Improving Profitability Management with AI-Based Data-Management Technology
Clients’ demands for transparency and cost certainty have driven many professional services firms to reconsider the ways they approach legal service delivery.Firms are training associates not only to better understand pricing and resourcing for profitability, but also to support client goals and learn how to craft fee arrangements that meet client objectives. But what skills do lawyers and future partners need to accomplish this, and what changes can firms make to best support their associates?
During Sandpiper Partners’ Managing Law Firm Profitability, Pricing, and Data Analytics Conference panel, “Using Data Analytics in a Pandemic Landscape and Beyond COVID-19,” panelists discussed the challenges of pricing and profitability management in the post-pandemic economy, and explored the role of data metrics and data management technology to support firms and their financial goals. Read some of the highlights below to learn how your firm can improve profitability and remain relevant in the industry.
Collecting Data and Providing Insights
To determine whether a matter can be profitable — and create a reasonable pricing plan — firms must be able to successfully collect and analyze data. However, firms that truly wish to gain a competitive advantage must also articulate value, provide insights, and prove their experience to clients. As one panelist noted, assessment of the firm’s effort, variables, and alternatives all affect financial outcomes. By being transparent with clients and proactively providing them with these insights, firms will build more confidence and trust.
In addition to transparency, clients also want cost certainty. Although providing cost certainty is a challenge, firms are more likely to succeed if they follow processes that lower risks and ensure compliance with both client mandates and governance issues. By harnessing data, experience, and pricing protocols, firms will be well positioned to earn clients’ confidence when pricing, resourcing, and managing projects and matters.
Focusing on Financial Outcomes and Profitability Management
You may have heard that “the hourly rate is dead,” but most evidence suggests this isn’t the case; in fact, many firm leaders state that only 25% of their matters use alternative fee arrangements. Firms may find it difficult to determine which fee arrangements will be most cost effective, which is why it’s crucial for professionals to evaluate matter planning insights.
Matter planning — including decisions around resourcing, rates, discounts, fee arrangements, risk, and target outcomes — produces benefits for both firms and their clients. As firms become better positioned to deliver greater cost efficiency with greater agility, client relationships improve substantially. Moreover, profitability insights can help lawyers frame the delivery, as well as determine up front which matters will be profitable.
Analyzing Data with AI and Advanced Technologies
When firms store information in disparate places — financial management systems, CRM solutions, timekeeping software, and other business systems — data can become lost or siloed. The less data that professionals have access to, the less accurate their plans and delivery will be. Furthermore, attempting to collect data manually is time consuming and increases the chance of risk.
To maximize accuracy, efficiency, and profitability, many firms are turning to AI-based data management software. Fredrikson & Byron, for example, had previously relied on spreadsheets and manual processes to gather source material and conduct the analysis required to develop new budgets. The firm has since implemented Intapp Pricing and Engagement DNA™ to accelerate and scale its pricing function.
“The ability for the lawyers to pull data together for a report … is highly valuable,” said Steve Chambers, Pricing Manager at Fredrikson, in a recent case study. “When they’re talking with clients, they need these insights at the ready to deliver on client experience and value.”
Of course, implementing advanced data management technology isn’t enough to ensure transparency and cost containment; professionals must be willing to learn how to efficiently use the software. They must also keep in mind that the software is only a tool, and that ultimately, they are the ones who must determine which data and insights are valuable to the firm.
Read the Fredrikson & Byron case study to learn more about the firm’s implementation of Intapp Pricing with Engagement DNA to accelerate and scale its pricing function.