"Lawyers Are Bad Businesspeople." And That Would Be Entirely Their Fault?

Can you say what an incremental dollar of revenue will contribute to profit at your firm?  Does it matter if that marginal dollar comes from an existing client or a new client, or which practice group generates it?  More pointedly, not all business is good business:  Does that new dollar come from a source aligned with your firm's strategic vision?  (For example, if it's a goal of your plan to grow your entertainment-industry intellectual property practice, what if that dollar comes from Grokster?)

Taking it another step, could any of your lawyers on the front lines do the same analysis?  In other words, do they have any clue—or any tools to help them determine—the profitability of matters they're working on or engagements they're contemplating accepting?  If the answer is no—which is probably true for north of 90% of AmLaw 200 firms—you are depriving your fee earners of any hope of making informed, economically sound and business savvy, decisions affecting the very fundamentals of what your firm does:  What matters it accepts or declines, how it staffs them and how it charges for them.

In corporate-land, Wal-Mart is an extreme case, to be sure, but the bedrock of their success is the remarkably powerful ability to deliver real-time performance measures into the hands of store managers, while they're actually in a position to do something to affect the numbers.  Let's "unpack" what that means:

• the store manager (the partner) has the information now;
• he/she is responsible for the performance measure (i.e., he/she has the both the authority and the duty to ensure the particular measure is moving in the right direction and aligned with the firm's overall strategy); and lastly and most important
• the measures themselves are germane and important.

John Alber, the Technology Partner at Bryan Cave (AmLaw 100 #55), calls this "actionable intelligence," and says the benefits of making it available to front-line lawyers are "extraordinary:"

"We find that there is a very high correlation between use of these tools and strong metrics. The more they use these tools, the smarter our lawyers get about economics and the more flexible they become about what pricing and staffing structures they consider."

Better yet, after having used these tools for a relatively brief time, lawyers can compare how staffing and structuring decisions on past matters did, or did not, support profitability and the firm's other strategic goals.  In other words, they can derive their very own set of "comparables."  In short order, their instinctive understanding of what worked best in the past will lead them to more optimal decisions on new matters.

 Why not get some yourself?