Agenda 8/8/2011. Financial Planning and Profitability: Looking Back and Forward to. Looking at Profit What has changed in recent years?

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1 Financial Planning and Profitability: Looking Back and Forward to Stay Ahead Russ Haskin Director, Consulting & Services LexisNexis Bill Puncer, Esq. Director, Market Outreach Lexis 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 101 1

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? 2. Utilization 3. Realization Production y Capacity 4. Leverage 1. Standard Value of Fee Capacity Revenue Direct Costs Contribution Margin 5. Margin O/H Operating Profit Investment costs Net Income 6. Client Investment Speed (Time Value of Money) Improving Firm Profitability Initial Steps In order to begin a systematic process of improving firm profitability a firm first needs: 1. Visibility into the data 2. An understanding of the data 3. A strategic and tactical plan to use the data 2

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 results Encourage the right behavior!!!!! gence Evolution of Business Intelli Business Strategy Performance Mgmt Framework Actionable Data People Processes Help? Analytic Applications BI Platforms Take action to resolve Customer ROI What should we be doing about it? Yes! Framework (tools) What happened? Information Management Services Approach Why did it happen? BI Today Value to Business BI Yesterday Value to IT/Analyst 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. Delivering i easy-to-understand, d customized insights i to partners and attorneys when and where they need them. Quickly access detail on performance, opportunities and goals using flexible tools. Education 3

4 Visibility into the Data Timely Distributions to Promote Sound Decisions Allowing many distribution methods Including triggers, , 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 4

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 group 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? Hourly Alternative or no? Hourly-based Non Hourly True Alternative Arrangements Risk-based Value-based Discounted hourly rates Volume discounts Blended rates Task-based rates Retainers Contingency Success incentives (usually coupled with reduced rates) Fixed fees Capped Fees Collared Arrangements Hold backs Stage based Hybrid Market priced fixed fees Bundled pricing Pure value based Risk vs. Value Debatable and interchangeable Many other alternatives and more are added daily 5

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 Collaboration Establishing a process People Technology Matter Management Simplified Know Your Goal Model and Prepare Deliver and Track Review - What is the client looking to 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? - What are the activities need to - Are we staying close to the - Did the actual events fall in line accomplish the goals? budget and schedule? with the plan? - What does the timeline look - Are we appropriately leading - What is the feedback from the like? and working with the client client? - What resources do we need? and internal team? - What is the feedback Constraints? - Do we need to adapt to internally? - Can we use historical data? changes? - Where did we succeed? - How do we maintain quality - Are there key deadlines we - How can we improve? while balancing firm needs? need to readdress? - Where can we improve - How do we plan for trigger - Do we need to change efficiency? events? strategy? - How will we approach it next - Where can we improve - Are we delivering a quality time? efficiency? product to the client? Define Success Start Somewhere Communicate Learn 6

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 future 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 comparing various pricing and staffing models. Generate fast cash flow and 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 codes? What about your clients data? Do you have access to the data you need? 7

8 Matter Management Simplified Know Your Goal Model and Prepare Deliver and Track Review - What is the client looking to 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? - What are the activities need to - Are we staying close to the - Did the actual events fall in line accomplish the goals? budget and schedule? with the plan? - What does the timeline look - Are we appropriately leading - What is the feedback from the like? and working with the client client? - What resources do we need? and internal team? - What is the feedback Constraints? - Do we need to adapt to internally? - Can we use historical data? changes? - Where did we succeed? - How do we maintain quality - Are there key deadlines we - How can we improve? while balancing firm needs? need to readdress? - Where can we improve - How do we plan for trigger - Do we need to change efficiency? events? strategy? - How will we approach it next - Where can we improve - Are we delivering a quality time? efficiency? product to the client? Define Success Start Somewhere Communicate Learn F M G 8

9 Stages of a Legal Career GRINDERS MINDERS FINDERS Research Drafting Document review Litigation Negotiation Associate Junior Partner Staffing Management Quality assurance Supervision Sophisticated services Partner/Practice group leader CFO KM resource PM Marketing Client relations Leadership Business planning AFA proposals Managing Partner CFO COO CIO Kinds of Information Required GRINDERS MINDERS FINDERS Research, drafting & discovery AFA management AFA proposals Lexis Search Advantage Kiiac Equivio Lexis Matter Experience Redwood Planning Finder & Minder Questions How many times have we Defended a single Plaintiff employment discrimination matter? got it Motioned out early? gone to Trial (win/loss)? won on Appeal? 9

10 Finder & Minder Questions Deeper In that Matter How much Discovery did we do how many depositions? who took kth them? Who/What were are toughest Adversaries? Judges? Jurisdictions? Phase & Task How many times have we Defended a single Plaintiff employment discrimination matter? got it Motioned out early? (L240) gone to Trial (win/loss)? (L450) (A109) won on Appeal? (L530) (A103) Extract Entities In that Matter How much Discovery did we do how many depositions? who took kth them? Who/What were are toughest Adversaries? Judges? Jurisdictions? 10

11 LSA Matter Experience How Does It Work? Timekeeping Note Analytics Matter Search and Analytics Adapt Document Profiling to Leverage LSA and Document Profiling to analyze timekeeper notes mine documents 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 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 Experience Timekeeping Note Analytics 1. Analyze narratives for key classification phrases Worked Date Timekeeper Hours Narrative Phase Review documents sent by J. xxxxx regarding subpoena of Dr. 11/10/ L110 xxxx. 11/11/ Draft and revise motion to quash subpoena. 2. Use sequence L210 analysis to 11/12/ Review and revise motion to quash subpoena. identify related L210 entries Review and revise draft petition for rule to show cause in 11/17/ preparation for filing in Supreme Court; prepare Motion to Stay L430 for filing. Draft proposed deposition accommodations for Dr. xxxx's 11/18/ L330 deposition and send to J. xxxxx. Task A104 A103 A103 A103 A101 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 11/20/ with Mr. xxxxxxx regarding status and further handling of L110 A107 matter; extended phone conference with Mr. xxxxx regarding issues in xxxxxxxx litigation; phone conference with Mr. xxxxx 3. Derive Phase and Task Codes regarding same. based on sophisticated rules LSA Matter Experience Matter 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 2. Understand key drivers behind matters, and filter to target the most relevant ones Responsible Hours Client Matter Matter Type Jurisdiction Attorney L100 L200 L300 L Pittsburgh 1 - O-Ring Litigation Federal Corning Failure Suit Class Actions 3rd District Allen Brougten Georgia Foundry Litigation Texas Pacific Exposure Class Actions 178th District Eric Walker Georgia Gasket Litigation Federal Pacific Failure Class Actions 10th District Eric Walker Gasket Litigation Federal A C & S Failure Product Liability 3rd District Michael Ingrids

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