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8/8/2011
1
Financial Planning and Profitability: Looking Back and Forward to
St Ah d Stay Ahead
Russ HaskinDirector, Consulting & ServicesLexisNexis
Bill Puncer, Esq. Director, Market OutreachLexis Search Advantage
Agenda
• Looking at Profit – What has changed in recent years?– What is the process in improving profitability
• Visibility into the Data
– Gaining Buy - In
• Transitioning lessons learned to Matter Planning and Alternative Fees– Setting up a successful approach– Using data to model and plan for success– Getting the data that hasn’t been captured
PROFITABILITY 101PROFITABILITY 101
8/8/2011
2
Profitability 101 – The Basics
• How Much Can We Charge?
• How Much Does it Cost Us?
• How Can We Maximize the Spread?
Has the model changed?
y
Cap
acity
Pro
duct
ion
3. Realization2. Utilization
4. Leverage
Fee
Cap
acity
Reve
nue
Con
tribu
tion
Mar
gin
Ope
ratin
g
Prof
it
Net
Inco
me
Dire
ctC
osts
O/H
Investmentcosts
6. Client Investment Speed (Time Value of Money)
1. S
tand
ard
Val
ue o
f
5. Margin
Improving Firm Profitability Initial Steps
• In order to begin a systematic process of improving firm profitability a firm first needs:
1. Visibility into the data2. An understanding of the data3. A strategic and tactical plan to use the data
8/8/2011
3
WHY do firms want profitability & financial information
• Give partners visibility to what is happening• Take action to improve current situation• Monitor action against budgeted/expected • Monitor action against budgeted/expected
results• Encourage the right behavior!!!!!
BI Today …BI Today …Value to Business Value to Business
People
Processes
Performance Mgmt Framework
BusinessStrategy
Take Take action to action to resolveresolve
What What should should we be we be doing doing ge
nce
genc
e
Actionable DataActionable Data
Customer ROICustomer ROI
BI Yesterday …BI Yesterday …Value to Value to IT/AnalystIT/Analyst
Processes
Analytic Applications
BI Platforms
Information Management
about it?about it?
What What happened?happened?
Why did it Why did it happen?happen?
Evol
utio
n of
Ev
olut
ion
of
Busin
ess
Inte
lliBu
sines
s In
telli Help? Yes!
Services Approach Services Approach
Framework (tools)Framework (tools)
Visibility into the Data
• Delivering tailored financial intelligence • Distributing reports, dashboards and key performance
indicators with firm goals with flexibility to personalize to each person’s preferred format. D li i d d i d i i h • Delivering easy-to-understand, customized insights to partners and attorneys when and where they need them.
• Quickly access detail on performance, opportunities and goals using flexible tools.
Education
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4
Visibility into the Data
Timely Distributions to Promote Sound Decisions
Allowing many distribution methodsIncluding triggers, email, and mobile devices Understanding Drivers across the Firm
Gaining Buy In• Commitment from leadership
Must be “in it for the long term”
• Establish basis for moving forward—what will we measure, and how?,
• Implement achievable business processes to build information base
Start small and higher level
• Track results, and create a feedback loop
8/8/2011
5
Gaining Buy in
Develop models for use by Practice Heads and Executive Committee to help them understand the business drivers
A. Education – start with pilot groupP h f ’ l b h d • Present the firm’s actual numbers in the education process
• Focus on metrics behind each of the profit drivers• Understand and explain how Elite/Aderant information may differ from Redwood
B. Process to deliver analysis• Establish set of reports and graphs with key statistics
for each group• Compare practice groups to firm, not each other• Identify opportunities and set specific goals• Monitor progress
What Firms and Companies are Starting to Realize
• It is possible to reduce a company’s legal costs (up to 25% or more)
• While increasing quality of the legal product• Improving communication• With the firms maintaining and actually enhancing
profitability
How do you define Alternative Arrangements?
• Discounted hourly rates
Hourly-based
• Contingency• Success incentives
Risk-based
• Stage based• Hybrid
Value-based
Non Hourly – “True Alternative Arrangements”Hourly – Alternative or no?
• Volume discounts• Blended rates• Task-based rates• Retainers
Success incentives (usually coupled with reduced rates)
• Fixed fees• Capped Fees• Collared
Arrangements• Hold backs
Hybrid • Market priced fixed
fees• Bundled pricing• Pure value based
Risk vs. Value – Debatable and interchangeableMany other alternatives and more are added daily
8/8/2011
6
Overall Matter Management is:The process of analyzing, communicating, guiding, delivering, and reviewing an alternative engagement from its creation until its conclusion in an attempt to meet three key deliverables:
Client satisfaction on value
Client satisfaction on quality
Acceptable results and returns to the firm
The process starts at the beginning. Mistakes made in estimation, risk identification, and scoping will be felt throughout the engagement and beyond
Successful Approach to Matter Planning
Training
Establishing a process
People
Technology
Collaboration
Matter Management Simplified
- What is the client looking to
Know Your GoalKnow Your Goal Model and PrepareModel and Prepare Deliver and TrackDeliver and Track ReviewReview
- What are the activities need to - Are we staying close to the - Did the actual events fall in line achieve? Do we need more information?
- What are the key risks?What needs to fall out of scope?
- What are the firm’s legal and business needs?
- Is this core to our business? Should we say no?
- Have we done work like this in the past?
accomplish the goals?- What does the timeline look
like?- What resources do we need?
Constraints?- Can we use historical data?- How do we maintain quality
while balancing firm needs? - How do we plan for trigger
events?- Where can we improve
efficiency?
budget and schedule?- Are we appropriately leading
and working with the client and internal team?
- Do we need to adapt to changes?
- Are there key deadlines we need to readdress?
- Do we need to change strategy?
- Are we delivering a quality product to the client?
with the plan?- What is the feedback from the
client?- What is the feedback
internally?- Where did we succeed?- How can we improve? - Where can we improve
efficiency?- How will we approach it next
time?
Define Success Start Somewhere Communicate Learn
8/8/2011
7
How do I better understand historical performance to improve
staffing and matter management decisions?
• Automatically pull data from your billing system to use historic performance as a template for f t o kfuture work.
• Track variance between actual and budget on a daily basis (early warning).
• Better manage staff and matters with insight into historical drivers of profitability.
How can I model and track engagements to optimize firm revenues
and deliver the financial results clients expect?
• Model fee arrangements, including alternative fees, at the client, matter, and phase/task level.
• Perform “what-if” analysis ycomparing various pricing and staffing models.
• Generate fast cash flowand income reports using monthly forecasting and variance analysis.
• Reward right behavior that delivers optimal profitability.
Clients and Firms Behaving Badly
• How accurate has your timekeeping and invoicing been over the last decade?
• How efficient have your processes been?• Are attorneys appropriately assigning task or project Are attorneys appropriately assigning task or project
codes?• What about your clients data?• Do you have access to the data you need?
8/8/2011
8
Matter Management Simplified
- What is the client looking to
Know Your GoalKnow Your Goal Model and PrepareModel and Prepare Deliver and TrackDeliver and Track ReviewReview
- What are the activities need to - Are we staying close to the - Did the actual events fall in line achieve? Do we need more information?
- What are the key risks?What needs to fall out of scope?
- What are the firm’s legal and business needs?
- Is this core to our business? Should we say no?
- Have we done work like this in the past?
accomplish the goals?- What does the timeline look
like?- What resources do we need?
Constraints?- Can we use historical data?- How do we maintain quality
while balancing firm needs? - How do we plan for trigger
events?- Where can we improve
efficiency?
budget and schedule?- Are we appropriately leading
and working with the client and internal team?
- Do we need to adapt to changes?
- Are there key deadlines we need to readdress?
- Do we need to change strategy?
- Are we delivering a quality product to the client?
with the plan?- What is the feedback from the
client?- What is the feedback
internally?- Where did we succeed?- How can we improve? - Where can we improve
efficiency?- How will we approach it next
time?
Define Success Start Somewhere Communicate Learn
F
MM
G
8/8/2011
9
Stages of a Legal Career
GRINDERS MINDERS FINDERS
ResearchDrafting
StaffingManagement
MarketingCli t l tiDrafting
Document reviewLitigationNegotiation
AssociateJunior Partner
ManagementQuality assuranceSupervisionSophisticated services
Partner/Practice group leaderCFOKM resource—PM
Client relationsLeadershipBusiness planningAFA proposals
Managing PartnerCFOCOOCIO
Kinds of Information Required
GRINDERS MINDERS FINDERS
AFA management AFA proposalsResearch, drafting& discovery
Lexis Search AdvantageKiiacEquivio
Lexis Matter Experience
Redwood Planning
& discovery
Defended a single Plaintiff employment Defended a single Plaintiff employment
How many times have we…
Finder & Minder Questions
discrimination matter?
…got it Motioned out early?
…gone to Trial (win/loss)?
…won on Appeal?
discrimination matter?
…got it Motioned out early?
…gone to Trial (win/loss)?
…won on Appeal?
8/8/2011
10
How much Discovery did we do
…how many depositions?
h t k th ?
How much Discovery did we do
…how many depositions?
h t k th ?
In that Matter…
Finder & Minder Questions—Deeper
…who took them?…who took them?
Who/What were are toughest…
…Adversaries?
…Judges?
…Jurisdictions?
Who/What were are toughest…
…Adversaries?
…Judges?
…Jurisdictions?
Defended a single Plaintiff employment Defended a single Plaintiff employment
How many times have we…
Phase & Task
discrimination matter?
…got it Motioned out early?
…gone to Trial (win/loss)?
…won on Appeal?
discrimination matter?
…got it Motioned out early?
…gone to Trial (win/loss)?
…won on Appeal?
(L240)
(L450) (A109)
(L530) (A103)
How much Discovery did we do
…how many depositions?
h t k th ?
How much Discovery did we do
…how many depositions?
h t k th ?
In that Matter…
Extract Entities
…who took them?…who took them?
Who/What were are toughest…
…Adversaries?
…Judges?
…Jurisdictions?
Who/What were are toughest…
…Adversaries?
…Judges?
…Jurisdictions?
8/8/2011
11
LSA Matter ExperienceHow Does It Work?
Timekeeping Note Analytics Matter Search and Analytics
Ad D P fili L LSA d D P fili • Adapt Document Profiling to analyze timekeeper notes
• Derive phase and task codes (e.g. ABA L-Codes)
• Map to customer codes where applicable
• Load phase/task codes into LSA Experience Warehouse, and optionally Elite/Aderant
• Leverage LSA and Document Profiling to mine documents
• Aggregate and profile matters based on associated work product
• Incorporate additional matter information from Elite/Aderant
• Provide simple and powerful search interface to locate matters by type, jurisdiction, topics, etc.
LSA Matter ExperienceTimekeeping Note Analytics
Phase Task
L110 A104
L210 A103
L210 A103
Worked Date Timekeeper Hours Narrative
11/10/2009 14782 1.1 Review documents sent by J. xxxxx regarding subpoena of Dr. xxxx.
11/11/2009 14782 1.75 Draft and revise motion to quash subpoena.
11/12/2009 14782 0.85 Review and revise motion to quash subpoena.R i d i d ft titi f l t h i
1. Analyze narratives for key classification phrases
2. Use sequence analysis to identify related entries
L430 A103
L330 A101
L110 A107
11/17/2009 13455 3.2Review and revise draft petition for rule to show cause in preparation for filing in Supreme Court; prepare Motion to Stay for filing.
11/18/2009 14782 0.5 Draft proposed deposition accommodations for Dr. xxxx's deposition and send to J. xxxxx.
11/20/2009 00304 2.25
Exchange voice messages with Mr. xxxxx regarding identification of issues in suit and significance of Dr. xxxx's testimony; receive voice message from and phone conference with Mr. xxxxxxx regarding status and further handling of matter; extended phone conference with Mr. xxxxx regarding issues in xxxxxxxx litigation; phone conference with Mr. xxxxx regarding same.
3. Derive Phase and Task Codes based on sophisticated rules
LSA Matter ExperienceMatter Search and Analytics
1. Locate matters using sophisticated conceptual search, powered by LSA’s deep understanding of matters
3. Review and act on details of multiple matters at a glance
4. Export results to Redwood Analytics, Microsoft Excel, and other applications to continue the analysis
Client Matter Matter Type JurisdictionResponsible
AttorneyHours
L100 L200 L300 L4001008027 - Pittsburgh Corning
1 - O-Ring Failure Suit
LitigationClass Actions
Federal3rd District Allen Brougten 1533.2 642.8 2041.1 205.9
1008158 - Georgia-Pacific
100 - Foundry Exposure
LitigationClass Actions
Texas178th District Eric Walker 833.5 425.2 1825.2 105.1
1008158 - Georgia-Pacific
191 - Gasket Failure
LitigationClass Actions
Federal10th District Eric Walker 1210.3 877.5 - -
1008225 - A C & S2 - Gasket Failure
LitigationProduct Liability
Federal3rd District Michael Ingrids 1456.5 610.6 1939.1 195.6
2. Understand key drivers behind matters, and filter to target the most relevant ones
8/8/2011
12
QUESTIONSQUESTIONS