Long-term, involved engagement key to profit planning success
By Kirsten McMahon, AdvocateDaily.com Managing Editor
While almost any law firm can benefit from profitability improvement planning, Toronto legal management consultant Mark Dormer says there are specific indicators that should prompt owners to take immediate action.
“If revenue is staying flat year after year, while expenses are slowly rising — this can lead to an uncomfortable position for the owners of the firm as the profits are dwindling,” says Dormer, owner and president of Cosgrove Associates Inc.
He tells AdvocateDaily.com that certain issues, such as climbing receivables or a large amount of work in progress, will cause a reduction of cash flow.
“One of the challenges we’ve noticed in working with firms for more than 25 years is it’s not one issue — it’s a number of factors,” Dormer says. “It’s a matter of identifying what those are and moving forward with a profitability plan.”
This type of planning is tricky for firms to handle internally, he notes.
“Sometimes the partners understand what needs to be done, but they can’t seem to get the message through to the associates,” Dormer says. “Or the accounting department is so busy with the day-to-day management it becomes hard to look at the big picture.”
That’s when having a third party come and take an outsider’s view can be a productive way to create change, he says.
Cosgrove Associates’ planning engagements start with one-on-one meetings with each member of the firm to determine what makes them tick, what kind of work do they, who their clients are, etc.
“Then we start putting together a plan for each lawyer, setting goals for all timekeepers and key people in the firm,” Dormer says, noting that financial targets for each lawyer may vary depending on a number of factors.
“If it’s agreed that it’s possible to reach these goals, it’s much easier to hit those targets as opposed to saying, ‘Everybody has to docket X amount of hours no matter what,’” he says.
Dormer says the planning process can be completed relatively quickly — in a month or two — but the implementation stage takes time.
“It can take people a while to modify the way they’re doing things,” he says. “Adapting new systems requires time, but once you enter a rhythm, then it pays out. Lawyers tend to focus on the art of law, and that’s what they’re very good at. Sometimes they’re not as strong with the financial management part of the practice.”
Something that sets Cosgrove Associates apart from other consultants is their longer-term engagement with clients to ensure the plans are executed, Dormer adds.
“If you have a great profit plan, but you’re dusting it off at the end of the year, then it’s not helpful,” he says. “We joke that we make nuisances of ourselves, but we show up every month to meet with people and find out what the challenges are, making sure those are addressed as we go.”