The success and ultimately the financial health of your law firm is dependent on three simple principles:
• Getting the work – Clients are key
• Doing the work – This goes without saying
• Getting paid for the work – It’s not always as simple as it sounds
These things are impacted fundamentally by the way your firm records time and the way you analyze and subsequently manage timekeeping. And to have a true overview of this, you need to go back!
What can looking into the past tell us about the future?
Typically in the past the proverbial time sheet was a means to an end, with the end being the invoice sent to a client. Once time found its way onto an invoice, the timesheet was filed, forgotten and the likelihood of it being used for any future reference was pretty minimal.
But should we really be locking away our old timesheets never to be seen again? Can they not provide us with valuable insight? After all, our past is inextricably linked to our future. There are many great victories that have been won and many valuable lessons that have been learnt by looking at our history, civilizations have risen and fallen based on the information they have garnered, or not garnered as the case may be from the past. So isn’t it time we started looking back, so we can be masters of the future?
Things in our world are moving at an ever faster pace and what this means for the law firm, is the need to be agile, flexible and responsive. Those words get tossed around quite often, but in the context of a law firm, it’s all about looking back at data that you have in order to understand what is ahead and so be ready for it. You hold precious and informative time data which can be transformed into invaluable information, giving you insight and a competitive edge and ultimately leading you to success.
What strategic information beyond basic “hours worked” can time data provide?
1. First of all it can help the firm gauge timekeeping performance at the firm.
In the past firms have relied heavily on the ‘hours worked’ metric which essentially delivers on quantity of time but not on the quality of time inventory. The result can often lead to future collectability issues and negative realization and ultimately it may be a sign of unhappy clients. Happy clients, pay bills and they keep coming back! The “velocity” metric which essentially measures time elapsed between when the time was worked and when it was recorded is a measurement that delivers on the “quality” element. Measuring velocity at the firm, practice group and individual timekeeper level, will indicate the level of contemporaneous capture and in turn the quality of the inventory. Better quality inventory means improved collectability and better realization and most probably better client relationships. In fact firms have actually used historical data to prove the correlation between poor quality time (measured by low velocity numbers) and negative realization. The velocity stat is one that every firm should be trying to determine, giving them the power to act immediately, improving both the success of the firm and the benefit delivered to its clients.
2.The second key area in the world of Alternate Fee Arrangements or Value Based Billing, (the preferred term used by corporate counsel), is understanding cost allocation to drive profitability, specifically in Fixed Fee matters. Put simply, knowing that the right experience /cost levels are working on the right phase/area of a matter can determine level of profitability and can also help in determining the optimal pricing to win in a competitive bid situation. Using analytics by mining the firms time data with focus on lawyer experience/cost vs. ranking the work product in terms of value (the value of the work at the “assessment vs. trial prep and/or pleading stages are obviously different) can produce compelling metrics that may lead to re-alignment of the resource pool against the matter-in-progress or impact a pricing model in the bidding process.
The information gathered from both of the above, can help law firms take action in improving profitability, improving business development (i.e. more competitive bids) and improving client relationships, safe in the knowledge their time inventory is always of a high quality.
By Peter Zver, President Tikit Inc, North America
Connect with Peter on Linkedin here.
Follow Peter on Twitter here.