As we watch another AMLAW 100 firm on a spiral-down trajectory, Law Firm Management and partners in other law firms look to quickly glean lessons - hoping to avoid the same type of demise.

When I see the tell-tale partner diaspora begin in the news, three things enter my mind:

1. The Root Cause - Degraded Law Firm Profitability
2. The Likelihood of Survival - Slim to None
3. The Timeframe for Extinction - Brief (Months, Not Years) 

Law Firm Management teams are looking for proactive profitability management solutions so that their firms avoid similar fates.  Many feel they just can't get their arms around it.  The reason for that is - the problem is dynamic, multi-dimensional and nuanced. 

Firms that aggressively move to take advantage of the dynamicity of the market for legal products and services will experience new growth.  Those that react retrospectively, tactically and with unidimensional approaches are likely to suffer the similar fate of extinction with increasing rapidity.

Legal Project Management - 101

Firms seem to be somewhat comfortable beginning to adopt one strategy for profitability protection - Legal Project Management.  By applying basic project management tenets, some firms are achieving higher profitability and increased customer satisfaction.  By employing project management best practices, firms can regain visibility and a new level of control over matter execution, with direct line impacts on profitability when done effectively.

Of course, there is no real news here - other industries have understood the need and value of project management for decades (like the technology industry, for example).  Once law firm customers began demanding accurate cost estimates and budgets, project management was an obvious requirement.

Why Law Firms Can't Survive without BPM

So Legal Project Management helps in some ways, but what doesn't it address?  So much - but let's focus on what I think are the top three:

1. Efficiency Gains By Changing the 'How':  Project management coordinates what work gets done, by whom, with some adjustments in terms of overall approach and timing.  The work itself might still continue on as before, just with better planning and coordinated execution.  Those are some elements of process optimization - but nowhere near what is required.  Law firms must fundamentally shift HOW work is done.  This requires a holistic approach to optimizing work delivery processes, and the effective utilization of supporting business systems or applications.  This is business process optimization, not project management.  BPM provides the optimization of use of both human and technology resources.  The result?  More with Less = Same or Increased Revenue with Less Staff or Overhead = Higher Profitability.  Faster Delivery = Accelerated Cash Flow.
2. Commoditization:  Law firm management must stay ahead of the curve in recognizing legal services that are destined for commodization (practice areas or customer types). 
1. Once recognized, process optimization techniques must be applied that empower law firm management and marketing teams to accelerate near-term revenue generation opportunities to capture as much of 'what is left' of the service offering while the commoditization process is occurring in the market.  The result?  Awareness + Focus = Exploited Revenue Opportunities = Working Capital to Fund Your Transformation
2. At the same time, while the practice area is in 'glide down' with full exploitation of remaining revenue opportunities, law firm management must use the working capital provided to accomplish required transformation.  This is done through the application of process optimization techniques.  The objective is to determine whether the firm can win at the commoditization game. 
1. If the answer is YES, the practice must be transformed to the newly defined process optimized delivery model, with the law firm marketing department out in front with the appropriate market penetration campaigns.  The result?  Exploit Commoditization = New Market Opportunities and Stable or Enhanced Revenue Generation and Profitability
2. If the answer is NO (the firm can't win at the commoditization game) then operational processes should be implemented to provide visibility and control over pursuit of new opportunities in this area - and redirection of these efforts to identified practice areas that might be able to releverage similar delivery approaches, skills and expertise.  The result?  Dump After Commoditized = Protected Profitability by Applying Resources to Higher Profit-producing work before degradation of profitability can occur
3. Market Differentiation: Legal product and services customers are self-educating and have new options (outsourcing; insourcing; online services).  These savvy buyers are looking for law firms who bring new perspectives, better ways of doing things, predictable high-value service offerings and innovative thinkers.  And to capture their business - law firm marketing techniques must transform with BPM techniques.  The results?  Deeper Customer Penetration + Increased Market Share = Increased Revenue + Increased Financial Risk Mitigation = Protected and Higher Profitability

If you discern anything from the above limited discussion, I hope it is this: the strategies I am discussing are evolutionary, not static.  Business Process Management is by definition meant to be applied to areas of dynamicity, and this is why law firms can't survive without it.   

Dowload our free whitepaper to learn more about why BPM is required to transform law firm operations and delivery models to ensure protected law firm profitability.

Our work with customers has proven over and over again that a process-driven approach, applied thoughtfully, is the best way to achieve almost immediate and, most importantly, sustainable (self-enforcing) change. 

We've all had the experience of what it's like implementing and manually enforcing change without the benefit of a process-driven approach. I'm sure you've got a story like this one:

A few weeks back, I was talking to a Finance person at a firm who was relating to me the pain they are having in managing, monitoring and tracking Alternative Fee Arrangements. His finance team went to great lengths to put together a spreadsheet and provided it to the accounting team.  Of course, the 'assumption' was that the accounting team would maintain the spreadsheet going forward and that this would allow at least the basic tracking they needed.  But...well, you know the answer - it didn't happen and in a few months they were right back into the confused, chaotic world they had tried to address.  They essentially got no where.

So what happened? 

This example is a classic one - you spend time putting something like that spreadsheet together and 'expect' it will continue to be used, but very often those kinds of mechanisms fall by the way side.  The reason is that the usage is not codified and enforced, and therefore does not become a natural part of the day-to-day business process. 

The Policy Police

Aren't you exhausted from manual policing of procedures and policies?? That's what a process-driven approach fixes!

The Big 3 

There are a plethora of reasons why a process-driven strategy and approach makes a fundamental difference in the way businesses are managed, but let's look at what I consider to be the 'Big 3'.

1.  Enterprise Agility through self-enforcing procedures and policies.  Business process management ensures that adherence to procedures and policies becomes part of the natural way business is conducted, alleviating the need for 'manual' follow-ups or policing.  That is not to say oversight is removed, but instead is just another coordinated part of day-to-day activities.  

And, of course, processes are not stagnant!  Once you've applied a process-driven approach using BPM strategies and technologies, you've now got a built-in mechanism for 'tweaking' procedures and policies, or introducing new ones.  This means a new kind of fluidity and agility for your business now and forever!

2.  Enterprise-Awareness Built-In through holistic thought processes.  

Thinking about business activities within the context of a process, and then thinking about the process in the context of an entire LIFECYCLE of processes in which it lives forces transformative thinking in any organization.  Siloes naturally begin to melt away as cross-functional understandings are forged.  

3.  Enhanced Risk Management and substantial efficiency gains as a natural by-product of how the business is run.  While your codified policies ensure adherence to risk management and loss prevention strategies - you are getting incredible monetary benefits at the same time!  Raising visibility into information locked up in existing business systems provides inreased Return-On-Investment on business systems that you thought had given all they could!  Most notably, your most important assets - your people, are being empowered with meaningful, relevant and real-time information and provided new bandwidth to be applied to higher-value work (as opposed to labor-intensive manual workflow management or duplicative data entry).  

These 'Big 3' are the core reason Law Firms around the globe have identified Business Process Management as integral to their survival and competitiveness.  Read more about Law Firm BPM in our FREE whitepaper - Why Law Firms Can't Survive Without BPM.

We've all heard and experienced the hub-bub about Alternative Fee Arrangements.  You can read more about our thoughts and work with customers relating to AFAs in other posts in this blog.

The reality, though, is that most law firms are still reliant upon and use billing rates for the majority of their matters.  Seems like old hat, nothing changed...but that's simply not true.  Even if you are still billing hourly, you can't escape the impact of the new industry expectations for legal services costs.  Maybe your firm has experienced the situation...

The new rates memo goes out, and things seem fairly quiet.  And then...first year billing time hits.  You send out the proformas for attorney review reflecting the new rates, and low and behold the accounting team is FLOODED with Rate Exception requests.

These have to be worked out, negotiations accomplished and bills updated and reviewed (AGAIN) before you can even get the bill out to the customer. 

And, in addition, lack of oversight of these negotiated rates may mean your firm is 'giving away' more than you realize until it's too late!

Poor Rate Exception Management Leads to Decayed Profitability and More

I can't tell you how many times over the past few years I've had CFOs, COOs, General Counsel, Managing Partners and other firm executives tell me that we could really help them if we could just "modify the behavior of their firm's users".  Of course, they are joking...well, at least partially!  But it turns out, we can help!  Don't believe me?  Read on...

About a month ago, I was talking to the CFO of a large, global law firm for which we have been implementing incremental process improvements over the past 2 years.  The firm started with the process automation of New Business Intake, which they have continued to extend and improve over time.  In addition, they have implemented subsequent process automation, like Lateral Hire and Matter Party Management, among others. The firm has been very successful at continuous process improvement, because they astutely target key strategic changes as they become priorities.

As a result, the CFO and Risk Management teams are, in fact, modifying behaviors within the firm as they go! 

This is exactly the approach we advocate and implement with our clients - introduce change incrementally and intelligently within a single user-friendly framework (our LBMS product).  Every change implemented further indoctrinates firm users, and their acceptance and tolerance of change increases, as they recognize the value in overall efficiency it is bringing them and the firm as a whole. 

Sound farfetched for your firm?  It's not as far away or hard as you may think!

Take a look at some of the most basic organizational change techniques we help law firm management employ:

1.  Implement business processes that have embedded business rules that ensure the process is followed in complete compliance with firm policies, but with the built-in flexibility necessary to accommodate the nuances that always exist within business environments.

• Example:  ensure that credit checks occur for all new clients, and enforce retainer check obtainment before intake process completes.

2.  Provide oversight visibility (and alerting) to key risk management, financial management and strategic management teams for proactive and intelligent adjustments.

• Example:  If Alternative Fee Arrangement is being utilized (and it was not previously reviewed by Finance), prompt immediate Finance Review by a Financial Analyst.

3. Hold the line of accountability consistently, across the firm.

• Example:  Provide ability for operational teams to return requests back to requestors if information is inaccurate or incomplete.  Even with the best business rules, requestors can sometimes send in a request that just isn't quite right.  Historically, central operational teams would just 'clean them up' because it was so arduous to send paper forms back, or email back and forth with the requestor.  But with effective business automation, 'training' of requestors by returning the request back for the additional information required is a fantastic way to change behavior and increase overall efficiency!

4.  'Bug' them just enough to act in a timely manner, and make it easy for them to do the work and move on so they can continue to focus on the practice of law! 

• Example:  Automate reminders and ticklers to ensure the users are timely in responding to information requests or approval requests.  Includes mobile review and approval.

5.  Ensure visibility into back-end business system information is provided securely to decision-makers to increase efficiency and accurate decision making.

• Example:  Provide Accounts Receivable Aging directly within new business intake for an existing client if firm A/R thresholds are exceeded to enable timely collection reviews or better decision-making regarding required retainer amounts.

I understand that those of you responsible for managing law firms have a hard balancing act to maintain in terms of transforming your firm's business model while at the same time ensuring you don't over-tip the scales of your firm's cultural norms. But, given the accelerated transformation the legal industry is undergoing, it is clear that sticking with the 'status quo' is more dangerous than doing something that provides the ability to phase change in thoughtfully.  The end game?  Getting the business of your law firm happening concertedly, and in an enterprise-aware fashion.

We’ve written a special report  that outlines how you can improve your business processes, increase your efficiency, and boost your bottom-line profits – even in this economy.

“7 Steps to Efficiency Gains and Enhanced Loss Prevention at Law Firms”  focuses on the new business intake process as an example and describes how to use a seven-step process to do more with less. Download the special report.

Business Process Management (BPM) is commonly misunderstood by Law Firms.

An academic definition of BPM goes something like this: Re-engineered Human Workflow + Re-engineered Business Systems Workflow + Business Systems Integration and Aggregation = BPM. What?? Exactly.

Let me see if I can do any better…

Law Firms that use BPM to their substantial competitive advantage have figured out that its: Redefining how work is distributed to get the work done by the right people + at the right time + armed with the right information (so they can do it faster) + in full compliance with firm policies and procedures + without having to retype the same things 3-5 times.

Now that makes good sense, doesn't it? And I bet you can see how that would save money, save time and mitigate firm risk. Welcome to the fundamental power of BPM!

How about a real-world example…

We just finished a BPM project for one of our law firm clients to extend their already automated New Business Intake process (which we implemented previously) to incorporate Alternative Fee Arrangement management for key corporate clients.

This request came straight from the Managing Partner, who recognized that his now large firm (with 20 offices) was beginning to hinder itself by negotiating differing Alternative Fee Arrangements across geographies for the same large corporate customer! He had no visibility into this until it had already impacted revenue and profitability…not the position a Managing Partner wants to be in, that’s for sure.

In addition, the firm's reputation was being damaged, as they looked like they had internal efficiency issues…a big problem when competing for corporate client work (we will be publishing an e-Book for law firms very soon that speaks to this key issue).

The minute this new extension of the New Business Intake process was deployed, rave reviews came back from the partners and risk management teams. The positive impact was immediate, and provided both risk relief and reduced effort.

For the partners submitting intakes for matters in these large corporate clients, they now get immediately visibility into existing standard fee arrangements (previously obscured from their view)…so they know exactly what the firm has pre-negotiated. This has reduced their propensity to provide additional discounts. In the end, this means their year-end distributions will rise! What a huge win for this growing firm and its partners. One user said "This is a dream come true!"

As I reflect on this, I recall our very first BPM implementation in 2003. I had NEVER seen a go-live produce such IMMEDIATELY MEASURABLE results. It literally shocked me.

In the turn of a key, the way this 12,000+ employee organization was being managed fundamentally changed. The re-distribution of responsibility and accountability for regulatory oversight happened instantaneously, with full visibility and safeguards built into the system for the compliance teams. The organization was immediately protected in ways never before possible, as policies and procedures were thoughtfully codified, enforcing compliance and raising actionable tasks when risk tolerance boundaries were crossed.

The thing was…I knew the project was going to produce unbelievable results. But the results and their immediacy exceeded even my high expectations. I was sold forever on the unparalleled value of business process management for all organizations, big and small, and have dedicated my career to it ever since.

I spend a lot of time working to educate law firms and corporations on these benefits. Often, even with clear Return-on-Investment calculations and references from peer organizations, they continue to struggle to believe it enough to cost-justify the project.

But when someone in the organization takes that first leap of faith…they never look back. Every single time, after the go-live of the first business process automation project we do with a new client, they are right back ready for the next one! The benefits are so immediate and so clear. The relief they feel so palatable. My favorite moment is when I see their eyes light up with the possibilities for other process improvements, because I know our collaboration has changed their way of thinking about their organization’s potential forever.