that store firm accounting and matter data separately. Before you can create a report, you have to gather, sort, and compile that information into a readable form.
But a system that integrates accounting, billing, and practice management software enables you to assemble comprehensive reports at the push of a button. Better yet, the right system will give your firm’s leadership team a dashboard view that offers real-time insights into how the firm is performing.
Modern law firms would love to hire a professional to drive innovation, efficiency, and profitability within their firm. But for many small firms, that just isn’t in the budget. Instead, they have to look for other ways to improve case management and your law firm’s productivity. Enter legal tech management tools: namely, practice management systems.
While a practice management platform can’t replicate all the functions of a legal operations guru, its automation of time-consuming tasks and simplification of workflows can take some of the burden off a law firm administrator’s plate.
A practice management platform that integrates matter management, timekeeping, calendaring, billing, accounting, reporting, document management, and more in one system can serve as a resource for quickly increasing a law firm’s efficiency. And, in turn, it can help you improve your law firm’s bottom line, alleviate the bottlenecks of manual work, and help turn your law firm into a pillar of productivity.
You know that your law firm is a business. But only recently have firms started focusing on how to improve their business. (After all, the leading legal industry organization dedicated to legal ops, the Corporate Legal Operations Consortium (CLOC), has only been around since 2016.) To date, few firms today have hired dedicated legal operations professionals, much less created a formal legal operations function.
An easy first step on the journey toward more effective legal operations is hiring an experienced legal operations manager. A driven and dedicated legal operations manager can make all the difference for a law firm that is looking to optimize business processes to increase revenue and productivity.
Legal operations is the business of running a law firm.
While lawyers may spend the bulk of their time engaged in the practice of law or strategic planning for matters, the legal operations department works behind the scenes to make sure all of that is done as efficiently and profitably as possible. Strong legal operations departments work to streamline processes within the law firm to maximize operational efficiencies, helping lawyers work smarter and faster so they can earn more revenue.
Day to day, this might look like monitoring lawyer productivity, identifying new legal analytical tools, budgeting for the firm, and managing third-party providers. Over time, it means implementing new processes and practices that will guide the law firm along the path to becoming a thriving business.
A legal operations team is no longer a luxury reserved for large firms. It’s now a valuable resource for small and midsized law firms that live and die by the bottom line. Legal operations should be a priority for law firms of all sizes, especially those looking to grow.
You can’t have an effective legal ops department without a fearless leader. That’s why near the head of the table in the legal operations department sits the legal operations manager.
A legal operations manager oversees various legal ops team members’ day-to-day activities and ongoing projects. Depending on the size of the law firm, the legal ops manager might report to a director of legal operations and be responsible for a larger team or just one or two legal operations specialists or analysts.
Either way, the legal operations manager must take stock of the current state of affairs of the law firm and come up with ways to make it better.
Legal operations managers take a deep dive into the firm’s budget. They break down where money is going within the firm and where money is coming from. They also provide stable financial planning for the future.
Legal ops managers use past yearly spending to build forecasting models and proactively identify new, creative ways to optimize financial resources within the firm. Many legal ops managers will also analyze processes related to e-billing to streamline outdated, tedious, and repetitive workflows. They study peer law firms as part of benchmarking exercises, always looking for innovative ways to price work and trim expenses.
But legal operations managers do much more than just budgeting! They also look at individual lawyer productivity and identify ways to make everyone at the firm work smarter. Sure, legal ops managers can’t step into the shoes of the managing partner, but they’ll have valuable input on staffing questions that firm leaders will want to listen to. Among other metrics, they analyze data related to billable hours, assigned cases, and revenue generated as a result of each lawyer’s work.
From that data, a strong legal ops manager comes up with ways to assign certain cases to lawyers who are more or less productive, depending on the needs of the firm and the ideal legal spend per case. They might also plan training for lawyers and staff and develop policies designed to increase firm productivity. Some legal ops managers even go as far as making recommendations on hiring and firing decisions.
Legal operations managers oversee third-party vendors, such as alternative legal service providers, freelance lawyers, and other professionals, like experts and consultants, who provide services to the law firm. In the past, firms might have relied on word-of-mouth recommendations or professional connections to decide where to outsource work rather than choosing the best, most efficient vendor based on objective criteria.
Proactive legal ops managers challenge traditional sourcing models. They also look for opportunities to rethink pricing arrangements and work to negotiate favorable rates from third-party vendors to maximize the value for every dollar spent. They scour the job boards and vet candidates to ensure that their firm avoids wasting money in the recruitment and onboarding process.
At the heart of it all, legal ops managers must collect, analyze, and translate the firm’s data. That means breaking data down for partners in the firm who might not be so business inclined.
Legal ops managers are responsible for data that extends across many different areas of the law firm. Their most common focus is the budget, scrutinizing data from their e-billing system to understand their revenue by practice area or case. They also collect data about lawyer productivity and translate that into smart hiring practices and case-assignment strategies that save money.
To collect this data, a legal ops manager will spend time researching and trying out innovative technology to choose the best tech for the firm. They’ll need to understand the latest trends and the opportunities to expand and incorporate new platforms into their work and the work of others in the office. This technology is important to optimizing processes and saving time (which means saving money) throughout the firm.
Most legal operations managers have a bachelor’s degree and at least some experience in legal project management or operations, whether in another law firm or in-house. Optimal candidates often have a blend of corporate legal department and law firm experience, which will ensure they have a deep knowledge of the inner workings of law firms along with the know-how and skills to position the firm as a leading outside counsel capable of addressing the needs of even the most demanding general counsel.
A job description for a legal operations manager will focus on competencies such as analytical skills, problem-solving skills, and communication skills that enable ops managers to speak to a variety of stakeholders at all levels of the firm. They should also have experience managing projects, developing policies, and collaborating with legal teams to deliver results.
Successful legal ops managers often have strong backgrounds in vendor management and change management initiatives. Extensive knowledge of technological solutions, including contract management, knowledge management, and matter management, will help the legal ops manager harness the inherent value in the firm’s data and inform their recommendations for procurement and service delivery strategies.
Hands down the best way for a legal operations manager to increase their firm’s efficiency is to leverage technology.
Legal technology has dramatically improved over the years. Instead of toiling away in the law library, lawyers can find relevant cases and statutes with just a few keystrokes. There’s no need to struggle to estimate the likelihood of winning a case because artificial intelligence and machine learning tools can do that for you. And - let’s not forget technology that helps with client recruitment, management, and correspondence.
Not only does a legal operations manager need to understand how to use these types of technology to make lawyers' work more efficient, but they must also understand how to leverage technology to make the entire law firm more efficient as a business.
Luckily, there are platforms that can help legal operations managers monitor key performance indicators (KPIs) like legal spending as a percentage of the firm’s revenue, the cost of a case per matter, and the cost per lawyer. This technology can also crunch the numbers so that legal ops managers can see whether the firm is optimally productive. Platforms can track the percentage of cases resolved vs. litigated, staffing and paralegal spend by lawyer, legal hours vs. administrative hours, and deadline compliance. Legal ops tools can even track the amount of time that a case takes at each pivotal point and the overall satisfaction of each client.
By leveraging innovative technology and continually re-evaluating the firm’s current processes, legal ops managers can get a clearer picture of the firm’s financial status and use the data to come up with new ways to make things run smoother, make the lawyer’s jobs easier, and make the law firm more profitable.
The future of legal operations management is constantly evolving.
Law firms’ financial, strategic, and internal decision-making is increasingly based on quantitative data instead of guesswork. That data is valuable for legal ops managers who need to evaluate productivity and streamline efficiency within the law firm. Instead of merely reporting on the data to firm leaders, future legal ops managers will play a vital role in redefining how law firms can work smarter and build a better business model.
This is a tremendous opportunity for legal ops professionals to engage in the business management of a law firm and to take part in the legal technology revolution. It is also a chance for law firms to differentiate themselves from competitors by creating value and to leap headfirst into the modern era.
Of course, there will be challenges: changing the status quo in a law firm can be difficult at times. But once law firm leaders see the value created by a great legal operations team, headed by a strong legal ops manager, it won’t take long for them to get on board.
By spending time now to build a strong legal operations team headed by an experienced, tech-savvy legal operations manager, you can modernize your firm and situate it to capitalize on future trends in legal operations.
A recent study from Bloomberg suggests that a third of law firms don’t have a dedicated legal operations function. But is that true?
To paraphrase Shakespeare, we think it’s a case of a rose by any other name smelling as sweet. Even if firms don’t have a formal legal operations team or use specific job titles like “director of transformation” or “manager of service delivery,” they’re still engaging in at least some operations-related activities. For example, they’re probably:
If you’re dabbling in these activities or considering whether your firm needs a dedicated legal ops professional, you may be wondering how deep to go down the rabbit hole in forming your team. Let’s take a closer look at what a legal ops team does and how you should go about building yours.
In a nutshell, legal operations is about running the business side of a law firm. It includes managing law firm productivity, avoiding risks, monitoring compliance, handling department budgeting, implementing technology, studying data from legal analytics tools, and sourcing and managing third-party providers, among other things.
Legal operations’ mandate is to ensure that the firm provides legal services efficiently and in a profitable way that stimulates the firm’s growth. In short, legal ops is tasked with optimizing a law firm’s performance.
According to the Corporate Legal Operations Consortium (CLOC), there are 12 main functions of a legal operations team:
CLOC explains that addressing these 12 functional areas leads to operational excellence. According to CLOC, operational excellence is “a philosophy that embraces problem-solving and leadership as the key[s] to continuous improvement and a mindset that embraces certain principles and tools to create sustainable improvement within an organization.” It involves the execution of a business strategy to reduce risk, lower operating costs while increasing productivity, and raise revenue through tactical and strategic objectives.
Given the breadth of these functional areas, it will be difficult for a single legal ops professional to oversee and optimize all of these areas. That’s where a legal ops team comes in.
As law firms feel greater pressure to do more with less, they need to find new ways to trim their bottom line and optimize their productivity. Midsize firms are already lean, so they can’t meet their goals by simply reducing headcount and raising their billable hours targets.
Legal operations helps midsize law firms find new ways to deliver better service to their clients. Not only can it help lawyers attract more clients by developing alternative fee arrangements that are beneficial to both sides of a transaction, but it can also ensure that law firms are maximizing their profitability by staffing properly. That means assigning the right work to the right level resource, whether that’s a paralegal, junior associate, senior associate, or partner.
Adding technology to the mix can simplify the practice of law and improve the quality of life for lawyers in midsize firms. And, most importantly, the data that tech tools, such as e-billing, matter management, contract management, document management, and data management tools, collect for firms can help them ensure compliance with client billing guidelines as well as understand opportunities for the firm to improve. Analytics from these tools help increase the firm’s transparency with clients and allow lawyers to better predict case budgets and outcomes.
You don’t need to be a lawyer to work in legal operations—but a legal background, whether as a lawyer with a law firm or in an in-house corporate legal team, won’t hurt. Legal operations professionals must be able to understand the law firm’s business model and be able to add value in conversations with law firm leaders.
The optimal candidate is likely someone with business acumen and possibly a financial and data analytics background. Someone with a law degree and MBA may offer the right blend of expertise for the role. But don’t be afraid to tap someone inside your firm if they’re already contributing to work on your firm’s processes, vendor management, technology, or data analysis.
The director of legal operations, sometimes called the head of legal operations, runs the legal ops team and usually reports directly to the firm’s managing partner.
The director is responsible for managing the entire legal ops team and for making higher-level decisions. These decisions might include the final opinion on resource allocation, vendor procurement, personnel matters, or leadership initiatives. The director of legal operations might also recommend whether to implement new technologies, advise on pricing structures, or suggest ideas to streamline processes that are wasting money. Usually, these recommendations are based on a synthesis of data and information provided by the lower-ranking members of the team.
It is important to hire someone with a demonstrated ability to identify and implement changes in legal technology, people, and processes. The director should also have well-developed change management and leadership skills, especially since they will be leading and acting as a role model for the rest of the team.
The Legal Operations Manager is the second in command of the legal operations team. They oversee all legal operations projects and manage team members’ day-to-day activities.
The manager should have strong leadership and communication skills since they will be guiding the team directly and interacting with a variety of stakeholders, including law firm leaders and possibly even a client’s general counsel or other department leaders. They should also have a strong sense of judgment, knowing when to share information with the director and with firm leadership. You should look for someone with years of experience managing people, driving process improvement, and collaborating across multiple departments.
A strong legal operations manager will understand the ins and outs of the law firm, including its hiring needs and the intimate financial details of the firm’s daily operations. They must be highly organized and detail-oriented with extensive experience in project management and streamlining processes to maximize operational efficiencies.
A legal operations specialist generally focuses on identifying areas of need and optimizing workflows. It is a highly collaborative role that requires strong communication skills and the ability to understand how other departments function. Examples of their work might be following up with legal operations analysts or researching new technology.
A legal operations specialist works directly under the legal operations manager. This position is usually generalized and a catch-all for the remainder of the work that falls under the purview of the legal operations manager.
It is important to hire someone who can handle a variety of projects and thrives in a fast-paced work environment with minimal guidance. A self-starter and easily motivated legal operations specialist is an excellent addition to round out your team.
A legal operations analyst is a more specialized role than that of a legal operations specialist. Unlike a specialist who (somewhat paradoxically) performs more generalized tasks, an analyst collects and synthesizes data specific to the legal team’s metrics.
The analyst does a deep dive into the functioning, caseload, work habits, and key performance indicators (KPIs) for each lawyer. This helps the legal operations manager decide where to allocate resources and how to better manage the legal department to increase profitability. Their work might affect the number of cases that each lawyer takes on, influence decisions about whether to hire additional local outside counsel or improve attorney management practices to boost productivity.
You should look for a detail-oriented individual with experience monitoring and reporting on data who can also collaborate on a larger team and between multiple departments. An analytical employee with an understanding of both the minutiae and the bigger picture will be an asset to any legal operations team.
Assembling a legal operations team might feel a bit daunting, but it doesn’t have to be. Instead, look at it as an exciting opportunity to grow your firm.
Start by identifying any gaps in your current legal operations team (or draft a plan for implementing one). Then create a plan for how you’ll start tackling the core functions we outlined above, whether it’s by recruiting new hires for the roles described here or sharing the work between existing staff. (Keep in mind, though, that legal operations responsibilities are often extensive enough to require a full-time role!)
The sooner you build out and formalize your legal operations team, the sooner you’ll start to see results in terms of more efficient processes, better client service, and more robust profits. Legal operations can also eliminate some of the headaches of practicing law, as your firm’s lawyers benefit from more organized knowledge management and accelerate their work with data-driven tech tools.
Remember that the purpose of a legal operations department varies from firm to firm based on each firm’s needs and current operating practices. Look at what your law firm needs today and strive to craft a legal operations team that can not only handle those needs but also bring your law firm into a future that you may not have yet imagined.
It’s already mid-December, and the end of the fiscal year will be here before we know it.
Evaluating end-of-year compensation for your attorneys may be the last thing (or, we’ll say it, most dreaded thing) on your to-do list as you work through closing the books for 2021.
There is some good news - you don’t have to go it alone. We were lucky enough to be joined on a webinar by Amanda Koplos, Executive Director, and Stephanie Donaldson, Controller, at Shuffield, Lowman & Wilson, P.A., a 40+ attorney, full-service law firm practicing in the areas of corporate law, estate planning, real estate, and litigation based out of Orlando, Florida.
Amanda and Stephanie have a wealth of experience in law firm operations and leadership, having worked in five firms over the course of their careers. They were gracious enough to share their own theories and best practices surrounding end-of-year compensation for attorneys. Here is what they had to say.
Amanda: In my experience, law firms typically divide compensation for timekeepers into multiple categories. Some are based on production; others are based on intangibles that are harder to measure that take into account the overall profitability of the firm or contributions that timekeepers made such as time spent on business development, mentoring other attorneys, or working on the business in a management capacity.
Stephanie: I have seen the same thing. I basically refer to it as objective compensation and discretionary compensation. Objective compensation is exactly what you think it means: there are a series of goals and if an attorney hits those goals, they receive that objective compensation or a combination of salary and bonuses. Discretionary compensation takes into account all of the things previously mentioned but it can also have components such as “overachieving” on objective goals. For example, if billable hours are a function of your objective bonus, and an attorney were to hit those and go over, some firms might add that into discretionary compensation.
Amanda: Lots and lots of spreadsheets!
Stephanie: While that is true, I recommend a few different methods for gathering information. I rely on our accounting system to produce reports. However, in specialized circumstances, I am exporting data from our practice management software and manipulating it in Excel. These reports vary throughout the year and the only way I am able to keep track of them is by running reports on an ongoing basis. For example, I may give each timekeeper one report every month so they can see how they are progressing, while also running a report at the end of each quarter, and finally, at the end of the year.
Amanda: Not to mention, these reports may vary depending on who you are giving the report to. An individual report is going to look significantly different than the one given to firm management or practice group leaders. Those reports are different from the individual attorney reports because leadership needs to see consolidated timekeeping information. My advice here is that you really need to put a procedure in place at the beginning of the year, and prioritize updating and reporting monthly. We know what a time crunch the end of a firm’s fiscal year is and you don’t want to spend hours in December creating standard reports.
Amanda: At the various firms I have worked at your “need” for information differs based on your position. Here’s an example: one firm might track collections based on who worked on the matter or by working timekeeper, meaning collections will become a driving factor for individual attorney compensation. Each attorney is going to want a basic report every month that shows the total collections on the matters they have worked on. Since it is just the collections attributable to them, they don’t need to know (nor do they probably care) what all of the other timekeepers collected on the same matter. So, you want a report that shows you “collections by working timekeeper” and you want to be able to filter it for one attorney with the ability to set date ranges such as a month, quarter, or year. You can pull those reports directly out of a good time and billing system. However, that shows only one side. You also need the ability to see how that ties to compensation for individual timekeepers by taking the raw data on collections and combining it into a report that shows the progress toward a bonus goal.
Stephanie: You need to make the report simple, yet functional. I’m a numbers person so I always want to dump a ton of data into one report. But, if the attorney can’t understand it, it’s a waste of time.
Amanda: I actually had a conversation with an attorney one time. She said, “yeah I get those reports every month but I never look at them or understand them.” I was befuddled by that because that report would help her plan how to make more money. So, I simplified the report for her, she finally “got it” and it was much more successful for everyone involved.
And that’s just reports for individual timekeepers! Then, we might have more in-depth reports for practice area chairs and for the managing partner that help leadership look at everything going on from a full-firm view. Sure, you need the individual numbers, and firm administrators need access to them, but you need to be constantly benchmarking where you are now and how you’re going to fare at the end of the year. A good controller gives you reports that are both historical and include predictions.
Stephanie: Since we’re talking about compensation in firms where there is a lot of variable compensation, (in other words: more discretionary than objective) I have to predict how much compensation we will be paying out on a monthly, quarterly, or annual basis, in addition to predicting how much cash we’ll need to pay that compensation and how the budget (and thus bottom line) is impacted by those predictions.
Amanda: It’s a lot of reports and it’s important to have an organization system. We’re even developing better systems for that. We are investing in pushing information to people and building reports that are specific to users that they can access easily, ideally within their time and billing system.
Stephanie: When a firm pays based on originations, the larger the firm, the harder it is to track that manually. So, you have to use a system that is sophisticated enough to handle variables. For example, originations can change if a rainmaker leaves the firm and doesn’t take the case/client/matter with them for whatever reason. They can also change if an attorney starts as an associate and is then promoted to partner, as those roles are paid differently. There isn’t a set way that situations like these are handled; I’ve seen it done in different ways at different firms.
You also need to be able to do split originations and have origination split changes throughout the year through a combination of an accounting system and a manual system. As of now, we do find that we pull information out of our practice management software to get the raw data but still have to manipulate it a bit to line up with the actual compensation plan.
Amanda: At the end of the day, we’re all trying to get to the same outcome, which is getting the numbers where we need them and making sure we can all make educated decisions as a result. Stephanie functionally gets everything we need in terms of origination in place right at the beginning of the year, setting us up for success throughout the year.
Stephanie: Origination is a combination of an automatic and manual workflow. That’s why we originated the “two-look” process. Anytime in our compensation program where manual data entry is required we double-check each other’s work. It is a team effort.
Stephanie: Everything changed when COVID hit!
Amanda: It’s true. Some firms place a lot of value in business development, so those compensation plans might have a component of needing to produce a certain number of business development hours or needing to attend a certain number of functions throughout the year. When everything was shut down during COVID, that was interesting because those firms had to rewrite compensation plans because they were very heavily based on that origination that wasn’t happening as much.
Stephanie: Sometimes that requires us to create a second budget based on what we think might happen because obviously, the last two years were so up in the air. There is a lot more playing it by ear now.
Amanda: First of all, make sure you can easily measure it and report it before it becomes a component of compensation, even the discretionary portion. And if you’re using a third-party system, (hopefully you are) you want to make sure what you want to measure can be reported by that system. While it’s not always cut and dry, if you manage expectations early on and keep stakeholders informed throughout the year it’s easier for everyone.
I also recently read two books that I highly recommend for anyone evaluating their law firm compensation model: Compensation Plans for Law Firms by James Cotterman and Dividing the Pie: Law Firm Compensation Systems by John Westcott, Jr.
Compensation is also so personal; I would recommend hiring a consultant or a neutral third party to review it and make recommendations.
End-of-year compensation is a tough time of year. You’re pulling a lot of reports and making changes on the fly in order to deliver the best outcome for all involved. While you’re going through the process, (which you may be currently and that’s why you’re reading this) it is important to think about ways you can prevent yourself from having to reinvent the wheel next year.
Don’t lose sight of all the work you did to close out the year. Take a moment to reflect in January to make sure your team is in alignment and ready to go with smoother processes in place for the year ahead with these tips we’ve provided today.
Legal operations is everything that it takes to run a law firm aside from the actual practice of law. It encompasses strategic planning, legal project management, financial oversight, and legal industry expertise.
The goal of legal operations is to improve law firm performance. Legal operations experts cover a broad range of fields, including data analytics and reporting, engineering, finance, and marketing. Operations professionals work with law firm management to choose the right legal technology, identify and manage risks, and monitor compliance. And above all else, their goal is to deliver value, whether that’s through keeping costs down or increasing productivity and efficiency.[/vc_column_text][/vc_column][/vc_row][vc_row type="in_container" full_screen_row_position="middle" column_margin="default" scene_position="center" text_color="dark" text_align="left" overlay_strength="0.3" shape_divider_position="bottom" bg_image_animation="none"][vc_column column_padding="no-extra-padding" column_padding_position="all" background_color_opacity="1" background_hover_color_opacity="1" column_link_target="_self" column_shadow="none" column_border_radius="none" width="1/1" tablet_width_inherit="default" tablet_text_alignment="default" phone_text_alignment="default" overlay_strength="0.3" column_border_width="none" column_border_style="solid" bg_image_animation="none"][vc_column_text]The seemingly sage advice to “run your law firm like a business” misses the mark. Law firms are businesses. They exchange services (and sometimes goods if they’ve productized their services) for money. They also meet the standard definition of a “business,” which is an organization engaged in commercial or professional activities.
So why have so many law firms resisted the idea of acting like the businesses they are?
Some lawyers claim it’s because the law is a noble profession. But, it’s more likely that law school doesn’t teach them how to run a business. Many aren’t well-versed in financial principles. They don’t value measurements and metrics.
For too long, lawyers have focused on practice, not process. But in recent years, clients have forced law firms to take a hard look at the numbers, their productivity, and their operational efficiency. With competition at an all-time high and clients demanding better service at a lower cost, it’s essential for law firms to rethink their business model.
Enter legal operations.
In the late 1980s to early 1990s, legal operations was a fledgling concept among in-house counsel, with corporate legal departments primarily focused on managing outside counsel.
Over time, that focus shifted. By the mid-2000s, corporate law departments were starting to look to legal operations for strategic insights into their outside counsel spend and risk profile.
In the last 20 years, the role of legal operations has become much more prominent, helping organizations manage complex legal issues and retaining the services of legal service providers to drive efficiency and lower costs. These issues continue to be focal points today, along with one more: establishing a culture of continuous improvement.
Today’s clients continue to place pressure on law firms to deliver competitive pricing and better service. In response, firms are striving to maximize their resources so they can do more with less. Now, law firms have adopted much of this mindset, looking for ways to reduce costs, automate processes, and drive greater efficiencies.
The Corporate Legal Operations Consortium (CLOC) has identified 12 key legal operations functions. Though CLOC envisioned these practices would be implemented by in-house legal teams, most apply to legal operations roles in law firms today.
Here is a list of the typical functions:
All of these functions may be combined within a department, or they may be carried out separately under the oversight of a legal operations manager.
The biggest challenge that legal operations professionals face is change management. The law is a system based on precedent and law firms are no exception. Lawyers are generally change-averse and prefer to maintain the status quo. It’s hard to convince lawyers that they need to do something differently, especially if what they’ve always done seems to still be working.
Other challenges include budgeting and resource allocation. Law firm leaders are often reluctant to add budget items or headcount to new initiatives, especially if they’re still skeptical about the value that a legal operations team can provide.
Tackling these challenges will require you to establish a business case for a legal operations role or team. If you can quantify the payoff in terms of time saved (automating manual processes with technology), dollars saved (optimizing vendor pricing), and client satisfaction (knowledge sharing and more efficient staffing), you’ll be more likely to convince firm leaders that legal operations is worth the investment.
Recruiting a strong leader with a finance background, technological acumen, and legal experience, whether as a practicing attorney or as a leader in another firm, can lend the department credibility. And, of course, getting quick wins on small projects early can prove value and increase the likelihood of buy-in on more ambitious projects.
Legal operations helps law firms drive efficiency across the board.
Between timekeeping, billing, and accounting, law firms have a lot to manage financially. That’s not even including client demands for lower rates and alternative fee arrangements! Legal operations can help firms build financial models that help choose optimal fee arrangements that please clients while yielding a profit. They can also compare firm vendors and help structure competitively priced deals.
In other words, legal operations helps law firms create more value.
On the operational front, legal operations rescues overworked staff from a variety of tasks, including contract management, knowledge management, and data governance. Legal operations professionals can help firms choose the right solutions to capture and track information to ensure nothing falls through the cracks, empowering lawyers and other staff to do more with less.
Law firms are known for being reactive. But, legal operations allows firms to adopt a more proactive approach. For example, legal operations can use data analytics and reporting to predict the right course, set reasonable goals and metrics, and develop a long-term strategic plan to improve the firm’s market position.
Law firms often invest in solutions serially, looking to solve one problem at a time, but with legal operations software, the key is to find a comprehensive solution that can evolve along with your law firm.
Effective legal operations software for law firms should handle solutions such as e-billing, timekeeping, accounting, matter management, document management, reporting, and client portals. The more interconnected these systems are, the more intelligence they deliver, and the better your firm’s results will be. It’s even better if the legal operations platform integrates with other systems, allowing firms even greater insight into matters and projects while enabling seamless client service.
Comprehensive legal operations software solutions help law firms save time, reduce costs, and improve client service. Some of the ways that law firms can use legal operations software to enhance their performance include the following:
Strong law firms can use the efficiencies generated by legal operations software to differentiate themselves in a crowded market. With the right legal operations tools in place, firms can improve their client service and deliver greater value.[/vc_column_text][/vc_column][/vc_row]
