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5 Tips from Peter Drucker for Increasing Law Firm Profitability

5 Tips from Peter Drucker for Increasing Law Firm Profitability

Note:  This post was co-written with Loretta Ruppert.  

Management guru Peter Drucker wrote his book The Effective Executive in 1967 yet it’s amazing how well his principles stand, the legal industry notwithstanding, in the current business environment.

Law is, as Drucker might agree, knowledge work, and the sure path to improving efficiency in knowledge work is to do things better. It sounds simple, but it’s a notion that too often gets lost in execution.

It’s not hard to see where this happens – the work day is often a whirlwind. The hours and days tend to blur in flurry of emails, a series of phone calls and a handful meetings. Add in a mix of memos, legal document review and some research and it’s easy to lose track of where one activity begins and the other ends.

“Management is doing things right; leadership is doing the right things.”
– Peter Drucker

In The Effective Executive, Drucker hones in on “getting the right things done” and he does so by zeroing in on these five tips, which we have adopted for the legal profession:

1.  Know where our time goes.  This principle isn’t just about you, but about the entire firm and focus on people, process and policy within a law firm.  Owners or managing partners need to understand how everyone on their staff spends their time.  This includes all roles from administrative to timekeeper and should include part-time help.  It’s important to underscore the need to examine not only billable staff and how they spend non-billable hours, but also non-billable staff and how they spend all their time. Are their efforts focused on tasks that remove non-billable hours from the timekeeper’s desk? We recommend having administrative, marketing, IT and financial staff account for their time using the same system your timekeepers use.

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2.  Contributions and the difference between work and results. It’s easy to get pulled into the day-to-day grind without realizing whether or not that grind is adding effective contributions to the firm. There’s a difference between work, and work that moves the needle for a law firm.  The way to manage this process is to step back and consider the processes and systems for handling a firm’s work flow, rather than focusing merely on individual tasks.

3. Build on your strengths and the strength of your team. There’s a good reason why some comedians need a “straight man.”  The humor of their jokes might be lost without a deadpan.  When evaluating your staff’s strengths and weaknesses it’s important to look at what they do well, rather than just the function for which they are employed. This is important when considering how best to employ the talents of your staff.  For example the good communicators might serve well in business development, the technophile on the IT steering committee, and the detail oriented in trust accounting.

4.  Concentrate on minor areas where performance makes a big impact. When a firm has good systems in place for tracking activities and time, it’s able to look at the impact either option have on costs, or alternatively on revenue.  It’s a mathematical, rather than subjective, way to identify areas for performance improvement. You’ll be amazed when you uncover how much time is wasted on low impact areas, for example formatting slides or spreadsheets to a particular partner’s liking.

5.  Making effective decisions is a system. Drucker touched on what Barry Schwartz would later popularize as the “paradox of choice” – ambiguity or a lack of clear choice is equally as debilitating as too many choices. Lawyers in particular are trained to be analytical and look for the imperfections in a project or program.  As a result, they are less inclined to agree until the polish is complete.  The result is often stagnation; in business, perfect is the enemy of good enough. Within the context of systematic decision making, experimentation in business is entirely appropriate.

* * *

All these years later, Drucker’s studies and writing are amazingly applicable in today’s dynamic legal market. The professor may well have been ahead of his time, but his time was undoubtedly well spent. “Management is doing the right things,” wrote Drucker. “Leadership is about doing things right.”

Photo Credit:  Flickr, via Creative Commons; CC 2.0

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This bio page is used to publish submissions by contributing writers. We welcome contributions from the legal community and are especially keen for contributions from our customers. Please review previous submissions published here and the “About Us” section to get a sense for what topics work for this blog. All posts must be original content not published elsewhere for at least 30 days. To submit an idea for consideration, please email blsssocial@lexisnexis.com.