Financial roadmap: Using business intelligence and analytics

Key takeaway points:

•  Invest time in understanding and defining the level of commitment that will be required at all levels of the firm in adopting a business intelligence and analytics system. Communicate your plan effectively to ensure commitment from partners.?

•   Stress test the solution – that is the best way ?to assess its suitability for your firm.?

•   Make sure the solution has a well-defined ?product development roadmap to maximise ?return on investment.? 

•   No project is without challenges – evaluate the potential technical/systems integration issues that can come up. Speak to existing customers to learn from their experiences and find out the provider’s approach to such issues.? 

•   The value that business analytics products deliver is entirely based on the underlying data and logical methodology; the front-end tool is merely a means of accessing the data warehouse beneath. Undertake continuous system balancing routines to ensure integrity of data.?

•   If all of your metrics or areas of business are not defined within the tool, work with the systems supplier to incorporate them. This is critical to ensure the management accountants and financial analysts use the tool and stop ‘spreadsheet creep’. Don’t leave out any metrics that they would expect to see in the system.

 

Our search for a business intelligence system began in 2007 when the management board at Charles Russell tasked my department (I was finance director at the time) to provide more insightful information on the financial performance of the constituent parts of the firm, including by business sector, work type, office and department – right down to individual teams and partners. This requirement came out of our business planning process.

In addition, the first hint of the imminent difficult economic conditions had begun to emerge and the partnership wanted to gauge the performance of the firm across offices, sectors, practices and individuals, to ensure that it was focusing on the right practice areas.

Extracting this level of detailed information on the financial performance of the constituent parts of the business was not a simple task. Our firm’s offering was very broad, spanning various private and commercial legal areas. We also had five offices in the UK and two international offices.

At the time, the finance team was using complex spreadsheet models to develop business reports and it became clear that this method was unbefitting the new task. Generating the additional analysis and providing timely reports through our spreadsheet models was difficult to achieve and, frankly, we were struggling.

Providing more in-depth analysis was labour intensive and outputs were delayed and error prone. Our processes were taking up considerable resources from the accounts team, which was impacting on the day-to-day operation of the department. It was an opportune time to consider the adoption of an enterprise business intelligence and analytics system.

We evaluated the possibility of developing a business intelligence and analytics tool in-house, but quickly realised that this would require substantial investment upfront and ongoing maintenance. The investment required exceeded the budget of a mid-sized law firm such as ours.

We questioned whether an in-house solution would give us the cutting-edge functionality of best-of-breed software and realised that the masterminds behind the system would become indispensable to the firm. After careful consideration, we concluded that the risk of developing the solution in-house was not worth taking.

Implementing an external solution was the better option for us. On investigating the business intelligence and analytics solutions market, we decided to use LexisNexis Redwood Analytics.

Senior management buy-in is fundamental to the successful adoption of technology, as often new systems require a firmwide change in mindset and approach to conducting business. Securing partnership approval was also vital. The finance department, armed with a solid business rationale for investment in a business intelligence and analytics system, presented to the board and six practice heads before signing on the dotted line.

Maximising value

The system was functional within 90 ?days. However, the use of a new technology system is akin to learning ?to drive – a driver may acquire a driving licence, but requires experience to ?become truly accomplished.

In hindsight, it is now apparent that when we initially discussed the configuration with the provider, we did not really have a full understanding of how we wanted to use the system. We have since continuously fine-tuned the configuration of the software to adapt it to our evolving requirements.

We learnt an important lesson, which is applicable to deploying any system: there needs to be organisational commitment, a keenness to truly understand the technology and a well-thought-through usage plan that allows the firm to derive the most value from it.

A single version of the truth is key ?to deriving value from an analytics system. While our system has a good in-built mechanism to ensure that the data ?residing in it is accurate and up to ?date, we also undertake our own ?data balancing routines.

Using incorrect data for analysis is counterproductive, so a word of advice: don’t ignore instinct or common sense. ?If a report doesn’t look right, it probably isn’t – the wrong assumptions may have been used or the data used may be inaccurate.

To illustrate, when we started using the system, we found that some metrics tied more closely with how a US firm might undertake reporting, differing from common practice in the UK. As a result, the system’s data did not initially tie in with the results of our practice management system. This concerned us but, after careful investigation and discussion with the provider, we adapted the metrics to ?UK practice requirements.

Measuring results

Cost-benefit measurement of investment in software is often not straightforward and so determining the return on investment is difficult. However, having real-time access to detailed financial intelligence has helped us to incrementally improve the way we work – resulting in improved efficiency ?in a number of projects.

For example, we undertake cross-practice analysis to measure the extent to which departments and offices refer work to each other. Since measuring this metric, behaviour across the firm has started to change – there is now a greater understanding of how we can grow our business through cross-referral practices.

Business and financial analytics has become critical to the way we operate. ?We are now expanding the functionality ?of the solution to inform our appraisal ?and compensation systems.

We have information on every single fee earner’s financial contribution to the firm – trainee through to partner. We will combine this information with the existing qualitative criteria to appraise partner and employee performance.

For example, for each fee earner we have a ‘worked focus’ analysis that shows at an individual matter level the time recorded, along with the amount billed, collected, outstanding or written off.

We also use the system for credit control. The system has a trends and collection feature that enables our credit control team to monitor in real time the status of payments and collections. This helps the department to focus and prioritise collection calls based on importance and in accordance with contract agreements. This saves time and delivers efficiency to the department, but also helps to improve cashflow by reducing lockup.

We regularly review client trends. ?We know which clients have reduced activity, which clients are growing and those that are stable, which sectors those clients belong to and so on. This is important information for our business development and marketing teams and it often prompts discussion with partners to understand the reasons for such trends.

We are looking to upgrade to the next version of the solution, which will enable us to further customise and enhance our existing functionality. For instance, the enhanced version of the system offers improved ‘dashboard’ functionality, which will be offered to all partners on their desktops. We will be able to create more meaningful dashboard metrics, facilitating greater direct usage of the system by partners.

In addition, the system will automatically generate reports and personal email alerts to lawyers, highlighting the status of the firm’s assignments – individually and collectively – to enable lawyers and the firm as a whole to closely track individual, team and organisational performance.

Utilising business intelligence and analytics is best practice. I can confidently say today that this discipline is now becoming truly embedded into Charles Russell’s culture.

 

Switching systems

Do

• Maintain the integrity of the data residing in the solution.?

• Remember that there is a difference between generating reports and analytics. The latter initiates changes towards improved business performance.

Don’t 

• Expect an all-singing and all-dancing system right at the start. It is a learning process and, the more you work with it, the better it gets and the more value ?it delivers.?

• Force the information on all partners from the outset. Start by engaging ?with a small group of enthusiasts and let them do the selling for you.?

• Initially use the system to deliver negative messages. Using it in a positive ?way will act as the catalyst to bring about positive changes.

andrew.staite@charlesrussell.co.uk