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ISSUE 02 | JULY 2010
Are you intelligent?
Interview
Alan Hodgart on deep knowledge
Why law firms need better information, and what they
can do with it to become better businesses
Feature
Numbers game
How analysing management information in a law firm can
boost profits and efficiency, from those who do it
Plus
Breaking down how firms can use intelligence and
analysis to keep profits up in a down market
SPONSORED BY:
Image: Sebastian Kaulitzki - Fotolia.com
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Is your business intelligent?
You’re intelligent, of course
– you’re reading Briefing.
But how about your firm?
The second edition of
Briefing is about how
to mine the information
inside a law firm to make
better decisions, deliver
transparency and drive up
profitability.
We were lucky enough to
rope down law firm strategy
guru Alan Hodgart for long
04
enough to grill him about
business intelligence (BI)
and how law firms should
be using their data – but we
covered more than that. To
Hodgart, BI affects the whole
firm, so there’s something to
learn whether you’re in HR,
finance, BD or beyond.
We’ve also analysed what
firms are really doing with BI
in our feature on page 8, and
we have analysis on how BI
08
is helping some firms beat
the recession from LexisNexis Redwood on p13.
Don’t forget that most
things in Briefing are
clickable, if you want more
information on what you’re
reading. I hope you enjoy this
month’s Briefing as much as
I enjoyed making it.
Rupert White, head of
content and community
13
Interview: Alan Hodgart
Numbers game
Making intelligence work
The strategy guru talks to Briefing about
how firms can make much more profitable
use of their information
upert White finds out how law firms are
R
really using BI and other tools to make
better decisions
Stu Gooderham from LexisNexis
Redwood on how some firms are using
intelligence to beat the recession
This issue of Briefing was supported by:
There’s a big
opportunity for KM and
BD people here – it’s not
all about the information,
it’s about how you get it
into people’s heads.
Alan Hodgart, Huron Consulting Group
Links key:
Want to get involved in Briefing? Click on the
purple W to find out more, or just call us on
0870 112 5058
Our interview with Alan
Hodgart was transcribed by
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ISSUE 02 | JULY 2010
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INTERVIEW ALAN HODGART
Deep knowledge rules
Alan Hodgart, strategy and
profitability expert, talks to
Rupert White about business
intelligence, analysing firm
performance and what most
firms are still doing wrong
Alan Hodgart is one of those
people that you’d be very
glad to see in a crisis, I’ll
bet. He’s probably not one
of those people you’d relish
seeing, though, if you were
the cause of that crisis.
His no-nonsense approach
is well known, and his rapid
movement from assessment
of failure to corrective advice is
like watching a very one-sided
boxing match – it’s not pretty,
but it’s fair and you knew it
was coming.
Hodgart and his business
partner Julia Chain sold their
business, H4 Partners, to
global firm Huron Consulting in
2009. He probably has one of
the longest careers in law firm
consulting without ever having
worked in a law firm – he read
politics, philosophy, history
and psychology at university,
trained in strategy consulting,
and has spent 20 years telling
law firms how to turn strategy
into money.
He also doesn’t shy from
dishing out painful advice,
which is what attracted me
to him for interview. He also
knows the true value of management information, which
is what business intelligence
tools, from basic reporting all
the way to complex cubes,
can do: it’s a better understanding of your firm, whether
you like the outcome or not.
But he still doesn’t think
firms are getting that, to turn
management information into
profits, they need to develop
ways to effectively measure
performance across the firm.
“Larger firms get [the world
of measured performance]
and a lot of the smaller firms
are getting it,” he says, “but
my feeling is that where key
performance indicators are
used, they’re often based on
an outdated model of how
lawyers work.”
Being as efficient as a
manufacturing company may
never be possible for a law
firm, despite what some pundits say. This doesn’t mean
a firm can’t be very efficient,
very customer-focused, and
run like a business in almost
any other sector – but law
firms are people businesses
and, to achieve maximum
efficiency and to make the
business analysis reflect the
truth, says Hodgart, a lot of
standardisation of method and
workflow has to be done.
“There is very little attempt
in most law firms to search
for the most efficient way of
doing, [say], a mid-size M&A
deal, or putting together
advice for a client on libel. Very
little work has been done on
how we standardise and take
out some of the labour cost.”
Firms have got to become
more efficient for the people
working at the coalface, too,
he says. “Assistants [will]
adopt a different approach
for one partner, then switch it
when they do the same job for
another partner, and switch it
again for a third partner. That’s
just completely inefficient.”
One of the best ways of
solving this problem, he says,
is to obtain “much better
information systems, and get
some KPIs”. These can then
be measured. But, he says,
what firms haven’t always
done “is actually go back into
the ‘how’: how you do the
work, and to ask ‘how can we
work the most efficient way
possible’”.
If you don’t standardise
working practices, your
attempts to institute KPIs
and measure them will likely
fail and doom to failure any
detailed measuring of the
firm’s performance, because
your indicators will indicate the
wrong things.
This isn’t just down to
mistakes – partners and
fee-earners don’t always
report what they really do.
This erroneous information is
one of the things that must
be stamped out, as far as
possible, to create a leaner,
fitter firm, says Hodgart.
But first a firm has to get
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INTERVIEW ALAN HODGART cont.
past the singular obsession
with time. No matter how
efficient someone is, if a
legal business is based on
billing time they are almost
encouraged to produce bad
data. A way to uncover this,
says Hodgart, is to hunt down
partners who regularly have
bigger write-offs compared to
others in the same work area
– “they may be good lawyers,
but they’re totally inefficient
how they go about it”.
in law firms, especially those
in which time-based working
is fighting against efficiency,
aren’t easy to see. You need
to dig deep into the firm data
to see what’s really happening.
That’s not going to happen if
partners and fee-earners are
so confounded by data that
Image copyright Netlaw Media
people here: it’s not all about
the information, it’s about how
you get it into people’s heads,
and KM and BD know all
about presenting information.
Hodgart agrees that finance
could get a lot out of a few
meetings with KM to work out
how to better present data,
“A lot of reports just have
page after page of statistics
on fee-earners, hours and
rates and God knows what.
That doesn’t pinpoint where
there’s been a problem.”
Presentation of data
This goes to the heart of why
BI tools and management
information, when mined well,
are so important to a law firm
– doing it right forces the firm
to produce better workflows
and to concentrate on reality,
not live blindly with figures it
knows are massaged.
One sticking point is that
the people mining the firm’s
management information
aren’t the people producing it.
This has the knock-on effect
of not just disconnecting the
fee-earners from the information and what it means,
but also making it hard for
business services people to
get the right information into
partners’ heads.
“There are two problems,”
Hodgart says. “One is the way
the information’s presented.
I’m not having a shot at
finance directors [but] across
so many firms, data is presented in such a way that the
partners and fee-earners don’t
understand it. And that leads
into the second problem:
they’re not using the data.” In
other words, the real problems
lot of finance reports just have
page after page of statistics
on fee-earners and hours and
rates and God knows what.
And it doesn’t actually pinpoint
where there’s been a change
or a problem.
“Most lawyers are fairly
visual and they understand
Alan Hodgart, managing director, Huron Consulting Group
they don’t act on it.
“A lot of data in firms is not
presented in a simple way
that allows you to get the big
picture and then draw down
on the specific items. So in
consequence, the fee-earners
just don’t look at them.
Partners in some firms I know
get loads of information, but
it’s presented in such a way
they don’t understand it, so
they don’t look at it.”
One answer, Hodgart says,
is to ‘tier’ the presentation
of data – start really simple
and make the top layer more
visually comprehensible. Only
get more complex as you drill
into the information, when you
need to.
“Unfortunately,” he says, “a
visuals. If you give them a
page of numbers, unless it’s
fairly simple and it follows a
certain pattern, they don’t
understand it. If it follows a
pattern, lawyers are prepared
to look at it and can see what
it means.”
This isn’t to say that lawyers
are all innumerate – as Frans
Post, CFO at Olswang, says
in our Feature, there are many
highly numerate partners out
there. Hodgart reminds us that
it’s not about whether partners
‘get’ numbers, it’s whether
finance can quickly and
effectively relate the numbers
to the legal work they do.
There’s a big opportunity
for knowledge management
and business development
and from BD and marketing
for lessons on presenting it.
Strategic capability
Hodgart’s big deal is strategy – and BI tools, and the
data behind them, help firms
develop strategy and assess
its success. Those strategic
goals need to be enacted by
putting in place milestones,
targets and key performance
indicators that allow those
people making the decisions
to easily see whether the tactics are working.
Of course, all these measurements are only as good
as the data. This applies in
absolute terms to manage-
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INTERVIEW ALAN HODGART cont.
ment information and BI – if a
firm doesn’t understand the
data it’s producing, or set
realistic, comprehensible
measures, it won’t understand
the output.
But before a firm embarks
on BI procurement, he says,
it’s important to know up front
what’s going to be measured.
This applies whether or not the
firm is thinking of adopting BI,
in fact, but Hodgart has some
straight ideas about what firms
should be measuring: “One is
your cost and profit per lawyer
– pretty fundamental numbers
in terms of making a profit.
[Second], how far out of line
are you with your competitors
or with the peer group on the
cost and profit per lawyer?
“Looking at profitability,
one of the first numbers we
look at is the profit per
lawyer because, subject to the
gearing or the leverage in the
firm, which you can’t change
quickly, that will determine the
profit per partner. And how’s
that affected by cost and
revenue?
“If you take the top 100
firms who publish their
numbers in the [legal press],
you can see some significant
differences in the cost and
revenue per lawyer [among
firms]. In some cases you can
explain it. In other cases you
can’t explain it without going
inside the firm and digging
into it.
“[Partners] look at the PEP
and say ‘our PEP is worse
or better than theirs’. But in
many firms now, people don’t
actually start taking that apart
and saying ‘what does that tell
me?’ If there’s [another firm
in the same city, or the same
country] it’s probably hiring
the same sort of people. So
why is their cost-per-lawyer
significantly different to yours,
and how have they got more
revenue per lawyer out of
them?”
How BI helps you pitch
This is, Hodgart says, “fairly
simple stuff” – but it’s not often
been addressed in the past,
because times were, generally,
help firms work out better
whether its pricing is correct,
and whether a firm can
engage in, say, fixed-fee work
without taking a bath.
Whether the will is yet there
to gain a truer understanding
of a firm’s position is another
matter. Hodgart says he thinks
“there’s a greater understanding that they probably need
to”, but it’s still reactive, as
clients ask for better deals.
“As you move towards more
fixed and certain pricing for
Three tips from the top
• Get the data right:
“Focus on key things that
matter, and get the matter
data and make it visual.”
• Be definite: “In each
practice group [define] the
work that you do fairly regularly. Take a small task and
start to look at how much
you can standardise and
what would be the most efficient process for doing it?
Can you put a cost on that?
good. Now times are hard, BI
can really help a firm work out
where its weak points are.
But, he says, “very few
firms do that level of detailed
thinking”. This leads to the
fact that analysing firm data is
fundamental to understanding
the true costs of legal work,
and being able to offer inhouse clients some measure
of cost certainty.
But moving away from
hourly billing means having
an accurate view of costs.
Hodgart agrees that BI can
What’s the standard cost? If
you start with just a couple
of areas of work in each
practice group and start to
think about it, you’re starting to get the mind going in
the right way.”
• Project manage:
“Lawyers have to understand more sophisticated
areas of project management in order to bring it in
on the price point.”
the client, the cost of the work
then becomes absolutely vital.
[But] there is a huge lack of
understanding,” and clients
have noted that, he says.
“Hourly rate pricing just
doesn’t encourage efficiencies. So with the coming of
alternative pricing models,
where you’ve got more certainty on the price, you cannot
get away with being inefficient
in the work process.”
BI and other sophisticated
tools for mining the firm’s
data, he says, are the way to
do that. “Years ago the old
mantra was if you get three
times the salary cost for the
fee earner, you should be
making good profits. [But]
most lawyers, most partners,
do not know the cost of the
fee-earners. That’s a very
simple piece of business
intelligence across a firm
that people need to have. [At
most firms], if you click on a
fee-earner’s name you get
their hourly rate for sale, [but]
you don’t get the cost price or
the profit margin – [that’s] very
simple data.
“You’ve got to understand
the cost and profit margin per
fee-earner… then standardise
the work process to a fairly
high level. In some cases you
can’t standardise it all, but
if you know the cost of the
fee-earner being put on
the job, and you run it and
project-manage them properly,
you can pretty well predict
what the profit’s going to be.”
Hodgart says that it’s
“nonsense” to say that legal
work is impossible to cost
ahead of time.
“When [lawyers] say each
piece of work is almost
unique, I’m saying it’s not. One
of the reasons it looks unique
is because each partner does
it differently. A large part of
legal work is fairly standard
once you’re doing a similar
sort of job. There’s 20% that
might vary, but if you understand what those variables
might be and discuss them
with the client, you can also
price them in.”
Is this where finance and
reporting might become a plus
point for BD people, I ask?
After all, if your firm is good at
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INTERVIEW ALAN HODGART cont.
costing and assessing jobs,
and can prove it and give the
client solid understanding that
the right people at the right
price will be doing their work,
why not sell on that basis?
“Yes, but a lot of firms
haven’t put the systems in to
manage it. That’s the problem.
People are going [to pitches]
and saying, ‘we’ll do this at
a fixed price’ but they don’t
have the systems to tell them
whether their fixed price is the
right price.
“The challenge for partners
in fixed-price or close to fixedprice work is: how do you
achieve the price for the client
and the profit margin for the
firm? You can easily achieve
the price for the client, even
today, [by just] discounting
until the client says yes, but
that means you’ve got a big
write-off.
“It comes back to the cost
and the flow of work – understanding that you can standardise huge amounts of work
and then manage it in such
a way that, even on different
pricing levels, you can achieve
the right profit margin.”
If a firm starts to understand
itself better, he says, this
affects everyone in the firm,
not just the fee-earners
and partners and finance
people, because it’s a move
that forces better business
processes and methods to be
employed.
HR people take note: as
work gets more standardised,
measured and understood, he
says, “what are you going to
give a first-year qualified, and
how many do you need? It’s
going to fundamentally change
recruitment patterns and the
type of people you need”.
This firm-wide effect brings
us back to how areas like
business development are
involved: “BD understands
revenue, but they haven’t
been given the information to
say ‘How do we manage profit
margins?’.”
Working out what not to do
The outcomes of any journey
into BI should arrive at a better
knowledge of what the firm’s
good at, and that might lead a
firm to some hard choices.
“If you stay broadly full
cally weighing the costs and
benefits associated with
being full service, how that
can be delivered, and what
the outcome might be. And
much of that task is measuring performance, cost and
success.
In other words, “focus on
what you’re good at, then
outsource the parts that
support the core but where
you can’t compete on costs”,
he says. But Hodgart is quite
clear that law firms should turn
to legal process outsourcing
(LPO) before thinking about
outsourcing parts of or whole
support functions. Only once
“Full service is no longer a
strategic concept. It doesn’t
tell me anything.”
Alan Hodgart, managing director, Huron Consulting Group
service,” Hodgart says, “I think
it’s inevitable that you’re going
to get some sort of outsourcing model to get the costs
down. That raises the strategic
question: do you have to be
full service anymore?
“Full service is no longer a
strategic concept. It doesn’t
tell me anything. Clients, even
less sophisticated clients,
don’t buy a full-service firm. If
there are areas of work you’re
doing which are not part of the
core business, why are you
doing it?”
For firms, then, it’s no longer
a choice between full service
or not – it’s about strategi-
the strategic decisions about
what work the firm should
do, why, and what it will cost
and earn, and the staffing and
outsourcing decisions resulting from those decisions, have
been made should firm think
about, say, outsourcing its IT
or HR functions.
This doesn’t necessarily
mean turning immediately to
LPO companies. An international firm can outsource work
to its own offices, as long as it
knows which is working well,
which has more capacity, and
which is most capable. And
using BI can also help crucially
in knowing this information.
“Very few international firms
actually move work around
the network into the cheapest
office and bring it back to a
high-cost office,” he says.
“But that will happen.”
That means having a very
good idea of how the different
country offices are doing,
and binding them all to good
processes and the same IT.
“You’ve still got to manage
it very tightly, and you need
to have business intelligence
to know about the cost of
the work and then the profit
margin you’re bringing back
in. The points I’m making
apply equally, even more so,
as you go down the outsourcing route.”
Whichever way a firm uses
BI, he says, it will pay big
dividends as it allows a firm
to analyse itself better, which
means making better decisions. And those decisions,
when turned into action, will
need measuring – and the
measuring encourages further
analysis. It’s a virtuous circle,
a synthetic approach to legal
business that’s still at a fairly
nascent stage of adoption.
It’s not like firms don’t
already have the data they
need to turn into business
knowledge, Hodgart says.
“Most firms are firms have a
huge amount of data on what
jobs cost. They’ve just never
kept it in one place.” l
Click to find out more
about Alan at Huron
Consulting Group
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FEATURE THE BENEFITS OF ANALYSIS
Numbers game
Rupert White looks into
how law firms are using
business intelligence,
reporting tools and
information analysis to
make better decisions
How much does your firm
know about itself? That is
not a trick question.
Some say law is one of
those sectors that’s five years
behind the others. While that’s
not true about a lot the top
100 firms, there’s still a lot
of sluggishness in legal, as
this issue’s interviewee, Alan
Hodgart, would attest to (see
Interview, p4). Where law
might be behind the curve is
in using sophisticated analysis
tools to delve into their businesses – otherwise known as
business intelligence.
BI isn’t all about software
that only someone with a
degree in applied numerology
can understand. It starts at
reporting and rises in sophistication to data warehousing
and cube analysis. The majority of practice management
systems (PMSs) come with
reporting tools, which is BI in
every sense. Most people will
at least have seen a Crystal
report. But at the higher end
is technology that can collate,
correlate and analyse data
from various parts of the
firm, and give practice heads
and managers vital detailed
information.
There are lots of BI brand
names around – PMS builders
like Elite, Aderant, Pilgrim and
IRIS and many others offer
various levels of BI reporting.
Dedicated systems such as
Oracle, Cognos, Redwood,
Business Objects, Qlikview
and even corporate stalwart
SAP hang out at the expensive
end of the BI bar. Some say
Microsoft systems are now as
good as the best of the top
end, so the choice is now vast
(see Is Microsoft now a BI
buy?, p12).
But this article is about
why firms need business
intelligence and what it can do
firm-wide, not which flavour of
BI they need.
Alan Hodgart told Briefing
that firms need BI to find out
that essential ‘how’ – how
they’re working, and whether
that’s the best and most
efficient they can be. Frans
Post, Olswang’s CFO, is of like
mind. Law firms, he says, can
use BI “to analyse what you
do well and what you do not
so well, and that’s obviously
related to profitability”, as well
as to answer some essential
questions. “In most firms there
is at least an idea of recovery
rate, but not in all firms. It gets
more difficult when you get to
the link between revenue and
how work is staffed. I don’t
think all firms have a clear view
of that.”
Ian Dinwiddie, Allen &
Overy’s finance director,
agrees: “Sophisticated and
detailed analytics are an
increasingly important part
of managing law firms of any
size. The ability to produce
detailed analytical data
quickly and distribute it to aid
management of performance
from the bottom up is critical
to improving performance.”
The two key areas in which
it is probably most useful,
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Numbers game cont.
says Dinwiddie, are lawyer
productivity and client profitability. But, he says, it can be
easy to lose sight of those
basic markers as firms get
larger and more international.
“These analytical tools enable
an overview of trends to
be reduced to manageable
chunks for action, and are
very useful in making rapid
changes to behaviours as
market conditions change.”
And boy, have market
conditions changed. Getting
a much clearer idea of what
work costs to deliver has now
become vital to winning work.
Clients now want much more,
for much less.
For David Gilmour, head
of finance systems and BI at
Wragge & Co, the recession
meant competitive pressure
from a price-slashing Magic
Circle. Wragges had to find an
edge, fast.
“Clients are much more
demanding on pricing –
they’re certainly more aggressive with us about what they
are willing to pay. We found in
the downturn that the Magic
Circle would drop their rates to
put them directly in competition with us. [And] while we
can drop our prices, if we’re
not winning the volume of
work it very quickly becomes
unprofitable, so it’s very
important that we have the
financial data to understand
[which work will be profitable,
and which not].”
Fortunately Gilmour and
his colleagues were already
rolling out a set of better BI
tools when the recession
hit, because they’d had the
same problem that comes to
many firms, legal or not: they
“The market has become
much more competitive...
We’re all in competitive
situations, and we have to
know [much] better what
we’re doing.”
Frans Post, chief financial officer, Olswang
BI and the board
Frans Post on how to
present complex data to
lawyers.
“I’m for simple, because
everyone understands
simple. Most people only
remember very limited
things, so there’s no point
going through 40 slides
packed with graphs, texts
and numbers – after three
slides people get bored,
doze off or start BlackBerrying.
“Being graphical probably helps, but it’s probably [as good just] to have
a few straight numbers.
The board just wants to
know how the business is
doing, not how you got to
that conclusion.”
knew the firm needed better
information for everyone in
the loop, but that couldn’t be
done with existing systems.
“In the past it had been very
difficult for us to be very
transparent to clients,” he
says. “The financial position
will change minute to minute
depending on what’s hit the
clock, and we wanted to get
to a position where people
were looking at the same thing
at the same time.”
Wragges chose to adopt
a data warehouse (a fairly
high-end BI set-up) “because
it allows us to [deliver live data
to anyone] using portals, and
we can almost guarantee that
we can show the same data
at same time to partners and
clients. It sounds simple, but
it’s very important.”
So BI has given clarity and
immediacy of information to
both internal and external
stakeholders at Wragges.
That doesn’t mean
everything has to measured
up to the second to be
useful; with good BI you can
choose frequencies to match
the data. Michael Malone,
financial systems manager at
Charles Russell (a Redwood
user), says his firm “decided
we needed to measure KPIs
such as profit on a monthly
basis, while we needed to
measure other KPIs, such
as chargeable hours worked
or collections, daily”. This is
because, he says, if targets
aren’t being met, “and if you
are not at least able to access
BI information on a daily basis,
you have no opportunity to
address this under performance quickly.”
In search of lost time
Perhaps BI should have its
own Chinese proverb: only by
measuring one’s performance
can one improve.
Setting goals measured
by KPIs is a vital part of the
arrangement. Key performance indicators (KPIs) sound,
and indeed are, tools straight
out of a management consultant’s phrasebook – but they
work, if they’re done properly.
John Connell-Smith,
finance systems manager at
Norton Rose, is using BI a
combination of Aderant Expert
ISSUE 02 | JULY 2010
briefing
10
on B U S I N E S S I N T E L L I G E N C E
www.legalsupportnetwork.co.uk
Numbers game cont.
PMS reporting and Cognos
for portal-style reporting on
financial/transactional and
management measures.
On the management side
Connell-Smith’s team created
a ‘partner portal’ for partners
to keep track of fee-earner
and team performance.
“[At any time] a partner can
see a snapshot of KPIs of
their team,” he says, including
“WIP, fees month to date, year
to date, debtors and various
forms of lock-up, and then drill
down to detailed information.”
Norton Rose also has a
fee-earner dashboard for
partners, showing information
such as how many hours
fee-earners have recorded by
week, month, year to date,
even daily. The concentration
on truer time logging was a
fundamental point for every
person interviewed for this
feature, as it is for ConnellSmith. And because Norton
Rose’s BI tools are mining live
data, remedies can be rapid.
Considering that analysis
is only as good as the data,
if a firm’s determined to
understand job resourcing
it must be more disciplined
about time recording. But
many in the business say that
time recording has actually
got worse in the recession as
lawyers become more desperate to show they’re delivering.
Connell-Smith has a great way
round this: don’t just measure
the time – measure something
that gives you an idea of how
accurate the time is.
“All fee-earners, including
partners, have to record a
minimum number of hours
a day. And we’re measuring
‘days to post’ – how long it
takes for them to post that
time – which avoids time leakage. One of our key indicators
at the moment is trying to
cut that figure, to make sure
people are recording time
quickly and accurately.”
That’s a KPI you can rely
on: you can’t guarantee
someone’s recording time
properly, but you can measure
when they record it. There are,
says Connell-Smith, “plenty of
spent years at regional firm
Martin-Kaye operating a more
modest, and to some more
comprehensible, BI set-up of
Excel and MS Query mining
Axxia databases. Firms should
push the information out
to everyone, he says, and
analyse more than just time.
“To be competitive, business managers must have
KPIs at their fingertips – time
recorded, fees billed, and cash
weren’t having to be that fussy
about these margins. Now
they are.”
As to mining the whole
business, Mills says that “[BI]
has the same benefits to a
law firm as it has to any other
organisation, and gives you
the ability to look at all aspects
of your business”.
John Connell-Smith agrees
– Norton Rose points BI tools
at every part of the business,
“It cleans up the data
almost as you go. As you
produce more information,
people see the need for
it and then make their
processes better.”
John Connell-Smith, finance systems manager, Norton Rose
studies out there saying that
the longer you leave your time,
the less likely you are to record
as much, or as accurately”.
Total recall
The best BI is when everyone’s interested in it, rather
than it being something used
purely by command and control, and BI that mines more
than just the amount of work
being filed every day.
Chris Cann, now a risk
and compliance consultant,
collected – and must supply
their fee-earners with that
same data.”
Rowan Mills was business
reporting manager at Linklaters until March 2009, and
is now a BI consultant. His
ex-firm was also heavily using
BI to analyse data from across
the business. “The BI we had
gave us ability to measure
people’s performance on a
lot of different methods. [For
example] it’s not just billing
the client – it’s who’s getting
money back from the client.
“Pre-recession, people
with dashboards for finance
people as well as fee-earners.
“We plug into our disbursement system and produce
Cognos reports from that,
[which gives finance] a single
place to see the information
and trend data.”
BI is very useful, but you
might not think that it can also
be turned into a selling point.
Frans Post does – he wants
to hire a business analyst that
will analyse BI reports and
work with BD to better select
the kind of clients Olswang
wants. “The crossing point of
ISSUE 02 | JULY 2010
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on B U S I N E S S I N T E L L I G E N C E
www.legalsupportnetwork.co.uk
Numbers game cont.
the strategic importance of
clients and the evaluation of
their financial relevance [as
mentioned earlier] is where
finance and business development cross over.”
SJ Berwin Business analyst
Kerrie Anderson certainly
agrees with that. “Technology
has enabled law firms to collect more data than ever about
their business, their clients,
and their operating costs. BI is
the next step for any ambitious
law firm. The name says it all:
it’s clever to collect good data,
but real intelligence comes
from being able to manipulate
this data to answer specific
questions, or deal with specific
circumstances – such ‘what’s
our exposure in Greece this
month?’. This allows you to
be nimble and to deal with
problems and opportunities
as they arise, rather than
conducting post-mortems
over historical data.
“The analyst’s role is to do
what we’re good at – listen to
a variety of people and distil
what they need to know, when
they need to know it, and how
they want to digest it.”
When I asked Frans Post
if more mid-tier firms should
employ business analysts, his
answer was straightforward.
“Who knows? I hope they
don’t, but Olswang certainly
will. We are a £91m business,
and if we can do our client
selection 1% better, you can
calculate how much that
would deliver.”
Strategic goals
Before performance can be
measured, of course, the
firm’s goals must be strategically mapped out and measures derived from the strategy.
And that’s another side benefit
of going down the BI route
– better decisions up front,
created from a need to define
profitable and not strategically
important, and you don’t want
too many of those.”
Nigel Stott, IT director at
Clarion Solicitors in Leeds,
echoes this point. “Some
clients are profitable, others
E-billing: A key future driver
for business intelligence?
David Gilmour, head of
finance systems and BI at
Wragge & Co, says that if
you’re looking at e-billing,
BI is a must-have.
“When you e-bill client
you send them all the
individual time entry data
relating to who did the
work. If you’re part of
a panel and they’re all
submitting e-bills, it’s very
easy for the client to look at
how the firms are leveraging the work. So it’s very
important to us to work out
how we’re resourcing jobs.
what, or who, is important to
the firm’s future.
From one perspective, BI
can help a firm find out what
is really important to it. “You
may have clients that aren’t
that profitable but are very
strategically important to the
firm, in which case you’d
happily make an investment
in that,” explains Post. “But
the importance of BI is in the
knowing – I want to know
the profitability of a client
in relation to its strategic
importance. [Of course], you
may have clients that are not
“Many people look at
e-billing and think it’s just
an operational billing utility,
but it isn’t – it’s BI in its own
right.
“If you’re naïve enough
just to send all of that
transactional data electronically to the client without
understanding how you
leverage the work, you’re
putting yourself at a
competitive disadvantage
compared
to the panel firms that
do know how they’re
leveraging the work.”
aren’t. What we want to know
are the attributes that distinguish a profitable client from
others. We have all this data
at our disposal but no easy
way to identify any patterns
that are hidden in here. That’s
where data mining comes in –
it gives us real information on
which to base decisions.”
John Connell-Smith is using
BI as part of a resource management programme, Flex,
for which Norton Rose won
The Lawyer’s HR Team of the
Year award in February 2010.
“There’s now a management
group in the business that
looks at resourcing and we
report to them with Cognos,”
he says. That group makes
some top-line decisions on
staffing, market analysis and
work trends in the firm – so
BI has been instrumental in
Norton Rose’s HR success.
Everyone I spoke to for this
article said BI changes firm
processes for the better.
“It cleans up the data
almost as you go,” says
Connell-Smith. “As you
produce [information] people
see the need for it and make
their processes better. It’s
highlighted that we need to
educate people around the
firm, not just on fees, WIP
and so on, but when we say
how much work we’ve done
in France, for example, what
kind of work, and how are we
capturing [the data]?”
Wragges has changed
much about the way it works
to improve processes across
the board as a result of
better BI, says David Gilmour.
“We’ve broken down work
into phases and tasks. On
a litigation case in the past
it would be worked out on
hours, but we’re now breaking
down the time recording into
phases and we know how
many hours are going into
those phases. In future, when
we’ve got enough data… [that
data will] help the client make
a better decision on whether
to even carry on litigating. So
it’s better for the client.”
Generally, it seems, until a
firm’s used BI to find some
answers it won’t know which
processes it needs to change
to get better data. But it’s
not always that way around.
ISSUE 02 | JULY 2010
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www.legalsupportnetwork.co.uk
Numbers game cont.
Christine Ardis, IT manager at
London firm Teacher Stern,
had BI capability in the firm’s
TikitTFB PMS a year before
the recession pushed her partners to call for KPIs and other
measures – and is therefore
living proof that IT heads who
ask for functionality they don’t
need right now are, in fact,
thinking strategically.
What BI delivers is a window
into a firm’s data, allowing
understanding of the data and,
much more importantly, better
decisions to be made from
more accurate information.
And Frans Post at Olswang
thinks hard times create a
need for better information.
“It’s clear that the market has
become much more competitive, and that’s a factor that
definitely helps [adoption of
BI tools]. We’re no longer that
comfortable. We are all in
competitive situations, and we
have to know [much] better
what we’re doing.”
Ultimately, how important
is BI? On this point, David
Gilmour is very clear: “I think
it’s got the potential to help
to transform law firm decision
making and the whole way
firms interact with clients,
but it needs to be embraced
all through the organisation.
But you’ve got to start
somewhere, haven’t you?
Hopefully it’s the future – that’s
why we’re investing in it.” l
Is Microsoft now a BI buy?
David Gilmour, head of
finance systems and BI at
Wragge & Co: “We’re transitioning to Microsoft SQL
Server reporting. Business
Objects costs us £40,000 a
year to support, while SQL
Server is free.”
Andy Stokes, consultant
at Saturn27 and one-time
IT architect at Wragge
& Co: “Two or three years
ago, reports showing how
much profit was being
made were often sufficient,
and the cost of a reporting
solution was just another
overhead. Meanwhile,
every legal organisation
was talking about Microsoft
SharePoint – it was ‘the
next big thing’, though was
complex and perhaps had
no ‘business need’. Things
have changed. BI through
Microsoft SharePoint has
become ubiquitous, driven
largely by the adoption of
‘free’ SQL Server Reporting
tools.”
Steve Gray at Anlys, BI
consultant: “BI is extremely
affordable a the moment –
you can get a whole Microsoft toolset for £1,500. It’s a
very affordable tool.”
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ISSUE 02 | JULY 2010
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on B U S I N E S S I N T E L L I G E N C E
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ANALYSIS MANAGEMENT INFORMATION
Making intelligence work
© NLshop at Fotolia.com
Stu Gooderham from LexisNexis Redwood outlines some simple
routes to increased profitability through business intelligence
There is no denying the
impact of the economic
downturn on law firm profitability. But understanding
what’s happening inside
a firm and applying some
business intelligence to it is
helping some firms sustain
profits in the recession.
When the latest report from
the LexisNexis Redwood
Think Tank analysed market
trends in the UK, it contained
some hard facts on just how
tough the industry has been
hit. Using the results of The
Lawyer’s annual Legal 100
report, the Think Tank analysed the shift in results over a
24-month period (see chart,
p14). The blue markers on the
chart represent the profit per
equity partner (PEP) results for
the top 100 UK firms during
the period 2007-2008 – a
solid year for the legal market,
as the concentration and
position on the grid of blue
dots demonstrates: most firms
posted a rise in PEP, with only
a few exceptions.
Contrast this with last year’s
results (the red dots) – and
you can see a significant shift.
PEP has taken a hit, but firms
are dispersed widely across
the graph, indicating that the
downturn has hit some harder
than others.
Firms face pressure from
every direction to change their
business models to make
it through this challenging
market – specifically, improving PEP through revenue
growth. The short-term fix is
to lay off staff and cut costs,
but the smart firms, those
which will not only ride out
the recession but also thrive
once it has passed, are
taking a more holistic view of
their businesses and making
long-term strategic decisions
based on accurate business
intelligence.
One of my clients summed
up this challenge like this –
“we, the law firm, need to
understand:
• Where are we making/not
making money?
• Why are we making/not
making money?
• What if we made changes to
our business model?
•What would the effect be on
our bottom line?”
Rigorous business intelligence gathering and analysis
are crucial to answering these
questions, giving management
teams an accurate picture
of their firm without basing
decisions on assumptions,
inertia or hubris. Specifically,
but not exclusively, BI can help
law firm decision making in a
range of areas, two of which
I’ll deal with in turn.
Personnel: It is no surprise
that headcount is being
questioned, but smart firms
are not simply laying off
staff at random. But a more
progressive approach is to
look at the firm in its entirety,
work to avoid top-heaviness,
and determine where the most
effective returns on investment
are made across the firm. This
approach extends into a firm’s
ISSUE 02 | JULY 2010
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on B U S I N E S S I N T E L L I G E N C E
www.legalsupportnetwork.co.uk
Making intelligence work cont.
not good at is knowing what is
profitable and what is unprofitable. [Using Redwood] we are
now able to model scenarios
that enable us to pitch at the
most competitive level and
remain profitable. Allocating
resource in the knowledge of
current availability and capacity, and knowing the margin
operated under the belief that,
due to the fragmented nature
of their client projects, no
single group could be counted
as ‘loyal’. But using Redwood
the firm produced a trending
report that examined transactions and billing patterns over
the past five years, uncovering
clients that had repeatedly
Firms growing PEP but losing rank
inconsistent payment history,
we tried to understand why –
were we not billing correctly,
or was it something to do with
our internal organisation?
“The results of our analysis
led us to make proactive
changes to our client relationships, increasing collections
and identifying opportunities
Firms growing PEP and relative rank
PEP rank change
recruitment policies: it is vital
to ensure graduate schemes
and associate on-boarding
match exactly the most
profitable areas of the firm.
Fee structures: The
traditional fee structure of
firms (hourly billing) has been
increasingly questioned by
commercially savvy clients.
Increasingly, fixed-fee, retainer,
or blended-rate plans are
being demanded, placing a
heavy burden on firms’ internal
systems to decode what
work, teams and individuals
are the most cost-effective.
As these alternative fee
arrangements become more
prevalent, firms need to
understand their clients, activities and billing in real depth.
We advocate a client profiling
approach – using systems
and information to manage
client portfolios. Effective client
profiling not only highlights
relationships that are worth
nurturing, but also drives
accountability within the firm.
By winning and retaining the
right clients, firms can identify
small or unprofitable clients
with little or no potential for
growth, or who perhaps
conflict with new business.
Law firms are already
employing the tactics outlined
above to keep an even keel
during the economic storm.
John Banister, COO of
Wiggin, a niche media law
firm, sums up his experience
thus: “We are all too aware
of the competitive nature of
the market and have many
anecdotes about firms pitching at unprofitable levels just to
get the work. Of course, you
can’t stop that, but historically
what we as a profession are
Firms dropping PEP and losing relative rank
Firms losing PEP but improving
relative rank
PEP change in %
LexisNexis Redwood Think Tank legal market trends analysis 2007/8-2008/9
for each fee-earner, informs
the decision. Pitches aren’t
just won on price, and our
success rate remains relatively
unchanged, but at least we
know the likely return on a
piece of work if successful.”
SJ Berwin has also been
working with LexisNexis Redwood to drill deep into internal
data to identify the corporate
business unit’s key clients.
This practice area had long
placed work with the firm, paid
within short payment terms
and referred additional work.
This was invaluable information that helped with client
segmentation exercises.
Mike Giles, financial director
at SJ Berwin, comments:
“We can now look at our daily
inventory, which gives us the
ability to plot the consistency
of payments for individual clients. For those we found with
for additional billings.”
The successful law firms
of the next five years will
be those that can best
understand data through a
BI tool to profile their best
clients, manage their portfolio
of services to those clients,
and create client plans that
deliver world class service for
a healthy profit. l
Click to learn more about
LexisNexis Redwood
ISSUE 02 | JULY 2010