With the New Year comes an opportunity to re-energize your people and help your firm achieve its profitability objectives. The pandemic has created new opportunities which you can capitalize on as well.
Update Your Firm’s Business Model
The pandemic has created an impetus for law firms to accelerate remote working options and they have invested heavily in new technology to facilitate remote working as a result. This has spurred some firms to take this further and move to remote hybrid models which allow them to access talent they wouldn’t be able to access otherwise. The remote hybrid model usually includes a central hub with “spokes” out to remote partners who may be distributed in other states, provinces or countries. The advantage is that firms can now provide clients with top talent to meet their needs without the cost of setting up new offices in these jurisdictions.
Update Your Firm Governance Structure
Many firms are still run as democracies where every partner has an equal say in the running of the firm. Often firms have an assigned managing partner who is handling the firm’s management and administrative matters but does not have the authority to make optimal operational decisions on a timely basis. The managing partner’s job description should be updated to provide her the authority to make the best operational decisions and be rewarded accordingly. Firms that make this change usually increase their firms’ profit per partner significantly on a long term basis.
Review Associate Profitability
Do a profitability analysis of all associates taking into account all direct and overhead costs. Many firms find that a significant number of their associates are not profitable. That’s due to either a lack of production or work not being delegated from partners to associates. This may also require adjustments to your partner compensation system to incentivize partners to delegate more work to associates.
Create a New 5 Year Firm Strategic Plan
Many firms don’t have a written strategic plan. Create a new vision for your firm and agree on goals and strategies to achieve your vision. This will help you prioritize your goals and focus your planning efforts in an optimal way.
Update Your Partner Compensation System
Along with your new strategic plan, update your compensation system to motivate partners to align their personal goals with firm goals. Once you have firm goals established, your updated partner compensation system will help the firm achieve its goals.
These 5 strategies will help set your firm up for success. Please call me at (604) 512-8104 if you have any questions and I’d be happy to provide further information on implementing these strategies.
One thought on “5 Strategies to Increase Law Firm Profitability”
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