The traditional model of law firm economics is changing, fast. An abundance of estate planning law firms and lawyers, competition from online legal service providers and elevated service expectations by consumers are all putting pressure on law firm fees and performance. If your team is not aware of the changing environment, perhaps now is a good time to open your books and let them get a reality check.
Unheard of in the past, sharing financial information is almost a necessity today, especially in smaller firms, where there’s less of a cushion when associates or partners aren’t pulling their fiscal weight.
Financial transparency has become more common in other industries. Privately held technology companies, for instance, routinely hold quarterly meetings where employees are given key financial information, including the company’s sales, expenses, cash flow and profits. Data on performance metrics, including client satisfaction, is shared as well.
How can this work in a law firm, and more specifically, how can this work in your law firm? This is a big cultural shift and law firms are traditionally resistant to making big changes. But imagine a conference room filled with partners and associates who are learning, some for the first time, exactly what it costs to run the firm. Without sharing information about expenses, they may have no idea what kind of cash flow is required to keep the lights on.
Note that transparency needs to be handled with kindness. Don’t single out any underperforming partners or associates in front of their peers. That’s a private conversation.
The goal is for everyone at the firm to understand what it takes to keep their salaries paid and their desks and computers in place. If you already do this with partners, it may be productive to extend the practice to associates. Engaging your team on this level may feel risky, but can also be engaging and empowering.
You may also get some questions. Be prepared to answer them, and if you don’t know the answer, get back to the individual. And don’t let the question linger for too long.
Whether you share the numbers or not, strategic reviews of your law firm financials and plans for growth should be regularly scheduled with partners. To make 2017 your best year yet, schedule a strategic planning retreat with IMS this year. You’ll learn how to grow your practice, define your firm’s sustainable competitive advantage, and set out a clear course for success.