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5 Questions with a Law Firm CFO

5 Questions with a Law Firm CFO

Law firm clients today are in the driver’s seat – asking law firms to provide more value at a reduced cost. Technology is one way law firms can provide improved efficiency and reduced costs, but what it does not provide is the client-centric focus and attention to value that is now expected by clients when providing legal services.

These ideas belong to Frederick J. Esposito, Jr., CLM, the chief financial officer of Rivkin Radler, LLP, a leading national law firm with offices in Long Island, New York City and New Jersey.  Mr. Esposito has more than 20 years of experience and in this Q&A, he shares his views on the challenges and opportunities facing law firms today.

1) What are the biggest challenges facing law firms? 

There are many challenges facing legal departments and the legal profession as a whole. One of the biggest challenges stems from the aftermath of the “big recession” of 2007-2008. When the economy declined, clients became more sensitized to the need for improved efficiency and value, and most important, reduced cost.

Today’s clients are now in the driver’s seat when it comes to shopping for legal services. Clients want to pay less, they want more predictability in legal spend, and “alternatives” to the billable hour.  Clients want value and clearly, alternative fee arrangements have been gaining traction in supporting the value proposition.

This trend is further supported by the increased emphasis on legal project management to improve efficiency.  All of these shifts in the profession have prompted firms to take a hard look at how they provide legal services.  So much so, the new “landscape” of efficiency, focus and value has challenged law firms to review and change their business models.

Clients have become more assertive in their fee discussions and law firms are being forced to “do more with less.” Further, firms must now align their economic interests with their clients, and alternative fee arrangements (any non-hourly fee arrangement) seem to be the preferred strategy.

There is no question that law firms are undergoing several change management initiatives and avoiding alternative fee arrangements is no longer a strategy. Law firms that see opportunity rather than hardship will reap the benefits, and those firms that recognize alternative fee arrangements as a means to differentiate themselves will outdistance their competition.

Some law firms remain very responsive to the new legal landscape and have been progressive in their efforts and methodology to review cost structures for clients. For example, I have seen this accomplished with the help of the LexisNexis Juris billing, accounting and financial management software which enabled the firm to produce timely and informative reports based on clients’ billing and collection performance, and then using those metrics to determine where the firm can offer more competitive alternative fee, or non-hourly, arrangements.

I’ve seen a firm obtain a sizable banking client from several larger suitors by offering alternative pricing scenarios for the work. Smart firms continue to embrace the changes in the legal profession and in doing so, has opened doors for the firm in terms of business development opportunities.

Technology provides firms with the opportunity to offer their clients more efficiency and if properly structured, reduced spend and value

2. How has technology changed or improved the way your organization or industry works?

Technology continues to have a profound impact on the legal profession. When I think about the impact technology has had, two thoughts comes to mind:

a) Technology provides firms with the opportunity to offer their clients more efficiency and if properly structured, reduced spend and value. It enables firms to automate certain processes in efforts to reduce costs to produce legal services. For example, some law practice areas are very paper intensive or form-driven, and by automating processes or outsourcing in order to reduce costs, that value is passed onto clients. We’re beginning to see more firms outsource these types of processes in order to focus their efforts on the more strategic legal work. This provides a win-win situation for both the law firms and their clients.

b) Social media is another area that we’re seeing many changes, and with great momentum. Unlike the old days when people would flip through a phone book to look for a law firm, attorneys are beginning to see the enormous benefit the web and social media can have in promoting their services. Firms are revamping their websites like never before. Instead of showcasing long resumes and endless lawyer credentials, law firms are streamlining their websites and offering a more concise and progressive “brand” image of their firms. It’s become more about solving the client’s problems then it is about boasting about the law firm itself. Clearly, technology is and will continue to be a very important tool for law firms in planning their strategic business development initiatives.

Most important, before firms can even explore these products, I would add that law firm principals need to understand their firm’s performance economics.

3. What advice would you offer someone considering a practice management product or system?

For those seeking a practice management solution, I would recommend exploring products and technology that has analytics built right into the system. Based on the changes we are seeing on the legal landscape, it is important for law firms to have useful, and particularly, responsive analytics and meaningful data to draw from.

When considering such resources, I would recommend exploring products that provide a soup-to-nuts solution for the firm with analytics built into it. The significant advantage of this platform is that all of the performance and historical data is self-contained, and can be analyzed in many different scenarios, with varying assumptions, and in most cases, with relative ease, for making the most informed financial and strategic decisions for the firm. Most important, before firms can even explore these products, I would add that law firm principals need to understand their firm’s performance economics.

Practice management products and systems generate the information, but that information must be reviewed and analyzed with an understanding of how and why the firm performs as it does.  For example, do law firms know how much it costs to produce a billable hour?  By practice?  By timekeeper?  By client or matter?  Are your alternative fee arrangements (any non-hourly arrangements) generating profit?  Improved understanding of these economics will assist firms greatly in their pricing and strategic business development initiatives –all of which are critical to remaining competitive, and profitable, under the new legal landscape.

…technology cannot do is to provide that ever important critical thinking component.

4. What are some things technology doesn’t solve that you wish it would?

The one thing technology cannot do is to provide that ever important critical thinking component. We need analytics, but we also need a critical thinking component which assists us in ascertaining if the analytics make sense. There needs to be an interpretation of the metrics and whether they make sense for the firm.  Statistics are not meaningful unless they can be benchmarked and validated. In short, critical thinking and technology are a powerful combination and a resource which opens the doors for providing efficient, client focused and low cost legal services.

5. You’ve indicated you’ve previously been a happy Juris customer with a prior firm. What’s your best tip or secret sauce to getting the most out of the product?

When working with Juris in prior firms, the software provided many useful standard reports (almost 800), but every so often you get into a situation where one size doesn’t fit all and custom reporting is necessary. When I did work with Juris, I had several support analysts and programmers ready to roll up their sleeves to produce custom reporting that met the firm’s specific needs. I would encourage others who are using Juris, or any other industry time and billing software package, to tap those resources, keep those lines of communication open, and speak up if you need a solution that is more customized to meet your firms and your clients’ needs.

* * *

Note:  Mr. Esposito is a frequent speaker and author on a wide-range of topics facing the legal industry, including alternative fee arrangements, legal project management, and law firm profitability models.  Connect with him on Twitter: @lawmgtguru or on LinkedIn.

Photo credit:  Flickr via Creative Commons; CC 2.0

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About Frank Strong

Frank Strong
Frank Strong is the communications director with Business of Law Software Solutions (BLSS) a division of LexisNexis. In this capacity he directs communications strategy and execution in support of BLSS products including those for large law, small law and corporate counsel. With 15 years in experience in the marketing communications for the high-tech sector, Strong previously served as director of PR for Vocus, which develops marketing, PR and media monitoring software. He’s held multiple roles in PR both in-house with corporations, and has also endured the rigors of billable hours, having completed gigs at PR firms both large and small. A veteran with two deployments, Strong has concurrently served in uniform in reserve components of the military for 20 years, initially as an enlisted Marine and later as an Army officer. Strong holds a BA in Film and TV production from Worcester State University, an M.A. in Public Communication from American University, and an M.B.A. from Marymount University.
2 comments
LillyJones
LillyJones

Great article. I was really interested in the section on AFAs. In your opinion, what is one of the best solutions to setting up an alternative fee system?


Lilly Jones