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Strategic Planning Series Part 2:

The Vision / Tracking Organizer (V/TO)

Most business owners are aware of the importance of a company vision, even if they don’t take the time to create one. A vision gets everyone in the firm seeing the same clear message of where the business is going and how it is going to get there. For those who take the time to create a vision, I wonder how many keep it front and center on a regular basis, ensuring that the vision they have for the business is where they actually end up.

In Part 1 of this series, we talked about Gino Wickman’s book, Traction, and the EOS system he developed in order to help organizations not just create a strategic plan but actually work the plan into fruition. The initial part of the EOS system is the development of the Vision / Traction Organizer (V/TO). The process helps the organization to develop a vision but also put other parameters into place to help work toward that vision.

The Importance of Creating a Vision

You may wonder why you need to take the time to identify or verbalize the vision you have for your firm. You know what you want for your firm, so why take the time to work through the process of writing it all down? Consider these points:

  • Having a clear vision for the firm that everyone understands gets everyone steering the ship in the same direction.
  • Fail to provide this vision for everyone in your firm, and they lack a sense of purpose and are functioning as if on an island.
  • The more clear your vision is to everyone, with everyone’s energy focused on the same thing, the more likely you will achieve it.

“If you could get all the people in an organization rowing in the same direction, you could dominate any industry, in any market, against any competition, at any time.” Author unknown

The 8 Questions of the V/TO

In order to create your organization’s clear vision, the V/TO provides support in identifying eight key areas:

  • Core values
  • Core focus
  • 10-year target
  • Marketing strategy
  • 3-year picture
  • 1-year plan
  • Quarterly rocks
  • Issues

Core Values

Well defined core values allow you to weed out people who don’t fit. Without the right people in the right seats, you will not find success. An organization should hire, fire, review, reward, and recognize based on its core values. Your hiring success ratio will increase significantly if you evaluate applicants based on their fit with your core values before their skills.

Core Focus

The core focus defines your two truths: your reason for being and your niche. By having a well defined core focus for your organization, you can easily make decisions about what cases you should take on and what cases you should pass on. Staying true to your core focus allows you to avoid being distracted by the shiny stuff. By having a clear vision of your core focus, you can avoid taking on cases that are not a good fit for you. Taking cases that do not make sense for your practice results in lack of efficiency, lack of profitability, and often lack of success. In addition, if you are busy working on the “wrong stuff,” you will not have the bandwidth to take on the cases that really matter to you when they arise.

“He who chases two rabbits catches neither.”

Ten-Year Target

Think BHAG: Big Hairy Audacious Goals. Don’t limit yourself here – shoot for the moon. It is better to have goals that are too big than to limit yourself by creating goals that are too small. Just ensure that the goals you set are specific and measurable so that your shorter-term goals can be specific enough to help lead you where you are trying to go.

Marketing Strategy

The EOS process will help you to be very specific in identifying your strategy. You will begin with four elements that identify who your firm is:

  • Target Market
  • Your Firm’s Three Uniques
  • Your Firm’s Proven Process
  • Your Guarantee

By taking the time to identify these traits that are unique to your firm, you will start to see a clear picture of how you can use your marketing strategy to help your firm stand out from the rest.

Once you have identified what sets your firm apart, the second part of your marketing strategy identifies who your clients are. You will want to identify these traits for your ideal clients:

  • Geographic
  • Demographic
  • Psychographic

By identifying what makes your firm unique and who your ideal clients are, you can focus your marketing strategy and your attention on the right clients.

“If you try to please everyone, you’re going to lose your a**.”

Three-Year Picture

Your three-year picture begins to break down your ten-year goal into a more manageable picture. You will begin by creating some basic measurables: Gross revenue, net profit, number of new clients, etc. Once you have identified that measurable goals you have for where you want to be in three years, think about what your firm will need to look like in order to meet those measurables. For example:

  • Number of attorneys
  • Number of staff
  • Added resources
  • Systems
  • Office size

One-Year Plan

Your one-year plan brings you into closer focus and should help you move toward your three-year picture. Create three to seven priorities to complete to be on track for meeting your three-year picture. These items should be specific, measurable, and attainable goals, and then ensure you have created a budget to support these goals.

Quarterly Rocks

In EOS, long-term tasks are called “rocks.” These 90-day goals are created in order to ensure that you will be on target in meeting your one-year plan. Like all of your other goals / tasks, they need to be specific, measurable, and attainable.

Rocks are assigned to individuals and/or departments. Your monthly partner meetings should address progress on assigned rocks to ensure that they do not fall by the wayside in the midst of busy practices. We will talk more about the EOS meeting structure in another article.

Issues

Finally, issues are obstacles that could stand in the way of accomplishing the vision you have defined for your firm. Issues are items that need to be addressed by your management team in order to identify solutions. Issues are discussed and resolved during your partner meetings in a well organized process defined by the EOS system.

Once your partners have defined these eight items, it is time to share the V/TO with your organization. You will achieve your full potential when your leadership team is on the same page. You will then be able to move your organization in one direction, rowing together to success.

For assistance with your strategic planning, contact Suzette@LawPracticeEdge.com. For more information on the EOS system, check out Gino Wickman’s book Traction.

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Strategic Planning Series Part 1:

Traditional Strategic Planning v. EOS Model

I have been receiving many inquiries regarding help with Strategic Planning recently. Most, if not all, business people are familiar with the phrase. They have likely even gone through the process once or twice – or more. For attorneys, while the concept is not new, putting the concept into practice may be.

The traditional strategic planning model has many iterations, but most look something like this:

  • Vision and Mission. Create a vision for what the organization should look like and a mission for what we are hoping to accomplish.
  • Objectives. Define the results we are aiming for. Identify short- and long-term goals.
  • Strategy. Come up with a plan for how we are going to meet our objectives. A SWOT analysis (identifying Strengths, Weaknesses, Opportunities, and Threats) may be involved here.
  • Approach. Figure out how we will execute the long-term plan.
  • Tactics. Define smaller, focused action plans that will support the overall strategy.

A lot of investment is put into strategic planning meetings. Multi-day leadership retreats are planned around the process. In law firms this often means days of lost billable hours for several partners in addition to the travel and other expenses tied to the retreat. The meeting can be a great investment in building collaboration, identifying the items mentioned above, and making everyone feel positive about being on the same page.

And then … we all return to our busy practices and the street paved with those good intentions that we left the retreat with leads straight to … well, you know the rest.

It isn’t anyone’s fault. Everyone at the retreat really did have good intentions, and they really want to work the plan that they planned so hard to create. It is just really, really hard to keep the momentum going and keep things from falling by the wayside when we are all so very busy just keeping our heads above water with client demands, employee issues, billable hours goals, mentoring, training, etc.

That Doesn’t Mean You Should Give Up

There is a way to create a strategic plan that you can efficiently stay on top of. Enter Gino Wickman and his amazing book, Traction Get a Grip on Your Business. I was fortunate to work with a firm who worked through this process several years ago, and if Gino’s protocol is followed, it works.

Not Sure You Even Need Strategic Planning?

Maybe you don’t – maybe everything in your firm is working swimmingly. You have all of the right people in the right seats, everyone is meeting your expectations, your clients are happy and your bank account is full. If that is the case, maybe you are right – maybe you don’t need it. However if you are experiencing any of the common frustrations below that Gino outlines in his book, you may want to consider it:

  • Lack of control. You have no control over your time, and instead of controlling your business, your business is controlling you.
  • People. You have employees and clients who are frustrating you. They don’t seem to understand your expectations, and you are not all on the same page.
  • Profit. There isn’t enough of it. You are busy and you know you should be seeing a lot more financial reward for all of the work you are doing.
  • Ceiling. You have stopped growing, and no matter what you do, you can’t seem to get to the next level.
  • Nothing is working. No matter what changes you have tried to address the issues you are experiencing, nothing seems to help, at least not for long.

One more that I will add: You have spent endless resources on strategic planning, and no matter how great it seems at the end of the process, you don’t end up with the results you were expecting.

If you are experiencing any of these issues, you may want to consider the EOS system (EOS stands for Entrepreneurial Operating System). A form of strategic planning in many ways, what is different about Gino’s system is that he provides the tools you need to not just develop a great plan but also work the plan so that you see the results you were intending.

In the following articles in this series, we will cover the elements of the EOS System and how it works:

  • Vision/Traction Organizer (V/TO). Much like the traditional strategic planning protocol, this will help everyone in the firm focus on rowing the boat in the same direction, identifying many items that make your firm unique and defining your organization’s sweet spot to keep you focused in the areas in which you most excel.
  • People. We all know we want “A” players, right? But what does that mean for your organization? This process will help you to identify what characteristics you need to see in your organization and its different positions in order to have the right people in the right seats.
  • Data. Think KPIs (Key Performance Indicators). EOS helps you to create a scorecard of KPIs that will help you to efficiently keep your fingers on the pulse of your organization on a weekly basis.
  • Issues. Think “weaknesses” and “threats” from the SWOT analysis – what elements are getting in the way of getting things accomplished? What does your management team need to discuss in order to resolve these issues?
  • Process. Your way of doing business. For example, have you developed a database of institutional knowledge for your firm? If you haven’t, there are many issues that need to be addressed around this topic alone.
  • Traction. Traction refers to your organization gaining traction by having systems in place to move the ball forward. There are two disciplines to be developed to assist in this area: Rocks, which are clear 90-day priorities identified to keep the organization moving toward your short- and long-term goals, and implementing a Meeting Pulse at differing levels of your organization. Traction and EOS will help you to learn how to use the Rocks and Meeting Pulse in an efficient and effective way so that you are moving toward your goals without wasting time (aka “death by meeting”).

As we work through this series of articles, I am confident that, like me, you will see the enormous value this system can bring to your organization in not only developing but also successfully implementing a Strategic Plan.

For assistance with your strategic planning, contact Suzette@LawPracticeEdge.com. For more information on the EOS system, check out Gino Wickman’s book Traction.

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Building A Better Budget

What does your cashflow look like this year? How about your net income by year end? Having a quality budget in place removes the guesswork and fear from your financial picture and ensures you end up where you want to go. We have all heard the phrase, “Failing to plan means planning to fail.” A budget will not only help to forecast net income and cashflow, but it will help you to plan for potential problems before they become emergencies.

The two most common types of budgets are zero-based and incremental. If you are a new firm with little to no history, you will need to start with a zero-based budget. A zero-based budget is just what it sounds like – you start at zero and forecast each expense you anticipate incurring, as well as revenue you hope to achieve.

With incremental budgeting, you have the luxury of looking back at your history and creating the next year’s budget based on what you have experienced before. Be careful though – with incremental budgeting, it can be easy to fall back on past numbers with little effort made to improve efficiencies and drill down on ways you can do better.

Regardless of the approach you take, the first step is to ensure you have a good general ledger chart of accounts. If you are not familiar with the chart of accounts, it is simply a list of income and expense categories used to track your spending. In a law firm, typically your income is fee income. You may also have rental income if you own a building and rent a portion of it to other tenants. When it comes to expenses, you want to find the happy medium between having enough detail to aid you in future years without having so much detail that it is a cumbersome system to use. It is also helpful to ensure you keep any expenses pertaining to meals separate – your CPA will need to know that number at tax time, because your meals are not 100% deductible!

Steps to Creating Your Budget

Don’t Plan In A Vacuum

Start by reaching out to all stakeholders in your firm. What do their CLE expenses look like for the year? Any conferences planned? How is the equipment looking? Is anyone going to need any major purchases to replace outdated equipment? What about staffing? If leadership is planning to add more employees to the firm, you need to know whether you are going to have the money to cashflow that addition. Attorneys typically take six months before they show a profit for the firm.

It is helpful to use a spreadsheet for planning your budget. You should have a sheet for income, a sheet for expenses, and a sheet that links the bottom line of your total income and expenses so that you can see your forecast net income.

Estimate Income

Begin your budget by estimating income. In your budget spreadsheet, you can estimate the fee income for each timekeeper in your firm. It is a simple list for each timekeeper, with their estimated billable hours for the year multiplied by their average realization rate. Your financial software may be able to run this realization report for you – if it does not, you can estimate a fairly accurate number by looking at the timekeeper’s previous history and dividing their fee receipts by their billable hours. If your firm has any contingency matters, don’t forget to account for them as well – some may be at a stage where there is guaranteed income to the firm, and some may still be truly contingencies – you should account for the contingencies in a separate line item that is not counted on.

Use Your GL Accounts To Your Advantage

When it comes to budgeting for your expenses, be sure you have a good plan for your GL accounts before you start. Try to anticipate everything you may want to be able to track in the future. Your financial software should allow you to have parent accounts and sub-accounts.

For example, you may have a set budget for firm events for the year, but you may want to be able to track what the firm spends on the annual holiday party v. its summer outing and its annual Administrative Professionals’ Day celebration. You can have a parent account for firm events, with sub-accounts for each of those sub-items. This will allow you to easily plan in future years by having a quick picture of your historical spending.

Another great way to use sub-accounts is to track costs the firm incurs for each attorney. Examples include insurance, association dues, CLEs, conferences attended, etc. By creating a sub-account for each attorney, it is very easy to run a report from your financial system to track their direct costs when you want to determine their true profitability for the firm.

Budget Your Months Accurately

When it comes to entering your budget into your financial system, be sure you are entering the expenses in the month that you expect them to occur. Some items will be spread equally throughout the year, like rent and equipment leases. Others will occur in specific months, like professional liability renewals and holiday parties. By planning for your professional liability renewal to occur in the appropriate month, you can have your eye on the ball in cashflow planning and avoid the extra expense of paying for financing your premium.

Don’t Just “Set It and Forget It”

Use your budget for decision making. If someone is requesting something that was not planned in the budget, is it necessary? Is it something that can wait until next year? If not, is there a way you can make up for the added expense by changing your spending in some other areas or increasing firm revenue?

Once you have entered your budget into your system, make sure you monitor it regularly. You should be running a monthly YTD income v. budget report to track how you are doing against your budget. Don’t despair if you see variances v. your budget. No budget is perfect, but by having one in place and monitoring it regularly, you can prevent any big surprises and make contingency planning when necessary.

For more information on budgeting, check out our Finance Level 2 Course, which includes a lesson in budgeting and a downloadable spreadsheet you can use in your own practice.

 

 

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Exploring Legal Software Solutions

Today’s consumer is more discerning than ever, and that includes the clients we see in our law firms. With the technology revolution and the explosion of information that is available on the internet, clients no longer come to firms ready to follow their attorney’s advice and pay their fees without question. In order to keep up with the technological savvy and demands of their clients, law firms continue to work to meet the challenges they face in handling their growing firms as efficiently as possible. With a business unlike any other, firms continue to strive to find the best software to support their unique needs.

In a recent survey, managers of 51 law firms responded to share their solutions to time & billing, finance, and document management software.  While the software solutions they are currently working with meet their needs to a certain extent, the survey responses confirm that firms have yet to find an all in one software that they are satisfied will meet the needs of their firm. It seems we are all going to be making do as best we can with what we have until someone comes up with a better solution.

Common complaints with current software options include:

  • Lack of mobility/remote access
  • Poor reporting/report layouts
  • Poor or no integration with other law firm software
  • Lack of customization ability

It is my hope that this survey will help to shed some light on the pros and cons of the most common software currently being used in the industry so that the reader can make an educated decision in choosing the option that best suits their needs.  Based on current communication among current law firm managers throughout the country, Centerbase combined with NetDocuments seems to be the current preferred option for mobility and integration. Stay tuned for a future article with more information on these options.

Click here for the full survey report.

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Ten Ways to Improve Billable Hours

Capturing the billable hour is a challenge in every law firm, but with a few habits and procedures in place, coupled with today’s technology, it doesn’t have to be so bad. Gone are the days where an attorney had to hand write every task on a time sheet and give it to his or her assistant to manually enter into the billing system. Today, attorneys and paralegals can easily enter their own time into the firm’s billing system to streamline the billing process and enable the timekeepers and their firm to capture a better and more accurate portion of the work they are performing.

Create a Policy

If your policy and goals are not defined, they will not be met.

It is important that you have support from leadership and that leadership leads by example.

Concurrent Timekeeping

Concurrent = Accurate = Client Trust

Studies show time not kept concurrently results in a 30% loss of time.

One hour lost per day at $350/hour results in $91,000 lost annually, per attorney.

Use a User Friendly Time & Billing Program

iTimekeep, for example, syncs with more than 30 popular time and billing platforms – it allows attorneys to dictate their time through an app on their phone or Apple watch when they are out of the office.

Shift Annual Reporting to November – October

If you start the annual reporting period in November, timekeepers may start their annual billing cycle in the hole during the holiday months, but that’s okay. This will encourage them to focus on catching up early in the year, in January and February, when firms need productivity the most.

This also allows timekeepers to do catch-up in September and October if they are behind their annual goal at year-end, instead of struggling to catch up during heavy holiday months. They will thank you for this!

Give Your Attorneys a Billing Calculator

A billing calculator helps attorneys track their year-to-date hours v. goal. This helps them to be a participant in tracking their time and having accountability for meeting their annual goal.

This prevents any misunderstandings or confusion – everyone stays on the same page as to where the attorney’s YTD balance is.

Require All Time To Be Entered By the End of the Day

Anything missing should be caught up and in the system by the end of the week at the latest.

Firm Manager Should Provide Month-To-Date Reports to Each Timekeeper Each Monday Morning

By providing timekeepers with a calendar view of their hours, they can quickly see a snapshot of any time they may be missing.

Capture All Time, Including Non-Billable

Task codes for non-billable tasks such as business development, internal meetings, training of other personnel allow you to track how your timekeepers are using their time when not performing billable tasks and keeps them in the habit of tracking everything they are doing. This also allows them to see where their time is going so that they do not become discouraged.

Use Your Billing System’s Timer

Using the automatic timer keeps your time spent on a task calculated automatically and allows you to pause the timer during interruptions.

Always Track Time for Flat Fee and Contingency Matters

You may need this for fee petitions.

Tracking your time on these matters is important, as it is the only way you can accurately analyze profitability on certain types of cases.

To learn more about creating your firm’s billing protocols, check out our Law Firm Finance Level 1 Course.

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Law Firm Profitability Increased Through Cost Accounting? You Bet!

How are changes in today’s climate impacting your law firm profitability? I have seen a lot of changes in the legal industry since 1982.  Technology has changed our world significantly, and law firms are slowly catching up to the rest of the business world in many areas.  Gone are the days of the large offices, where every attorney has their own secretary, and the firm houses a large library full of books that must be manually updated with those supplements that would arrive on a regular basis, much to our chagrin.

As we have slowly joined the rest of the world in the ways of online research and paperless offices, we are also considering more appropriate ways to look at profitability.  This is due, in part, to client demand.  Clients no longer accept the idea that they will pay our firms by billable hour, with no budget or foreshadowing of what their final out-of-pocket expense may become.  Technology allows for broader communication and stiffer competition, and if we want to remain competitive, we must become more efficient and readily able to consider alternative fee arrangements (AFAs) such as flat fees, risk collar agreements, etc., or at the very least, offer accurate budgets that clients can count on so that they know their worst-case scenario.

While we may have given in to the fact that we must agree to these terms in order to get the work, many firms find themselves no longer profitable as a result.  Where they are falling short is in the failure to recognize that, like other businesses, they must have a cost accounting model that allows them to understand what their cost is for producing the client’s product before they can agree to a sale price.

What can we do?

If you think only manufacturing companies can use cost accounting methods in their businesses, think again.  Law firms who are using these methodologies will leave in the dust those who do not jump on the bandwagon.  You may not be producing widgets, but you are selling a “product” that can measured in order to determine the cost to produce.  By implementing a cost accounting system, you will be able to determine profitability by producer, department, office, client and matter.  (You may be surprised to learn that your largest fee income client is not necessarily the largest contributor to your bottom line!)

How does a firm determine the cost of their product?  It isn’t as complicated as you may think.  By determining the direct costs of your timekeepers (salary, payroll taxes, insurance, training, etc.) and allocating the remaining firm overhead to your timekeepers (how the overhead is allocated to differing timekeepers is another article in itself), you can determine an annual cost per timekeeper.  By then looking at the number of hours each timekeeper bills per year, you can determine their hourly cost.  (Timekeeper annual cost including overhead allocation ÷ number of hours billed = timekeeper cost per hour.)

The calculations are done. Now what?

Once you have determined the timekeeper’s cost per hour, you can readily understand what you can (and cannot) afford to offer as your billable rates and AFAs.  You can determine the necessary billable rate for each timekeeper in order to meet your profitability goals, taking into account anticipated write-downs and write-offs (typically 10 percent).  You will also know very quickly whether you can afford to offer a client a discount on any given invoice and still receive a profit on that work.

By doing a small amount of legwork on the front end to create a model that works for your firm, you can

  • Ensure you are billing your timekeepers at a rate that will meet your law firm’s profitability goals;
  • Look at the profitability of each client based on the timekeepers who have worked on their matter(s) and the effective rates for those timekeepers after receipts;
  • Be more accurate in your budgeting for client proposals;
  • Be more competitive by using this knowledge to be creative in your billing models and the use of AFAs.

Get started

You can start with a simple spreadsheet prepared for each of your timekeepers to determine their break even rate. Email me at suzette@lawpracticeedge.com for a free copy. To learn more about cost accounting in law firms, check out our Finance Level 2 course.

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The Importance of a Good Onboarding Program

Onboarding, defined as the action or process of integrating a new employee into an organization, is a largely discussed topic today.  Google it, and you will find there are over 27.5 million results.  Why has it become such a large part of our culture?

Onboarding is more than just a “warm and fuzzy” PC practice of expecting everyone to like everyone and be singing kumbaya.  It is a practice that is very important to your business.  Turnover is expensive.  Training is expensive.  And, in today’s market, good, qualified employees are extremely difficult to find.  When you are lucky enough to get a great hire, chances are you had to pay a recruiter a hefty sum to find them, and the last thing you want to do is lose them after the investment of recruiting fees, training costs, and the slow productivity while they get up to speed.

The results of onboarding are not just subjective.  They are also quantifiable.  A good onboarding program has been shown to result in better job performance, greater commitment to the organization, reduced stress, higher job satisfaction, and better retention.  The cost of hiring a new employee averages $65k, and it takes an average of 5 months of full-time employment to bring new hires up to full productivity.

So how does one successfully onboard an individual for successful integration into the firm?  For starters, onboarding begins well before the employee actually starts their employment.  If you wait until their first day on the job, you have waited too long.  Engaging an employee in the onboarding process before his or her first day not only helps them get a leg up on the process, but it can actually mean the difference between them starting and not starting at all.  With competition for good people being what it is, it is not uncommon to lose a new hire to a better offer before they even start – oftentimes due to a better offer from their existing employer.

Make sure they are so excited about joining your firm that they wouldn’t even consider another offer.  You can start by creating an onboarding platform that can be shared with the new hire before their start date.  This platform can include instructions for their first week, forms that they need to bring with them, notes on who their peer mentor(s) will be, information on company culture and core values, and even a “who’s who” of existing attorneys and staff in the firm, complete with photos so that they have some idea who they will be seeing on their first day.  It should also have a checklist for all of the training they will need when they start, and anything else that needs to be completed by a new hire.  This checklist will ensure that nothing falls through the cracks in getting them up to speed.  A Trello Board works great for this process.  It is a free online platform, and you can copy the firm’s onboarding Trello Board for each new hire and make it specific to them.  The Trello Board can be shared with anyone responsible for the employee’s training.

In addition, phone calls to the new hire on at least a weekly basis to make sure they don’t need anything and to answer any questions that may have come up for them can go a long way to show you care.  When they arrive, having a clean work space that has been set up with any supplies they may need and a computer that is ready for them with their passwords and software ready to go will go a long way to show that you have made an effort on their behalf.  We have all been in situations where we inherited someone else’s mess – don’t let that be your new hire’s first day experience.  There may be a mess for them to clean up out of necessity, but that doesn’t mean they have to be greeted by it on their first day.

Ensuring the successful onboarding of a new employee is not difficult if you have the right systems in place.  With a little planning, you can have a platform in place that will ensure every new employee receives the appropriate welcome and training that they deserve.

To be the first to be notified when our Human Resources Basics for Law Firms Course has been published, email suzette@lawpracticeedge.com.

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