How can firms end 2023 strong and set up for success in 2024?

As many firms and leaders look towards the end of 2023, they must navigate budgeting, compensation and performance reviews, race to bill and collect final dollars, and identify key priorities for 2024. In our 2023 Am Law series of articles, we have covered topics of collections, practice management, knowledge management/marketing/BD, and data & technology to help leaders find no/low cost ideas to get ahead. With big decisions to be made soon about 2024, this summary of takeaways will help leaders create and guide a strategic, planful approach to solidifying success in 2023 and setting up your firm for success in 2024 and beyond.

Where we find ourselves nearing the end of 2023:

• Uncertainty remains, but firms have proven in recent years that they can succeed in the face of uncertainty.
• The legal market has remained resilient in the face of external threats and uncertainty (ex. inflation, recession fears, global conflicts etc.).
• The pace of data and technology disruption continues to accelerate and firms are exploring the opportunities and impacts of technologies like AI, ChatGPT, among others on business operations, risk, and clients.
• The broad talent crunch has subsided, but movement of partners and practices continues.
• M&A activity remains low, but more likely to improve than get worse.
• 2023 profits may be down slightly, but revenue is healthy and we may be returning to pre-pandemic profitability levels given T&E expenses and IT investment.
• Tailoring year-end messaging to position key initiatives set for 2024.

 

Focus Areas to Help Firms Finish Strong In 2023

 

Collections

Opportunity: Direct impact to bottom line and improved client experience. While you cannot overhaul your collections process before year end, you can bring focus to the importance of a good process and fine-tune messaging to foreshadow future improved processes.

The annual scramble to collect expected revenue is on. While this can be a profitable exercise, doing this only at the end of the year, with a manual approach often causes undue stress, diverts efforts away from normal activities, and risks frustrating clients and partners. To ensure a more effective and efficient collections experience for everyone, consider devoting resources and time to understand:

• The firm’s collections philosophy, expectations, and KPIs to measure success.
• The process: who is involved, what their responsibilities and decision rights are, and how technology, automation, and predictive analytics can help.
• The client experience and how collections can be a positive client management interaction.

Am Law firms range from tens of millions to multiple billion-dollar enterprises so collections are an inevitable part of running large firms. With so much revenue at stake, it’s important that everyone understand the firm’s targets for collections, expectations around write offs, and how the approach to these conversations might differ across client relationship situations. Having a firm-wide and leadership driven approach to collections will help everyone involved understand their role in a successful collections effort while acting in the manner that clients expect from the firm.

The right client experience often starts before any interaction with the client. The internal process of collection is made up of many steps, sharing of information, real people playing their role(s), and leveraging of technology to make this (hopefully) easier, faster, and more accurate. While many firms jump to a new technology platform as the solution to a process problem, there often exists simpler and more impactful solutions by analyzing the current process. When firm leaders walk through the process end to end, they can see and experience the gaps. Providing simple, clear direction to everyone involved about their role(s) and decision rights can go a long way to dispel assumptions about how things work and who does what. One source of truth that everyone can reference (ex. process maps, role descriptions, RACI definitions, etc.) will keep the process consistent and on track.

Once the process and people side of the equation is optimized, technology can be most effective. With the amount of data law firms have, predictive analytics can increase the likelihood of collecting, lower the cost of collecting, and help predict revenue/profit for better financial planning.

 

Business Development

Opportunity: Win more of the right kinds of business, more often with a client-first approach.

The end of the year is a great time to reflect on the work you’ve done/are doing with clients and have a collaborative conversation about what’s next. Oftentimes, lawyers and partners are so busy delivering, they do not take the time to ask clients about the work they are doing with other firms and where they can help.

Consider that:

• The client may be overwhelmed with a certain kind of work and could use help from the firm.
• They may be dissatisfied with an existing firm relationship.
• There might be upcoming business changes that will require a different set of work the firm could help with.

A dedicated focus and unique approaches to key client accounts can make the difference in driving the relationship vs. being the last to know about a client’s decision without any time or opportunity to influence decisions.

This focus comes by connecting with clients and asking about what matters to them, involving clients in the process of account planning, and being intentional about collecting feedback from the clients throughout the year.

While partners and lawyers may want to engage in these open, honest, and strategic conversations, there often isn’t time or appetite because of existing cases and deadlines. Integrating BD teams into practices, firm strategy, and operations can be a useful approach to dedicating the right time and people to those conversations without impacting current work. This framework will require trust, expectation setting, clear roles, and intentional communication, but can be worth the effort for longer, more impactful client relationships.

 

How Firms Can Get Ahead of 2024 and Set Up For Success

 

Data & Technology

Opportunity: A consistent approach to data and technology that connects to firm strategy and provides a strong ROI.

Consider that:

• Continuous data and technology strategy updates can help provide a consistent approach to evaluating new technologies (ex. generative AI).
• Measurements and processes to ensure appropriate ROI are critical to meeting targets.
• ROI comes in many different forms: direct cost savings, revenue generation, time savings, and others; it’s important for those involved in assessing technology to be clear about the type of ROI they expect.

Law firm leaders have the complex responsibility of connecting the value of technology to the practice of law and the business of law, all while mitigating risk and providing the firm and clients with a proper ROI. This is a daunting responsibility without some way to guide decisions. That’s where a firm and data/technology strategy can provide the most value. Connecting the firm’s vision and strategy to the firm’s data/technology-specific strategy is key. Once those strategies are aligned, firm leaders can look to those documents as guidance to inform which technologies to implement, which ones not to, and increase the probability any technology related decisions deliver high ROI.

Due to the fast pace of changes in the legal technology and data space, the data/technology strategy must be continuously reviewed, updated, and tested. Looking at the strategy once a year or worse, once every few years will likely lead to your data and technology capability becoming uncompetitive quickly. Additionally, a dynamic data/technology strategy helps to defend leaders against one-off requests by individuals or practices and, if integrated well into leader’s messaging, builds the culture and knowledge for each person in the firm to contribute positively to the desired strategy outcomes.

 

Practice Management

Opportunity: Provide clients with consistent and value-add experiences.

• Setting up key client account programs means firms need to organize and score clients in an unbiased manner.
• An honest understanding of a client’s needs and potential helps the firm and practice understand what kind of talent and skills are needed to serve the client best.
• Collaborating with other practices is a great way to challenge the status quo while benefiting the client and the firm by identifying new ways to provide value to clients.

Ironically, the best way to manage a firm’s practice is to start outside the practice. Starting with the client point of view is the best guide to help organize, focus, and grow a practice. Understanding the details of the practice’s best clients can help practice and firm leaders drive more consistent revenue, identify the skills/expertise clients needed, and guide talent decisions.

Collaborating with other practices can further help leaders think about new potential opportunities for client work and create a stronger tie between the client and firm, protecting and growing revenue simultaneously.

 

Knowledge Management

Opportunity: Create a differentiated client and attorney experience by elevating Knowledge Management (“KM”).

The importance of leveraging the collective knowledge and experience of all people within a law firm is obvious, but hard to achieve. Barriers to a successful knowledge management strategy can include overall firm culture, differing levels of understanding of KM value, and resistance to sharing details of client contacts, among others. Existing tools and developing technologies, hand-in-hand with effective change management, can increase the likelihood of an effective KM initiative. Key steps and considerations include:

• Creating a knowledge inventory to identify and categorize current and necessary knowledge.
• Matching knowledge assets and skills to client needs paired for seamless delivery.
• Leveraging large language models plus generative AI to provide firms the ability to automate many processes and develop best in class KM functions.

Our series to date has focused on maximizing existing resources and low-cost solutions that can be implemented immediately. However, knowledge management is most effective when there is a firm-wide commitment to knowledge sharing and efficient access to current forms and standards, all leveraged by effective technology. Such wide-ranging transformation takes time, but, without such universal and uniform access to information, firms are unlikely to maximize their ability to fully develop client relationships. Actionable tactics that can be implemented immediately, if not already in place, are the standardization of forms across practices, offices, and regions; expansion of client teams to encompass a diverse set of stakeholders; encouragement of use of firms’ client relationship management software and the memorialization of client contact. These behavior-changing, low-cost suggestions can increase collaboration between team members, and create an ideal environment for wide scale transformation efforts.

 

Marketing

Opportunity: Represent the firm’s unique value in the market while remaining agile to capture today’s opportunities.

In support of the firm’s strategic plan for 2024, marketing resource deployment should align with those markets, industries, practices, offices and personnel that are sought to be emphasized as part of the agreed plan. In line with knowledge management and business development, among the others discussed above, marketing resources, including communications, press and media, should have both internal and external tactics and engagement plans. The ongoing work of marketing must emphasize:

• Process for maintaining relevance and external visibility.
• Clear decision-making processes and communication to keep stakeholders informed.
• Clear connections to firm strategy that avoid the “flavor of the month” approach.
• Differentiating the firm, amidst increased competition.

The stronger the partnership between marketing, management, attorneys and all supporting personnel, the more effective that the “story” of the firm, and the good work being done will be persuasively presented to the market.

Regardless of the year, uncertainty will likely continue throughout all business cycles and the best firms are prepared to be agile and proactive to any changes. Remaining committed to firm strategy, grounding decisions and investments in that strategy, and focusing on clients will continue to be the best starting points for decision making in uncertain times.

Exciting possibilities are ahead with potential macro-economic strengthening, a new normal of hybrid work, and continued integration of data, technology, and AI into firm’s everyday value they bring to employees and clients. Here’s to a great end of 2023 and an exciting look ahead to 2024.

 

By Jay Russell, Mark Masson, and Ed Estrada

Originally published in AmLaw, December 8, 2023