Attend the Webinar: Kathy Deuschle of Orrick will host a live presentation on July 24.

Orrick, Herrington & Sutcliffe - an international firm with 1,000 lawyers in 18 offices in seven countries — faced a problem not unfamiliar to most major law firms: getting their lawyers to turn in timesheets in a timely manner.

Orrick's time capture issues caused a frenzy of billing and collections activities at year-end closing. Additionally, it had hidden financial impacts. The firm's cash flow was slowed, its profitability was restricted, and its ability to establish a business continuity plan was limited.

In 2005, Orrick formed a special committee to improve its three main inventory components: time entry, billing, and collections. The committee included the firm's chief operating officer, controller of operations, and four partners.

"Our goal was to introduce new programs that would improve our financial performance, client relationships, and ability to recruit top talent," said Kathleen Deuschle, Controller of Operations at Orrick.

The committee first focused on raising individual partner awareness of best time capture and billing practices and introduced several measures, including:

• Incentives for meeting - and penalties for missing - time capture deadlines.
• Limits and guidelines for attorney write-offs.
• Sending automated reminder statements.
• Creating a grading system/report card.
• Face-to-face meetings.
• Partner training lunches.

No Hiding This Report Card
Orrick's committee introduced quarterly and annual "report cards" that evaluated partner performance. The cards helped partners see the results of their efforts as well as hone in on areas requiring further attention.

The report cards were generated from Orrick's financial management system, ADERANT Expert, which the firm had been using for time capture, billing, and general back-office accounting functions since 1997. "We took advantage of more ADERANT Expert features and reporting capabilities to develop the report cards, often providing financial information many partners had not seen before," continued Deuschle.

For example, Orrick expanded its billing frequencies in order to categorize different types of billing. Historically, it was enough for them to know if something was monthly, quarterly or on call. Now they need to know if it is transactional (and what kind of transaction).

Orrick instituted an automatic bonus and penalty system as part of the new report cards. The committee consciously exploited the innate desire of Orrick's partners to improve individual performance and live up to their "overachiever" reputations - while producing tangible benefits for the firm as a whole.

The new system was not designed to draconically punish or over-reward partners. Penalties were set at a percentage of their average work-in-progress and accounts receivable; bonuses were also set at moderate levels and calculated on a percentage basis of the billing partners' annual cash collections. Grade A bonuses had a pre-set ceiling and floor, the same applied to penalties for "Cs" and "Ds". Those with "Bs" did not receive rewards or penalties.

Making the Grade
There have been tangible benefits from Orrick's use of report cards. Partners who were delinquent or inattentive to their inventory have either improved or are actively working with individual committee members to work through specific issues and exceptions. Consistent communication on metrics, variances, and financial results has significantly improved partners' understanding of the link between key financial metrics such as timely time entry and overall firm profitability.

Another advantage is that partners can see the impact their individual performance has on the firm's overall finances. Equally as valuable is the communication that now takes place between finance, partners, practice group leaders, and the firm's leadership team when it comes to attorneys' financial accountability and performance.

Orrick leveraged its business management software, ADERANT Expert, to reduce lags in time capture and client billings, encourage faster collections, and as a result, increase cash flow and profitability. The report card system has enabled the firm to achieve tangible results, including:

• 14% decrease in Orrick's average days in the cash cycle since 2004.
• Improved cash flow from faster billings and collections.
• Increased - and faster - partner draws.
• 31.2% increase in Profits per Equity Partner, from $1.09 million in 2004 to $1.43 million in 2006.

Orrick also experienced several other more intangible benefits. The firm felt that partner report cards - along with improved business processes and communication - improved the level of client service. Improved time capture and better access to information meant that the firm could provide clients with more timely access to financial information and no billing surprises. Orrick's increased profitability improved its ability to recruit and train top talent.