Taking Stock

The article outlines a number of  practices in law firms that could be improved especially if law firms want to improve their current position or be PrimeLaw certified.

Firms which are gearing up for PrimeLaw certification and firms which are looking forward to improving their current position have to start by reviewing their practice.

The purpose of the review is to understand better the strengths, weaknesses, opportunities and threats to the practice and the services it offers; to look for ways of improving the practice’s structures; to identify the strengths and weaknesses of the members of the firm, both fee earners and non-fee earners; and more importantly, to review how the firm acquires and allocates financial resources.

Reviewing Client Services

With respect to the services provided by the firm, ask:

•    Where is the firm’s practice now?

•    Where does the firm want to go?

•    How will the firm get there?

Analyse

The following aspects should be analysed:

•    the strengths of the practice and how to capitalise on them, the weaknesses within the firm and how to overcome and minimise them;

•    opportunities available to the firm or which the firm could develop; and

•    threats to the firm’s competitive position.

In order to do this, we must use available data, for example, billings by department, say, over the last three years, information on costs and measures of profitability, if available, for each type of work. It is not enough to rely purely on opinions and views. There must be a factual basis for the conclusions drawn.

It is important that feedback be obtained from as wide a spectrum of the firm as possible, including paralegals, in order to consider real underlying causes of issues raised. The aim is to analyse the situation accurately and to consider how to improve the services and operations of the firm.

Reviewing the Firm’s Structures

Look at internal and external factors 
which may present obstacles or opportunities, particularly the organisational structure and communication within the firm. For example, are departmental boundaries preventing the firm from working in a synergistic way? Is the firm failing to recognise and market sub-specialities within a group?

It will be good to encourage all members of the firm to suggest ways of improving systems and structures. Often, it is the people who are ‘closest to the ground’, so to speak, who really know where the faults are and how they can be improved. Any proposal for change and improvement should be based on hard facts which will also make it easy to justify.

Make sure that those affected know what they are required to do to implement the improvements and that they are committed to the change. It is necessary to give sufficient time for 
implementation. And it is important that the needs and expectations of all the stakeholders are well understood and have been taken into account before executing any change.

Reviewing Staffing Capability

Identify and evaluate the strengths and weaknesses of the staffing of the firm. Human resource issues are always sensitive. It is important that the management makes assessments which are clear, unambiguous and, most importantly, fair. Again, having facts to back up the assessments made are always helpful. The assessments must be based on the best information available, such as the firm’s appraisal system.

In order for a firm to have resilience and efficiency, it needs to develop a reasonable mix of different skills and experience.

A balanced view must be taken, including the longer range potential of areas or individuals who may currently be considered ‘weak’. Just looking at them here and now may well destroy the firm’s ability to develop potential. One should have due regard for personal feelings and confidentiality when reviewing individual capability and potential.

It is not sufficient to consider only the current needs of the firm, but also its needs for the future, based on where it wants to go.

Reviewing Financial Resources

Know who your friends are, that is, know as much as you can about those who can help or hinder the process of acquiring funds.

Use commonly accepted performance measures, such as total billings, billings per partner, etc, which allow the firm to compare the performance of departments within the firm and the firm as a whole.

The context of the firm, for example, be it a well established firm, a new firm, or a reasonably established firm with some new units or departments; and its culture, for example, is it an innovative firm, willing to explore new areas of work etc, will play a part in the way it acquires and allocates funds and the extent to which it will be able to do so.

It is important that the firm compares its current performance with alternative means of acquiring and allocating financial resources over the short, medium and long term. For example, should the firm arrange lease financing for furniture and equipment instead of using overdraft facilities? There are different ‘efficiencies’ in different methods of financing. This is an area that is not often well reviewed by law firms.

Where the financial review of the firm reveals threats, it is important to take quick action to develop and implement tenable alternatives. For example, if the firm’s receivables have been increasing both in terms of amount and the number of days from invoicing before it receives payment, then internally, steps must be implemented to ensure that everyone understands the importance of following-up on outstanding bills. A system of reminders and reports must be developed to enable follow-up on outstanding bills and to manage the receivables. There must be communication with clients to clearly establish the firm’s credit policy. And in relation to difficult or delinquent clients, it may be necessary to insist on taking fees on account before commencing work.

It is only after the firm has done a thorough review that it will be able to develop a strategy for going forward.

Stanley Jeremiah

Goodwins Law Corporation

E-mail: stanley_jeremiah@goodwinslaw.com