What is demand management, and why is it important to law firms?

Building a competitive and sustainable law firm in today's legal marketplace requires law firms to be strategic in planning for both the present and the future.  To do this, many forward-thinking law firms are implementing demand management techniques.

What is demand management? 

Demand management is the process of managing internal and external factors that impact the amount and mixture of work a firm should do over a given interval. For law firms, it is balancing client demand with the firm’s output capacity as efficiently and profitably as possible.  When done properly, law firms deliver timely and quality work to satisfied clients while still making a profit. 

While demand management can have many benefits, it can be counterintuitive and takes courage to implement.  This is because law firms are often guided by the belief that “more is better". They would rather choke on overcommitment than starve from lack of work.

We appreciate the innate fear that drives the need to add business. Law firms are expensive to run, and underemployed lawyers can quickly zap capital reserves. Work done for paying clients is what generates cash flow at a firm. 

So how should a firm manage demand in the real world? 

The unpredictable nature of legal work can make resource planning a nightmare. Complex litigation cases can quickly escalate, requiring significant resources and causing production challenges for even the largest firms. Complex transactions, too, can develop into complicated mega-projects in an instant. 

Most small and mid-sized law firms don’t have the budget for excess lawyers and staff to handle material surges in demand. Even when extra capacity is available, it is difficult to quickly bring people up to speed. A typical reaction is to redline (overwork) the project team. 

Where to start? 

From our many years of working with law firms, we have observed law firms achieving various levels of success in their use of demand management techniques.  Their success depended upon certain factors, the most significant being:

• The level of discipline present in the culture;
• The quality of firm leadership;
• The health of a firm’s balance sheet; 
• The effectiveness of a firm’s marketing; 
• The availability of good tools, and 
• A willingness to review data. 

While the factors listed above will influence the level of success your firm has with demand management, our next post will outline helpful techniques and tools that all firms can use to manage demand and production. While it takes some extra work to implement the techniques, the results often lead to improved client satisfaction, boosted morale,  better case outcomes, and greater profitability. 

You don't want to miss this next post! Stay tuned!