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August 2001
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Practice Management

Shifting Lawyering to a Business Model

Law firms must change their orientation, and no longer operate like a regulated industry.

By Stanley M. Wasylyk

Shifting Lawyering to a Business Model THE days of operating a law firm like a regulated industry are fading fast. Just like airlines, telecoms, and railroads, forward-thinking firms understand that they operate in a competitive marketplace, and must transform to thrive.

Practice management is one of the key components of this transformation, and savvy firms are constantly on the lookout for new processes and tools to support evolving practice management agendas.

In a regulated industry, management attention focuses internally -- working to understand details of internal operations and performance, and thinking about improving profitability by controlling costs. In a competitive marketplace, management focus shifts externally -- to managing and making decisions that drive competitive performance. In this business model, management attention focuses on markets; clients and prospects; inquiries and proposals; work performed; skills, experience, and availability of the professionals; knowledge and intellectual capital; and satisfaction of the firm's clients.

In practice-oriented management models, lawyers are organized based on practice groups or client industry segments. They operate on a firm-wide model, rather than an office-by-office approach. This promotes a small-firm spirit and sense of community, even in large, growing firms.

The concept: good work drives financial performance. To get there, management must foster lawyer morale and professional development; the firm's "inventory" of expertise; work assignments (including both billable work and practice investments); quality control; and knowledge management.

The practice group manager's work is very proactive. Managers must try to shape behavior in the direction of improved competitive performance. Take workload management, for example. Operating in the old, reactive model, firms review last week's utilization data on Monday or Tuesday morning -- only to find that there were lawyers the previous week who had down time and could have done additional work. But too late to do anything about this lost opportunity.

In a proactive model, managers examine projected utilization throughout specific time-frames; adjusting workloads and assignments on-the-fly, to mitigate underutilization.

Thus, managers match individual lawyers' skills, development plans, and available time with both billable work and other practice needs. This influences quality of life for the lawyers, quality of service for clients, and, ultimately, financial returns for the firm.

This shift in practice management does, however, create real tensions in law firms and the market place. Newly-appointed practice managers struggle with the responsibilities, and need new processes and tools to help them operate.

A proactive model also changes the nature, timing, and granularity of required information. Lawyer availability and client satisfaction may be measurable, but those readings do not fit the structure of typical record-keeping systems. Currently, most firms record lawyer time only as billable matters and only after they clear conflicts. In contrast, workload management needs to track all commitments (both internal and external) that affect the hours available to perform work as soon as the commitments appear on the firm's radar screen.

One thing is certain: These requirements for new processes and information resources to support the new practice management agenda will drive vendors to provide new tools, and motivate firms to acquire and use those tools. Our challenges will include clarifying and evolving "best practices" in practice management; educating practice group managers about the responsibilities of their new roles; and providing tools and resources.

Along with the tensions and challenges comes real opportunity. Research shows that many of the firms who are beating competitors in net income, client base, and size are those with strong practice management programs. During the '80s and '90s we learned how to use information and systems to manage operations and to assure that operations were carried out in a controlled manner and at a reasonable cost. Now we must learn how to shift the management focus and agenda towards competitive performance and to providing the tools and resources that management will need.

Stanley M. Wasylyk is a technology management consultant for Hildebrandt International, based in Washington, DC.

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