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:
- The Root Cause - Degraded Law Firm Profitability
- The Likelihood of Survival - Slim to None
- 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:
- 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.
- Commoditization: Law firm management must stay ahead of the curve in recognizing legal services that are destined for commodization (practice areas or customer types).
- 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
- 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.
- 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
- 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
- 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.