Last week, I had the pleasure of attending and presenting at the 17th Annual Law Firm Leaders Forum in San Francisco (hosted by Thomson Reuters).

The news for law firm leaders in 2012 and looking ahead to 2013 seems pretty dismal.  Both Citicorp and Wells Fargo have published reports showing a decrease in billable hours and realization for the majority of law firms in 2012.  They report things won't be much better in 2013.

If you've read the blogs and content pieces we've published over the last 18 months, then you won't be surprised - we've been advocating fundamental change in how law firms operate on multiple levels - operationally, in areas of marketing and business development, and of course in the way services are delivered, priced and managed. 

In our discussion at the breakfast briefing on Friday, Mr. Richard J. Mackessy, CFO of Steptoe & Johnson PLLC and I asserted that law firm survival today and tomorrow must be accomplished by evolving from the current ("old") business model to a new, sustainable model.  In other words, take a breath law firm leaders - no one is telling you to throw the baby out with the bath water here.  Not at all.  In fact, given the sensitivity of the law firm partnership structure and resulting culture, it would be suicide to think you are going to make revolutionary changes! 

Ok, so now that you are breathing a bit better, let's examine the top 3 threats to Law Firm Survival as I see them:

I actually believe that the last one (business entropy - simply put - wasted energy that is seeping out of existing processes thereby removing it from the 'energy pool' for productive work) is the key to addressing the first two.  If law firms can't find the organizational energy to put into reshaping (and rethinking) their business model in the immediate future, they are facing extinction. 

We are working together with our law firm customers to reinvigorate previously wasted energy (and, oh, let's not forget money) back into the organizational system so that the firm can recapitalize that energy and money as investments into their shifting business model.  This is incredibly exciting stuff!

How do we do it?  Through our Legal Process Management thought leadership and powerful technologies (Law Business Management System).  By first transforming how firms think about work, then transforming how firms do the work, we are accomplishing incredible reductions in business entropy. 

Law Firm Leaders - where is energy seeping out in your organization (wasted)?  What would  you do if you could get it that wasted energy back? You can and you MUST!

Elegrity and Steptoe & Johnson PLLC Co-Present at the 17th Annual Thomson Reuters Law Firm Leadership Forum in San Francisco, California

On Friday, November 16 from 8am-9am, I have the pleasure of co-presenting with Mr. Richard J. Mackessy, Chief Financial Officer of Steptoe & Johnson PLLC, on the preeminent subject of ensuring law firms have a sustainable business model.  The presentation will be given at the 17th Annual Thomson Reuters Law Firm Leadership forum being held November 15-November 16 at the St. Regis hotel in San Francisco.

Many times in the last several years in this blog, e-books, whitepapers and webinars, I have discussed the key threats law firms face in the new, ever-changed global economy. 

The good news is - law firms globally have more than come to terms with the impacts and need for change.  The bad news is - confusion abounds when it comes to when and how to apply the right LPM disciplines to achieve needed results.

The 'LPM' acronym alone is confusing - because it stands for many different things:

• Legal Process Management (the 'Legal' version of the universal Business Process Management discipline).
• Legal Project Management (the 'Legal' version of the universal project management discipline)
• Legal Practice Management - the management of legal services and product offerings through the application of Legal Process Management, Legal Project Management and other related disciplines.
• Legal Profitability Management - the management of overall law firm profitability through the application of Legal Process Management (law firm BPM), Legal Project Management, Risk Management, etc.

Friday, Mr. Mackessy and I will work hard to replace confusion with knowledge and empowerment for change by providing real-world examples of the practical applications of Legal Process Management and Legal Project Management.

If you miss our talk, I'll be sure to share key points in this blog and our upcoming webinars.  In fact, this may end up as a new free downloadable e-book if the feedback warrants.  In the meantime, you might want to download our ground-breaking 'Protecting Law Firm Profitability' e-book now.  If you missed it - you missed a lot. 

After nearly a decade of successfully delivering Business Process Transformation solutions to Fortune 100, Fortune 500 and law firms of every size, we at Elegrity have learned (and continue to learn) first-hand what it takes to achieve true success with BPM.

Most of the time, this law firm BPM blog focuses on discussions regarding how to apply the discipline of business process management to meet challenges to law firm profitability and loss prevention.  By now you know my opinion - these are hard-core business projects - technology simply serves as the facilitator of the business.  Well, simply - hmm.  Is it really that simple?  Not if you don't have the right technical toolkit, that's for sure.

On Thursday, August 30 at the ILTA 2012 conference, I'll be presenting a session "Mastering Business Process Transformation in Law Firms".  This blog provides a preview of some of the discussion we'll have around required technology during that session.

What Your BPM Technology Must Provide

BPM suites aren't enough.  Forms aren't enough - I don't care how cool or 'simple' they seem to be to build.  The fact is, as your law firm matures in its implementation of BPM, the workflow itself should start to become 'indetectable', or a natural part of the flow of work. That kind of transparency requires application functionality.  Stilted form-based workflow stagnates - every time - it is frankly unsustainable over the long-term.

Here's the truth from the real-world of what your firm's BPM platform of choice had better provide

1. Scalability.  Not just multiple processes - multiple collections of processes (or cradle to grave lifecycle management as Elegrity calls it). Thousands of users (don't be fooled - good BPM doesn't bound itself by your firm's boundaries or number of timekeepers).  This scalability must be provided while at the same time being lightweight - both on the back-end and the front-end (client side). 
2. Sophistication, but Highly Configurable.  You can't be limited by the capabilities of the form builder or workflow engine - you need the ability to get out of those boxes.  To extend, add-on or supplement. Relationships between data and processes themselves must be managed.  Single process thinking is a dead-end.
3. Modularity.  Re-use, re-use, re-use.  I can not over-emphasize the criticality of modularity in every aspect of every process implementation.  User interfaces (NOT FORMS), system interfaces, data, business rules, etc.  EVERYTHING.  If your platform fails you here - you are headed for stagnation.  Your firm won't be able to continue its transformation not just from a time and money standpoint - but from an organizational change management standpoint.  See my previous blog on the criticality of 'Consistent Change'.  This level of modularity requires intelligent abstraction of all aspects of the solution.
4. Security.  Last, but not least by a long shot, you need an extensible, configurable and law-firm aware security framework that can be applied cross-process, cross-lifecycle, cross-application.  It pains me to see this aspect get either butchered or consume more time and effort from IT teams than they ever could have known.  Don't underestimate this.

One of These Things Doesn't Look Like the Others...

I suppose the neglect of the technology aspect of law firm business process improvement in this blog is my fault. Its not that I don't think about it, believe me!  I and our team spend all day thinking and working on it, as a matter of fact - constantly looking for ways to improve our Law Business Management System platform.  

That said, we have what is probably an unfair advantage - we built our LBMS platform from the ground up to embed our years of substantial real-world and practical experience of delivering sophisticated business process management to thousands of users world-wide - and at the same time embedded our legal industry business understanding directly into the platform. As a result, our platform isn't like any other (remember that phrase - "One of these things is not like the others?") - well, that's LBMS.  You can read more about LBMS on our product pages and in the following free whitepaper about its uniqueness.

Sure, the title sounds like a hoax - but I'm not kidding.

In our work with law firm prospects and customers, we see return-on-investment numbers of $500K (and often more) coming right back into our customer's hands within a few months!

We know this to be true, because we diligently calculate Return-On-Investment in collaboration with our clients and prospects as part of our standard scoping process for New Business Intake projects and then we deliver on every New Business Intake process improvement and transformation we scoped in timeframes that are 50% FASTER THAN OUR COMPETITORS.  As a result of our expertise, our customers achieve incredible ROI timeframes (meaning they get that expected return of hundreds of thousands of dollars 50% faster than their peers, and 100% faster than their peers that are still sitting stagnant!).

How Do You Get The $500k?

Of course, the specific value of your firm's New Business Intake process has to be based on your firm's current state and defined 'transformed state', but $500k is a fair middle ground.  So let's just use that for now.

The actual value of your firm's New Business Intake transformation must be calculated for your specific situation, but you find the value across the following key areas:

1. Loss Prevention

Every time you embed risk management or compliance-related policies, procedures or oversight into your New Business Intake process you *should* be achieving loss prevention.  If that's not true, then why do you have the policy to begin with, right?  Your executive team can definitely ascribe value to this type of loss prevention, so this is low-hanging fruit for inclusion in your ROI.

2. Time-Value-Of-Money

If you get paid within 15 days of delivering a product or service you actually make more money (in a sense) than if you get paid within 90 days of delivering a product or service.  This is known as 'Time-Value-of-Money'. 

Transform your NBI in ways that lead directly to acceleration of cash flow and/or collections, and you've just achieved real monetary increases.  Just ask your CFO - they'll tell you!

3. Value of Bandwidth Increases

Efficiencies better be achieved by your New Business Intake process transformation - or don't do it!  These efficiencies ultimately result in increased bandwidth for various types of resources throughout your firm (attorneys; marketing teams; risk management teams; secretaries; paralegals; department chairs; etc.). 

These bandwidth increases have REAL DOLLAR VALUE - this means these resources are released for leverage on other HIGH VALUE ACTIVITIES.  This return comes back in increased revenue, additional loss prevention and enhanced overall profitability.

There are so many more areas that a well-done New Business Intake transformation provides, but hopefully this short synopsis peaks your interest.

So the question is - if your firm is sitting on its hands 'living with' the old New Business Intake - are your executives aware they are losing $500K or more from the bottom line?   Maybe we should tell them, what do you think?

Elegrity offers unprecedented no-commitment process transformation workshops to qualifying Law Firms internationally - which result in amongst other things, a validated Return-On-Investment calculation specific to your firm.  Download our flyer below or call today to see how we might help your firm win $500k!

In my previous blog, I discussed at a high level why organizations (corporations and law firms alike) who have implemented ERP systems require Business Process Management (BPM) to achieve success.  Note - this isn't a 'might need' scenario - it's a 'must-have'.  It just varies in terms of when the realization strikes the firm.  In fact, in some cases, law firms utilize BPM in lieu of ERP. 

Ok, so wait.  ERP Alone = Not Good; ERP + BPM = Success; BPM Alone = Success.  What gives?  Do you need ERP or not? 

The question of 'whether to ERP or not' doesn't have anything to do with Business Process Management.  That's because ERP systems are not BPM Systems (more about the ones that say they are later).  They are application and data management systems.  ERP provides functionality surrounding the management of information regarding various 'things' - like suppliers, employees, clients and matters.

BPM systems, on the other hand, are WORK, ACTIVITY AND DATA GOVERNANCE systems.  BPM provides functionality required to organize and coordinate the involvement of people and information (business systems including ERP) in the business processes that make-up your firm.  These processes may be departmental, but most often they are cross-department, cross-geography and sometimes cross-organizational.

Why is BPM So Important?

Does every organization need BPM?  In my book - most do.  Why?  Because every organization requires more efficiency, better loss prevention and greater agility than ever before.  There's no margin for ineffectiveness being filled by 'more' of anything - more people, more money.  There's no room for unexpected and uncontrolled losses to degrade law firm profitability.  There's not time to spend months or years making strategic or risk management adjustments to the running of the business.  We don't live in that world.  We live in a world of exponential acceleration, constant paradigm shifts and 'with less, do more'.  Anyone out there not living in that world?  Remember the days of the 10-year strategic plans?  Ha!  Now that gives me a good laugh.

When is ERP Important?

So - what about ERP (or 'baby-ERP' finance systems for law firms)?  Who needs those?  The answer to that question is more nuanced and dependent on specific functional requirements.  The reason its dependent on specific functional requirements is because these systems are FUNCTIONALLY-based.  That's what they do - manage data around FUNCTIONS and FUNCTIONAL areas (HR; Finance; Supply Chain).  So, if you find that you have financial or accounting needs that require specific data management assistance - then perhaps a finance or accounting module from an ERP system will do the trick.  If you find you need better organization of information relating to employees, then maybe an HRIS or HR module of an ERP system is required. 

Remember this - good data management and data governance relies on good PROCESS MANAGEMENT.  BPM ensures that the MEANING AND CONTEXT of the data is clear to end-users (because BPM is friendly - so you can ask for information with understandable questions or phrases - you don't just throw an ERP field at the user and expect them to know what it means!).  BPM automatically involves the right resources in review of the entered information BEFORE it makes it into the ERP system.  BPM systems automate the push and pull of relevant information from ERP systems to ensure accuracy and efficacy of the information as a natural part of every day work.

Coming Next...Don't Get Fooled - Know What Real Success Looks Like

Coming next...beware of ERP / Law Firm Finance System vendors who tell you they have the solution you need for 'BPM'.  They know they need BPM to be successful - but don't get fooled by their attempts to fill their hole themselves.  Also, I'll share some real-world success stories of law firms and corporations getting the most bang for their buck with BPM with and without ERP.

In the past several years, some law firms have implemented ERP systems for some or all of their financial and HR functions.  Others have begun embracing what I call 'Baby-ERP' systems which are the latest releases of some of the law-firm specific finance systems that are inching their way towards the beginning realm of ERP. 

A very common question I get asked is "Why do we need BPM [Elegrity's Law Business Management System (LBMS)] when we have X, Y or Z ERP or 'baby-ERP' or are planning to get it?"  It's a great question - and it inspired this blog (thanks to customers and prospects alike for the wonderful collaborations and blog fodder!). 

Not a New Question  

Let's start with the fact that, although fairly new for law firms, this question is not new in the larger business context.  Global corporations (non-law firms) almost always have ERP deeply embedded in their organization.  Inevitably, we get engaged by these corporations when the need for enterprise Business Process Management (BPM) is recognized (and the fact that the ERP system cannot deliver it).  Some of these corporations recognize the need for BPM early, saving themselves more money over the long term than I can calculate.  Others recognize it only after years of pain and extraordinary cost. 

 I hope to help our law firm customers and prospects learn from the corporate world so you can save yourselves the experience of the pain of getting the role of ERP wrong in your firm.

Key Reasons BPM is Required with ERP  

Here are the key reasons I and other experts believe BPM is required even if, or perhaps especially when, organizations have ERP:

• ERP is focused on management of data held within the ERP system in various, but siloed, functional areas.  ERP systems may offer ‘embedded’ or functional workflows, but they provide no or very poor enterprise workflow that is considerate of cross-functional needs or the needs or uses of non-ERP business systems!  BPM supports both functional and enterprise process transformation scenarios.
• BPM is far more agile than ERP systems, where BPM requires on average 3-6 months to implement, ERP takes 20-24 months (minimum). Change management (key to agility) follows a similar pattern, with BPM empowering enterprises to implement change 85% faster - now that's what you call agility!
• ERP needs BPM to help realize its full value.  BPM helps ERP by allowing it to stay functionally focused while providing for the cross-functional, cross-system and cross-boundary needs of organizations.

I concur with all of the above - but I will add one more that I believe is crucial:  END-USER ADOPTION.  

Working with an ERP system is somewhat akin to flying a 747 -what if you sat down in front of the pilot's console on your next flight on a 747?  Do you think you could get going right away?  HARDLY.  It takes years to learn how to work all those controls.  The same can be said for ERP systems.  That's why you leave using the ERP system to the back-end core operational teams, and implement nice and friendly BPM in front of them for the end-users.  In this way, you achieve incredibly fast adoption rates.  ERP alone?  Well - get ready of hundreds of hours of costly training, with questionable results.

Stay tuned for future blogs in which I will explore ways ERP vendors and IT departments attempt to overcome ERP's lack of business process management capabilities - and the dangers of misplaced investments of both time and money.

As Law Firm business managers, you know how important policies are for the protection of your law firm's profitability, and even survival.  You are constantly thinking about and tweaking policies to make adjustments for lessons learned and new business strategies.  But how sure are you that those policies are understood and followed consistently by the firm attorneys and staff?

Ask yourself this:  "Are your policies up for interpretation?" 

If you are still operating in a world where policies are implemented on paper (inside of documents in your DM system or portal), then I think you probably would have to agree - they are definitely getting interpreted (rightly or wrongly) on a daily basis.  Well, I suppose interpretation is better than the other fear - that they are being ignored entirely.  Either way, it's causing your law firm management team too many sleepless nights of worry over what is getting missed.  And then of course, you need to get up from those sleepless nights and get to your office so you can manually try to police those policies into action!

But wait, I'm happy to tell you - there is another, highly effective way to make sure your policies are in-place, consistently followed and evolutionary.  It's called Business Process Management - or as one of our clients nicely phrased it - "Codifying Policies Through Software". 

Here are the highlights:

• Policies (and what are commonly referred to as "exceptions") become business rules that direct work and oversight as a natural part of daily operations.  
• Attorneys and staff are relieved of the impossible burden of having to 'know, understand and adhere to' policies.  Instead, they get to focus on conducting their business, and the policies are automatically overlaid as needed.
• If a policy is so nuanced, that only a human being can make a determination, then the review is sent to the right people to do the interpreting!

Sound too good to be true?  Well, it's not - it's reality.  Trust, yet verify - call us to see how we are helping law firm management transform how their firms operate, achieving full policy adherence while at the same time increasing firmwide bandwidth, productivity and law firm profitability.

I sat down this morning to look at a mid-tier firm's existing New Business Intake process - with the intention of having a starter 'transformed' process documented for them in a matter of a couple of hours.  

Current Analysis Paralysis - Not a Good Starting Point

Before digging in, I read my email - and quickly find an email that goes something like this from a law firm - "We know we have to change our process, but we are still working on documenting our current processes."  Immediately I go into the 'no, don't do it!' mantra, because I know how much time, money and effort they will waste by focusing on current state, versus the transformation of their processes.  But at the same time, I know they do this because they believe if they don’t, something will get missed and they’ll be left with gaps.  So, I'm constantly looking for new ways to relate for them why a focus on the future, not the current state, is a substantially more effective approach.

Transforming Business Process Is Just Like a Remodel of Your Home

So today, it occurred to me...what if firms could see that business process transformation is like remodeling their house?  Let's say you want to remodel the main floor of your house.  What might that look and feel like?

Why a Remodel? 

First and foremost, there must be reasons you want to take on the project.  These might be a mixture of increased usability, financial and risk mitigation.  Something like this:

• Usability - The rooms are too closed. We can't see the kids when we are in the kitchen cooking.  We aren't getting the best use of our space right now, we think we could actually increase the usable space if we had a more open floorplan.
• Risk - There's been some water damage and we think we are going to need to go up into the ceiling and roof to fix it.  Seems like while we are there, we might as well use the opportunity to make improvements at the same time. The stove isn't properly vented right now either, which is concerning.
• Financial - This remodel would substantially increase the resale value of our home.  In the short-term, I think it would help us get a better refi, and we'll save energy costs as well, because we can put in more energy-efficient windows and appliances.

What and How Much? 

Next, you need to know what you would need to spend, and what your remodeled house would look and feel like in the end.

• No one in the family is an architect, so we'd better get a good one to help us. 
• We arrange for them to come over and consult with us, take a look around - and eventually draw up for us what our remodeled home will look like and outline for us the associated break-down of costs.

Go or No-Go? 

Now armed with knowledge of what 'could be' and what it would cost, you need to decide whether to go forward or not.

• Does the remodeled floor plan sufficiently meet our outlined needs (or even exceed our expectations because the experts pointed out things we never even considered - after all, they do this on multiple homes every year - so they see and hear a lot more from home owners than we do)
• What is the estimated cost - is it worth it?  Can we afford to do it all at once, or can we break it up into more feasible chunks?  What is the return-on-investment we expect in the short and long term.  Is that enough to move us forward?
• What will life be like for our family during the remodel.  Do we have to move out, or cook on a hotplate in the living room for a while?  How long?  Can we handle it?
• We talk to some friends that have remodeled and get the real-life low-down on what it was like and whether they felt it was worth it in the end.
• Finally - we have a family meeting and reach our 'Go-No-Go decision'.  We picture yourselves in that new, open and spacious floor plan and we agree 'Let's do it!' 

The Focus is on What You Will Have AFTER the Remodel!

Now, let's think about where in the above thought process the CURRENT DESIGN OF YOUR HOUSE gets considered:

• By you - when you are figuring out what works and doesn't work for you and your family right now.  How long does it really take you to think about this?  Probably not very long...you live there every day, and already know what you love about your house and what is frustrating or could be better for you.
• By the architect - architects know that their designs have to be realistic.  They can't just throw out any design of your home they want - they have to work with what you've already got in place. Where are the support beams, pipes and wiring, what are your preferences in terms of maintaining current fixtures, etc.  That said, where do they spend most of their time?  On the TO-BE design.
• In the budgeting and planning - the cost break-down will naturally include the components that have to change - and will identify what changes will take more money and time than others.

So clearly, the current layout and architecture of your home gets thoroughly considered at every step of the above process...but where is the majority of the FOCUS spent?  On the 'To-Be' - what your REMODELED HOME would look like.

Business process transformation is no different.  Your time and effort has to be on the future process, not the current.  You don't have to, nor should you, spend focus time on documenting current process.  Instead, you should be going through the process of transformation - and the current state will naturally make itself known all the way through.  Oh, and just like with your remodel - unless you are an experienced business process transformation architect, you should bring an expert in to help you envision that to-be so they can bring you industry-wide and developing best practices and guide you safely through the transition.

If you want to experience accelerated transformation without getting caught in 'current state analysis paralysis', participate in an Elegrity iPOW (Interactive Process Optimization Workshop).  We offer one-of-a-kind law firm process transformation workshops that accomplish more in 6 hours than what most firms are accomplishing in a period of weeks, or worse, months of time.  Let us help you and your firm get a real understanding of that remodel!  We will arm you with all the information you need to make safe, informed decisions without wasting time and money along the way.

 Financial Systems (i.e., Accounting Systems) for law firms are good at what they were built to do...manage finances and the ever-fun maze of law firm billing.  What they do not do well, however (and should not be used for), is to manage the enterprise business processes of law firms.

We see law firms misusing their finance systems in several ways, which end up costing them time and money on an ongoing basis.  Let's look at a couple of key misuses and the negative impacts they produce.

First, let's talk about the mess that is made of law firm accounting systems when they are used for 'workflow' and reporting purposes.  Oh, the joy of custom fields...NOT!  Custom fields for black/trigger list indicators for clients that have gone bad.  Custom fields for marketing purposes for 'reports' - which rarely actually get produced and used.  Custom fields for additional information about matters, which end up acting like a catch-all field for 'other stuff'.  Custom fields, custom fields, custom fields....

Next thing you know, you've got more custom fields than you bargained for - and you actually start forgetting why on earth they were created in the first place.  Oh, and on top of that, the data in those fields is suspect - not properly maintained, or 'blank' half the time. What a mess.  

And here's the thing - now it's time for a major upgrade of your finance system.  Finance system upgrades are hard enough without having to worry about 'migrating' all those customizations you've made over the years to try to 'manage' your law firm business using a system meant to manage your firm's finances.  The costs of the upgrades go up, or you avoid them all together because they are just 'too hard' and you get farther and farther behind on the maintenance of your central business system - the one that manages your firm's money.  Bottom-line - ask yourself: "Are we adding this field because it directly relates to management of our finances and billing?"  I can pretty much guarantee you - the answer is going to be "NO" more than it is going to be "YES".  So what are you actually trying to accomplish with those fields?  BUSINESS PROCESS MANAGEMENT.  The problem is, you are using the wrong tool for the job.

Another key mistake we see is law firms using the functionality of their finance systems as the delimiter for how they are managing their firm's business.  Let's look at an example...

Let's say you want to better manage your Billing Rate Exceptions (see our previous blog regarding this topic), but your finance system 'reflection' of these exceptions is somewhat stilted.  Does that mean your management of these exceptions (in terms of oversight) has to be stilted too?  No!!!  Yet over and over again we see firms get stuck because they make the mistake of allowing the limitations of their finance system to limit their ability to manage their business. The finance system, obviously, has to hold the end result of your rate exceptions for billing purposes, but it does *not* have to hold all the information about how those exceptions get requested or approved.