Steps in Sync
The current crisis is having a very different effect across the sector.
But so far many of the firms that I speak to are having far less of a problem than they had expected only a few weeks ago. Most firms are telling me that that their billing is holding up reasonably well. Since the lockdown started in late March the cash flow has been reasonably strong and has been helped by the CJRS Furlough refunds.
But when I’ve probed into the data about new work and about value creation the picture is far more mixed and generally less optimistic.
It has long been the case that law firm’s primary short-term measurement is their billing level. Unfortunately, excessive focus on this obscures some underlying issues
Firms need to hit their billing targets, and even more importantly collect in the relevant cash!
But it is just as important that they open at least as much value of files as they bill in any given month. Of course, many firms don’t bother to identify the value of the files that they open in any given month, so we have to use the numbers of files opened as a proxy. But it remains the case that unless you open at least the same value of work as you complete, your business will decline. In effect you will be selling the family silver-or as we prefer to describe it you will be draining the tank.
A third thing that we have to do in order to ensure our business is in sync is to understand and measure the amount of value that we are creating in each month. It still surprises me after many years just how few firms carefully monitor work in progress creation and movement.
Unless you open matters on which to do the work, and then create value by doing the work, you have nothing to sell, and therefore the billing will not follow.
We know that many fee earners much prefer doing the work (chargeable time) to going out and winning it-we also know that What Gets Managed Gets Better. So, for many firms it is relatively easy to monitor the amount of chargeable hours that their fee earners are doing even when working from home- it is much harder to assess the business development work that they’re doing. Therefore, any fee earner who wants to look good can keep their billing levels high by keeping their Chargeable Hours high and Neglecting to bring in tomorrow’s work.
By not keeping matters opened, value creation and billing in sync our fee earners may just be sowing the seeds of future decline.
It’s much harder to fill the tank up again than it is to drain it