New Outlook for Legal Industry FP&A: Embracing Change to Modernize...

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New Outlook for Legal Industry FP&A: Embracing Change to Modernize the Business of Law

By Jon Kanter, CFO, Goodwin

Jon Kanter, CFO, Goodwin

I joined Goodwin, a top 50 global law firm, five years ago as Director of Financial Planning and Analysis, having spent 20 years at international management consultancy and accountancy firms. At the time, many considered legal at least five to 10 years behind other professional services firms in how our industry ran its business operations. When I arrived, Goodwin was already focused on the significant disruption, consolidation and modernization in the industry. The firm was embarking on a quest to redefine its business model and operations to become a market leader in the business of law, and I wanted to help senior management implement its ambitious strategic plan. Part of that implementation involved taking a hard look at systems and processes.

"We knew that our proposed solution was capable of effective reporting and so much more, setting us up for continued progress in the future"

Let me take a step back to provide some context. First, lawyers and law firms are generally known for their conservative approach and do not tend to embrace change quickly. Second, large US-based law firms operate on a cash accounting basis, so while there is no need to deal with accrual accounting and revenue recognition standards (at least not in the US), it also means that cash is king and collections (or lack thereof) can have an immediate impact on operational and capital expenditures. Third, in a partnership, all profits generated in any given year are paid out to the partners. Consequently, significant spikes in revenue tend to happen over the last quarter of the fiscal year and are sometimes coupled with a reluctance to make investments that might only reap rewards in the future.

Coming to Goodwin, I was joining a firm that recognized and embraced the need for change, and where leadership was investing in the people and technology needed to effect that change. Not surprisingly, however, I arrived to find operations built on an array of legacy systems, many of which were bespoke for the legal sector. Several were built on technology that would not be deemed competitive if considered against the best-in-class peers in the marketplace. And of course all of them were firmly entrenched on in-house servers.

Fortunately, my arrival at the firm coincided with a heavy investment in building a preeminent IT team and upgrading the firm’s infrastructure. Goodwin’s new IT leadership was looking to the future, and Finance and IT quickly partnered to move the firm toward a leading position in the sector by adopting new technologies.

Management provided the catalyst we needed with a demand for improved business unit performance reporting. Finance and IT collaborated to push the traditional reporting envelope and create a monthly dashboard with the tools we had at hand, offering a temporary fix. Implementing a strategic and structural shift from 36 legal practice areas to nine business units helped us leverage the desire for better reporting in our quest for better technology to serve the lawyers. We knew that our proposed solution was capable of effective reporting and so much more, setting us up for continued progress in the future.

While we focused on the burning business need to justify the expenditure and implementation time commitment, we had a long-term vision of how this tool could be used across our business. Indeed, the new platform is now widely used as a business intelligence platform throughout the firm, across all of our administrative departments, including Finance, IT, Project Management, HR, Recruitment, Knowledge Management and Marketing.

Upgrading our budgeting and forecasting capabilities has taken a similar path. The firm was using a certain tool for many years, which struggled to keep up with basic technological capabilities including working with multiple currencies. With Goodwin’s recent expansion into two European countries within six months, however, it didn’t take too much persuading to overhaul our budgeting system. It was time to take advantage of the recent technological enhancements in this area. Once again, our forward-thinking Finance and IT teams partnered to replace the budgeting black box with a state-of-the-art tool.

Given our firm’s pro-cloud stance (fairly unusual for many law firms), we surveyed the entire field of vendors. After whittling down to six candidates, we sought proof of concept demos that helped us narrow down further to three, and following a further demo and discussions, we settled on our chosen partner.

Implementation was the next challenge. We knew from prior experience that the hard work was ahead of us. Working in our favor was the fact that annual budgeting happens once a year and offers a clear and fixed timeframe. That enabled us to plan the implementation project to allow for a realistic timeframe. Our Finance and IT teams, working with our Project Management Office and a carefully selected third-party implementation partner, delivered the first phase of the project in time to conduct our new fiscal year budget process on the new platform.

Of course, this is not the end of the journey. There are follow-on enhancements that will inform phase two, which we are currently working through. However, the real benefit is yet to be realized. The need to replace an outdated budgeting tool certainly justified the initial purchase, but the forecasting analysis and scenario planning that we will now be able to do systematically is the real gold dust. We are also exploring additional benefits that might be realized by running additional finance processes through the system.

It’s an exciting time as we continue to leverage FP&A best practices to help Goodwin become a market leader not only in the practice of law but also the business of law.

Weekly Brief

Top 10 Budgeting and forecasting Solution Companies - 2019
Top 10 Budgeting and Forecasting Consulting/Service Companies - 2019

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