Legal Executive Institute Discusses Metrics That Matter
Thomson Reuters held its annual Legal Executive Institute from October 25 to 27 in Manhattan. The event opened with the “Law Firm Financial Performance Forum.” EisnerAmper partner Elliott Lee moderated a panel that included Bruce MacEwen (founder Adam Smith, Esq., legal consulting firm), Gary E. Kalbaugh (deputy general counsel and director at ING Financial Holdings Corp.), and Mat Rosswood (CFO at Milbank, Tweed, Hadley & McCloy LLP).
Elliott began by asking the panelists about the different financial metrics they use. The consensus was that “profit by partner” is their main financial metric. However, some contended that metric has a few shortcomings, such as that it is not particularly straightforward and that it may not be as relevant in today’s marketplace.
Some of the panelists suggested considering other metrics such as revenue per lawyer, reoccurring/returning client metrics, profits earned by geographical location, profit by industry, and the percentage of cases won vs. lost. Panelists emphasized not forgetting about firm intangibles when examining financial metrics.
One interesting topic the panelists tackled was how to handle billable hours in the age of artificial intelligence (AI). The main concern is how various tasks will be eliminated via technology and billing for the lost time. However, it was agreed that billable hours will continue to be relevant as well as necessary for internal time tracking. Elliott asked the panelists how they are integrating AI at their practices. One panelist noted that if you don’t adapt to new technology then your competitor will, and it will put you at a significant competitive disadvantage.
The group’s closing thoughts echoed that as the legal industry evolves, and as new competitors enter the market like PWC Law and Deloitte Legal, firms must adapt to the changing landscape and create a culture to track intangibles by leveraging technology.