The business of management

The reputation of ?solicitors as managers ?is not particularly impressive. When reviewing ?the management of a practice, ?it is vital that the following questions be considered.

What is the structure of the business? For example, is it a partnership, limited liability partnership, limited company, ?or partial incorporation?

How do equity owners see their roles within the business ?as regards its management, day-to-day operations, resources, technology, marketing, etc? Should they ?just become shareholders?

Who have been identified ?as future equity owners? Why have these particular individuals been identified? What qualities, strengths, or vision will they bring to the business? What terms will they be offered? ?If they are brought in as salaried partners or associates, what ?are the timescales for them to become partial owners and when will they achieve parity ?(if at all) with the existing owners? Perhaps a better question should be: do they want to become future owners?

When we consider the reduction in training contracts, where will the talent come from? Since 2010, training contracts have reduced from around 6,500 a year at their peak to a little over 4,500 contracts today, and this has remained static despite ?the increase in work taken on. ?Why is this?

The lack of supply of solicitors with three to five years’ post-qualified experience has pushed their demand and, subsequently, their value extremely high. If this talent provides the engine for many practices, how do we grow our business, and where will future owners come from?

Recording time

While we are seeing a gradual move towards more fixed-price services and recognition of ?the value concept of pricing, ?we still need to evaluate what each service is costing to ensure ?we can deliver that service profitably.

Reporting time recording on ?a daily basis by each fee earner is another essential tool in effective practice management. Time recording is an important part ?of any billing procedure, but for effective people management, ?a daily summary of time recorded by each fee earner and each department should be on the managing partner’s desk by 10am the following morning. 

This has two significant uses. First, it allows the managing partner to review the time recorded against a daily cost target, and as overheads are generally fixed in the short ?term, knowing what time was recorded the previous day ?puts controls in place to spot a problem before it develops. Your practice management software should do all of this for you.

For example, if a department’s time recording on a Monday shows a significant dip against target, then the managing partner can discuss with the head of department if there is ?a problem with staffing levels, under-performing staff, or clients’ instructions at the beginning of the week, and take any appropriate actions. It is no use finding out this essential information at the end of the week or month (or even at the year end, as has been witnessed in several practices). 

Second, the only way to evaluate whether a department is operating at a profit is to record time against every file that is opened. This time ?may not be recoverable, but ?at least the managing partner ?or CEO can assess whether a department that could be working on a fixed-fee basis ?is losing money on these ?files. Additionally, recording ?time that is not recovered demonstrates a lack of belief ?in the fee earners’ value.

Unfortunately, many practices that consider themselves above industry standards, claiming they are ‘professionals’ and, therefore, not subject to time recording, are not operating with sound management objectives.

Management information

To run any practice effectively, ?it is essential to have practical management information. ?The expectations of the banks can also be better managed if essential management information can be provided.

Every law firm needs to be able to produce monthly management accounts, and these should be in a format ?that can be understood by partners and owners who are not financial specialists. The monthly production of an aged debt report is another essential piece of management information. 

There should also be firm but fair credit control policies and procedures in place. Letters of engagement should specify that clients will be invoiced monthly for work in progress, where this ?is possible, and that payment is expected in seven days following the date of invoice. 

Once clients and customers understand your terms and conditions, there will be no issues in their acceptance. ?These simple changes will improve your management information and, more importantly, your lock-up and subsequent profitability.

Viv Williams is CEO of 360 Legal Group@360legal www.360legalgroup.co.uk