Published for Thomson Reuters Legal Executive Institute on July 7, 2015
I am looking forward to chairing Thomson Reuters Legal Executive Institute’s Second Annual Law Firm Financial Forum on September 18 in New York. Last year’s inaugural event was a resounding success. We will build on it—literally—this year.
We launched the Law Firm Financial Forum to promote a thoughtful and informed examination of the vexing financial questions that law firm leaders confront. As we did 20 years ago, when we started the Law Firm Leaders Forum, we perceived a need for a reliable setting for leaders to come together annually to confer about emerging issues. Our hope is to achieve the same level of pragmatic candor as we have done for the last 20 years on the broader set of management issues.
Building on the First Year
In our first year, we took stock of the changing legal landscape and assessed the ways in which the traditional metrics were outdated and/or inadequate. At the conclusion of last year’s session the participants resolved that we should examine three issues in 2015:
- Establishing new metrics for the new legal landscape;
- Measuring and managing true profitability; and
- Improving the law firm business model.
This year’s Financial Forum will be organized around these three issues. We will do so with an outstanding faculty and in formats that will maximize the participation of all those who attend.
The times call for new metrics, both to measure the performance of the market as a whole, and to measure the performance of individual law firms. This year’s first session will address both of these issues.
Based on new findings and recommendations by Peer Monitor, prepared especially for the Forum, the session will examine:
- the shifting market shares among law firms, in-house departments, and new entrants;
- the granular detail that underlies the often misleading market averages;
- trends on key issues such as the adoption of legal technology, the makeup of the legal services workforce, and the breakdown of hourly rate and alternative billing;
- how law firms can measure productivity by outputs rather than inputs;
- how law firms can measure efficiency and quality; and
- how law firms can distinguish between partner compensation and law firm “profits.”
The session will be led by Mike Abbott, vice president of Client Management and Global Thought Leadership for the Legal business of Thomson Reuters which also includes Peer Monitor. The session will also include three of the world’s leading observers of law firm financial performance—Indiana University’s Bill Henderson; long-time editor-in-chief of American Lawyer magazine Aric Press; and Dan DiPietro, chairman of Citi Private Bank’s Law Firm Group.
Measuring and Managing Profitability
Traditionally, law firms have been reluctant to adopt the kinds of profitability measures that their clients use, content to rely on billable hours, realization, and average partner income data as adequate proxies. With the advent to changing service models and fee arrangements, it has become imperative that law firms measure and manage their fundamental profitability more closely.
The Forum’s second session will address how law firms can measure profitability by engagement, practice area, and any other dimensions in ways that are reliable and provide vital insight for all critical law firm management decisions. The panel will also discuss how law firm leaders can best apply the learning from profitability data and navigate the leadership challenges that its use presents.
Improving the Law Firm Business Model
The traditional law firm business model was created long ago for a much simpler and different set of circumstances. In the current environment, the model often embeds unnecessary cost, impedes innovation, and dampens lawyer morale.
The final three sessions of the Forum will address the law firm business model and how it might be improved. We’ll start with a panel consisting of Georgetown Law Professor Jonathan Molot, the author of a provocative article critiquing the law firm business model, and leaders of three law firms who have successfully made significant changes in their firm’s business models.
We’ll then turn to examining how law firms can undertake the actual process of conceiving changes to their model. We will do that in a session led by Margaret Hagan, who heads the joint venture of Stanford University’s Law School and Institute of Design.
We will conclude the business model sessions with a case study that will give all participants a hands-on opportunity to work together in break-out sessions to apply the concepts discussed throughout the day to a specific situation. The results of the break-out sessions will be published on the Legal Executive Institute web site.
To ensure the desired level of audience participation, we will limit enrollment to this program.