5 Examples of Status Quo Thinking in Law Firms

business of law

5 Examples of Status Quo Thinking in Law Firms

by Craig Dekshenieks, Director, Content & Marketing Operations, Aderant

Focusing only on the competition is one example of status quo thinking, according to Lisa Bodell.  The author and speaker provided a keynote address on this subject at the 2018 ILTA conference titled, Kill the Company: End the Status Quo, Start an Innovation Revolution.

She used BMW as an example. If the company only looked to Mercedes as it developed future, it might miss the fact municipal governments are looking for ways to reduce the number of vehicles in cities to ease congestion. That’s more than a competitive threat. It’s existential.

BMW could choose to ignore the trend or “fight it tooth and nail,” wrote Stephen Embry in a summary of the session. “Another option is to do what BMW is doing: partnering with city planners and other diverse groups to prepare for the future. To formulate a business strategy that does not necessarily rely on the conditions and environment of today.”

The Status Quo in Law Firms

Status quo thinking – relying on the conditions and environment of today as the basis of decision making – is baked into the human DNA. What’s new and unfamiliar is potentially also dangerous. The familiar is known and perceived to be safer.

This is a form of bias, as we wrote in Challenging the Status Quo in Law Firms, a Legal Business Report. Anytime a process is executed in a certain way just because “it’s always been done this way” there is potential for status quo thinking.

Changing how we do things is hard work, where keeping things as they are is the path of least resistance…at least it the short-term. Here are several other examples of status quo thinking in law firms that are worth challenging.

1) Late time entry is just a fact of life in law firms.

It’s not unusual for an attorney to complete a legal task for a client on the second day of the month, but delay making a time entry until 20 days later. It’s challenging to remember what one did yesterday, let alone what we did two or three weeks ago. It’s possible to reconstruct the time by looking through emails and notes, but studies suggest, this leads to under billing for fear of overcharging a client.

This simple status quo creates a compounding problem:

  • Partners can’t describe for clients the status of WIP until the end of the month;
  • Pre-bills are delayed or inaccurate with slows invoices; and
  • Invoice delays have an adverse impact on cash flow and profit.

No other industry in business operates this way – it just unacceptable anywhere else. A law firm that wants to improve margins can do so by improving the ability to capture time, real-time, which requires easier ways for the fee-earners to act.

2) It will always take the firm three weeks to get an invoice out the door.

An invoice dated the first of the month, may not actually be sent to a client until three weeks later. In the business of law and technology survey, more than 90% said their firm spends too much time during the billing and invoicing process.

Reducing the time to get bills out the door is entirely possible. Twenty-five percent of firms surveyed say their firm completes invoices in a week or less – and 11% do it in just 72 hours or less.

These firms have implemented automation that automatically routes pre-bills through review and approval and supports paperless initiatives. They have found ways to remove the expense of excessive clicks and touches from the pre-bill processes.

3) Compensation is the most important law firm incentive.

When law firms change compensation models to incentivize profitability over billing hours, it is worthwhile also to consider the role it plays with the millennial generation. Research shows millennials place a greater emphasis on work-life balance, ethics, and civic activities than previous generations. Firmwide policies on telecommuting and volunteerism are non-monetary factors law firms should consider when modeling incentives.

4) We need to generate a monthly pre-bill even if we are not invoicing the client.

Law firms tend to generate pre-bills monthly. Large law firms can generate several thousand pre-bills even if they have no intention of actually invoicing the client.  Those firms may have quarterly, annual or even contingency fee arrangements in place.

In 2015, Aderant analyzed billing metrics from 50 law firms and found this practice is surprisingly common. Some firms said this happens with half of all their client accounts and a few said it was true 80% of the time. Essentially, these law firms are using the monthly pre-bill process to get a status check on work-in-progress (WIP).

This comes at an incredible expense considering the time, resources and effort that goes into the pre-bill process. More importantly, it’s completely unnecessary because a modern law firm billing system puts this information at a partner’s fingertips. There’s no need to even send an email requesting a report because these can be generated with a click of the mouse or the touch of a screen.

5) AFAs are not as profitable as billable hours.

Research suggests that many firms have experimented with creative pricing. Still, with just a median of 14% of client accounts are structured under AFAs, law firms haven’t exactly dived in with enthusiasm.

Some law firms resist AFAs because they perceive these as unprofitable. That probably has more to do with the fact that alternative pricing strategies are still emerging as a discipline. AFAs that are unprofitable imply an insufficient understanding of the costs to deliver the service – or an inability to manage the costs effectively.

Whether or not clients truly want AFAs, they are still inviting the conversation. Law firms that focus on data collection can develop the capability to accurately price AFAs. Imagine the competitive advantage of the law firm that responds to such a request with a confident prediction of costs for client and profitability for the firm.

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The task of challenging the status quo is ultimately a leadership responsibility. Change must start at the top for a law firm to be successful. A simple way for law firm leaders to get started is to get in the habit of asking one simple question: When someone says, “It’s always been done this way,” ask them “Why?” Testing these status quo boundaries with broad will push your firm toward success and reimaging the way your firm, and other firms, innovate.

We’d love to hear from you about push the boundaries and how your firms are reimagining success.

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