The current recession is an opportunity to clean up your practice. Although the drop in business and fear of the impact of the Legal Services Act are impacting on the morale of many lawyers and managers within law firms, there are key steps that very many firms can take to improve business now and for the future.
Here is a checklist to help you and your colleagues take stock of how your firm is progressing in key areas as you aim to bring your practice out of the recession, well equipped to be successful and to provide you with a good return in the longer term. Use the time you have now to get these right.
Whatever you do, all of this has to be achieved whilst enhancing the client’s experience of dealing with the firm. The most crucial change for most lawyers is to start thinking as a client.
1 Business Management
It is a time for level heads, direction and leadership from the top and much of this must come from considered information rather than emotion and gut feel. There are decisions to be made that not only ensure the management of current priorities but also get the firm ready to respond to the inevitable upturn in the market whenever that might be. The behaviour of management has an immediate impact on morale and can have an adverse impact on stability when the upturn comes.
- It is critical to take stock fully understanding the key management information available or what should be available within the firm.
- Highlight key components for the firm’s profitability, client relationships and cash
- Priority actions need to be identified and agreed; they will require constant focus.
- There needs to be a strategic plan that represents the short, medium and longer term direction for the business
- This plan needs objective milestones which can be regularly monitored and there has to be a willingness to change direction when it appears necessary
- Prime KPIs need to be established by department (they will be different) and they will also need to be varied over time
- The whole team at the firm needs to be harnessed, which requires sharing of plans and targets; also delegation of responsibilities, supporting a move to a platform of “accountability” rather than “responsibility” where it is essential to establish fair decision making processes
2 Cash Management
For many the biggest challenge in the short term is working capital, you will need:
- Effective credit control is a necessity but needs to be handled firmly and with sensitivity. However, there are earlier steps in the billing process that can be applied well before this stage to make credit control easier and more effective.
- Effective deployment of rule 2, including sensible estimates and a client risk assessment (ability to pay) is a good first step for every lawyer in every firm.
- To establish, working with your IT people, a means to monitor costs against the estimate to trigger early warnings when an estimate needs to be changed; and be bold enough to do it, making changes clear to the client..
- Review your client/file inception procedures to add in the agreement with the client of when they are to pay what; establish this billing profile and bill on time in line with the profile
- Review costs and timing of expenditure
3 “Strategic” Cost Reduction
This has to be handled objectively and has to be done! Preferably, harnessing the knowledge and skills of staff, who generally understand the need in the current climate. To make this work, you should aim to:
- Establish cost management as one of the KPIs for a department, engaging staff and creating accountabilities to focus minds on this area.
- It is the time to address – in priority order – the business processes for the firm that affect profitability, efficiency, client relationships and encourage the removal of the restrictions by some to changing working practices to get the financial benefits of improved division of labour. Review the capability of existing IT to support these process improvements.
- Review the effective use of IT already available in the firm, such as Case/Matter Management and even the enterprise roll-out of digital dictation systems
- Complete an inventory of supply contracts and be prepared to renegotiate at the appropriate time or event
- Make sure that IT/Systems maintenance is only being paid on licences that are actually being used. You may still be paying for people who have left?
- Consider outsourcing of IT may cut costs, improve reliability, remove niggles and ease the payment timetable.
- Rationalise printing and copying – get a competitive tender underway
- Ensure money spent on marketing and marketing material is in line with the marketing plan.
4 Client Relationships – Retention and Development
To maintain and enhance client relationships which are more critical now during the downturn than ever:
- Establish x% client satisfaction as your number one non-financial KPI; measure it, share feedback and respond to it.
- The client database is a valuable asset. It probably needs to be cleansed and segmented so that it can be used to generate repeat business and to cross-sell.
- Get IT and client marketing people to work together.
- Conduct client audits, potentially using a third party to really establish what the client perception of the firm is
- Train and coach staff on how to speak to a client with telephone and face to face enquiries
- Have an effective process in place to manage complaints efficiently and effectively – another KPI?
- Make everyone in the firm aware of the forecasted 800 people who will get to hear of a bad client experience.
- Establish clearly the role of the client partner and the interface with others that also deal with the client
5 New Business
There is new business out there but you and your colleagues have to win it from other firms or from the new suppliers to the “always online” Y generation. Gut feel on where new business is or is in the best interest of the firm is not enough. To do more, you want to:
- Be prepared to use targeted market research to identify low hanging fruit opportunities, perceptions and routes to market. It can be surprisingly cost effective.
- Ensure the web site is effective and there is the necessary investment in SEO
- Make it easy for people to make an enquiry and get a response online, on the telephone and face-to-face. Many opportunities are lost at this stage
- Make sure reception and other staff know how to handle an enquiry from a potential new customer – still too many are asked to call back!
- Get people involved in developing local referral networks.
- Ensure marketing material is effectively targeted at the appropriate audience
6 On Compliance
- Be ready for the SRA by ensuring that simple processes and manuals are in place
- Be able to prove readily that compliance actions have been undertaken
- Create a focus on quality to ensure that the business process and culture wants to get it right first time
- Be clear on how much the IT applications can support compliance
7 IT & Technology
There is a great deal of investment in IT but, all too often, real returns on this investment are not being achieved through lack of ownership and the absence of clear objectives from departmental managers, lack of training, sticking to old processes, poor relationships between partners and the IT people; and between the firm and its suppliers.
- Ensure a clear understanding of where and how the IT system, with its enhancements since installation, could better support the firm to improve the performance against defined business priorities. That includes PMS, CM and MI systems.
- Ensure you are getting the best from other systems, such as digital dictation
- Sort the client database to enable you to segment your contacts into groups you want to sell your services to and to support your marketing initiatives
- Find out how the massive changes resulting from consolidation of legal IT suppliers are going to affect your firm in the short and medium term. A strategy is needed.
- Find out enough about outsourced and managed IT services to make a decision on whether you should be doing it or not. IT infrastructure is getting increasingly complex to maintain and support with increasing demands for home working, extended out of hours support, access from anywhere, continuity of service and disaster recovery.
People are the critical asset for now and the future. Nobody likes it but most understand the need for redundancies as a last resort. How the firm pursues this course of action can impact on the ability of the firm to retain others when the upturn arrives; it’s not just about the impact on short term casualties.
- Make sure that skills and experience of all staff are involved in tackling the firm’s short term challenges. Respect their views.
- Make the changes from “responsibility” to “accountability” with the implementation of SMART objectives
- Recognise who can and cannot do different jobs. The best lawyer is not necessarily the best manager or team leader. Not everyone can sell or maintain good client relationships.
- Establish a meritocracy with partners, with defined management and client development tasks to perform for the firm; allow time and start to reward against these achievements.
- Ensure that competencies are recognised, with development needs and accountabilities are clearly reflected in appraisals
- Ensure that a training and coaching programme is in place linked to the firm’s strategy and plans for succession; not just the challenge of amassing CPD points
- Be prepared to introduce incentives and reward for performance targeted to address the immediate challenges that your firm faces today
How are you faring on each of these? Identifying the gaps and setting out a plan of action on each would be a good move now.