IT investment in law firms

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This article, discussing IT investment in law
firms, first appeared in The Law Society of
Scotland Journal. It is reproduced by kind
permission.
Mungo Dunnett Associates 11 Polstead Road, Oxford
OX2 6TW Tel [phone] Email
info_at_md-as.com Web www.md-as.com We operate
across a range of businesses, large and small.
Our focus is on ensuring that your activities
are geared towards the areas that are most
commercially valuable.
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March 2004
Making money out of IT
BY MUNGO DUNNETT
IT is not an area that should be wasting your
money. It should be making you money. But in
law firms this goes wrong with depressing
regularity, and typically with the same
pattern.   First, do you really need a new
system? A classic pitfall of IT purchases is
unnecessary expenditure on state-of-the-art
systems. Whilst good IT can make it very easy to
spot where things are going wrong, and can
certainly make it quicker to reach the right
conclusions, none of this necessarily makes the
firm any money. Your business depends on people
meeting people, and on your peoples ability to
access specialist knowledge quickly and
accurately and if the technology is not helping
them to do that, then you might as well simply
stand around the box and admire it. It is easy
to spend large sums on new IT systems and in
many cases, the bigger the firm the bigger the IT
disaster. The key is not what you buy its why
you are buying it, and how you use it.   The
killer question Start with the killer question
do you really need a new system? See Effective
IT usage Make certain that the old one cannot
simply be used more intelligently, and the data
inputted and extracted more cleverly. It is
extraordinary how often the new system is
expected to right the wrongs of the entire
company. If you are not thinking sensibly about
your IT needs, and why your IT is not delivering
the value it might, you will spend money on a
shiny new system that is beset by all the old
problems, but merely spins them around faster.
Before committing to purchase, draw up a list of
precisely what has gone wrong that is eminently
fixable, and what
really does require a new system. Secondly, buy
only the functionality you need. Have you ever
let an architect friend run amok in your house?
Fabulous state-of-the-art constructions, that you
really dont need? The same applies to
information systems. Think about what you really
want the system to deliver and resist the
temptation for all those bells, whistles and
customisations. They will not be cost-effective.
It generally costs a fortune to customise and
if your people do not understand what the fancy
gadgetry does, your money will again be largely
wasted. Thirdly, think about how this system is
going to help you make money. What you need is
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a management information system simply, a
database that delivers commercial value by
allowing you to access the knowledge trapped
within the firm, and by letting you focus your
sales, customer service and marketing activities.
And this is a key start point. The purpose of
good management information is to tell you what
to do to operate more profitably. The way it
will do this is by letting you understand your
client base. This means that you and your
staff will need to listen to your clients, note
down the relevant If you cannot persuade your
senior practitioners to use the central IT
system, you will never be more than the sum of
your scattered parts information about their
plans, preferences and activities, and then make
intelligent use of this in the way you treat
those clients. It is a theory that is as old as
selling, and as effective as friendship. It
entails listening really listening and then
reflecting intelligently on what you have heard.
You will be doing much of this already, but
informally and without much scrutiny of your
peoples methods for gathering and holding
information. You need to become much more
professional here. Knowledge management problems
tend to proliferate in the larger firms, and yet
even the smaller firms can have real difficulty
in getting client and technical knowledge into a
central storage system that allows the whole firm
to reap the benefit. If you cannot persuade your
senior practitioners to use the central IT
system, you will never be more than the sum of
your scattered parts.   The most commercially
important technology needs to be able to handle
simple data fields. That could well mean an
Excel spreadsheet or in bigger databases,
Microsoft Access with some simple amends to suit
your purposes. This is generally the simplest
part of the process, not the most difficult the
reason being that most of the faults, mistakes
and wasted time are to do (predictably) with how
the system is used, and what data is put into it.
From that point onwards, the role of the
technology is to hold all this information in one
easy place, enable you to look it up easily, cut
it into different sections if that is what you
need, and use it to build a simple contact
programme to make timely, relevant contact with
your more important clients. A few simple tips
for assembling effective client data. First,
make sure that when your people have been in
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touch with a client, they find out what the
client likes, wants, needs and does not want.
Then load this into the system and tell the
client that you would like to bring their records
up to date accordingly. Consider the patterns
that emerge which The best, most invaluable
insights about clients can be destroyed utterly
by a clunky, ill-prepared sales
pitch types of client are saying which sort of
thing? What was it that attracted them to your
firm? Who is expanding their business activities
and is therefore in need of different kinds of
support, based on what they have already told you
about themselves? These clever but simple
inferences are at the heart of effective
data-and-selling. Finally, use the information
properly. The best, most invaluable insights
about clients can be destroyed utterly by a
clunky, ill-prepared sales pitch. Try to
surprise clients with how carefully you have
examined their data, and how much effort you have
put into understanding their business. Their
expectations are generally astonishingly low
take advantage. Simple technology, and simple
sales practices but done with real care and
subtlety. And in the meantime, think of the IT
budget you have just saved. See Building
costing databases All this is a start, but you
will not be able to function as a really
efficient profit-maker unless you are focusing
your efforts on the activities that will be
consistently profitable for your firm. This
means hard facts, and this is where law firms
who are professional detail people are baffling
short of detail as regards their own activities.
There is often not nearly enough information
about the actual profitability of client work,
and not enough use of profit data in deciding
what activities the firm is going to become
involved in, and the degree of investment that
would be appropriate. It is vital that you know
what is profitable and what is not. Your simple
database will tell you where to focus your
activities. This is not simply an in-house
accounting package everybody has one of those,
but it will only give you bottom-line numbers,
without telling you why the numbers are as they
are. The software itself is not the key factor
as mentioned, any basic system that allows
multiple entries and an element of analytical
examination will suffice.   Client
profitability First, you must be able to
determine the profitability of your client work.
If this means that you need to get tougher on
timesheet management as well, then do it unless
you know the cost per hour of each employee, you
cannot possibly work out whether any given
exercise is actually making you money. Secondly,
you need a single If this means that you need to
get tougher on timesheet management as well, then
do it or you cannot possibly work out whether
any given exercise is actually making you
money data view of each client all of the
separate activities you are working on, linked
together, including the profitability of each.
You can now rank your own clients by
profitability which is guaranteed to produce a
different view from your
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vital, and that it is another mandatory part of
their daily work. It is people that wreck IT
investments, not systems. IT systems are very
threatening they are either impenetrable, or
they are likely to reveal information that
threatens individual members of staff, or
peoples working practices will need to change in
order to accommodate it. If views are not sought
and listened to, if training is not comprehensive
(and as much fun as possible), and if the IT is
not positioned as a positive benefit in your
firms working life, the system will expire
quietly.   The client-facing person has the
ability to terminate your IT investment simply
through poor engagement with it. This is why the
selection of IT, the populating of robust
databases, and the production of valuable
reports, is only half of the journey, and the
expensive half to boot. The other half the
mobilisation of your data is the one where you
make money. IT installations are all about
return on investment. If you are not tough on
the way it is used, you will join the line of
firms that have wasted their money.
intuitive ranking by billings. What it will
show, if your firm is similar to nearly all
businesses, is that 80 of your profit will be
coming from 20 of your work and, just as
importantly, 80 of your work is producing only
20 of your profit. See Typical profitability
of professional customer bases You also need
to be able to examine your client business for
trends sectors where you are growing (or not)
clients whose business is growing (or not)
particular jobs which are increasing in sale
levels or profitability or not. Finally, use
this information to determine where you are going
to focus, and what you are going to do
differently. The answer will be right in front
of you. Finally, it is a people issue. No
matter how good your data system, of course, it
is in the hands of your staff. And if they
cannot be bothered to input the data correctly,
and simply cannot get it right, you are back to
burning money again. Sloppiness with data simply
must not be tolerated. When data needs to be
added into the system, it must be done, done
straight away, and done correctly first time. If
not, it is a disciplinary issue. People need to
know that data is