Generating Profit From Technology As lawyers, we need to recognize a harsh reality: Competency in practice and competence running our own businesses are mutually exclusive. You can be at the pinnacle of your practice, recognized by peers, and still be a lousy businessperson.
The explanation for this paradox? We come by business ineptitude honestly. As did most of my law school classmates, I came from a liberal arts background -- an economics major, which is as removed from the reality of understanding business as can be imagined. My classmates were English, political science, history, sociology and philosophy majors; few had business or accounting degrees. While not an excuse for a lack of business operations acumen, it's an explanation.
Reality Check: Decisions relating to specific technology are no longer exlusively about technology. Rather, they should be focused on delivering top-notch client services. We should never use technology in law practice just to use technology.
Technology accomplishes several objectives in our practices, including:
Generating, organizing, retrieving and leveraging work product.
Maximizing profitability, through revenue increase and cost reduction.
Providing competitive advantage -- offering services that proactively anticipate the needs and expectations of clientele.
If technology in your practice is not about these "big three," you need to refocus. The days where managing partners viewed technology as a "bunch of computers" that are "an expense; a necessary evil" are long gone. Firms harboring such primordial technology views, to some degree, have already died -- the corpses have just yet to be buried.
Back to the premise, that lawyers do not have a reputation as being the most savvy businesspeople. If you accept the premise, what technology lessons can we learn? ROLTI -- RETURN ON LEGAL TECHNOLOGY INVESTMENT
A primary lesson -- Law Practice Business 101 -- is the concept of "return on investment," or ROI. We've all heard about it, but have we ever run an ROI analysis on our firm's prospective technology purchases? What technologies yield a positive return? Which merely drain the firm's coffers? What constitutes a credible analysis? How do we make these concepts understandable to non-business savvy lawyers?
Perhaps we need a more understandable version of ROI, tuned to project the return on the dollars we spend on technology. I propose a new acronym: ROLTI -- Return on Legal Technology Investment.
A ROLTI analysis can be a powerful financial and key decision-making tool for law practice managers. Applying a ROLTI analysis to technology acquisitions can reliably predict whether money will be made or lost. This approach can provide a well-reasoned starting point before wasting otherwise billable time on the administrative machinations related to technology planning and purchasing. Why spend the time developing RFPs, turning your firm upside-down with new tools that only decrease the bottom line -- with no hope of generating a positive return? CASE/PRACTICE MANAGEMENT SYSTEMS
The best way to explore the ROLTI concept is with a specific technology area: case/practice management systems. Case/practice managers are hardly new technology. But the reputation of case/practice management is mixed. User feedback shows there may be no other area of technology in practice that generates such oppositional polarity of opinion.
Firms intelligently selecting a case/practice manager, properly implementing and integrating the system into their workflow, find no other technology they've purchased creates such a significant return. Conversely, firms failing to properly select and install case/practice managers find the opposite is true. For unsuccessful users, case/practice management systems feel like a black hole in the office floor into which otherwise billable hours are poured.
Presume for the sake of our ROLTI example that your firm heeds all the cautions, follows sound advice and embarks on a well-thought out case/practice management implementation. You hire an experienced consultant and build a case/practice management team. You begin the process by reviewing and streamlining processes. In other words, you "do it right."
You will generally find that most lawyers who use such a system to manage client matters, calendars and billings report they bill at least an additional 15 more minutes per day. Your paralegals and legal assistants report an average of 30 more potentially billable minutes per day. WASTE LESS TIME
How does this happen? Consistent feedback shows a common theme: The time lawyers and support staff waste looking for information that can only be found in paper client files can be significantly reduced, if not eliminated.
If the information -- whether an electronic version of a sticky note, a document received in discovery from opposing counsel, or a substantive e-mail sent by an expert -- can be found with a few mouse clicks, the economic impact can be staggering. That means no more desperate searches for the "smoking Post-It note." We all know it happens -- even in well-organized paper-dependent practices -- time gets wasted.
If we can do the equivalent of "googling" that same information in our case/practice management systems and one person (rather than a Keystone Cops-esque squad of three) can find the information in a few clicks, we waste less time. Common sense says that we then have more potential billable time in the same length workday. Little time increments saved can add up to big returns -- to a compelling positive ROLTI. Many firms leveraging case/practice management systems "buy back" even more time than this.
Clearly, other wasted time can be converted to billable time via case/practice management use. Examples include the time leveraged from a document assembly process using case/practice management system data. Or the elimination of wasted lawyer and staff time subsidizing the duplicative entry of contact and matter information in multiple applications. But let's keep it simple -- let's focus on finding matter and practice info electronically that would have previously existed only in paper form or the original CMS -- the cranial memory system.
This table shows the ROLTI for a well-selected, well-installed case/practice management system. Our example is based on a firm with 10 lawyers and 15 legal assistants/paralegals.
The data in the calculation chart at the link above is self-explanatory -- and the analysis leans strongly conservative, evidenced by discounting of returns in year one by 50 percent, with discounts in years two through four of a four year project of 25 percent per year.
Some firms will generate more return, others may generate less. The bottom line is clear numerically -- the hypothetical 10 lawyer firm would generate $570,000 in positive ROLTI from a well-structured case/practice management installation.
The converse also holds -- the cost not to install the case/practice manager is the same $570,000. This is the cost over four years in non-billable, administrative time that flows from lawyers wasting just 15 minutes each day and staff 30 minutes each day chasing paper files. Another key business concept is that not making money has the same negative effect on a firm's P&L as writing an expense check.
The total projected project cost including non-billable lawyer and staff time helping plan the implementation is about $90,430 versus $570,000 in return. I'm not a math major, but that shows a 629 percent ROLTI over four years for the case/practice management project. An economic no-brainer.
A ROLTI analysis can be applied to other contemplated technologies in your practice. The bottom line, seen numerically perhaps for the first time by many, shows how an investment in technology such as case/practice management systems makes economic sense.
In the end, there are two lessons:
Implement a case/practice management system and do it wisely.
Always run a ROLTI analysis on any contemplated technology before making a financial commitment.
Author: Ross Kodner is an attorney, and president of MicroLaw Inc., based in Milwaukee. From: Law Technology News.
