Time for lawyers to realise when they should stay in bed

Written by Charles Christian  | 27 September 2008

It’s the autumn fashion season, so let’s have a story about the supermodel Linda Evangelista . Back in 1990 she famously commented that she “didn’t get out of bed for less than $10,000 a day.”

Why is this relevant to a legal IT column? Because it is a message many lawyers have yet to understand. And why don’t they understand the message? Because their firms do not have the financial management information systems, reporting tools, business intelligence and key performance indicators to provide them with analytics on such things as the true cost of handling a matter, the amount of WIP being written off or that they will never recover and their profitability.

Although when push comes to shove, I will usually argue that law firms should be spending money on systems that will help them earn more beans (such as case and workflow management software) rather than systems that merely help them count beans (such as accounts and practice management software) in times of recession, when margins are under pressure, it becomes vital for firms to have a handle on what is really happening to their businesses.

The other day a consultant told me one of provincial clients was complaining that they were having to close down their residential conveyancing department because the property market was in such dire straits. “And about time too,” said the consultant, as their conveyancing business was losing them £200 on every transaction they completed. Why, because they didn’t understand the true scale of their overheads and the cost of processing the work.

If some firms are to survive and others are to make a decent return (and looking at the profit margins some firms report, they probably make more money if they fired all their lawyers, shut the business down and let out their offices at a commercial rent) they need to understand the true picture of their financial strengths and weaknesses. If you can measure something, you can manage it. But if you don’t have this kind of information, you are stuffed.

The big difference between Linda Evangelista and lawyers (apart from the obvious one that she has better clothes sense than most lawyers) is that she knows whether or not its worth getting out of bed in a morning to go to work. Lawyers don’t, their finances are often so deludedly over-optimistic (total billable hours, aka turnover, is vanity, profits are sanity) that they are working all hours on projects that do not – and will never – make commercial sense. And that’s why one of the hot technologies today – despite the fact we are in a recession – are business intelligence systems.