Back to Basics — a Business Briefing for Lawyers: Productivity

Welcome to the latest edition of Back to Basics — a Business Briefing for Lawyers. This month the focus is on Productivity. The Oxford Dictionary defines Productivity as “the effectiveness of productive effort, especially in industry, as measured in terms of the rate of output per unit of input:” and in this month’s Briefing we will look at getting more out from the effort you’re putting in. Much of this means working with the resources you have and applying them properly to make sure that you can improve the productivity of the firm. If you’re not getting the best out of your resources then you are harming the productivity and, inevitably, the profitability of your firm. Take some time out to consider how you work on a daily basis and whether there are some things you might think about doing differently that will give you a productivity boost. If you need any help in creating systems or tools to assist you in your productivity efforts please get in touch with me—I’d be delighted to help.

Brian O’Neill LL.B MBA
Business Consultant
40c Drakemyre
Dalry
North Ayrshire
KA24 5JE
t. 07855 838395

Productivity

Every business must be conscious of the need to continuously improve its productivity and to apply its resources as effectively as it possibly can. Unfortunately, due to established working practices and inertia, many businesses fail to take advantage of the tools available to them and instigate the changes needed to achieve those aims. The resources of any business are precious, not least in the legal profession, where fee earner time is probably the most valuable resource. There are only 24 hours in every day—and, despite what the more young and energetic amongst us might think, we still need to sleep. After that, we’re left with somewhere between 16—18 hours every day to carry out a whole host of activities—washing, eating, drinking, getting dressed, relaxing—oh, and working!

To get the best out of the time you spend working it is absolutely essential that you are organised. You need to consider the other resources at your disposal—money is usually pretty high on the agenda as are the people who work with you. As with time, it’s highly likely that your money resource is not limitless. In the course of the last few years, money has been very “tight” for many, many legal practices and this has resulted in redundancies and short time working. As the recovery, such as it is, continues, it is important to consider all options to aid productivity rather than simply engaging more people. You are likely to have some form of office that you use—even if it’s a home office—and tools with which to do your work—a PC will probably feature in the mix somewhere as will, potentially, a Practice Manager system. Do you use these resources wisely…. properly…. at all? Finally you need to look at the processes you employ to carry out your day to day work. People say it’s hard to change and think about doing things differently.

If time is your most valuable resource and if you don’t use it properly you will lose it then it makes perfect sense to look at the ways you and those in your firms do things and work out the ways you could do things differently to employ your resources more effectively and improve not only your personal productivity but that of the firm as a whole. Improved productivity inevitably leads to improved profitability—after all, that’s what being in business is all about —isn’t it?

What are you going to do today?

In a previous issue of Back to Basics we looked at Objective Setting—and the need to write down your clearly defined objectives. This helps you to keep focused on what’s important to you and what you want to achieve in your business. Last month we looked at the Importance/Urgency Matrix that you can use to help you decide what parts of your work are top priority and which parts are unimportant. Another tool that many successful people employ is the To Do List—and not simply a list of all the things you need to do, but a To Do List that’s prioritised. To start off you need to list everything that you have to do—yes, everything. Then assign a priority to each item on the list, starting with A items and ending with F items. A items are the most impactful on your business and should be the things that will do most to help you achieve the objectives you’ve set. They might not always be the most urgent (but many are) but they will certainly be the most important to you. B items are not as important as A items but tend to support them whilst being more important than C Items. C Items are the third priority items which are less critical than A or B items. When it comes to D items, you really need to consider whether you should be doing these items at all.

By prioritising your A, B and C items you’re deciding that only you can do these things—and if, when reviewing your list you feel that there are some things on it that might be best dealt with by others, then demote them to Ds and delegate it to others. The E and F items on your list tend to be the “like to do” items and you need to consider whether you need to do these things at all! Once you’ve assigned each item a category you should then group all your A items together and prioritise the most important item in that group as A1. Decide on the next most important and assign it A2. You go thought your A list and assign a priority to each item. Then start to work on your highest priority item—your A1 item—and you don’t move on to any other item till your A1 item has been completed. Then move on to your A2 item and do the same thing. If something comes in during the day that you need to deal with (as it inevitably will), add it to your To Do List and determine its priority rather than just starting the task without thinking about it. Try to avoid distractions—particularly email distractions.

People tend to work with Outlook open, with prompts telling them a new email message has arrived. This is probably one of the biggest “attention thieves” that you are likely to come across. You should ring-fence some time each day to deal with email—and close down Outlook outwith those times—and if you can’t bear to be without Outlook being open, at least turn off the new message prompt! Solicitors work hard—it’s just sometimes they don’t work smart. Have a go at creating and using your very own Prioritised To Do List. Do this every day and watch your productivity soar!

Simon says…..

‘Performance’ is one of those often thought about aspects of running a law firm but one that is rarely attributed to any individual’s job description. Which is odd really because it can be easily measured, compared, analysed and then improved or worsened; by just a single decision. When I meet Partners of law firms to talk about IT, we often stray into other areas and a favourite question of mine is this – ‘in order to improve efficiency would you foresee doing more tasks yourself or delegating more tasks to others?’ By the way, there is no right or wrong answer – all 3 possible answers are perfectly acceptable (the 4th one involving not changing is obviously not acceptable). There are some common aspects of achieving an increase in the performance of all law firm staff. The quality of your Style Template Library is a vital component. I don’t mean simply having one. I mean having it in electronic form, having it available immediately to anyone that needs it, having all the common fields in-filled automatically from your client and case file information, storing the resultant letter or form automatically and distributing it electronically to the recipient – this would seem to me to be a utopia of performance. I rarely find it.

Even if you fell short in the final stage it would still be a tremendous leap up the performance ladder for the vast majority of law firms. A common failing of some Partners is the failure to agree on common styles for the firm itself to use, preferring instead to adopt individualistic forms of standard correspondence that fails to grasp any form of economy of scale that a basic Document Management system can provide. Some firms will be unwilling to invest any time or effort to produce a style library – fortunately there is an organisation called The Styles Bank that can supply ready-to-run Style Libraries that are kept up to date for you. I strongly suggest that you check them out. As I have suggested above having an automatic store of electronic documents – often referred to as a case management system – can make it easier for colleagues to retrieve files when you are out of the office and they are trying to cover for you.

This is doubly useful if you have also filed your emails in it as well (both Sent and Received). This means that there is a phenomenal reduction in staff time spent printing and filing (always a challenge in itself) and then locating the appropriate file (a lost file is a real daytime nightmare). These simple gains in productivity will convert directly into improved performance – and clients will notice. No Fee Earner is an island – there is always a team. People are change resistant, so there is often a proving stage to be negotiated, but if your improvement programme is sound, implemented well and people can see the benefits, they never want to go back afterwards. Your role is to keep them moving forward and to praise them when they achieve good results. By the way the 3 possible answers are:- 1 – Doing more myself. 2 – Delegating more. 3 – Both.

Simon Greig is Sales Manager of LawWare Limited, Edinburgh. Contact Simon at simon@lawware.co.uk

Get organised

Keep your workspace clear, clean and tidy and try as hard as you can to have only 1 file on your desk at any one time. This will help you to focus on the matter at hand. Keep other files that you intend to work on nearby on a shelf or table so you can move on to them after you’ve dealt with your current file. When you deal with a case, do everything that can possibly be done at the one sitting—don’t do a little bit and then ask for the file back to do another little bit and then repeat the process. Do as much as you can in one sitting—”single-hand” everything you possibly can. Put a reminder in your Diary or Task List or, better still, your Practice Management system, and after that put the file back in the filing cabinet—then, at least, you’ll have half a chance of finding it when you need it.

Do you know that you can spend up to 30% of your working time looking for something that has been misplaced in some way? That’s a huge waste of one of your key resources and should not be viewed lightly. It can get worse, of course, when you engage the assistance of others to help you find the file. Just think of all of the productive things that you and they could be doing instead of trying to put your hand on a missing file—and if everything you do is in your Practice Management system, you might not need the file at all! It pays to be organised—don’t let that thought ever leave your mind.

Review your processes

We all take the way we do things for granted. Stop for a minute and think about all of the things that are done in your firm on a daily basis and why they’re done in that way. Is this just because “that’s the way it’s always been done” or has someone actually determined that it’s the most efficient and effective way to do the task? Make sure that the right person is assigned to do the right task—don’t have high cost people doing low cost work! Think very carefully about every process in your office. If you find any that are inefficient or ineffective—change them.

Lawyers love documents!

I’ll bet every lawyer who receives this Briefing generates several hundred letters and documents every week. Unfortunately, many of these documents are created from scratch when they don’t need to be—with the same thing being dictated over and over again. That means something that could easily be incorporated into a standard Work Template taking a few seconds to produce takes minutes to dictate or type (or have a secretary type). All of these minutes add up to weeks of wasted time. Do yourself a favour, consider having as many of your documents as possible created using Word Templates that can be easily accessed. It will take less time to produce your documents and letters and give you half a chance of enhancing your risk management processes.

Contact us

Brian O’Neill LL.B MBA, Business Consultant, t. 01294 833220, m. 07855 838395, e. brian@drakemyre.co.uk

Simon Greig is Sales Manager of LawWare Limited, Edinburgh. Contact Simon on simon@lawware.co.uk

Back to Basics — a Business Briefing for Lawyers: Managing

Welcome to the latest edition of Back to Basics — a Business Briefing for Lawyers. This month the focus is on Managing. Each edition of Back to Basics addresses a single management item and on this occasion I felt that it would be sensible to consider some of the processes that go into managing. It’s made up of many, many components and we can only scratch the surface in the limited space we have available in this publication—but we’ll touch on some of the essential elements you need to consider. Effective management is something you need to work hard to achieve—and you need to use a very wide range of skills and tools. It can take years to develop as an effective manager and you have to start somewhere—and where better than with the basics! If you need any help in creating systems or tools to assist you in your management efforts please get in touch with me—I’d be delighted to help.

Brian O’Neill LL.B MBA
Business Consultant
40c Drakemyre
Dalry
North Ayrshire
KA24 5JE
t. 07855 838395

e.   brian@drakemyre.co.uk

Managing

Running your own business can be a bit like fitting together a jigsaw puzzle— you know all of the pieces are there, but it’s not always easy to find the right pieces in the right order and fitting them together. Management in a legal firm has always been viewed as something you learn on the job—or not, as the case may be. This leads to many, many difficulties, not least of which is having to make decisions without enough information to support them. Ad hoc management decisions inevitably produce results that are unexpected and generally poor. These lead to further ad hoc decisions being made which simply compound the problems. I’m not suggesting for a minute that management is an easy thing to do or that it is a panacea for everything that goes on in a legal firm.

If management is simply a case of “doing it by the numbers” then everyone could do it and become a success. There are, however, some fundamentals that need to be put in place for the smooth operation of any firm. There should be a clear purpose—where is the firm going? There should be some sort of “plan” to get there—and a written plan with specific objectives or milestones is critical. This is an essential tool to help you assess how you are performing. You need to ensure that your financial information is current and that you can see how your monthly results impact on your overall annual projections—and what that will mean to you in cash terms. You also need to make sure that you let your clients and the public know what you can do for them. These are just some of the pieces of the puzzle and your challenge is to fit them together in the right way to create a business that is effective and successful.

A view from the High Street

I’m delighted to welcome Austin Lafferty as my guest contributor in this edition. In his firm, Austin has developed his managing role over the years and now operates a distributed practice across 3 branches. In addition to managing his firm, Austin is Vice-president elect of The Law Society of Scotland and takes up office at the end of this month.

Here’s what Austin has to say on the subject:

Like so many solicitors with a relatively small firm, I started out with little idea of management, and, frankly/sadly, something not much more than contempt for that function, which was regarded as a minor function that sat in a backroom role around the edges of running a law practice. In other words, it was assumed that clients would come in, the solicitor and staff would do the work, get paid, and move on to the next case/transaction. I learned over a few years that if this philosophy had any traction, it would have been many years ago in a different world. The reality was and is that structured, planned management can either increase your profits while reducing your risks, or, in rough times, can secure your survival. I remember watching an episode of LA Law (it dates me, I know) and the story was that the managing partner (Douglas Brackman – bald but handsome…) was ridiculed by the glamorous litigators and real estate whizzkids for creating no fees and being a boring and almost worthless functionary who was only holding them back from bigger and better things. He went on strike. Within 3 days the whole firm ground to a fractious halt with mayhem and loss everywhere. Message received. No lawyer is an island.

It was the rise of computers that really got me into a full appreciation of management values. From the early 80’s I was involved in media work, and although this was the birth of commercial IT for law firms, I had to learn to type and use a PC (or Amstrad) to write scripts for TV and radio shows, and for newspaper columns. Having worked in these environments, I could quickly see how the techniques could be adapted to a small law practice. As I began to apply them, that led to other ideas, rationalizations, developments, changes. And as these played through, it became apparent to me through chatting to clients, friends, colleagues in other professions and trades that what I thought of as innovation was either standard procedure or even best practice in the wider business world. And that realization was the tin lid on it – management is not a lesser exercise or something that happens to other people, it is a universal tool of organization, and in effect essential to the profitable and safe practice of the law.

It is a sad fact that still, well into the second decade of the 21st century that so many law firms don’t yet appreciate this. I was involved in a number of seminars and conferences in my Law Society of Scotland role, aimed at helping the high street general practice division of the solicitor profession in Scotland in the light of the general economic downturn. Although I used as much of my ability, experience and understanding of management to suggest a wealth of ideas for firms to use to help themselves (not my personal ideas, just general tactics known to be useful). Some listeners got it, but a fair few looked blank, and some, even in the questionnaires completed by attendees, treated the ideas with naked contempt (makes you wonder what they were doing there). Let me leave you with this thought. Management is a never-ending story. You cannot rest on your laurels, there is always a better mousetrap, a new challenge to face, a risk or an opportunity arising. It is never enough to be a good lawyer. You need to have a business brain, and treat your practice as an organic enterprise that is capable of being grown, harvested and pruned when necessary. Profit is the crop, and the fertilizer? Constant vigilance and hard work – with always an open mind.

Simon says…..

There is a great deal written about this subject. A Google search for the specific term ‘law firm management’ will list millions of hits (over 43 million – I checked!). A lot of people appear to know a lot about it! So why is it something that features so little in many Scottish law firms? I know this is generally true from personal experience. I do think you have to be of a certain size before ‘management’ becomes a definable aspect, which can probably be summarised as the point at which it regularly encroaches too much on client work time. Then it becomes time to get an Office Manager and the problem goes away. Ironically it is at this point that Management disappears and get replaced by Containment, when Management gets associated with Staff and this ‘problem’ is delegated to the new Office Manager or promoted secretary.

The issue I have with this is that Staff is the single most important resource any firm has and if responsibility is delegated to someone with no interest in how effectively this resource is utilised then it won’t develop, it won’t improve – it will be contained. Yes, I know! – lots of ‘management speak’ in that statement. You’ll know if this has happened in your firm as you will have heard this phrase – ‘We have always done it this way’ – numerous times. This is not to say that Staff is Management. Management is a multi-disciplinary facet. There are 4 areas in a law firm that should be constantly changing and evolving and thus require managing:-

1. Case Load Performance 3. Business Development
2. Financial Performance 4. Staff Development

And these need to be proactively managed by setting a target, actioning a plan and reviewing the results.

Simply reviewing performance is not Management, anyone can review performance. Managers set targets and think about how to achieve them. I personally describe this level of activity as tactical because there is always something going on with each of these, a bit like plate spinning, and each contributes to the overall success of the firm. As I’ve just hinted, each of these has a supporting role in something bigger and more overarching – Strategy. A firm of any size should have a Strategic Plan, encompassing the 2 vital ingredients that all successful law firms have – Vision and Direction. Ask yourself two questions – Where are we going? [Jot the answers down]. And then – How can we get there? [Jot the answers down]. Now you have started your Strategic Plan; keep at it!

Prioritisation

Deciding what is or is not important is a key part of the management function— whether it relates to managing your cases or managing your business. By creating a grid like this you will be able to separate out and prioritise your tasks. Write down all the tasks you need to do on a separate piece of paper. Once you’ve done that, think about them in terms of importance and urgency and then list them in the quadrant that best matches the priority of that item—the most urgent and most important go into the top right hand quadrant and the least urgent and least important go into the bottom left hand quadrant. You should then work your way through the most urgent and important before anything else—then move to important, but not urgent. You then need to consider whether things that are in the bottom half of the grid—the urgent but not important—or non urgent and unimportant items need to be done at all. You must always remember that if you don’t manage your work—and that includes all the various management tasks—your work will manage you. You must make it your priority to ensure that it’s the former and not the latter methodology that you practice!

Contact us

Brian O’Neill LL.B MBA, Business Consultant, t. 01294 833220, m. 07855 838395, e. brian@drakemyre.co.uk

Simon Greig is Sales Manager of LawWare Limited, Edinburgh. Contact Simon on simon@lawware.co.uk

Back to basics – a Business Briefing for Lawyers: Managing Performance

Welcome to the latest edition of Back to Basics — a Business Briefing for Lawyers. This month the focus is on Managing Performance. It is essential that every firm has a range of Performance Management tools—not only of a financial nature (although those are very important) – but more wide ranging.

Armed with these tools, firms will be able to make decisions based on factual foundations rather than on “gut feelings” or “instinct” which, sadly, can prove disastrous. We will touch on just some of those tools in this month’s Briefing. You should not only check your performance for the current month but also over a period of time to help you gain an understanding of the way your business is working and what trends there are that are affecting it. If you need any help in creating systems or tools to assess your performance, please get in touch with me—I’d be delighted to help.

Performance Managing

You see them vying for victory every week during the F1 season – trying to improve their performance week on week. They try things to see if they work, and if they do, they keep them and if they don’t they discard them and try something different. The whole team knows what it’s trying to achieve and they all have a part to play. They measure everything that goes on because they know that by doing that they will find ways of improving that will help them win the race. In your business, there is no difference between what they do in Formula 1 to what you need to do.

Every business needs to have a range of Performance Measurements against which it can test its progress. There are the obvious financial measurements in the form on budgets and projections which you can compare to actual results. You can measure the number of new cases that you opened this week, month or year against the same period last year. You can count the number of new clients that you’ve taken on— and where they came from. Are your Sources of Business continuing to perform as you expected them to? You must identify the information that is important to you and once you to that you must check your progress against that. Are you going to make the effort to improve week on week or are you just in the race to make up the numbers?

If you can’t measure it you can’t manage it!

It’s well known in the world of management that you can’t manage something if you can’t see it—and if you don’t set any performance measurements then there’s nothing to see. It is an essential element of running any business to set performance measurements. Without these you will have no accurate idea of how your business is doing. Simply relying on the bottom line in your bank balance will not give you a very good idea of which parts of your business are performing well and which are performing badly. To do this you need to introduce a range of performance measurements. There need not be a huge range of measurements—but you do need some. As I mentioned earlier, it is prudent to have a range of financial measurements. You really should set out a budget for your financial year (and if you’re part of the way through the financial year and haven’t set a budget—set one for the remainder of the year). Every month you should compare how you’ve done against your budget. You should look at which areas performed well and which areas performed badly—and, in each case, work out why. You should also benchmark your results against the Cost of Time Survey conducted by The Law Society. You will find a range of Financial Ratios in that Report against which you can test your own results.

If you are intent on growing your business profitably, you will be interested in where your new clients are coming from and to compare how many new cases are created by new clients against the number of new cases generated by existing clients. A monthly Source of Business report is a good barometer as to whether you have solid connections that supply you with new cases month after month—and whether a once successful Source of Business is now in decline.

Reading rows and rows of numbers can be difficult and don’t necessarily help you to spot trends. Try putting the resulting into a Chart to compare your projections against your actual results or, in the case of Source of Business Reports consider establishing trends over a period of time to see if there is an improvement or decline from your various sources of business. As can be seen from this chart, existing clients and client referrals are performing well, referrals from the firm’s Web site are increasing month on month, Yellow Pages produces a very small number of cases and might not be worth the money and there is a declining trend in IFA Referral work. This assists you in making decision about which areas you should focus on for growth.

Simon says…..

If I was a budding Olympian (I wish!) then the term performance management would be an oft used phrase. If I was CEO of an FTSE company it would be part of the furniture. So is it something only associated with participants that are at the peak of their chosen field, or, is it something to do with how you attain the heights of capability. The above have teams of dedicated people to measure, analyse and report, which of course isn’t the case for your average law firm in Scotland. Having said that, I reckon you only need the teams of experts if you are trying to win a medal or keep investors happy. The average law firm in Scotland can be informed about its performance much more easily – simply use modern Practice Management software that takes a holistic approach to the firm rather than just the Cashroom.

The most common tool to measure a law firm’s performance is probably the cash accounting system. Unfortunately far too many cash accounting systems were designed for cashiers to use, which means they pander to the needs of the few rather than the needs of the many. Compliance isn’t difficult to achieve and it’s certainly not an aspect to be feared or shrouded in ignorance. Any decent Practice Management System (PMS) will make Compliance transparent to all and automatically alert Partners as to how Anti –Money Laundering and Cash is performing – and, it will show you how your Fees Rendered and Fees Recovered are performing – although don’t be one of those people that think Fees Rendered is the goal; it isn’t – only Fees Recovered (i.e. cash in your bank account) is of practical use to today’s law firms. A good PMS will reveal how quickly you fee (by Work Type, by Partner, by Department) and how quickly you get paid; by revealing the number of days it takes to be paid – then starts you thinking about how you can reduce it. It will also show you any clients with a £500+ credit balance — and show you any clients with a Credit Balance and Fees Outstanding if your Terms of Business says you can take a fee if sufficient client’s funds are available, then call client and let them know you are taking it. If your Terms of Business doesn’t say this – change it. If you are currently using the Bank Statement as your primary performance management tool, then have a look at a modern Practice Management System; you will get a very pleasant surprise if you do. You may be one of those that waits for the accountant to tell you what’s what after the financial year end. The difficulty with this is that by the time you find out there’s a problem; it’s too late to do anything to improve things in the relevant financial year.

Many firms are trading on an overdraft, in which case the bank has probably taken a proactive role as far as reporting is concerned – in many cases this was because the firm itself wasn’t proactive. However, don’t simply be feeding the bank with what it wants to know; understand how good your business development is – report on new clients introduced and new instructions received as these are the things that will feed through into your cash figures in due course. Understand the dynamics of your business: what number of cases lead to what level of income, what are the overheads and expenses that underpin which levels of work type; How are they performing? Is a good question. How can they perform better? I would suggest is the goal.

Fee Earner Performance

Because of the nature of legal firms, it is very important that Fee Earners have their performance measured. In many instances Solicitors are not only the owners and managers of the business, they are also the prime producers of the firm’s income through the work they carry out to generate fee revenue. You should consider measuring the number of cases a fee earner is dealing with at any given time, when it is likely that these cases will generate an income—and how much. You will be interested in the number of fees the Fee Earner renders each month and, most importantly, the number of fees the Fee Earner recovers each month. You can look at the averages of both the number of fees raised each month as well as the average value of fees rendered and recovered and by doing do make a reasonable projection of how much a Fee Earner is likely to generate over a future period.

You can also test what the effect would be of either increasing the average number of fees raised or the average value per fee (or both) or, more worrying, what the impact of a decrease in either of these figures would lead to. To follow this process to its logical conclusion, you will be able to set costs against the Fee Earner—not just the Fee Earner’s salary but also Employers NI and the share or overhead that is attached to the Fee Earner for use of the office space and systems –and the cost of any secretarial or administrative support. By doing this exercise you will be able to calculate Fee Earner profitability. This is a very useful measurement to help you with your decision making. It may seem from taking a “top line” approach based on the value of Fees Rendered that a particular area of work is valuable to the firm but when you analyse out the cost of that work you may well discover that when the cost of carrying out the work is applied that the profitability is simply not there. This may help you to determine how that can be dealt with or whether the firm should continue to do that particular type of work.

Brian O’Neill LL.B MBA, Business Consultant, t. 01294 833220, m. 07855 838395, e. brian@drakemyre.co.uk

Simon Greig is Sales Manager of LawWare Limited, Edinburgh. Contact Simon on simon@lawware.co.uk

Back to Basics — a Business Briefing for Lawyers: Managing Change

Welcome to the latest edition of Back to Basics — a Business Briefing for Lawyers.

This month the focus is on Change and Change Management. What a topic to try to cover in a couple of pages! There’s a school of thought that says all the best companies are in a constant state of change—and that’s not wrong. I should make clear, though, that it’s not always wholesale change. Incremental change can be extremely effective. Be careful to make sure that you can justify the reasons for change—there’s no point in introducing change for change’s sake. Make changes that will support your objectives, improve your services and increase your profitability— that’s what you’re in business for, after all. If you need any assistance to introduce and/or manage change, please get in touch with me—I’d be delighted to help.

Brian O’Neill LL.B MBA
Business Consultant
40c Drakemyre
Dalry
North Ayrshire
KA24 5JE
t. 07855 838395

e.   brian@drakemyre.co.uk

If it’s so hard to change—why bother?

I’ve lost count of the number of times I’ve heard the phrase “but this is how we’ve always done ……”. (add your own ending). There is no doubt that many people in most businesses are change resistant—they would rather do anything other than change the way they do things. They are emotionally attached to internal processes that can be shown to be outdated, obsolete, time consuming and no longer fit for purpose—but suggest that they change the way they do something and many people behave as if you’ve just suggested that they should jump off a very high cliff! I’ve mentioned this before in this Briefing, and I believe it’s worth repeating. If you want to change the results you’re getting then you need to do things in a different way—or to put it in a much less charitable way—the definition of insanity is doing the same thing over and over again and expecting a different result. Change is a challenge and many employers shy away from that challenge, sometimes because they fear change themselves! In the last few years change has been forced on many legal firms. External pressure caused by the recession meant firms had no choice but to review the ways that they structure their staffing requirements and be selective in the work they do.

Some firms moved away from doing what they believe to be unprofitable work whilst others diversified into areas where, in the past, they did not provide services. These changes have been forced on the profession by external circumstances and it is clear that there has been a great deal of pain. Change forced by external pressures will inevitably result in unpalatable decisions being made and changes implemented that would not be the first choice of the partners in the firm—I know many partners who had to make the very painful decision to make staff redundant or put people on short time in order to cut the cost base just so the firm would survive. It will come as no surprise, then, to learn that change driven from within and implemented through choice can have a much more significant impact on the future of the firm. This is change that’s introduced not for survival but for a positive purpose. Finally, there must be a reason for change—and what better reason than to achieve the objectives that the firm has set –Oh!, you did set those back in January when we discussed them…….didn’t you?

Back to Basics — a Business Briefing for Lawyers: Succession and Retirement.

Welcome to our most recent edition of Back to Basics — a Business Briefing for Lawyers. This month the focus is on Succession, Succession Planning and Retirement.

I’m delighted to include in this edition, an article by Douglas Mill, former Chief Executive of The Law Society of Scotland and currently Director of Professional Legal Practice of the Diploma in Legal Practice at the University of Glasgow. Douglas has a special interest in this field and has advised many firms on their succession strategy.

No matter how far you’re into your legal career, you need to think about and make plans for your succession—and review these on a regular basis. Whilst your retiral may not be imminent, it will come at some stage and it’s best to be ready for it when it does.

If you need any help in this area, please get in touch with me—I’d be delighted to help.

Brian O’Neill LL.B MBA

Business Consultant

40c Drakemyre

Dalry

North Ayrshire

KA24 5JE

t.  07855 838395

e. brian@drakemyre.co.uk

We all need to go sometime—how will you go?

This month saw the disappearance of two formerly prominent Scottish Legal Firms—and for very different reasons. McGrigors merged with Pinsent Mason—and became….Pinsent Mason. The Judicial Factor who had been appointed to manage the affairs of Ross Harper decided, on 30th April, that the business could no longer continue to trade and closed it down. Two names that have been most prominent in the legal profession for many years are no more.

We all need to consider the “end game” at some point. For myself, if was a change of career and leaving private practice as a solicitor to seek out new challenges. For some solicitors in recent times, their exit from practice has not been through choice but through the process of cost cutting and redundancy.

We are going through (and arguably, at last, beginning to come out of) the recessionary cycle—although the last two quarters of shrinking GDP would not have us believe that!! It continues to be incredibly tough for solicitors in firms of all sizes and the focus needs to be on managing the costs whilst striving to increase the revenue.

As market conditions slowly begin to improve, there is a need to reset horizons and start to concentrate on the strategic development of the business and a review of the business objectives. Part of this process should also be to consider the options you have for succession and how you might plan for that day when you take your foot off the gas and start to take more of a back seat.

Those of you who are partners need to consider how best to exit the business when the time comes—in fact, it’s a very good idea to have some sort of idea of when that time might be. My colleague, Stephen Vallance, made a decision some years ago that he would leave private practice before he was 50—and just a couple of years ago, at the age of 46, he negotiated a successful exit after having built a very successful and profitable firm.

So, when you’re revisiting your objectives and setting out the strategy that will take you forward as the economic cycle turns, don’t forget to look at the structure of your firm and take the time to consider what you need to do to ensure that you have choices as you head towards your chosen exit date. It’s simply no use to wake up on your 60th or your 65th or, heaven forbid, your 70th birthday and think “This is the day I’m supposed to retire….but I can’t do that because there’s nobody who can take over from me”.

Whether you wish your exit to be phased or come to a quick end, if you have some idea of how you can secure a return on your investment at an early stage you will at least have something to strive for.

Simon says…..

Are you making a success of your succession planning?

There is a definite issue with succession planning nowadays and I know a fair few senior partners that have already recognised it themselves. I appreciate that this is a multi-layered issue and Brian can only touch on it in the space available; I will target my comments on just a few areas in summary.

The traditional succession model where a senior partner is bought out of firm by a junior partner has failed. The banks will not lend the kinds of sums required by senior partners, so unless the money is in the firm to buy out a capital account – it cannot be bought out. Very few firms have these sums readily available and therefore it is my view that this model has failed, it just doesn’t work anymore and needs to be changed.

I understand why the banks won’t lend to junior partners and its nothing to do with the junior partners, it’s all to do with the banks perceived value in what the junior partners are buying – they perceive very little value. That is not to say there is no value in law firms – clearly there is – but the traditional partnership structure is perhaps out of sync with today’s economics. If a partner works 30 years building up his practice – this is recognised in the firm’s accounts; but from the banks perspective once that partner walks away the earnings power walks away too therefore, they argue, the potential earnings are dramatically diminished and the loan to return ratio is too short (and risky) and they will decline to loan. I understand the underlying problem too. The partner hasn’t created any self sustaining value in his business that enables the business to continue when he is absent from it. If you can demonstrate that your business is self sustaining then it can be the subject of a business loan rather than a personal loan; then that’s a whole different category of ‘investment’ that a lender can look at in a different light. If you haven’t developed this kind of business model, you need to take action now and be prepared to work until it takes effect; however long it takes.

There is a further challenge that ought to be recognised – if senior partners are working longer then there aren’t the opportunities for junior partners to move on up as quickly as they intend. These junior partners have more choice then to simply wait around for senior guys to get their act together. It has never been easier to start up yourself or with a group of like minded colleagues (LawWare’s LawCloud is experiencing huge growth in this segment) – in this scenario the senior partner is potentially left isolated with an asset that cannot be fully realised.

Another thing to be aware of – banks won’t support ailing firms for long nowadays. If firms are waiting for the recession to end before returning to better times – stop living in the past. The current business environment is the one you must live in and prosper within. There have already been major changes enforced on well known law firms as a result of not changing quickly enough; the resulting rapid mergers, or worse judicial factor appointments, are happening much more frequently nowadays. This is symptomatic of a ‘head in the sand’ culture. Don’t be like them. Law firms are businesses, if they are run on any other basis other than a sound commercial one, then I truly fear for them.

I was talking recently to a senior figure in the industry and I mentioned to him my greatest fear – the impending cull of senior partners that could potentially find themselves out on a limb because they wouldn’t change the business structure away from being all about them. He was shocked that I put it in such harsh words but he didn’t disagree. There is no safety in numbers in this regard; it is literally every man/woman for him/herself when it comes down to leveraging your capital account. If you don’t protect it – no one else will and as it has a direct impact on the quality of your life after work you need to be proactive – if you ever want to stop working that is!

Simon Greig is Sales Manager of LawWare Limited, Edinburgh. Contact Simon at simon@lawware.co.uk

It’s never too early…….to plan your exit strategy!

By Douglas Mill

The recession didn’t come at the right time for the legal profession in Scotland. Over-expansion over the last 15-20 years, allied to the ‘bulge’ of the Baby Boomers still 5-10 years short of retiral, created a sad situation—for this first time in the profession’s history retirement was not a given.

Much media focus has been on the big commercial firms whose structures and client work were such that they were most vulnerable when commercial work fell off a cliff. This quicklyon trainees and law students. Things became tough almost overnight. It takes 7 years generally to produce a solicitor, but the economy can crash almost instantly. People realised that getting into the profession was problematic. What has not yet been highlighted is that getting out is almost as difficult.

This applies to probably about 600 firms in Scotland—and a high percentage of our sole practitioners. It is going to be exacerbated as the effects of the Double-Dip kick in. It is simplistic to say the first wave of recession hurt the big firms and the second hit the High Street, but when people in public service start to lose their jobs the immediate impact will be felt by family lawyers.

It is hard to be over sympathetic to elderly partners who have taken the Lion’s Share for years, keeping good youngsters at bay on the age-old promise that “someday this will all be yours”. What will be? Partnership is now a risky business and banks will find many reasons not to grant practice loans—and forget getting £s for goodwill. This generation are more risk-averse—and for good reason!

Most solicitors haven’t been like that and it really is not hard to feel sorry for them. Most have been hard working stewards for their firm. However, the prudent investments in an Equitable Life pension and RBS shares have made retirement an ever-receding prospect. Reducing fee income makes it harder to earn new partners in and old partners out. Few partnerships talk openly about their plans and expectations. A good, say, 6 partner firm should have partners spaced apart in age, but who was ever that visionary?

Retirement ages are increasing and will continue to do so. The profession will have to adjust to that and start planning accordingly. Firms whose strategy is just to wait and see can expect their partners to die in harness. No one is going to do this for you. If your partners are reluctant to face these realities, prioritise yourself. Remember you have duties also to your family, friends—and yourself. It actually never is too early to plan your exit strategy—but in this climate it could soon be too late!

Douglas Mill is Director of Professional Legal Practice of the Diploma in Legal Practice at the University of Glasgow. Douglas can be contacted on Douglas.Mill@glasgow.ac.uk

Consider your options……

Most solicitors, when considering succession and retiral, look within the firm and, on many occasions, leave it far too late to bring on board Partners who have the right quality to continue the firm and secure a sufficient return to the retiring partner. This assumes that the firm is a Partnership. When considering your succession options, you might want to have a look at your business vehicle and work out, with your accountants and financial and business advisers, which would be the most suitable, tax effective vehicle to be in when you’re looking at building a succession plan—the traditional partnership model may not be the right vehicle for the job and an LLP or Limited Company might be a much better option.

An alternative might be some form of merger or acquisition—a sort of “buy in” of the right kind of talent that will secure the future of the business, enlarge its client base, improve its profitability (if economies of scale lead to reduction in duplication of personnel) and provide a platform from which you can extract sufficient value to get out when you want.

Alternative Business Structures potentially offer a further route for consideration—depending on the eventual percentage ownership interest available to the external investor and, leading up to retiral, could provide an option for disposal of part of the business for “cash”. This is an interesting area that will develop in the next year or so.

Building from within will probably remain the preferred option for most firms and, if this is the route to be followed, the sooner the planning starts, the better. Remember, this is business—and if you want the business to succeed you need to surround yourself with skilled, able people who can support the continuation of the business without you actually being there.

Finally, you must consider what your financial needs will be when you do decide to go. It’s essential to prepare a retiral budget to work out exactly how much you will need on a month to month basis—not only to spend on those essential bills, but to provide for unexpected eventualities. You really need to be as “debt free” as possible and that means you need to start now to plan your financial future and build up your nest egg to ensure that your retiral is as financially comfortable and secure as it possibly can be.

Contact us

Brian O’Neill LL.B MBA, Business Consultant, t. 01294 833220, m. 07855 838395, e. brian@drakemyre.co.uk

Simon Greig is Sales Manager of LawWare Limited, Edinburgh. Contact Simon on simon@lawware.co.uk

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Back to Basics for Lawyers: Have you made your New Year Resolutions?

Over four thousand years ago, the Babylonians celebrated New Year’s Day — although their celebration was in March rather than in January, coinciding with the spring planting of crops.

The New Year, no matter when people have celebrated it, has always been a time for looking back to the past, and more importantly, forward to the coming year. It’s a time to reflect on the changes we want, or often need, to make if we’re to have the motivation to move forward. Resolutions are a reflection of the Babylonians’ belief that what a person does right at the beginning of the New Year will have an effect throughout the entire year.

If you do nothing else in January, take a little time out to reflect on the past 12 months. It’s been tough out there for lawyers in the last couple of years. 2012 is likely to be no less challenging.

When you’ve done that, start setting down your objectives for the current year. By failing to review where you are now and where you want to go in the next 12 months you are doing yourself and your firm a huge disservice.

Any objective setting session needs to be based on some sort of realism. If it’s not, it will be demotivating and troublesome. In this edition of Back to Basics, we will look at setting some realistic objectives for the current year. Based on your own situation, you will be able to gauge whether what you set out to achieve is, in fact, realistic.

As always with any objective setting activity, you need to adopt a SMART approach. Are you up to the challenge?

Setting your objectives

90% of the population do not have any set objectives – you could say that if they don’t know where they’re going, they’ll probably end up somewhere they shouldn’t have.! This is equally true in business. When people first start out in business, they usually have a clear idea of what they want to do, when and how they want to do it and why they want to do it. Over time, however, these reasons become blurred and people end up doing what they’ve been doing day after day, week after week, month after month and year after year – out of habit and without stopping to consider why they started out in the first place.

In January you should take some time out to re-set your objectives – if you spend all your time working on specific cases for clients, you are doing yourself no favours if you fail to set aside the time look after your own business. Every individual in the firm as well as the firm itself should have and regularly review their objectives. This will help them to work out if they are going forward towards those objectives or backwards away from them.

Objective setting is a very powerful tool and should be used by every firm as well as every individual in the firm.

 Test your current objectives — set out what you believe your business objectives are — and don’t be surprised if you don’t actually know what they are or that you don’t actually have any specific objectives. This is not unusual. Whether you have any current objectives or not, it is vital that you set down some for the next 12 months.

You MUST write your objectives down.

You might want to use an objective setting tool to help you to create your objectives. This will help you to check that your objectives are SMART (Specific, Measurable, Attainable, Realistic and Time Bound). You should then clearly communicate your objectives to those who will be involved in helping you to achieve them.

Check that your objectives do not conflict with one another or with any personal objectives you may have. Once your objectives have been developed you should look at your objectives every day, every week and every month until they are achieved.

Finally, set frequent and regular dates in your Calendar or Diary to review your objectives and measure your progress against them. Don’t worry if it all seems a bit haphazard at first, you can “tweak” it as you go. The important thing is to take action NOW — don’t leave it till later as you will find other less important things to take up your time.

You now have the basics. Take action now. You can always move on to more sophisticated models over time.

Brian O’Neill LL.B MBA

Business Consultant

t. 01294 833220

e. brian@drakemyre.co.uk

Back to Basics for Lawyers: Welcome from Brian O’Neill

Welcome to Back to Basics for Lawyers. The aim of this Business Briefing is to help support lawyers in their efforts to manage their firms, their workload and themselves.

In each edition, which will be published regularly on this LawCloud blog, I will take a look at a different topic and provide some recommendations that have been useful to many lawyers. You too can join in by sending me your questions and comments with suggestions on how you do things to improve your business.

If you need any help with anything that appears in this Business Briefing, please get in touch with me.

Finally, may I wish you all the very best for 2012 and that everything you hope for becomes a reality.

Brian O’Neill LL.B MBA

Business Consultant

t. 01294 833220

e. brian@drakemyre.co.uk

LawCloud: Cloud for Lawyers UK