Law Firm Financial Leaders on Reducing Profit Leakage

Zach Rausch, Director of Financial Planning & Analysis at Fisher Phillips and David Rueff, Chief Practice Group Solutions Officer at Baker Donelson discuss how they reduced areas of profit leakage to better the financial health of their firms. 

Zach: As far as issues we’ve identified within our firm, it's really going back to those self-inflicted problems. Where are the write downs beginning? Is the associate writing down time before even gets to the billing attorney? We're getting a lot of discounts off of standard. You’re seeing that standard rate's linear progression, but you're seeing that work rate and that build rate not necessarily follow because of the write downs that seem to be increasing as standard rates increase 6-7%, year over year. That’s been a big key focus for us – what are we writing down off of standard, and then how are those write downs occurring? 

Educating our associates not to be bashful with the time that they enter because even if they are entering too much time, that becomes an education opportunity for the billing attorney that he or she may not otherwise know, unless it gets to them. So, those are some issues we have identified.  

Again, working through education, using data, using dashboards to tell a story, look historically at what has happened, and model what should or could happen. That’s where my team has been provided some value in showing this history - good, better, best scenarios, and then going to care monitor, going to market surveys and saying: “Where would this put us? Are we still a laggard? What do we need to do to become a leader in this area?” Those are two key areas we've been focusing on. 

David: In order to tackle write-downs and write-offs it's all about communication. I think the data, and tracking that, helps you identify problems before they get out of hand. There also needs to be some education training, both from a lead lawyer on communicating to the team what's expected, and then also to the team about what the clients’ requirements are in those billing guidelines. 

We’re starting to see technology you can deploy that is going to help us capture some of those things as the time is entered. I think there's also a need here, when we diagnose a client or an engagement that has heavy write downs and write offs, will actually come in and do training to help the lawyers understand and the team understand what the client's requirements are. 

Zach was talking about the data and how important that is, I think that's exactly right. One of the things we found years ago was the codes were not helping us be able to identify or get to the root cause of the problem so that we could actually put a solution in place. So, we did an overhaul of those codes couple years ago, to help us be able to flag better on the front end. What's the root cause of that write-down? How can we remedy that same thing for write-offs?

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