 Volume 5, No. 4 – April/Avril 2008
Do You Know Where Your Knowledge Is? Law Firm Accounting Part VIII How is Your Firm Doing?
Law Practice Management is published by the Law Practice Management Section of the Ontario Bar Association. Members are encouraged to submit articles or suggest story ideas. The articles that appear in this publication represent the opinions of the authors. They do not represent or embody any official position of, or statement by, the OBA except where this may be specifically indicated; nor do they attempt to set forth definitive practice standards or to provide legal advice. Precedents and other material contained herein are intended to be used thoughtfully, as nothing in the work relieves readers of their responsibility to consider it in the light of their own professional skill and judgment. |
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Do You Know Where Your Knowledge Is?
Ginevra Saylor* Ginevra Saylor, who spoke first, is the Director of Knowledge Management with Fraser Milner Casgrain LLP, a major national business law firm with six offices in Canada and one in New York. Saylor began by drawing a distinction between knowledge and information, noting that knowledge is information combined with experience in context, and explained that the two are managed differently. While most lawyers understand how to manage and locate information, managing knowledge can be significantly harder and it is knowledge (not information) that lawyers are paid for and need to get hold of to take action and make decisions. Knowledge Management in law firms encompasses a wide range of programs, projects, and tools. Some of the more prominent focus on capturing and indexing knowledge to make it more accessible for reuse, bundling different kinds of information frequently used as a package, improving work flow and work processes to enhance efficiency and accuracy, combining knowledge from different sources to generate new and better knowledge, enhancing communication and collaboration, and integrating technology into practice with a defined strategy and purpose. The knowledge that must be managed includes everything crucial to a firm, from who its clients are, changes relevant to the law and clients’ lives and livelihoods, what the competition is up to, which practice resources and technology generate the greatest benefits to where the firm’s lawyers are or need to be and what needs to be done on or by any given day. Michael Girard, co-presenter, drew upon over two decades of experience in civil litigation, including his current practice as Principal of Girard Law Office in Toronto, which focuses on civil litigation particularly in the areas of commercial, securities, technology, professional liability and insurance law. Girard noted that when he started practicing law, Knowledge Management was a simple matter of walking down the hall to a partner’s corner office, where he could easily find a binder of precedents to help write a first draft, learn about the significance of new case law, and obtain information on any of the partner’s clients from a notebook the partner kept full of client information. Girard found that he had access to everything he needed until the day he left the firm and decided to open his own office. At this point, he had to replicate all of that partner’s systems and more. Girard went on to highlight the importance of investing in one’s practice to ensure that the accumulated knowledge does not walk out the door each night. Today lawyers have countless tools to help them manage their knowledge and practice. Some of the more vital technology tools for lawyers include a robust practice management system, secure and reliable e-mail, current awareness and professional development tools ranging from websites to blogs to RSS news feeds, up-to-date precedents and model documents, and social network systems. The amount one spends and the tools one focuses on will be driven by many factors, such as the size of the office, the areas of law practiced, the volume of cases handled, and the geographic area serviced.
Saylor recommended the following resources for learning more about law office knowledge management: Books
Websites Blogs Girard recommended the following resources to learn more about available law practice technology: Desktop search software
Case management software
Document Management software
Internet software
Online reference links
* Ginevra Saylor is Director of Knowledge Management with Fraser Milner Casgrain LLP. She can be reached at (416) 863-4680 or ginevra.saylor@fmc-law.com. |
Firms often fall into four types based on the type of work they do. Sector 1 is occupied by firms with a high proportion of associates to partners and a high average billing rate (exemplified by the national firms). Sector 2 is made up of firms dominated by partners usually, but not necessarily, practicing in one area with a high average billing rate (commonly called ‘boutiques’). Sector 3 firms have many partners practicing many areas of law; these firms abound in small towns. Finally, the Sector 4 firms have few partners and many associates usually, but not necessarily, practicing in one concentrated and competitive area, like insurance defense.
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How Is Your Firm Doing? Paul Kuttner*
Accountants will tell you, “If you cannot measure it, you cannot manage it.” In law firms, progress – or its absence – is measured superficially all too often. Individual lawyers check their billing each month. Someone reviews collections and WIP. A profit and loss statement is compiled. And, all of this is compared with last year’s results. But, like any other revenue-generating entity, a law firm is a business. Every lawyer in the firm must pay close attention to the dynamics of the business to capitalize on opportunities and implement solid remedial action when needed. It is true that the lawyers are practicing law; it is equally true, however, that they are running a business. A Painful Thorn in Many a Managing Partner’s Side
What do most lawyers really know about their firm's record-keeping, systems, capital needs, quality of work performance and financial stability? Sharing operating results and information has long posed a tricky problem for many managing partners and executive committees. Yet, how can lawyers be expected to participate in the business without access to operating information? Doing so is akin to flying a helicopter blindfolded – everything might be okay for a while as long as you keep heading straight up. One way to get lawyers familiar with the working business environment is to prepare quarterly – or at least semi-annual – reports under the managing partner’s supervision. Presenting the annual report could be treated as a major event coupled with an offsite meeting shortly after the year’s end. Creating a Meaningful Report
The report should evaluate the past three years and plan for the coming fiscal year. The benefit the firm reaps from this exercise will be directly proportional to the amount of time and effort devoted to identifying and resolving business issues. The annual report should cover:
Firm Economics
Appropriate objective economic measures help assess a law firm’s operations. Present the information clearly and never omit key data for the sake of simplicity. Indicate the firm's gross billings compared with the past five years in both dollars and annual percentage of growth or decrease over past years. Include gross income by lawyer as well. The report needs to state the firm’s and each partner’s net income, also compared with past years. Write-offs will need to be analyzed. Next, the report must analyze the firm's sources of income for the past three years by each of new clients, current clients, practice area, and the firm’s top 10 or 20 clients. The report will also need to explain the past fiscal year’s actual income and major expenses, along with any significant variations from the budget, being sure to look beyond the numbers and compare with past years. Objectively review the billable and non-billable activities of all lawyers, legal assistants and law clerks. Although wasteful, non-billable time should be identified and eliminated, avoid undervaluing non-billable business and associate development time that can yield future streams of income if properly managed. Take some time to review the types of work the firm is engaged in and the techniques used for setting fees for that work. Examine what has and has not been profitable. Some bold – and now profitable – firms in the GTA have eliminated practices based on their actual and projected profitability. Remove emotion from business decisions that will affect everyone’s take-home pay. Hourly rates by lawyer must be scrutinized and the urge to grab an extra $100 per hour here and there must be resisted. On the other hand, do evaluate the current marketplace and prevailing client mood carefully to determine whether some lawyers’ rates can be bumped up safely. Keeping in mind that cash flow is the law firm’s lifeblood, report on cash flow and evaluate all receivables over 90 days, stale WIP and write-offs. More than one law firm in recent memory has fallen to dwindling ready cash. Ask the important questions. Are any capital needs or improvements anticipated for next year? What staffing and expansion can we expect in the next three years? Set financial goals for the future. Areas of Legal Work
The next section of your report should address expanding or contracting practice areas, new areas developed in the past year, and new fields being considered. Support this analysis with financial and other projections wherever possible. Do not forget to review the charitable and pro bono services the firm delivered and assess the value derived from that work. Emotions must be kept in check here; remember, you are running a business after all. Personnel and Administration Objectively and openly discuss which of your lawyers have left the firm and why. Include in your review actual and pending retirements, disability and deaths. After looking at lawyer departures, objectively evaluate the administrative support required and your current staff’s ability to provide that support. Also review the salaries of all non-partner personnel. Facilities and Equipment
Evaluate the firm's physical needs for the coming period, being certain to consider the most effective use of new space. Also assess technology and office equipment in terms of efficiency and effectiveness. Treat your practice as the business it is. The more respect you pay to the business of law, the more you should be able to enjoy the practice of law. * Paul Kuttner is a principal of innovate! Marketing, (905) 889-9125, www.innovatemarketing.ca. |
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Preparing to Meet the Press When a reporter calls and you agree to be interviewed, as soon as the interview begins you are – as they say in show biz – on. Being on means being prepared. At first you may be tempted to wing the interview. If you are, think again: although the interview may go smoothly without a hitch, the risk of unpleasant surprises popping out of the woodwork is just too great. Being prepared will not only help you with your delivery, but also help the reporter run a smooth interview. Here are a few additional tips to help you ramp up for your next encounter with the media, whether print, radio or television. Shape the Message and Delivery Rule 1: Stay on the message. Never become distracted. Have you ever noticed how politicians handle questions? No matter what they are asked, they reply with their predetermined message (no matter how frustrating this may seem to the viewer). Although this approach may be a bit extreme for your interviews, do be on guard for digressions; the reporter’s natural curiosity may veer you off of your prepared path. It is your job to keep on point. Rule 2: Reporters are decent people. Generally speaking, they are not out to skewer you. So, be polite. Rule 3: Be ready to talk. Think of all the possible questions and frame answers that support the proposition you plan to deliver. Decide what impression you hope to make and what message you want to leave with the audience. Do Your Homework Know the reporter and the medium. An understanding of who the average audience member is and the reporter’s general style will help you shape your approach and responses. Your responses will be somewhat different when you speak to a legal audience than when you speak to a trade group comprised mainly of business owners. Question the reporter about the topic and ask for sample questions before the interview. Doing so is not only perfectly acceptable, but also prudent. Develop and write your main points down before returning a reporter’s call. Have printed materials available to pass on, as any story is enhanced by supporting statistics that validate the major points. If you are challenged at any point, stand tall and face the music. “No comment” generally is seen as code for, “I am hiding something.” Tips for Print Interviews Every print story is edited. The available space on publication day, the story’s overall flow, and countless other factors determine just how much editing any given story will receive. The reporter’s anticipated word count will affect the reporter’s questions and interview style, how you should tell your story, and the amount of detail you will be able to provide. So, knowing the target word count in advance will help you be prepared to provide a clear and well-organized message. Because newspaper stories try to answer many questions to satisfy the readers’ curiosity, anticipate more detailed questions from newspaper reporters. But, understand that all of your answers likely will not make it into the published piece. Reporters need to understand the issues to write a comprehensive and balanced article. So, always follow up with the reporter after the interview. Reporters often return to their offices, only to find that they need to clarify certain points or ask questions they forgot to ask. Offer to be available and then be available. Tips for Broadcast Interviews Once an interview has been taped for broadcast, consider the interview to be “out there” and recognize that you can do very little to stop it. Before agreeing to do a live interview, make sure that you can be comfortable thinking on your feet and responding off-the-cuff. If the interview is taped, it will be edited and you may ask to stop and begin again. Even so, do not ask to do this too often. Instead, try to pause briefly before answering to give yourself time to think and offer a clean sound byte. Keep it mind that a 30-minute interview may be trimmed to 10 minutes by the time it airs. Communicate your message, keeping the essence of what you planned to say always top of mind. As a general rule, you should keep your answers short and simple, but never dumb your content down. If asked a tough question that allows a one-word answer, give the one-word answer to avoid risk. You also need to be in control of your voice, expression, and body movement throughout the interview, particularly if it will be televised. The following pointers should help you maintain a dignified and professional appearance:
The Bottom Line The best advice, of course, is to relax. Try to think of the interview as just another day at the office. * Paul Kuttner is a principal of innovate! Marketing, (905) 889-9125, www.innovatemarketing.ca. |
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Evolution Is a Croc: Law Practice Management and the End of Articling
David Debenham*
Who says you cannot learn about law practice management (“LPM”) from the Discovery Channel? Take, for example, a broadcast on crocodiles that inhabited a raging river in Australia. When a drought occurred, the river was reduced to a stream and younger crocs were forced to find new streams. As the drought continued, the river that had been reduced to a stream was further reduced to a group of puddles, with a single croc in most puddles and one or two crocs in the few larger puddles. As even the puddles began drying up, more and more crocs fled to other streams and the bigger crocs pushed the smaller ones out of the remaining puddles. Finally, only the largest croc remained in the last puddle. Too weak to travel to a new stream, the largest croc died when the last puddle finally dried up. Had buggy whip manufacturers had the opportunity to watch the Discovery Channel, they certainly would have learned a lesson from the crocodiles and their vanishing river. Undoubtedly, the largest, most efficient, and highest quality buggy whip manufacturer stayed in business the longest, until that market dried up completely. The other manufacturers all moved into other markets. Why should LPM be any different? Some Personal History I have no lawyers in my family. My first exposure to the legal system was my articling term. I was amazed that we still had Lords and Ladies of the Bench and Masters of the Court. With the Dickensian titles came the omnipresent mystique of the legal profession’s honour and concept of noblesse oblige, practiced and rarely breached. It was spoken only in whispers in the barristers’ lounge when junior counsel, had crossed the understood line in the sand. Matters were dealt with quietly and put right informally between leading counsel, at times with high level diplomacy at the local club. Compensation was lock-step, based on seniority. Given that employment generally was for life (absent the occasional voluntary departure), juniors waited patiently for their turn to lead and leaders were free to act as mentors without the interference of billing pressures. Can this last in a world where price control on routine transactions has all but disappeared and admission to law schools and the Bar no longer are tightly controlled? Does History Repeat Itself? Will history repeat itself with the legal market and the profession’s mores inculcating the legal culture the same way that bourgeois morality spread with the growth of the market in 16th century Europe? Will Q.C.s be forced to adapt to the new environment as surely as the European Lords? Even the old titles are giving way to more acceptable market-oriented titles like “Certified Specialist.” Will the ideologies supporting the old guard need to change and reflect the mores of the new legal environment? Just as modernity required the Divine Right of Kings’ defence of the monarchy be replaced by the more consequentialist dogma of Hobbes’ Leviathan, so too the profession’s honour, in the guise of civility and formally defended as a de-ontological virtue in itself, is defended as an effective competitive strategy today.2 The End of the Profession I Joined New wines are being poured into our old bottles. The connection between increased local and global competition and the effect of unrestricted competition on civility is overlooked for the most part. The old ideology tries to persevere despite the systemic pressures on it. Doing away with articling is yet another step in the new legal order’s consolidation and the most tangible evidence of the end of the legal profession I joined. LPM will need to keep pace with these radical changes. Rather than rage against the machine, LPM must accommodate the new reality. The drought is here. Our challenge is to face the issues that arise from the new era of law practice and the end of articling. The receding waters of the old profession mean the old crocs will need to move into new streams of business and rethink LPM. When the Law Society of Upper Canada’s Licensing and Accreditation Task Force delivered its Interim Report to Convocation on Ontario’s bar admission scheme, it recommended abolishing the Skills and Professional Responsibility Program from the bar admission process. Doing away with articling is one of three options also being considered. We need to consider that option in light of the US experience with lawyers who enter practice without articling. The perception is that early in their careers, many associates get a steady diet of drudge work: reviewing documents, reading e-mails, organizing schedules for transactions, researching minor issues. Working on large teams, associates are given no individual responsibility of consequence. Partners often take little time to communicate the overall strategy and instead send younger associates to do piece-work. Juniors often must work for senior associates whose only goal in life is their own advancement and care little about their younger colleagues. Partners with huge workloads and unceasing pressure to produce, spend no significant time worrying about young lawyers’ professional development and shy away from mentoring, educating, and training others. Firms do not communicate candidly about their finances, business strategy, and young lawyers’ partnership prospects. Associates are treated not as young professionals, but as generators of "rates times hours" for annual revenue models. Because corporate clients are unwilling to take risks on young associates and pay their rates, many associates are left with no interesting opportunities to do important work, meet with businesspeople, and travel to depositions, hearings and arguments. In sum, legal training becomes a process of stratified, on-the-job training from law clerk to partner with no fundamental strategic educational plan. A New World for the Brave? Most young associates today do not expect to remain with their first firms their whole career. They quickly find that they need to move to grow at their desired rate. At the same time that competition has driven up associate compensation, associates have had to “ramp up” their skills, with start-up costs and write-offs spiraling. Training investment is lost when new associates move to other firms at the very time firms are hiring more laterals to avoid investing in training. The cost of training has historically been a hidden benefit to working in bigger firms. As in-house training and mentorship disappear, promises of in-house training and mentorship now become a marketing tool for the firms who continue to offer them. Compulsory lifetime education replaces mentorship. The short-term nature of the employment contract really is a tug-of-war between management foisting the cost of training on employees and employees pushing the cost back on their firms. Associates who entered the workforce with visions of our honourable profession’s old civility are under stress as they encounter the full force of the emerging new practice ethos with far less informal training, mentorship, support, and camaraderie than ever before, which can lead only to high attrition rates. Such is the fate of all untrained soldiers flung headlong into the front lines before fully ready. LPM needs to recognize the new reality and create models that address it. You do not have to be B.F. Skinner to realize that a more satisfying explantion of incivility comes from the idea that pouring more fish into the tank will turn us all into mythical rumble-fish bashing our heads against the glass and each other. Does Articling's End Signal the End of the Guild? Globalization has pressured the Canadian legal industry to consider scrapping articling to better compete with our southern neighbours. The growth in law school graduates compared with the market for articling students is probably even a more decisive factor in signalling the end of articling. Articling's demise signals the end of the guild system in our profession. The structures of the craftsmen's associations in the old trades were the same everywhere: a governing body, assisting functionaries, and the members' assembly. The governing body consisted of the leader and deputies. The guild was made up of experienced and confirmed experts in their field. Before an entrant could rise to the level of mastery, the entrant needed to go through schooling as an apprentice (articling student). The apprentice then advanced to journeyman (associate). Apprentices typically learned only the most basic techniques until their peers trusted them to keep the guild's secrets. After working for a master for several months and producing a qualifying piece of work, the apprentice received the rank of journeyman and documents (letters or certificates from master or guild) that certified the apprentice as journeyman. Several more years of experience qualified the journeyman as a master craftsman (partnership), which required all of the guild masters’ approval (partnership), a donation of money and other goods (entrance fee into partnership), and the production of a so-called masterpiece (a promotion-worthy legal triumph) that illustrated the aspiring master craftsman’s abilities.3 Adapting to the Market Just as market forces killed the guilds of yore when journeymen and apprentices openly competed with their former masters based on price, so too licensing paralegals independent of law firms and eliminating articling will increase competition and render the price/quality continuum and internalization of training costs more critical to Canadian law firms than ever before. Law firms will need to use training as a competitive carrot and long-term contracts with restrictive covenants as a competitive stick. Or, they may need to adopt even more revolutionary – and formerly unthinkable – ideas like those the high-tech and other highly skilled labour markets have been using for years. The legal profession needs to replace the current “high-stress-work-for-high-pay-for-as-long-as-tolerable in exchange for a bucolic escape on retirement” proposition with a new and more satisfactory social contract. LPM must lead the way. But where should we look for guidance? Evolution and Intelligent Design We are living through a period of punctuated equilibrium where the modern legal marketplace now requires a systemic rethinking of traditional notions of LPM. Where do we turn for exemplars? As the old Crocs’ story demonstrates, evolution is not about survival of the fittest Croc; it is more about the Crocs who can best and most quickly adapt to the new environment. Look to the smaller, more agile firms who compete and manage in new ways. Simply changing titles from managing partner to CEO, office manager to CFO, and management committee to Board of Directors and calling lawyers shareholders and Vice-Presidents instead of partners and associates is merely putting old wines in new bottles. But, firms operating like corporations, joint venture to win beauty contests against the bigger competition, pick their best executive rather than their best lawyer to be CEO, and compensate their CEO and practice group leaders based on firm and group performance, are serving a new wine. Look for the younger crocs who develop an effective model to manage their move to new streams and go on to become the next raging rivers. The reason is obvious. For lawyers at least, evolution is all about intelligent design.
* David Debenham is Counsel with the Ottawa office of Lang Michener LLP. He can be contacted at (613) 232-7171, extension 103.
1 Matter of Freeman 34 NY 2d 1, at 7 (1974). |