Can you say what an incremental dollar of revenue will contribute to
profit at your firm? Does it matter if that marginal dollar comes
from an existing client or a new client, or which practice group generates
it? More pointedly, not all business is good business: Does
that new dollar come from a source aligned with your firm’s strategic
vision? (For example, if it’s a goal of your plan to grow your
entertainment-industry intellectual property practice, what if that dollar
comes from Grokster?)
Taking it another step, could any of your lawyers on the front lines
do the same analysis? In other words, do they have any clue—or
any tools to help them determine—the profitability of matters they’re
working on or engagements they’re contemplating accepting? If the
answer is no—which is probably true for north of 90% of AmLaw 200
firms—you are depriving your fee earners of any hope of making
informed, economically sound and business savvy, decisions affecting
the very fundamentals of what your firm does: What matters it accepts
or declines, how it staffs them and how it charges for them.
In corporate-land, Wal-Mart is an extreme case, to be sure, but the
bedrock of their success is the remarkably powerful ability to deliver
real-time performance measures into the hands of store managers, while
they’re actually in a position to do something to affect the numbers. Let’s
"unpack" what that means:
- the store manager (the partner) has the information now;
- he/she is responsible for the performance measure
(i.e., he/she has the both the authority and the duty to ensure the
particular measure is moving in the right direction and aligned with
the firm’s overall strategy); and lastly and most important - the measures themselves are germane and important.
John Alber, the Technology Partner at Bryan
Cave (AmLaw 100 #55), calls this "actionable
intelligence," and says the benefits of making it available
to front-line lawyers are "extraordinary:"
"We find that there is a very high correlation between use
of these tools and strong metrics. The more they use these tools, the
smarter our lawyers get about economics and the more flexible they become
about what pricing and staffing structures they consider."
Better yet, after having used these tools for a relatively brief time,
lawyers can compare how staffing and structuring decisions on past matters
did, or did not, support profitability and the firm’s other strategic
goals. In
other words, they can derive their very own set of "comparables." In
short order, their instinctive understanding of what worked best in the
past will lead them to more optimal decisions on new matters.
Why not get some yourself?
