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.
How has legal operations evolved over the years?
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.
What are the key functions of a legal operations role or team?
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:
Business intelligence: Using data to make better decisions, including using data analytics to identify opportunities to optimize firm processes and workflows and to focus the practice on understanding clients’ needs.
Financial management: Developing budgets and forecasts to improve predictability and encourage the responsible usage of resources.
Vendor management: Choosing and onboarding the right service providers, negotiating fair pricing models, and performing due diligence on prospective vendors.
Information governance: Creating policies for sharing and retaining information, managing data security, and ensuring compliance.
Knowledge management: Giving lawyers and staff access to accurate, up-to-date information for matters and firm business as well as capturing the knowledge of team members.
Organization optimization and health: Creating a firm culture based on clear values, building a pipeline of leadership talent, and strengthening teams by creating a hiring strategy designed to recruit a mix of skills and perspectives.
Practice operations: Assigning work strategically so everyone is using their skills and working at the top of their capabilities.
Program/project management: Enabling the firm to lead firmwide initiatives, such as setting new policies or directing projects and programs, and managing change without distracting from the firm’s core work.
Service delivery models: Creating a sourcing model that matches the right work to the right resource.
Strategic planning: Prioritizing projects that align with market trends, client needs, and competitive forces.
Technology: Transforming manual or repetitive processes with automation, finding new ways to solve problems, and integrating tools to improve client work and firm oversight.
Training and development: Equipping employees for success with effective onboarding and engaging employees with continuing development opportunities.
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.
What challenges do legal ops professionals face? How can these be solved?
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.
How does legal operations increase efficiency?
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.
Can legal operations software be used to improve performance?
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.
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]
As some semblance of normalcy returns to a legal industry forever changed, many law firm leaders are making long-term plans for their physical office spaces. In addition to traditional considerations about cost and location, safety considerations and potential business disruptions have been added to their long list of concerns.
At the height of pandemic shutdowns, virtual work became a widespread necessity, leaving thousands of expensive law offices empty. Many firm leaders began to question the value and role of the physical office space, choosing to either move to a 100% virtual business model, downsize considerably, or reconfigure the utilization of their spaces.
Law firms nationwide are redefining the traditional law office and here are some trends evolving out of these changes:
Moving to Virtual
In a virtual law firm setting, attorneys and staff perform all client and administrative services within a cloud-computing virtual environment. Tech tools, such as legal practice management software and conferencing platforms, allow firms to operate from any location without the need for a physical office.
While the virtual office has been a reality for many solo attorneys for more than a decade, more small and medium-sized firms are now moving in this direction for a variety of reasons:
Tech innovations have made the transition to virtual easier to navigate
Promoting a safer working environment for firm members
Even with so many benefits, virtual office arrangements raise serious concerns about ethical compliance, client confidentiality, and the supervision of law firm staff members. In making this change, law firms must maximize their use of technology to effectively meet these demands.
Reducing the Financial Footprint
The explosive growth of virtual work arrangements has sparked conversations about the necessity of physical office spaces. Within an industry where large office buildings and prestigious addresses equate to status, law firm leaders began questioning whether a reduction in their real estate footprint could offset financial challenges brought on by the pandemic.
Even some of the nation’s largest law firms have considerably downsized their office space, doing away with expansive libraries, large corner offices, and expensive downtown views. These previous law firm norms are being replaced with standard-sized offices for all firm members regardless of seniority and the reduction of common spaces. Trendy collaboration areas and floating workspaces that entered the law firm environment in recent decades are becoming a thing of the past.
Hoteling is another office space management option garnering attention among law firms. Under these arrangements, instead of having assigned offices and workspaces, firm members schedule their use of shared workspaces such as desks, cubicles, and offices ahead of time. This technique essentially takes the finer points of residential hotels and applies them to an office setting for the benefits of a flexible workplace.
Some of the advantages associated with hoteling include:
Easier adherence to social distancing norms
Effective utilization of space
Improved productivity
Cost savings
While these tactics may result in some level of financial savings, serious questions have been raised about the long-term effects of downsizing efforts on the culture and cohesion of a legal practice. Particularly within a large firm, collaboration plays a major role in meeting client expectations, so firm administrators must weigh the potential loss of camaraderie that may result from these office decisions.
Promoting Flexibility
Flexibility has evolved from being an added bonus to an absolute necessity. As law firms redefine the physical law office, they do so with an eye towards the future and the potential for another business interruption in the months or years ahead. The pandemic has made it painfully clear that law firms need systems that allow for quick pivoting to meet unexpected circumstances.
Firms are accomplishing this goal in a number of ways, each requiring its own level of elasticity. A one-size-fits-all model does not exist because every firm has its own dynamics. Employee satisfaction, specific practice area needs, client expectations, technology, and policies all play a role in how firm leaders and administrators incorporate flexibility into their office planning.
Risk assessment is a standard aspect of practicing law, but that term has taken on a whole new meaning as a vital component of office decision-making. Leaders must assess potential hazards within the office and implement strategies to address them. That includes adding safety measures, such as more frequent cleanings and space dividers, to the office environment.
This also means evaluating the needs of individual firm members, especially those who are more vulnerable to illness due to age or underlying conditions. Within a flexible work environment, firms may allow these members to continue virtual work or implement other social distancing policies within the physical office.
Flexibility at your law firm should also include the ability to quickly pivot in the event of another shutdown or some other interrupting occurrence. This includes ensuring that the right technology is in place to support virtual law firm operations and that your employees are adequately trained in what steps to take should another interruption occur.
The Takeaway
Law office flexibility will require some experimentation as leaders struggle to adapt to evolving needs. Data analysis regarding space usage and employee feedback should be an ongoing part of the process.
Now, more than ever, it is important to be adaptable in all aspects of your business, including financially and operationally. The right legal technology tools can support virtual and hybrid work while ensuring both productivity and client confidentiality.
A successful attorney-client relationship begins with the client intake process. Not only does it formally introduce the client to the firm’s procedures and requirements, but it also helps firms identify potential issues that could cause delays during representation.
A lot of firms operate with unsystematic onboarding procedures that vary from one client to the next, and these bad habits can thwart successful client relationships.
Improving the client onboarding process requires both efficiency and simplicity.
With the right tools and the following tips, law firms can create a client onboarding experience that is quicker and hassle-free.
Pre-Screening Process
With a pre-screening process, law firms evaluate potential matters to identify any issues before the onboarding process even begins, saving valuable time and resources.
This can be accomplished in a number of ways, including:
A mandatory client intake form on the firm website that clients must complete prior to their first appointment
An automated data-gathering email initiated at the client’s first contact with the firm, requesting preliminary information about their case
A legal practice management system that includes conflict checking features
Standardized Data Collection System
Organization is key to simplifying the onboarding process, so you need a standardized system that repeats the same general procedures for each client’s onboarding experience.
This may involve such tools as:
Pre-printed forms tailored to the firm’s specific areas of practice
Preliminary review of completed forms by a support staff member to ensure accuracy before initial attorney review
An intake checklist to track the progress of all initial agreements, acquisition of all necessary information, and payment of all required fees
Standard intake questions designed to expediently secure adequate information from clients during the onboarding meeting
Remote Capabilities
While some clients may prefer to meet in person, others do not have the time or ability to come into the office for an intake meeting. Remote onboarding capabilities provide clients with the convenience and accessibility that they appreciate, demonstrating a commitment to client service and respect for your clients’ time.
You benefit from remote onboarding capabilities by starting the client relationship on a positive and efficient note. For example, when coming into the office for an intake meeting, a client may forget to bring important information that is needed for their case. However, when meeting remotely, they can participate from a location where they have access to all relevant documents and records, effectively avoiding potential delays in the initiation of representation.
Calendaring
No attorney wants to start their representation of a client by missing the first court appearance, but that is exactly what can happen as a result of inadequacies in the client intake process.
That is why calendaring should be a regular part of your onboarding process. When clients come in with court dates or deadlines already in place, those should be immediately added to the firm calendar to ensure that they are not missed while all onboarding forms are reviewed.
Tracking New Clients
Law firms need a practice management system that allows them to store all onboarding and client information in a centralized location that helps keep track of both new and existing clients.
These platforms help ensure that nothing falls through the cracks between onboarding and initiation of work. Consider the following:
When notes are taken by different firm members during the various steps of the onboarding process, it can lead to disorganization. Electronic notes are easy to use, trackable, and accessible to everyone working on the matter. When used correctly, they help to promote the provision of quality representation.
Some legal practice management systems allow firms to set reminders or alerts for specific actions on a case. For instance, firms can set a reminder for a client that requires a callback following onboarding or for a client that needs to provide additional documentation. Having these safeguards in place helps streamline the representation.
Efficient client intake begins and ends with the systems and tools that law firms implement. The right legal practice management software can prove instrumental to handling this important start to legal representation, thereby enhancing clients’ experience at your firm.
Describing a criminal defense legal practice as busy is a serious understatement. On a daily basis, these firms handle countless criminal matters, many with some pretty high stakes. When dealing with something as serious as a person’s freedom, criminal law firms need systems in place that help them provide stellar legal representation. That includes maintaining client files in an organized manner, staying ahead of critical deadlines, and invoicing with the highest level of efficiency.
This blog will take a dive into the features criminal defense practices need and why they're important.
Calendar Management
It is not uncommon for a busy criminal defense practice to simultaneously handle hundreds of criminal matters, all in varying stages of completion. This equates to a calendar full of preliminary hearings, discovery due dates, court appearances, and filing deadlines. Keeping up with a calendar this full can be virtually impossible without the right tools in place. Further complicating matters, even a single missed deadline can have detrimental consequences for the client, as well as the law firm.
Legal practice management software can ease the burden of managing multiple criminal law attorney calendars through the integration of intuitive calendaring tools. Individual attorneys can easily keep track of their own deadlines and appearances, while the criminal law firm administrator can keep an eye on the entire team’s upcoming schedule. Here are some calendaring features that particularly benefit criminal law practices:
Calendar view options that let firm members easily choose between personal, team, or firm-wide calendars.
Seamless calendar syncing between the legal practice management software and integrated platforms like Office 365.
The ability to set deadlines and event reminders.
Convenient sorting options allow firms to group events and tasks by client, matter, status, or responsible firm member.
Statute of limitations deadline tracking and reminders.
Streamlined Intake
The urgency of a criminal law matter often requires a speedy commencement of representation. New clients typically come in feeling as though they have the weight of the world on their shoulders, and they expect immediate assistance. They may need a speedy bail motion filed or they may already have a court appearance scheduled for the following day.
These constant and urgent demands mean that criminal defense law firms need the ability to onboard new clients quickly without the delays that can come from inefficient processes. When it comes to criminal matters, clients don’t have a moment to lose and neither do their attorneys.
With legal practice management software that streamlines the intake process, law firms can quickly get clients onboarded so that the important work of representation can begin. For instance, automated conflict checks can be extremely useful within a busy criminal defense practice. This tool help firms efficiently scan all of their matters for potential conflicts of interest so attorneys quickly know whether they are able to take on a case.
Website intake integration is another useful tool for expediting the intake process. With this resource, firms can collect necessary client data directly from an intake form that was completed through the website. This saves firm members the time of recollecting information that the client has already provided.
Once the intake process is complete, representation can begin. Criminal attorneys can get their clients up to speed on the game plan by providing them with access to everything they need to know. By using a legal practice management system that includes client portal features, firms can quickly make new clients aware of upcoming court dates, discovery needs, and billing details.
Client Communication
As previously stated, criminal clients are often in the midst of extremely stressful situations and they need the assurance of knowing that their attorneys are diligently working on their behalf. The best way to accomplish that goal is through consistent client communications. Criminal defense law firms need tools that help them achieve a client-centered experience.
Client portals are useful tools for providing clients with the information they need. Firm members can quickly upload regular information and clients can independently access their account any time of day or night. This not only promotes client communications, but it also maximizes efficiency. Instead of calling into the firm with their questions, clients can simply log in to get most of the information they commonly need.
Other practice management software features that help with client communications include mobile texting tools and conversation tracking resources that track communications directly into a matter for easy reference when needed. With an automated time capture feature, criminal defense law firms can also easily track time spent on communications to promote accurate billing.
Firm Collaboration
When handling complex criminal matters, law firms often distribute individual tasks among several members of the firm. This type of divide and conquer strategy needs legal practice management software that lends itself to team collaborations with such innovative tools as:
Chatting features that allow for easy and trackable communications between team members.
Automated case flow tools that automatically assign matter tasks.
Team calendaring to keep all members up to date on matter deadlines.
Remote access capabilities so that team members can securely access necessary case files and documents when working remotely or within a different office location from other team members.
A workflow system that automatically updates documents and data so that the entire team has the most accurate and up-to-date versions.
A central location to store all notes related to a matter.
Document Management
A criminal defense attorney who shows up to court with a disorganized and messy case file is an attorney who loses the confidence of their client. Disheveled case files make it difficult to locate necessary information, especially under the pressure of a crowded courtroom. This is why it is imperative that criminal defense law firms maintain their files in an organized manner and document management tools help get that done.
Document management systems save criminal defense law firms countless hours by streamlining the competitive tasks of document creation and filing, along with searching for relevant information. They also allow firms to share documents with clients and collect documents from clients through a secure platform. Firms that already utilize a document management system like NetDocuments can benefit from a law practice management system that offers complete NetDocuments integration.
Preparing the best criminal defense for clients requires appropriate management and organization of matter files. Document management features help criminal defense law firms digitize volumes upon volumes of documentation for improved workflow, organization, and legal industry compliance.
The Takeaway
Law practice management software gives criminal defense firms the tools they need to navigate a case from intake to payment using a centralized hub. Comprehensive case management, combined with integrated billing and accounting tools, keeps law firms on top of their numerous responsibilities. By automating many of the repetitive tasks that come with running a criminal defense practice, law firms can maximize productivity and remove the roadblocks that can hinder them from delivering on their promises of top-notch representation.
Any human resource (HR), firm administrator, or back-office professional working within a law firm environment can affirm that firm culture creates its own set of distinct challenges. Regulatory guidelines and industry standards require considerations not often seen within other business industries. While most big law firms maintain an HR department to address these complexities, HR issues often wind up on a law firm administrator’s long list of duties.
This blog will take a look at eight unique HR challenges commonly experienced by law firm administrators.
1. Finding the Best Legal Talent
Law firms constantly compete with one another to attract new talent. With such a high level of competition, firms need financial incentives, like aggressive compensation packages and new hire bonuses, to stand out from the crowd. While administrators typically don’t make compensation decisions, they do have significant influence to craft a workplace culture that attracts new talent. Legal professionals want to work in an environment where they feel heard and appreciated. By implementing policies that address this desire, law firm administrators can help their firms attract quality new hires.
In recent years, younger law school graduates have also voiced a preference to work with firms that have taken public stances on social issues and actively support initiatives that they find important. These candidates want to feel good about where they choose to work, and some of them are even willing to forgo larger salaries to meet this philosophical need.
Recognizing this growing trend, administrators can take steps to highlight their firm’s philanthropic efforts during the recruitment stage. Whether it's pro bono representation or direct financial contributions, charitable information should be highlighted when recruiting.
2. Workplace Diversity
Over the past year, the lack of diversity within law offices has garnered a lot of attention, with increasing criticism about the industry’s lack of racial, ethnic, and gender inclusion. Traditional recruitment efforts to find and secure new associates often create applicant pools that are far from diverse, so this is where firm administrators should start when seeking to address the issue.
For instance, administrators can suggest that firms expand their recruitment efforts to Historically Black Colleges and Universities (HBCUs) and job fairs that focus on promoting diversity. By casting a wider net, firms can better position themselves for the consideration of a more diverse candidate pool.
Administrators can also take steps to revamp their firm’s recruiting processes and minimize bias. Tools like blind recruiting and diverse hiring committees promote diversity and help law firms meet their goals.
In addition to finding the best diverse talent, law firms also need strategies to keep them. Sustained law firm diversity requires an environment where all attorneys feel welcomed and valued. Firm administrators can promote this culture with policies such as:
Clear standards for the treatment of all employees
The provision of diversity and inclusion training
Mentoring opportunities for minority firm members
The creation of a diversity committee that provides leadership with valuable feedback
3. Retain the Top Legal Talent
Getting talent into the firm only represents half of the challenge. Competition among law firms not only exists at the first-year associate level, but also drives lateral hires. Traditionally, law firms have been seen as long-term commitments, with associates working for years to reach the partner track. But increasing numbers of law firm attorneys are choosing lateral movement to a different law firm over tradition.
For law firm administrators, this means crafting strategies to keep firm attorneys happy and satisfied in their current positions. Here are some suggestions:
Identify what drives lateral movement between law firms. For some attorneys, it may be dissatisfaction with the workplace environment. Others may feel stagnated with no opportunity for professional development or upward movement.
Maintain competitive compensation. Money is the top motivator behind the lateral attorney movement. Consider whether the compensation paid to your firm’s top talent is comparable to industry standards. If it isn’t, communicate your concerns to firm leaders and advocate for better compensation packages.
Maintain a satisfying firm culture. Attorneys want to work where they feel appreciated. By establishing a workplace environment that promotes those feelings, administrators can better position the firm to keep high-performing attorneys, as well as valuable legal support staff. Offerings like flex time and remote work options can be useful. But firm administrators also need to ensure that the culture consistently feels inclusive and welcoming.
4. Technology Resistance
Legal tech innovations are constantly improving law office management and the practice of law. From legal practice management and document production to legal research and court document filing, advancements in technology have swept through the legal industry.
Unfortunately, many law firm administrators find it difficult to implement these new technologies due to resistance from firm members. Some senior attorneys may not want to change their current methods of getting tasks done. They may fail to recognize any value in implementing new technologies.
Addressing this resistance can be done through HR policies that require a certain number of tech training hours each month. Administrators can also consider peer training programs between more advanced and less advanced firm members. Law firms have a duty to stay abreast of standard legal industry technologies and firm administrators must stress this duty as an HR responsibility.
5. The Stress of Legal Practice
The practice of law is notoriously stressful. On a daily basis, attorneys work under tight deadlines to produce results that are free from error, beneficial to their clients and sometimes even life-changing. While attorneys stress about their outcomes, staff members stress over hovering attorneys and their long list of tasks.
Together, all of this creates an extremely stressful environment, where late hours and poor work-life balance become the norm. This leads to depression and anxiety, which are widespread problems among attorneys. Mental health issues cost law firms substantial amounts of money, so it is in the firm’s interest to address these concerns.
While administrators cannot do much about court timelines and demanding clients, they can implement policies that seek to address the amount of stress experienced by law firm members. Administrators should consider policies such as:
Mentorship programs and shared experiences that promote camaraderie and prevent negative feelings of isolation.
Mental health self-assessment tools for firm members
Requirements that firm attorneys and legal support staff take their regular vacations and work reasonable hours.
Praising attorneys for working early and staying late only exacerbates an already stressful situation. An unhealthy work environment can diminish productivity and leave attorneys feeling burnt out.
6. Continuing Education Requirements
Attorneys have a requirement to earn a certain number of continuing legal education credits each year. In most business environments, HR takes on the responsibility of tracking employee education efforts. However, within a law firm, CLE also comes along with reporting requirements. Particularly within a large firm, this can quickly become an all-consuming task. For this reason, many firms choose to have a dedicated staff member to track and report CLE efforts. This individual may fall under the supervision of HR or the firm administrator.
In addition to CLE requirements, continuous education may also include such things as professional development training for improved client contact, marketing techniques for improved rainmaking, and courtroom demeanor presentation skills. Law firm administrators may also implement training for legal support staff in the form of court filing rule updates and technology training.
7. Firm Hierarchy
The reporting structure of a law firm can be extremely convoluted and tricky to maneuver. The lines of supervision often overlap, creating an environment ripe for potential conflicts. For example, attorneys supervise the work of their support staff. However, those staff members report to HR for personnel needs. With this dynamic in place, a simple vacation request can become a big problem. While HR may approve the request, the supervising attorney may reject it due to a pressing case deadline.
Another unique characteristic of law firm hierarchy is the status system that commonly exists. Founding partners, shareholders, and top rainmakers often make up the leadership level of the firm. Non-equity partners fall a little below them, followed by attorneys, then legal support staff, and administrative support staff – in that respective order.
Under circumstances like these, it can be hard to identify where the HR department fits in and what power they have to effectively carry out their duties free from interruption. This creates a situation where law firm administrators routinely walk a fine line between HR and firm management.
8. Outsourcing Law Firm Tasks
Outsourcing has become a common practice within the legal community as law firms look for ways to offer a high quality of service while cutting costs. For instance, when a big case walks through the door, law firm leaders and administrators may find it more efficient to bring on contract attorneys and paralegals rather than pulling their existing staff from other client matters.
While outsourcing can promote profitability for the firm, it can present some challenges on the HR side. Firm administrators must ensure that contract workers remain in compliance with confidentiality and qualification. Even as temporary staff, these legal professionals must meet all professional requirements.
The Takeaway
Law firm HR duties often spill over into management and administration. As such, law firm administrators need to consider HR challenges and be prepared to address them as needed.
In an environment where the business side of practicing law equals the importance of the provision of client services, legal operations have emerged as a driving force behind law firm administration. Evolving from the combination of various support and administrative tasks, legal operations are the processes and activities that help legal departments efficiently serve clients by applying business and technical principles to the delivery of legal services. While commonly used in the discussion of in-house legal departments, the concept can also be applied to law firms, particularly those that routinely provide corporate legal services as outside counsel.
The Evolution of Legal Operations
Many corporate-centered law firms currently face the challenge of shrinking corporate budgets even as service demands increase. Meeting this challenge, while simultaneously providing clients with stellar service, requires a greater focus on legal operations. Through strategic planning, project management, and technical innovations, legal operations help law firms streamline their financial responsibilities so that attorneys can place their focus on the actual practice of law.
Over the last few decades, corporate law firms and legal departments have been expected to shift their focus from solely advising business clients to driving value for them. They have been charged with streamlining services and managing operations more in line with business clientele. In doing so, firm administrators have placed a significant focus on analyzing current firm practices and making necessary adjustments, including the reorganization of processes and procedures for cost savings and greater operational efficiency.
While legal operations have been part of the legal industry for decades, it is still a relatively new concept that is continuously evolving. The following trends will likely impact legal operations over the coming years.
1. Increasing Importance of Data Analytics
As law firms pursue greater cost savings in the provision of legal services, reporting and data analytics serve as a driving force. Firms will increasingly rely on reporting to provide information about the effectiveness of administrative and legal service procedures. From financial reports like accounts receivable to administrative data like attorney profitability and matter management budget reports, data analytics arm firm administrators with the information they need to make strategic decisions about the firm’s direction for greater profitability.
Scaling Up with Legal Technology
Legal technology innovations will continuously play an integral role in helping law firms and legal departments streamline procedures and scale-up in response to growth. While legal technology isn’t new to the industry, service providers constantly introduce new and innovative solutions for meeting the specific needs of legal practices.
Much of the buzz around legal technology has centered on Artificial Intelligence (AI) in recent years. Through the use of algorithms and machine learning, many law firms currently use AI to streamline a variety of law firm procedures, including legal research, the performance of due diligence, document review, and even some forms of legal writing. But even with the increased use of AI, law firms have a more valuable tech tool when scaling their processes for growth.
Every law firm needs a practice management system at the center of its legal operations platform. These tools support the foundation of the firm, providing administrative systems and client matter management, as well as the data and reporting functions that firm administrators need for informed decision-making. The right practice management system promotes efficient law firm operations along with quality client experiences. From client relationship management and the efficient movement of matters to e-billing and document management, practice management software serves as a catalyst for streamlining operations and driving efficiencies within the law firm.
2. Alternative Legal Service Providers
Alternative Legal Service Providers (ALSPs) have provided traditional law firms with some unexpected competition as clients increasingly choose these cost-effective options. ALSPs are nontraditional providers that offer legal clients assistance with a variety of services, from legal research to litigation support. Increasing numbers of corporate counsel and law firm clients have turned to ALSPs for their technical innovations and specialized expertise at lower costs.
However, though ALSPs have been largely seen as competition to traditional law firm representation, law firm administrators increasingly recognize the value in these services. Not only are they consulting with these entities about the latest legal technologies, but they are also choosing to implement ALSP offerings into their own provisions of service, creating a sense of collaboration rather than competition.
3. Increased Use of Alternative Fee Arrangements
Alternative fee arrangements have gained considerable momentum throughout the legal community over the last decade. An industry firmly entrenched in the billable hour has begun offering a greater variety of pricing options, including fixed fees and customized hybrid billing arrangements.
Clients prefer these options because they offer a more transparent provision of service, providing a greater understanding of the total cost of their cases. Law firms have found value in these arrangements because they are easier to budget for and provide greater billing predictability. With alternative billing, law firms can provide their clients with affordable and efficient legal services.
Although the legal community remains hesitant about the widespread usage of alternative fee arrangements, many of the latest legal technologies have been equipped with tools to properly track and manage these options. As a result, these arrangements will likely affect legal operations managers in the year ahead.
Legal Operations will Continuously Evolve
As in-house legal departments and large corporate law firms seek to meet the immediate needs of a changing legal environment, legal operations will continuously play a major role. Firm administrators will identify new methods and tools for streamlining firm operations, saving costs, and providing clients with top-notch service.
There is a common aphorism that often gets applied to life that goes, a rising tide lifts all boats. And it’s true in many cases. In good times, many businesses can see great returns, and the economy and emotional spirit of both large and small groups or populations of people can be elevated. But these past few years have been different. We are coming out of a really trying time, but something we have heard reiterated time and time again is that through challenging times, a firm's branding and marketing efforts become critical.
More importantly, when the going gets tough, the need to heavily rely on data to gain insights and direction becomes even more important as well. To be able to gauge trends and monitor consumer patterns is how firms will thrive through the chaos. For example, law firms that were marketing in 2020 saw a big drop in revenue in Q2, similar to firms who did not market, but, their leads and overall numbers were higher than they were in 2019 prior to the pandemic. And then into Q3 and Q4, they remained ahead of their previous years' numbers. The idea here is that although there were fewer people searching for legal services during the height of the pandemic, the jobs won went to firms that were consistently marketing.
Visibility and Searchability
The way people are finding law firms, especially via their websites, is significantly more fragmented than it has been. This fragmentation is primarily the result of the omnichannel environment we live in today. On any given day, you have people surfing Facebook, Google, local newspaper listings, online newsletters, podcasts, radio, the list goes on and on. The bottom line here is your potential clients are finding your firm in a lot of different ways.
Create and Highlight Content
Traffic from social media almost doubled in that second quarter during the pinnacle of quarantine, and surprisingly enough, it stayed almost 4% higher throughout the rest of the year than it did in 2019. We are seeing more traffic come from people on social media than ever before. And not only are these people spending more time on social media, but they are also actually taking the next step and going to law firm websites. The strategy here indicates that you need to be in more places online and the easiest way to achieve this is by producing content. Some of you may have read that and felt a wave of panic but don’t worry! When you begin thinking about this content, think about the content your firm would be best at producing; the areas of expertise your attorneys, firm administrators, paralegals and the like possess and capitalize on that! And utilize your ability to repurpose that same content in other areas as well. For example, if you have a blog, consider using that material and making it a video.
Another thing to think about in terms of your content is highlighting and marketing all the technological advancements you have at your firm. If you utilize practice management software, publicize your ability to take online payments, publicize your client portal, automation capabilities, easy intake process, etc. All of those things are advancements that potential clients will look at and cross-compare against other firms, so use it to your advantage! Being able to highlight your customer experience improvements will only serve to benefit you.
Utilize the Internet
Search engine optimization is not going anywhere, in fact, it is driving more and more traffic to law firms. If you think about all the effort you put into gaining referral partners, whether it’s getting on the phone with potential businesses, sending thank you gifts, those couple rounds of golf, all the things you do to establish those relationships. Now think about how much time you're putting in the largest referral partner you have, which is Google? The benefit of Google is that most users are searching for something already. They are looking for an answer or help so not only will they be more reliable, but they will be more willing to work with you to get their problem solved.
Let’s walk through a hypothetical example. Take an estate planning firm, typically, they do a lot of in-person events to drive potential new clients and they really emphasize the need and highly encourage clients to come in for consultations. Well, in almost the blink of an eye, the world shifted to operating online. And now, the first consultation is a Zoom meeting, and those in-person events have transformed or disappeared entirely. So what happens now? In this case, the firm would need to change their website to support online intake and then direct the potential new client to a calendar scheduling tool to seamlessly book the meeting. With this shift, you can now market the efficiencies of this new online process and emphasize the benefits of putting time back in your client's day by reducing commutes and streamlining the intake process.
Ultimately, all the things you are doing to help your law firm be more efficient and effective are also the way your clients want to work. So remind them of the pain of doing things the “old” way and market your services as ones that meet their new needs.
The Intake Process
Now that we have gone through some marketing strategies, let’s think about the ways that you can connect and hopefully get those new clients to contact and hire you. The next challenge that many firms face is how to manage the intake process. How do you manage the volume of calls and digital messages coming in? The issue that arises here is that there is a finite number of hours in the day, but clients don’t care about that, they want a response as soon as possible. And the sad reality is, people are impatient, if they don’t hear back on their time frame, they will find another firm who will.
The pandemic has obviously caused a lot of disruptions. But what has that meant for attorneys and firms? What solutions have been implemented to improve the client intake experience and ensure that responses are efficient and uniform?
System Dependency
Overall, the best way to maintain an elevated client experience is to be system-dependent and not owner or operator-dependent. Think about the lack of availability you may have on a day-to-day basis, between your personal and professional life, handling operations, HR, administrative tasks, everything that you have on your to-do list leaves very little time to handle those inbound inquiries that come to you. You still want to be responsive to both your existing and current clients, but also to your potential new clients and referrals. It is really critical that you set up systems that can be responsive for you, and bring in the technology and the talent that is on your front line. What we saw last year was a lot of people quickly added new technologies that acted like a bandaid or patch. And now what we’re seeing today is as people begin to recover, they notice the holes that they patched and they want to make it look better. They want to make it look great because after all, it is the reputation of their firm that is at stake.
Easy Automation
Making it easy for PNCs to select an available time for a consult without disrupting your day-to-day is the easiest first step to enhance your client experience with minimal effort. Not only will this calendaring automation speed up that first initial contact with the client, but it frees up your staff and it is easy to manage with minimal training in the case that you do need your receptionist or team to step in and intervene. Also, it’s important to keep in mind that everyone faced disruption this past year. So while you’re working hard throughout the day, your clients are too. Sometimes, it isn’t until 10 PM at night when a PNC will come home and have the brain space to think about those divorce papers, mergers, settlements, etc. So giving people the silent comfort of choosing availability on their time is priceless. And we are not saying that you have to answer your cell phone and email at all times of the day, but you do have to be responsive.
The next piece of this intake process revolves around legal workflow automation. The reason why legal workflow automation exists is that law firms needed to find a way to reduce the administrative tasks their attorneys take on and give them more time to focus on creating billable hours. Let's walk through some examples... when a PNC gets created, you can use a workflow to automatically alert your team that work needs to be done. You can automatically schedule a conflict check, confirm that the PNC's data is entered correctly, and verify that your attorneys can take on the workload. Not only is this eliminating inefficiencies, but it is increasing team communication, and enhancing your client services. You can also eliminate the monotonous task of creating letters of engagement or other documents with document merge. This allows you to automatically generate a document based on fields within Centerbase instead of manually typing each document and filling in the respective detail. You can create the initial template and set which information fields you want to be pulled to populate the document.
Legal workflow automation is meant to help create efficiencies and reduce human error. If you're not adopting these technologies or working with software that enables your firm, you're doing yourself and your clients a disservice. If you’re curious to learn more about this, check out this video.
The ways we are consuming and interacting with each other as consumers and businesses have changed a lot in response to the disruption of the pandemic.
Communication Expectations
A lot of what has changed in the last two years has been expectations. Today, clients are fully expecting that you guide and steer the process. So you must ask yourself, how do you make sure that you’re delivering on what the client needs? How are you producing content and answers on all the channels that you operate and are publicly available online? Every platform your brand is listed on needs to uphold the same level of responsiveness. And it’s not just about the speed, it’s about the quality of content. One of the main reasons clients won’t move forward with a firm is because they don’t get the answers they’re expecting. Easily combat this by proactively anticipating the commonly asked questions. Time is thin right now, and if you think about the importance of lead screening and qualification, not everyone is going to be a good fit for your firm. So it is one thing to get out in front and be responsive but you also don’t want to be taking consultations with just anyone on the internet who finds your firm and books your time.
The 2 Keys to Success
So after all of this, what are some of the most successful law firms doing when it comes to their intake process? Well, two things come to mind… the first is when you’re system dependent, you have to be constantly checking and monitoring those systems. That is simply a good habit that is just a matter of professional responsibility. It may not say it very specifically in the bar rules, but triple-check that when someone calls your firm the phone is answered and to your liking. Make sure that when someone sends an email and you have generated automated responses that the email is being triggered how you want it to, that it is being received, and that it also reflects the brand and voice of your firm. There are a lot of systems that are only being set up once and then forgotten and never checked again. Because of this, a lot of business is lost because no one has been assigned to that voice mailbox or that email account. If you don’t check them, that is a blindspot that is aiding a loss on investment for all your marketing efforts and all the other energy you’re putting into promoting and advertising your firm.
The second thing that successful firms are doing is following up with those individuals who reach out. This step can often distinguish the haves and have nots. What happens is the more you follow up (to a certain limit), the higher the payoff. Six points of contact are about the threshold here. Statistically, if you’re following up only once, we know that about 50% or slightly less of your inbound calls are being answered. There is so much distraction and noise these days that if you’re not following up multiple times, your message won’t be heard. It’s as simple as that. Depending on the practice area that you operate in, that will also really set the cadence. So when you ask, “How often should I follow up?” You have to take note of who your clientele is. If you are in personal injury, high-end estate, or intellectual property, you should be following up a lot sooner. Don’t give up and throw in the towel until the person has told you they have made the decision one way or another. That type of chase is incredibly beneficial to the bottom line.
The events of 2020 and their impact on our lives will not be soon forgotten. Like other businesses, the legal industry is seeing changes to its landscape as we move forward in 2021. In general, law firms weather downturns in the economy better than most, but there is nonetheless a change in the areas where attorneys will be most needed. With some forethought, attorneys and firms can proactively prepare for the changes ahead. By combining this preparation with an intentional focus on client service, you will find success.
Practice Area Growth
While attorneys will always be needed, we have seen some areas of practice on the rise while others have suffered over the past year. Practice areas that have seen the most significant growth include:
Family Law. Many families have suffered a breakdown through the COVID crisis. Contributing factors include isolation and financial stress.
Mergers & Acquisitions. Through the financial challenges businesses have faced during the crisis, there has been an uptick in companies considering changes that they would not have considered in the past.
Banking. Through the PPP loan opportunities and later PPP investigations, banking practices have seen a significant increase.
Employment Law. As many individuals have lost their jobs due to the financial challenges businesses have experienced, there has been an increase in employment-related wrongful termination claims.
Bankruptcy. The unfortunate end result of the health crisis has been bankruptcy for many businesses and individuals.
Insurance. There has been an increase in insurance practices as a result of bad faith claims and insurance fraud committed in an attempt to make up for lost income, as well as disability claims as a result of COVID-related illnesses.
Practice Area Decline
Practices who focus on foreclosures have suffered the most during the COVID crisis. By using what they know about banking and finance, attorneys and firms that practiced in the foreclosure business previously can pivot in a natural transition to banking and bankruptcy practices.
You Have Decided to Change or Add Practice Areas. Now What?
If your firm has decided it needs to move into another practice area, you may be wondering where to start. There are many things to consider.
Know Your Why
What are you trying to accomplish by adding a new practice area to your firm? Do you have a strategic plan in place defining your one-, three-, and ten-year goals? There are many questions you may want to consider:
Why are you adding a new practice area?
Does the practice area fit into your strategic plan?
Do you have attorneys in place who are already experienced in the practice area?
How will adding the practice area impact your firm and its culture?
What will the timeline be for getting the new area up and running?
What is the projected cost for implementation and training?
Understand the Needs of the Practice Area and the Subcategories that Fall Under It
Most practice areas have a wide range of legal matters that fall under them. Consider family law, for example. There are divorce, custody, child and spousal support, settlement negotiations, litigation, premarital agreements, protective orders, and others. Some areas, such as employment and personal injury practices, typically require you to choose whether you want to be a plaintiff practice or a defense practice. You need to define the scope of matters you intend to cover once you have chosen a practice area so that your internal and external clients will understand what you do.
In addition to giving all interested parties a clear understanding of what you do, having a specific definition of the scope of your practice will help you in multiple areas. It will allow you to:
Identify existing clients who may be potential clients for the new practice area;
Know what potential clients to accept and which ones to refer elsewhere;
Tailor your marketing to the appropriate audience;
Structure your internal systems efficiently;
Clearly define what protocols need to be added to existing procedures;
Determine how cases or matters will be staffed;
Identify needed training and plan for change management;
Determine how you can use technology to your advantage.
Identify Clients In Your New Practice Area
It is important to have systems in place for internal communication so that your partners can share information for existing clients who may be served in your new practice area. It is surprising how many firms have corporate clients who are unaware that the firm offers services that the client is currently getting from another firm. In addition, knowing the scope of services you intend to offer in this new practice will allow you to train all internal stakeholders on the types of matters you will and will not accept.
Tailor Your Marketing to the Appropriate Audience
When you know who your desired clients are, you know how you need to structure your marketing plan. A plaintiff’s personal injury firm is going to be marketing to an entirely different audience than a personal injury defense firm, and their marketing strategy will be very different.
Structure Your Internal Systems
Begin by identifying the similarities your new practice area has with an existing area, where procedures can follow the same protocol. Once those items have been identified, look for other processes that will take place in this new area that will be similar across all or most of the matters and create procedures, processes, and forms for those tasks. Part of this process should include identifying how each task will be staffed. By carefully identifying your legal services in each practice area and setting up procedures and protocols for each task with team members assigned appropriately, you will develop an efficient and well-oiled machine.
Identify Training Needs
Once the processes have been identified, you will need to determine where your current staff is lacking in knowledge, skills, and abilities so that you can either train existing attorneys and staff or add new hires. Bear in mind that change is scary and difficult for people, and managing change effectively will help make it easier for everyone.
Determine How You Can Use Technology To Your Advantage
You have identified processes and procedures that need to take place with your new practice area. Do you have the technology in place to make those systems work efficiently?
Technology offers us many opportunities to provide exemplary service to our clients. Using good practice management and time & billing software means that you can:
Keep a clear and accurate record of the progress of each case;
Effectively collaborate with the other attorneys and staff in your firm;
Keep an effective tickler system of reminders with due dates and dates to reach out to each client so that nothing falls through the cracks;
Provide clear, accurate, and timely billing to your clients each month.
Nothing Ventured, Nothing Gained
They say the greater the risk, the greater the reward. Whether you want to add an additional area of practice to your firm or change your practice entirely, with some careful planning you can have a successful transition, and your team will learn a lot of valuable lessons along the way.
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Many people are resistant to change. Oftentimes, that resistance comes down to two factors: the fear of loss or the fear of having to adopt new processes. Whatever the reason may be, change is often the inhibitor preventing innovation and improvement.
With this in mind, ask yourself this, if change is necessary for the advancement of society and businesses alike, how can you help your firm embrace the change that will help improve your business?
There are three types of change that impact our firms.
People-related changes can be a change in the duties of an individual or position, promotions, new hires, terminations.
Process-related changes include changing procedures, protocols, workflows.
Tool changes that involve changing technology and or equipment.
Regardless of the type of change, people fear they are losing something. To address those fears and have as smooth a transition as possible, there are steps you can take to encourage your firm members that you are taking the matter seriously and working to ensure the change is made for the good of all. Let's take a look.
Identifying the Need for Change
Firms who have a clear strategic plan and clear vision of where they are going will find it easiest to identify where change is needed. By identifying where you want your firm to be in ten or five or three years, you can assess external and internal environments and determine what challenges are going to interfere with your goals and what changes you need to make to overcome those challenges.
For firms who do not have a clear strategic plan and vision (don’t feel bad if this is you, as this is the majority!), the need for change is often ignored until there is a financial loss that is impacting the firm in a negative way. By ignoring the need for change, a firm will eventually lose its competitiveness in today’s market, impacting its bottom line, and then there will be a scramble to make the necessary changes to overcome the challenge. This reactive instead of proactive approach creates a firm environment that can be unsettling for its members, and the more you can work toward becoming a firm that is proactive, the better off you will be.
Enlist the Buy-In and Support of Leadership
Without the buy-in and support of leadership, any attempt at change will be a challenge. Firm employees are intelligent people, and if they are reporting to a partner who is not on board with a change, they will see it, and they will follow suit. You will not get the entire firm steering your ship in the same direction if your leadership is not all turning the wheel in the same direction.
Communicate, Communicate, Communicate
When considering a change in your firm, it is important to communicate early and often. Do not assume that leadership discussions stay within the upper ranks. There will always be a partner who trusts their long-time staffer with management information, and before you know it the rumor mill is buzzing. With the exception of people changes that are inappropriate to share, it is important to communicate with your firm members. Today’s technology allows for such communication in a face-to-face environment even if you are not all in the same location. One communication with everyone at the same time is ideal so that everyone receives the same message.
What if, after communication among firm members or while still on the leadership level of communication, you discover the issue is not yet ripe for change, but you know it is important to your firm’s long-term vision? Do not despair. Over time, you can gently move communication in a direction that it becomes ripe for change.
Involve All Stakeholders in the Process
We already know that humans do not like change. How can we help them overcome their fears? Part of the communication process involves including all stakeholders in the process. Consider a technology change, for example. Who are your end users? How will they use the product? Do you know all the ways in which they use your current system and what their needs or wishes are for a future product?
When it comes to technology, there are many reasons for change, but the most important reason is to meet the expectations of our clients. Clients today want efficiency, transparency, service delivery, and technological savvy from their law firms. While this is what your external stakeholders want, your internal stakeholders may be harder to convince. Where do you start?
Communicate the reason for the needed change.
Query your end users on their needs.
Create an implementation team that includes stakeholders from every level of your firm.
Help the team to make data-driven decisions.
Manage resistance. Hold subtle conversations, listen, and promote discussion. Ask “how do we make this work?”
Identify Benchmarks for Evaluation ROI
Follow-through is important. If your firm has a habit of implementing changes but not following through on them – saying we are going to do things one way, then finding it doesn’t work and going back to the old ways that don’t work – eventually you will not be taken seriously. If firm members see you taking change seriously for the greater good and evaluating what went right and what went wrong, they will be on board with you.
By knowing what you hope to accomplish at the beginning of your project, you can easily identify benchmarks of improvement that the change is meant to accomplish. Once the change has been made, are these benchmarks being met? Things don’t always work out as we had hoped, and that is okay. It is also okay for your firm members to see that you are not afraid to try and fail – it will encourage everyone to be a change agent looking for ways to improve for the greater good without fear of failure.
Some examples for positive changes you might see from a change in technology, for example:
Attorneys now able to enter their own time efficiently and easily;
Improved and more efficient billing process;
Ability to easily save all documents and emails to a client file;
Ability to track activity in a client file;
Ability to track deadlines in a client file;
Ability to log into a client file regardless of where you are located.
By identifying similar benchmarks for what you hope your change will accomplish, you can easily pinpoint what worked and what didn’t. By allowing your firm members to participate in these processes, the changes necessary for the growth of your firm will have a much better chance at being successful.
The Takeaway
Change can be hard, but without it, your firm will lack the progress and development needed to stay relevant in a very competitive industry.
With the continuing change in the landscape for law firms, it is increasingly important for firms to understand where their most profitable areas of practice lie. Gone are the days of multi-generational client loyalty. As a result, firms must hone their skills and identify the areas that are most beneficial in adding to the bottom line. Regardless of how altruistic your firm’s core values are, without a profitable business, you will be unable to support your clients or your employees.
There are multiple metrics a firm can monitor to ensure financial success. Having good billing protocols is a good place to start. Once those procedures are functioning well, you can accurately identify which areas of practice are most beneficial to your firm. Knowing where you should be focusing your assets (time) allows you to strategically make decisions on what cases to accept and what cases should be declined or referred out.
Identify Your Practice Areas
Begin this process by identifying the practice areas in which your firm most often practices, and ensure they are entered into your billing system. Using a billing system that allows you to identify practice areas and run reports quickly and efficiently is an important piece of this process. The identification of practice area should be a part of your client intake protocol to ensure that cases are properly identified at the outset.
Identify Departments
Depending on firm size, there are different ways to go about the identification of departments. If your firm typically has specific attorneys and staff working in each practice area, it is intuitive to define your departments by practice area. You may have a real estate department, a civil litigation department, a criminal litigation department, and a corporate department, for example.
If most of your attorneys are working across multiple areas of practice, you may want to define your departments by supervising attorney rather than by practice area. This will allow you to determine whether profitability is impacted by practice area or by managing attorney, for example.
Start Monitoring Your Metrics
Once you have identified the practice areas you want to track and how you would like to divide your billable timekeepers (attorneys and paralegals) into departments, you can start monitoring the revenue you are seeing from each practice area and department. By putting your clients into buckets of practice areas, you can:
Identify the average Client Acquisition Costs (CAC) for each practice area;
Identify the average Client Lifetime Value (LTV) for each practice area;
Determine the net revenue for each practice area;
Determine the overall profitability for each department.
Client Acquisition Costs (CAC)
The cost to acquire a client may be different depending on the practice area. Your physical injury cases may come to you through television advertising, which is going to have a different cost than your probate clients, who may come to you through word of mouth. By identifying your client acquisition costs by practice area, you can get a more accurate evaluation of the true profitability of each case type.
Client Lifetime Value (LTV)
Likewise, the lifetime value of a matter is going to be different by practice area. As is the case with acquisition costs, by identifying your average lifetime value by practice area, you can drill down even further on profitability by case type.
Net Revenue By Practice Area
Once you have calculated the average acquisition cost and lifetime value for your cases by practice area, you can determine an overall average net revenue for each area. This does not take into account the costs of your timekeepers or firm overhead – this is strictly net revenue after taking into account the cost to acquire the matter. For example:
Net Revenue By Department
Once you have calculated the net revenue by practice area, you can break things down even further to determine your revenue by department. In this calculation, you add in the direct costs of your timekeepers in each department.
To begin, you need to have calculated the hourly cost for each of your timekeepers. By knowing what it costs for each of your timekeepers to work one hour, you can calculate their costs in each practice area by running a report showing total hours billed by practice area or department. In the example below, the firm’s departments are identified by practice area:
Using What You Have Learned
Now that you know what it costs your firm to conduct business by practice area and department, how can you use this information?
Narrow your focus. Knowing where your firm is most successful financially, you can use this information to focus more on the areas that help to meet your financial goals.
Better identify your firm’s mission and vision. Using this information can help to bring clarity to what you are doing. Having clarity will help everyone in your firm to perform better!
Learn to say no. Once you have decided on the areas on which you will focus, learn the difficult task of saying no. Taking work that does not benefit your firm will only create a financial loss and take focus of your valuable assets (your attorneys) away from the work they should be doing. That doesn’t mean you can’t take on loss leaders if you think they will bring value in other ways, but you can be more intentional about those decisions.
Identify who should be performing what tasks and delegate accordingly. If there are areas of practice that you do not want to give up but you see that the current timekeepers performing the work do not allow you to be profitable in those areas, how can you change that? Are there younger associate attorneys who can handle the tasks currently being performed by senior associates or partners? Are associates performing tasks that could be performed by paralegals? Have you considered the option of using of counsel or part-time attorneys for some areas? The options are endless once you have the knowledge to make informed decisions.
By identifying these important metrics for your law firm, your firm can become more profitable, and your attorneys will be more fulfilled and effective with an improved clarity of focus.
