The Mechanics of Law Firm Profitability: People, Process, and Technology

The Mechanics of Law Firm Profitability: People, Process, and Technology examines why a focus on profitability and metrics is reshaping law firm operations and matter management.

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  • Publication date: November, 2016
  • Pages: 127
  • ISBN: 978-1-78358-260-0


Many law firms today are far too focused on increasing market share; they should be paying attention to what makes them a more profitable business. Market share doesn’t matter much if you’re not profitable, and firms cannot simply grow their way to prosperity by undercutting the competition. Instead, firms must focus on value creation and increasing clients’ willingness to pay for their services. The question should be: “What can your firm do better, or more efficiently, and more profitably than anyone else?”

The Mechanics of Law Firm Profitability: People, Process, and Technology examines why a focus on profitability and metrics is reshaping law firm operations and matter management; how to define the bottom line and to distinguish between “good” revenue and “bad”; and how to change the dialogue from “hours and revenue” to “revenue and profit”, while changing the mindset from increasing market share to simply running a profitable business.

The Mechanics of Law Firm Profitability: People, Process, and Technology provides practical and proven tips for all law firm leader on adjusting current processes and identifying opportunities for future profitability within their firms.



Executive summary

About the authors

Chapter 1: Using knowledge management to increase firm profitability and pricing predictability 

  • Introduction
  • First financial case study – Practice efficiency improvements
  • How KM can increase fee predictability
  • Examples of KM resources 
  • Second financial case study – shift work from partners to associates
  • Third financial case study – more efficient partner pitch preparation
  • Conclusion
  • Appendix A – The three financial models
  • Appendix B – How to start/restart a KM practice efficiency program
  • Conclusion

Chapter 2: The “every dollar is a good dollar” fallacy – The difference between good and bad revenue 

  • Not all revenue is created equal 
  • Incentivizing the wrong behaviors 
  • The cost formula 
  • Revenue and PPP 
  • A word in support of realization 
  • Parting thoughts 

Chapter 3: Pricing, profitability, and compensation 

  • The legal twist 
  • Caution 
  • A modest (and high-level) compensation proposal 
  • Baseline worker reward 
  • Above the base 
  • Combinations 
  • A leap of faith? 

Chapter 4: Incentivizing the new normal 

  • Profit is important 
  • Align compensation with strategy 
  • One size doesn’t fit all 
  • The formula for success 
  • What matters more than matters 
  • Opaque is not the new black 
  • Succeeding at succession 
  • The new normal 

Chapter 5: Managing client intake to increase profitability 

  • Client Selection 
  • Engagement Letters/Fee Agreements
  • Conclusion 

Chapter 6: Profitable lateral hiring – Numbers and nuances 

  • Management
  • Assumptions 
  • The process of financially modeling lateral acquisitions 
  • Information you should gather ahead of time 
  • Performing the analysis 
  • Modifying the transaction 
  • Is this a good hire? 

Chapter 7: Measuring different practice groups, differently 

  • Client purchasing decisions 
  • The firm as a provider of space and services 
  • Markets and perceptions 
  • Other ways practice groups differ 
  • How to set price 
  • What this means for profitability and compensation 
  • Conclusion 

Chapter 8: Four challenges in managing law firm profitability 

  • #1 Lawyers’ lack of understanding of profitability 
  • #2 Controlling the bidding process 
  • #3 Drawing the line between acceptable and unacceptable losses 
  • #4 Problems defining and rewarding profitability 

Chapter 9: Profitability, the concept of Managing on the Edge™, and their importance to a regional law firm 

  • Introduction 
  • Managing on the Edge™ 
  • The macro-approach to profitability 
  • The micro approach to profitability 
  • Establishing a basic profitability model 
  • Using the profitability model 
  • Conclusion 

Chapter 10: Case study – Strategy and culture driving effective use of people, process, and technology at Faerge Baker Daniels 

  • Background 
  • In practice 
  • Future
Contents, Summary, Sample


Toby Brown
Toby is the director of strategic pricing & analytics for Akin Gump. In this role Toby works with firm partners and clients in developing pricing arrangements and service delivery models that drive successful relationships. Prior to this, Toby served in similar roles for both Vinson & Elkins and Fulbright & Jaworski, where he also drove knowledge management (KM) initiatives and various marketing efforts. Before joining Fulbright, Toby served as the communications director for the Utah State Bar. In his tenure with the Bar, he also served as the CLE, access to justice and programs director.Toby presents nationally on legal pricing, marketing, technology, and law firm management for associations, law firms, legal departments, law schools, and paralegal programs. He has also published numerous articles on these topics. Toby has served on a number of legal services boards, bar association task forces, and legal market organizations. He received the Peer Excellence Award, the President’s Award, and the Anne Charles Award from the National Association of Bar Executives. Toby maintains the ABA award-winning 3 Geeks and a Law Blog along with two colleagues, and can be found on LinkedIn.  
Michael Roster
Michael Roster was formerly managing partner of Morrison & Foerster’s Los Angeles office, co-chair of the firm’s Financial Services Practice Group worldwide, and a member of the firm’s policy committee. In 1993, Mike was appointed general counsel of Stanford University, Stanford Medical Center, and Stanford Management Company. He was subsequently executive vice president and general counsel of Golden West Financial Corporation. Mike has also served as chair of the Association of Corporate Counsel, as outside director and vice chair of Silicon Valley Bank, chair of the Stanford Alumni Association, steering committee co-chair of ACC’s Value Challenge, and chair of two start-up companies. He currently teaches Contract Drafting and Analysis at the University of Southern California Gould School of Law and is a director of MDRC in New York, a nonprofit organization that evaluates the effectiveness of government and other programs affecting lower- and moderate-income families and individuals.
Jack Bostelman
Jack Bostelman is president of KM/JD Consulting LLC in San Francisco, California, which advises law firm leaders on practice management, including knowledge management and other productivity improvements. Before founding KM/JD Consulting, Jack was a partner for over 20 years at pre-eminent AmLaw 20 firm Sullivan & Cromwell in New York City, where he had a nationally recognized transactional securities law practice and exercised management responsibilities.
Chris Boyd
Chris  Boyd  is  the  chief  operating  officer  of  Wilson  Sonsini  Goodrich  &  Rosati  in  Palo  Alto,  California.  Chris  leads  the  firm’s teams  that  handle  attorney  recruiting,  business  development,  diversity  and  inclusion,  human  resources,  knowledge management,  marketing,  practice  management,   professional   development,   research   and   information   services, and work allocation. These teams work with firm and practice leaders  to  implement  processes,  programs,  and  tools  that  support  the  firm’s business  goals  and  help  the  firm  deliver  more  value  to  clients.  Chris  has  an  undergraduate  degree  from  Princeton  University and  a  law degree from Stanford Law School.  Before joining Wilson Sonsini’s management  team,  he  worked  as  a  management consultant,  corporate  and securities lawyer, and technology company knowledge management leader.    He  is  a  member  of  the board  of  directors  of  the  International  Legal Technology Association and the board of trustees of the College of Law Practice Management.
Jim Hassett
Author and Founder, LegalBizDev.
Wendy Chang
A partner at Hinshaw & Culbertson, represents lawyers in all types of complex matters that involve the practice of the law, including risk management counseling, ethics, crises management, fee related issues, discipline defense, hotline counseling, professional liability, and litigation defense. Ms. Chang is a certifi ed specialist in Legal Malpractice Law by the State Bar of California’s Board of Legal Specialization. Ms. Chang is a member of the American Bar Association’s Standing Committee on Ethics and Professional Responsibility, and is an advisor to the State Bar of California’s Commission for the Revision of the Rules of Professional Conduct. She is a past chair of the State Bar of California’s Standing Committee on Professional Responsibility and Conduct.
Timothy B. Corcoran
Tim Corcoran is a former CEO who now guides law firm and law department leaders through the profitable disruption of outdated business models. Tim is a trustee and fellow of the College of Law Practice Management, former president of the Legal Marketing Association and a member of its Hall of Fame, an American Lawyer Fellow, a frequent presenter at lawyer retreats and legal conferences, and a writer whose articles are published regularly in leading publications. He also authors the widely read Corcoran’s Business of Law blog.
Anthony Davis
Best described as a lawyer’s lawyer. Mr. Davis is a member of the Lawyers for the Profession® practice group and his practice focuses on the laws that govern lawyers. He advises attorneys and law fi rms on legal professional and ethics issues, law fi rm creation, merger and dissolution, risk management, and loss control. Mr. Davis is a lecturer-in-law at the Columbia University School of Law, teaching “Professional Responsibility Issues in Business Practice.” As an adjunct professor of law, Mr. Davis taught “Legal Profession” at Brooklyn Law School for many years. Mr. Davis has served as a member of the New York City Bar Professional Ethics Committee and is a former chair of the Professional Development Committee.
Keith Maziarek
Keith Maziarek recently joined Perkins Coie as the senior director of client value. In this newly-created role, Keith works closely with the legal operations executives at the fi rm’s top clients to establish strategic pricing arrangements, implement customized communication/collaboration tools and effi ciency solutions, improve performance monitoring and reporting, optimize service delivery models, and establish metrics that will enable client legal departments to qualify and quantify the value they are capturing through their work with the fi rm. Prior to joining Perkins Coie, Keith served as Head of Strategic Pricing for DLA Piper LLP. There he developed, implemented, and managed the fi rm’s strategic pricing, profi tability, and legal project management functions, with a focus on the practice in the Americas.
David J. Parnell
David J. Parnell is a business of law author, columnist, speaker, and the founder of legal search and placement boutique, True North Partner Management.
James G. Perkins
James G. Perkins, chief operating offi cer and chief compliance offi cer at Procopio, leads the fi rm’s non-legal operations including fi nance, human resources, administration, marketing, and information services. With 20 years of experience at the fi rm, he has more than 35 years total leading as a chief operating and chief fi nancial offi cer in the professional services, management consulting and manufacturing industries.
Steven Petrie
manages the strategy and operations department at Faegre Baker Daniels. In this capacity, he oversees the collection, extraction, and application of fi nancial data and performance metrics for purposes of business analysis, practice development, creative pricing, and strategic planning. Steve holds a Yellow Belt certifi cation in Legal Lean Sigma and provides guidance for the fi rm’s institutional efforts in the areas of legal process improvement and project management. Steve’s department is also home to the fi rm’s administrative operation functions. Prior to his career in law fi rm management, Steve worked for the strategy and operations practice of a large consulting fi rm. He is a frequent industry contributor on topics of law fi rm economics, profi tability analysis, alternative pricing, and process effi ciency.
Mark Voigtmann
Mark Voigtmann is a partner at Faegre Baker Daniels and leader of the fi rm’s construction law and real estate litigation practices. He is the author of The Automation Legal Reference: A Guide to Legal Risk in the Automation, Robotics and Process Industries, published by the North Carolina-based International Society of Automation. He also co-authored a set of contract documents created for an incremental, education-based lean project delivery model used in two $200 million hospital projects, among others. Both within the fi rm and in the construction industry, Mark implements sophisticated project management and process improvement strategies to deliver optimal effi ciency across the board.
Tom Snavely
Tom Snavely has almost two decades of process improvement, operations management, and project management experience. He earned an M.S. in Technology Management from the University of St. Thomas, a Certifi ed Black Belt in Lean Six Sigma, and a Mini Master of the Lean Enterprise. Tom has developed Lean Six Sigma programs and training for several organizations that were new to these concepts. He has created and developed project management offi ces for several organizations to align project opportunities to strategic goals and the ultimate success of these projects. As a consultant and an operations manager, Tom has aided several organizations, and a private equity fi rm, to achieve strategic operational goals through process improvement and organizational change management. As a project manager, Tom has led operational and information technology projects for new innovative applications and complex business systems such as PeopleSoft and SAP.
Vanessa Savoie
Vanessa Savoie is a senior strategy and pricing analyst at Faegre Baker Daniels law fi rm in Minneapolis. She is part of a team that works with fi rm leadership to provide data driven solutions so that attorneys may best serve their clients, and effectively manage their practices. In support of fi rm management, she applies analytical rigor with creative problem solving to the business review process, complex fi nancial modeling, pricing, and strategic planning. She truly enjoys partnering with and supporting the fi rm’s professionals across the country and internationally. Vanessa studied Psychology and graduated with honors from the University of Wisconsin-Stout in 1996. After graduation she transitioned her interest in research design, methodology, and statistics into a career in Finance and Technology. She has been fortunate to have worked at some of the Twin Cities’ largest companies, including; U.S. Bank, Carlson Companies, FICO, and Ameriprise Financial.

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