Do you want to quick-start your firm's efforts to improve your profitability?
At your next partners' meeting or partners' retreat, invest an hour or two in reviewing your write-offs. This exercise can provide actionable insights into issues that you and your partners might not have been noticed otherwise. It can produce very substantial improvements in profitability in a very short time, usually with only minimal investments of time, attention, and resources.
First: prepare for the meeting by compiling all the instances during the past 120 days when your firm has written off more than 2.5% of a billed fee. Depending on the number of write-offs, you might want to set this threshold at 5%, or even slightly higher, or select a longer period, such as 180 days. The important point is to have a sufficiently large sample upon which to base an accurate and reliable analysis.
Second; for each case, identify the reason or reasons for the write-off. Do not be content to accept the most obvious or general explanation, such as "incomplete research" or "missing information." Profitability issues usually require further discussion to move beyond the issues on the surface and down to the underlying causes. As Japanese management experts say, "Ask why five times."
Third: once you have defined the underlying causes, determine which ones resulted in the greatest amount of losses of billed fees. Those are your "low-hanging fruit," the ones that should receive your attention. In many instances, these will be a small number of relatively simple causes that produce a disproportionately large share of the lost revenue.
These four steps -- which usually can be accomplished in one or two meetings -- are the first steps to making quality a profitable reality in your law firm, and not just a slogan on your website. By identifying and addressing the causes of writeoffs, rather than try to fix mistakes after the fact, any law firm can dramatically reduce them or eliminate them altogether. Every hour that you can save not having to fix mistakes that could have been avoided is pure profit, because it increases productivity.