Fostering Innovation in Law Firms

Transcription

1 Thomson Reuters LEGAL EXECUTIVE INSTITUTE presents Fostering Innovation in Law Firms Changing What We Measure: The Use of New Metrics to Encourage New Thinking about the Business of Law Firms Moderator: James Jones, Senior Fellow, Center for the Study of the Legal Profession, Georgetown University Law Center Panelists: James J. Barbaria, Chief Financial Officer, Proskauer Rose LLP Jeffrey Connor, Chief Financial Officer, BuckleySandler LLP Paul Eichelman, Global Chief Financial Officer, Baker & McKenzie LLP Joy E. Spicer, Founder, President & CEO, Elegrity, Inc. Scott Springer, Director, HBR Consulting LLC

2 The Changing Market for Law Firm Services Shift to a buyer s market for legal services for the foreseeable future. Clients now defining what constitutes value in the market. New focus on efficiency, predictability, and cost effectiveness in the delivery of legal services. Is requiring firms to rethink how they plan, deliver, and price the services they offer.

3 The Changing Market for Law Firm Services (cont.) Shift to a much more competitive market for the foreseeable future one in which supply exceeds demand. In a limited demand market, one firm can win only if another loses. While growth in demand for legal services will increase over time, a more competitive market is likely to remain. Is requiring firms to rethink the definition and scope of the markets they serve, as well as the nature of their competition.

4 The Changing Market for Law Firm Services (cont.) For the foreseeable future, most firms will face a market with: Very modest demand growth (if not decline); Serious constraints on the ability to raise hourly rates and pressures for alternative pricing; Declining realization; Productivity challenges; More competitive procurement practices; Increased client willingness to disaggregate matters; Increased competition from non-traditional service providers; and Growing pressure to increase expenses.

5 The Search for New Metrics A growing realization that firms will need to rethink the metrics they use to measure their performance in the new market environment in almost every area of their operations: Overall firm financial performance; Expense management; Practice performance; Partner performance; Client development; Balance sheet performance; and Management and leadership.

6 Overall Firm Financial Performance Traditional Metrics PPEP PPP RPL Leverage Profitability Index Possible Other Metrics Profit per Employee Matter Profitability Return on Capital or Equity Risk-adjusted Performance Profit in Excess of Partner Salaries Value of Income Stream

7 Expense Management Traditional Metrics Expenses per Lawyer or Employee Staffing Ratios Functional Expenses per Lawyer or Employee Possible Other Metrics Efficiency Index Return on Assets Employees per $ Million Compensation per $ Million

8 Practice Performance Traditional Metrics Fees and Growth Realization Utilization Leverage Matter Profitability Import/Export Statistics (with Other Practices) Possible Other Metrics Matter Contribution to Profit/Margin Practice Contribution to Profit Profit per Practice Member Profit per Employee Market Share Extended Leverage

9 Partner Performance Traditional Metrics Originations Working Attorney Fees Supervisory Attorney Fees Realization Billable Hours Leverage Possible Other Metrics Profit per Share of Practice Managed Total Profit of Work Originated or Managed Unit Cost of Work Originated or Managed Client Satisfaction Ratings Expansions of Key Relationships Employee Satisfaction Ratings Cross-Selling/Cross-Working

10 Client Development Traditional Metrics Fee Growth Realization Originations Client Turnover Rate Client Diversification (Revenue Produced by x% of Clients) Possible Other Metrics Brand Strength Wallet Share for Target Clients Growth in Share of Target Clients Client Quality Index Percentage of Revenues Driven by Flexible Resources

11 Balance Sheet Performance Traditional Metrics Capital per Partner Debt per Partner Debt/Equity Ratios Debt/Net Fixed Asset Ratios Possible Other Metrics Value Index/Firm Valuation Return on Capital Risk Index (Combination of Debt, Capital, Financial Performance, etc.)

12 Management and Leadership Traditional Metrics PPEP Growth Fee/Revenue Growth Turnover of Partners/ Practices Lawyer Headcount Other Firm Rankings Possible Other Metrics Market Share Growth Client Satisfaction Index Employee Satisfaction Index Leadership Index Return on Human Capital Management Value Index ( Value / Cost )

13 Discussion

14 Thomson Reuters LEGAL EXECUTIVE INSTITUTE presents Fostering Innovation in Law Firms Changing What We Measure: The Use of New Metrics to Encourage New Thinking about the Business of Law Firms Moderator: James Jones, Senior Fellow, Center for the Study of the Legal Profession, Georgetown University Law Center Panelists: James J. Barbaria, Chief Financial Officer, Proskauer Rose LLP Jeffrey Connor, Chief Financial Officer, BuckleySandler LLP Paul Eichelman, Global Chief Financial Officer, Baker & McKenzie LLP Joy E. Spicer, Founder, President & CEO, Elegrity, Inc. Scott Springer, Director, HBR Consulting LLC