Knowsley Management Services
Legal Practice Management Consultants
I hope this September edition of KMS “Robservations” finds you in good health and prospering…
I have again briefly covered for you a few more issues that are impacting lawyers in small-medium firms in Australia and New Zealand…
I trust you continue to find the content of interest and value to you in your practice…
The strongest thread from our consulting in the past month has been related to pricing…
I have been reminded a number of times this month what a dramatic impact improved pricing can have on profitability, short and long term, and branding.
Not exactly light-bulb moments, but a timely reminder of a key area of opportunity for lawyers in many jurisdictions.
While various commentators over a long period have commented on the need for value-based pricing, regulatory authorities managed to keep far too many lawyers in fear of being accused of charging unreasonable fees.
The handcuffs are well and truly off on pricing and billing, and properly-managed, lawyers can charge closer to what a matter is worth to most clients.
Yes, the trade-off is stricter Disclosure obligations for some jurisdictions, but the upside is now far more commercial and reasonable.
Of course, not all clients will agree to the pricing you provide in your Disclosure to them, but there will be more than enough who do, and it will make a significant difference to your revenues, and a whopping difference to your profit.
Given that margins have been slim and declining in many firms, the opportunity is well and truly there to reverse the trend.
I have decided to include a specific item on pricing in every issue of this newsletter. I trust at least some of you get very good value from that particular content. Hopefully, in excess of 10,000 readers won’t all be wrong!
KMS Common Sense Law Firm Marketing…more short sharp thoughts from the trenches…
I commend to every reader this short piece… The LinkedIn Effect by Rick Smith.
Rick makes some very powerful points about our brain’s capacity to manage connections, and how computers, and social media platforms like LinkedIn have dramatically extended that capacity, from hundreds to potentially tens of thousands.
Here’s a brief excerpt… the emphasis is mine…
“Our professional weak ties are where our long term career success will come from. Those of us who actively leverage social media to maintain those ties dramatically increase our exposure to ideas and opportunities—and our resilience when we need our professional network most. The advent of LinkedIn and other social media tools, and the resulting explosion in our capacity to manage and benefit from larger and larger social circles, may very well be one of the most important outcomes of the digital age.
Achievement in almost any area of life is heavily dependent upon other people. Actively cultivating and curating our online professional relationships is now the investment required to achieve a successful career.”
The Legal Profession Uniform Law, impacting lawyers in Victoria and New South Wales from July 2015, a solid settling-in period now, confirms the hitherto slowly-developing scenario around more sophisticated pricing and billing for informed clients of law firms.
NB Readers outside Australia may be interested that these two states have nearly three-quarters of Australia’s lawyers, around 50,000 of a total a little over 66,000.
The LPUL costs basis is that agreements between informed, consenting, clients and their lawyers should be supported. Welcome to the real world, finally!
Critically, a valid Cost Agreement is prima facie evidence that the costs are fair and reasonable.
The legal practitioner must satisfy himself or herself that the client has understood and agreed to the course of action, and the costs to be incurred. Especially where prices are fixed and the work to be done is clearly set out, and actually done, it will be hard to challenge the agreed fee. The upsides of sensibly fixed fees grow all the time!
On the downside, there are significant consequences for a lawyer who doesn’t give proper Disclosure to the client, both at initial retainer, and throughout the matter if appropriate, principally that failure to comply with the Disclosure provisions voids the Cost Agreement.
If the Cost Agreement is voided, the costs are only recoverable on a fair and reasonable costs basis.
In relation to Cost Agreements, it should be noted that in the LPUL there is no requirement that a Cost Agreement itself be fair or reasonable. Common Law will apply to the agreement.
If a Costs Agreement is challenged, a Cost Assessor first determines whether or not a valid Cost Agreement exists.
The LPUL provides that costs must be fair, reasonable and proportionate, and as mentioned above, requires the legal practitioner to satisfy himself or herself that the client has understood and agreed to the course of action and the costs to be incurred. These matters would of course be relevant as to whether the Costs Agreement was valid.
It will remain to be seen how well lawyers handle the, admittedly demanding, Disclosure provisions, and the degree to which Costs Assessors seek to strike down Cost Agreements.
Excellent engagement processes, excellent record keeping, and quality training about the real world financial impacts (time and money) of not getting Disclosure (and re-Disclosure if necessary) right, are the essential orders of the exciting pricing days ahead.
Lies, Damned Lies, and Statistics…
In each issue I try to introduce comment about a management issue that revolves around “the numbers”.
The short item this issue is a heads-up about carefully checking the basis upon which particular reports from your PMS are prepared.
While reviewing August performance for a client firm and its team members I noticed that the purported Realisation Rates for everyone, on the WIP they had absorbed in August, were patently ridiculous numbers.
The data electronically transferred from the firm’s PMS reports to our own reporting system proved to be accurate on close checking.
What was not immediately obvious was that the August 31 report on Unbilled Raw WIP by team member who recorded the WIP had been prepared to include GST and to exclude WIP in draft bills at 31 August.
This was not the same basis as the supposedly same report as at 31 July.
Accordingly, the net amount of Raw WIP supposedly absorbed by each team member in August was wrong in a big way, corrupting realisation Rates dramatically.
The information about the parameters set by the person generating the report from the PMS was in very fine print.
Some PMS have a facility that allows you to store the report parameters once you know you have got them right, and I commend using the facility if it is available to avoid errors of the type above that are easily made.
NB The KMS formulas to calculate Realisation Rates on absorbed WIP are not needed in some firms where their particular PMS has an accurate calculation included as a standard facility, but most do not!
Law Firm Practice Management Systems… convenience or chaos?
Regular readers will know that I have touched on this important topic over a number of months…
One key thrust has been my experience that pretty much every PMS can deliver what is needed, if set up correctly.
There was a very good demonstration of this with a KMS client this month. The client had been reporting to its supplier that a particular function it valued in its PMS (if it worked) was not working.
After nearly two years the firm had essentially given up hope of ever having the desired functionality, an important issue relating to the potential need for revised Disclosure.
However, after all this time, on a recent visit by a support person from the supplier the solution to the problem was finally provided and implemented, and yes, you guessed it, it was a relatively simple set-up issue!
The bottom line…be like the proverbial dog with a bone with your supplier in relation to the apparent non-availability for you of promoted features and facilities. Don’t accept being fobbed off. Demand effective service that provides early solutions. You are paying for it…often handsomely!
Lastly on this, one for the ages…be careful who you provide as references…
I had a client recently who had experienced problems generating a most fundamental report from its PMS…an essential in anyone’s terms. The supplier equivocated for a long time, before eventually supplying a referee client, supposedly to verify that the PMS worked as intended for them in this particular respect.
Only problem, the key referee confirmed it didn’t work for them either and they had given up on it!
Lawyers unfortunately have a deserved very poor reputation for being effective marketers.
Their core training doesn’t align well with skills and attitudes needed for good marketing.
To help interested lawyers get on the right track, at KMS we offer a service called KMSMarketingPower™…
For a small fixed fee, we will analyse a number of key aspects of the firm’s existing situation and the efforts of the firm in marketing, and point to key areas where we would add things or do things differently if it were our firm.
Our focus will be on areas where firms can learn to generate more of their particular desirable instructions at very reasonable cost.
The advice we give will provide a hard-hitting assessment, and clear guidance for a few simple things the firm could do better, and we provide a telephone conference to discuss any issues arising from our advice, within the fixed investment.
There is no further obligation or pressure to use us to assist beyond the provision of that advice.
To get the ball rolling please just email me and let me have your name and phone contact details, and preferred contact times, and I’ll get back to you promptly.
KMS Out and About…
Since last issue we’ve conducted more in-house training on the Business of Law, spoken to Law Societies CPD sessions on the tight links between Pricing, Marketing, Effectiveness and Profitability, advised further on Practice Management Software, advised on applications for promotion, advised on remuneration reviews, assisted with reviews of SEO efforts, completed over 100 KMSFeedBacks for August for individual lawyers, reviewed more than forty-five draft items of content, mentored Principals, assisted firms with extracting better information from their PMS, assisted with firms’ incentive schemes, and helped a number of firms with aspects of their marketing efforts.
If some of this content has been of interest and value for you in your practice, you will find other related content here…
My LinkedIn posts…
KMSWebsite includes an archive of all earlier newsletters…including all issues of “Robservations” and KMSProfitPower Tips back to 1996.
My LinkedIn Discussion Group… Excellent Management In The Small Law Firm