Excerpt from the Legal Cash Flow Report, Part 4: Committing to People and Processes to Create Cultural Change  

Combining new financial expertise with lawyers incentives is helping firms make the cultural changes required to achieve a more profitable business but the question remains - are individuals empowered with the information required to support their financial goals? 

While wage inflation is a board-level concern, it is encouraging to see that law firms are not shying away from adding the expertise required to achieve systemic change. The majority of firms (70% NA, 58% UK) have hired new dedicated financial analysts over the past 18 months. This adds to the expertise confirmed in the BigHand Pricing and Budgeting Report, which revealed 70% (NA), 61% (UK) firms have hired new dedicated Pricing resources in the last 18 months and 23% (NA), 27% (UK) plan to recruit a pricing specialist in the next two years.  

Adding these new strategic roles to the legal marketplace is a clear indication of the shift law firms have made in recent years from the ‘practice of law’ to the ‘business of law.’  Firms are also evolving towards a far more commercial culture, an environment in which lawyers are encouraged to be far more aware of profitability and financial aspects of client relationships. 

Firms are using lawyer remuneration to nudge this change – 39% (NA), 41% (UK) firms have introduced lawyer remuneration / incentives to reduce billing write-downs; and 49% (NA), 50% (UK) plan to do this over the next two years. In addition, 39% (NA), 44% (UK) firms have introduced remuneration / incentives to focus on increasing cash realization; and 46% (NA), 43% (UK) plan to do this over the next two years. The theory is strong – but how are lawyers going to meet new financial objectives without an in depth understanding of current performance?   

Empowering Change with Information 

These incentives reinforce the cultural shift occurring throughout the industry – but the question still arises as to how lawyers will achieve these goals. Setting targets is just one part of the process. Without the right information, how are lawyers to achieve change? From underpriced matters or incorrectly applied discounts to causes of client friction that may lead to write-offs, accurate, trusted information is vital to reduce working capital and minimize leakage. 

If remuneration incentives are to achieve the systemic change required, the process needs to be simple, the information intuitive. In addition to pricing tools that allow individuals to compare different fee options and resource levels, at-a-glance insight into KPIs will transform the way lawyers consider profitability.  

This is a significant change to the way lawyers consider and engage with clients. While lawyers have spent a lot of time over the past 18 months building client relationships and going above and beyond to support clients during a challenging economic situation, there is now an imperative to add a more commercial focus to the client engagement, one that supports the client and increases firm profitability. From initial scoping to resourcing matters throughout the engagement, lawyers require robust, accurate and trusted data, presented in a way that enhances not detracts from profitable work and client relationships. 

This was an excerpt from The Legal Cash Flow Report. Access the full report to dive deeper into the findings from over 800 legal management professionals: