In 2002, global law firm Bryan Cave faced the million-dollar question: How do you make the most money with your resources while simultaneously delivering the highest customer value?
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The problem was pressing. Clients of the firm, which now has 800 lawyers in 15 offices worldwide, were demanding alternatives to the traditional hourly fee structure. They wanted new models such as fixed pricing and pricing that was adjusted during a project.
But making money off these new billing strategies required the complicated balance of staffing and pricing. Projects weighted too heavily with a law partner’s time would be expensive (for the law firm) and not optimized for profit. Devoting too little of a partner’s time would leave clients feeling undervalued. Optimizing profit and perceived value had to be achieved by spreading partners’ time throughout a number of cases and balancing the remaining resources needed for a case with the less-expensive fees of associates and paralegals.
“Clients are most likely to stay with you if you deliver just the right mix,” says Bryan Cave CIO John Alber.
The law firm’s traditional method of analyzing collected fees and profit used a spreadsheet that was complicated and took too long. Spreadsheets provide a level of detail that can be valuable for analysts, says Alber. But the information in a spreadsheet can be confusing and difficult to work with. Alber says he decided it was better to build an easy-to-understand interface using BI tools, he says. Although the company will not release specific figures, Alber says since the company implemented its first BI tool in 2004, both profitability and hours leveraged (meaning the hours worked by equity partners and all other fee earners at the firm) have increased substantially.
Bryan Cave partners use business intelligence tools from Redwood Analytics as well as tools constructed in-house using Microsoft’s OLAP tools (SQL Server, Analysis Services, Reporting Services) to forecast what effect various pricing and staffing decisions will have on a project.
The tools also allow lawyers to track budgets in real time so they can quickly make adjustments. The BI tools even provide a diversity dashboard, which tracks the hourly mix of women and minorities working on the firm’s cases, a feature the company will license to Redwood Analytics for sale to other law firms, Alber says. The firm developed this diversity tool to bring transparency to the diversity reporting process required by many clients, says Alber.
In other words, the tools provide Bryan Cave with a method of customizing its fees and helping clients better understand what they get for their money. As an illustration, Alber points to the customized pricing one lawyer gave to his real estate client. Developers think in terms of square feet, says Alber, and this client couldn’t understand why legal fees for a 400,000-square-foot building might be the same as for a 4,000-square-foot building, though it required the same amount of the lawyer’s time.
So the lawyer used the pricing and staffing modeling tools and historical analysis tools to determine whether it made sense for the law firm to charge clients based on the size of their projects. He found that while there was risk of underpricing large buildings, the deal volume in small buildings offset that risk for the law firm. The result made per-square-foot pricing possible.
“It may be possible that someone with enough willpower or manpower could do that [using traditional analysis],” says Alber, “but this lawyer had the information right at his fingertips.” Business intelligence enables “us to be in touch with clients and shift things around in response to what customers are asking,” says Alber.
How Bryan Cave Profited from BI
Adopting new and improved project management, pricing and customer service capabilities required planning, appropriate pacing and user buy-in. Here are five steps Alber took to get results.
Identify and get consensus of the most important performance indicators.
You can come up with a bazillion measures of success, says Alber. There are only a few that are right, however. For Bryan Cave, those key performance indicators (KPIs) were defined as: fees billed, fees collected, realization (the percentage of standard rate collected), leverage (hours that equity partners worked and all other fee earners at the firm) and contribution (a percentage of goal profit per equity partner goal).
Make your KPIs central to the functioning of the organization.
Defining the most important performance indicators is pointless if you don’t use them to run the business, says Alber. “Use them to make all key decisions,” he says, including what new business to take or create.
Start small and simple.
For Bryan Cave and many companies, financial performance assessment will be the focus of your first BI application. Alber built a bare-bones beta using Cold Fusion (a Macromedia Web development platform now owned by Adobe), tested it with a small user group and used that information to build the Microsoft Analysis Services application that would be widely rolled out to the company. For example, because some users were uncomfortable reading rows of numbers, Alber’s team added visual options such as bar graphs and “speedometers” showing profit contribution, leverage and other KPIs. Over time, Alber added the predictive capabilities, but the key to success was deploying the simplest tool before building onto it.
Focus your message about the BI tool’s value around customer service.
The idea of dashboards can instill fear in staff, as they may be seen as a way to “show how badly you are [doing],” says Alber. To combat lawyers’ fears that business intelligence tools would be used against them as a report card, Alber and other executives at Bryan Cave focused on the positive aspects of the tool—that is, as a way to see what’s working well, to serve clients better and to more productively manage projects.
Keep the apps rolling.
Right now, Alber is focused on increasing search and aggregation functionality in order to make it easier for lawyers to access the information they need. “Information about your important business relationships should cluster together in a way that’s findable, repeatable and aggregated in a way that makes sense,” he says. To that end, he has laid the infrastructure for one new feature that will aggregate and deliver information based on the phone number a lawyer has called. So when a lawyer calls a client, he can choose to have all information on that client pop up on his screen.
“In today’s environment, you can’t do value innovation without being in touch with the economics of your business, without really understanding where you make money and where you don’t, and that’s what business intelligence tools do,” says Alber. “Our goal,” he says, “is to build the best long-term relationships in the world.”