For many people, the practice of making New Year resolutions is something that is attempted and failed within a few weeks of a new year. All too often the newly laminated gym membership lies hidden in a drawer while the misery of a dry January is soon ended.
According to historic research from BUPA, a quarter of UK adults (26%) make a new year resolution. Subsequent surveys conducted in the US by Discover Happy Habits, indicated 31% of Americans surveyed planned to make resolutions for 2021, the most popular being improvements to fitness (50%) and saving money (44%)
Bringing comparisons back to the UK, a recent poll by YouGov indicated young Britain’s are most likely to make a resolution (47%) compared with 30% of 35 to 44 year old's and just 18% of those aged over 65.
Results across all 3 survey resources report high failure rates with key reasons being setting unrealistic goals, not keeping track of progress or a simple loss of motivation.
Taking these lessons in a finance context, we can conclude the importance of 3 key actions which will give the most chance of success to attain financial objectives.
Set realistic objectives
Measure progress
Maximise quick wins to maintain motivation levels
Set Realistic Objectives
Understanding what actions are likely to have the biggest impact is an important place to start. A great way to begin is by completing a financial benchmarking exercise which will lay bare the firm’s performance against its peer group and across key metrics of the business.
Once performance is understood the decisions required to improve performance across key areas becomes very straightforward.
As an exercise the finance team should be encouraged to complete this process and provide a report which highlights areas of strength and offers suggestions for improvement.
Measure Progress
It is essential for all businesses to set objectives and track their performance against each target. Effective management information should be developed, and understood, providing a reporting pack which offers granular insight into business performance.
A monthly meeting between the finance team and department heads can create a fantastic opportunity to discuss and plan actions that can be taken to improve financial performance.
A detailed analysis should be completed which provides a clear explanation of the performance results and encourages a collegiate approach from fee earners and department heads to improve financial performance.
Maximise quick wins to maintain motivation levels
Influencing behaviours to deliver consistent performance is the key objective for any management team. Opportunities to think differently, should be encouraged and can offer real motivation to improve results. Colleagues should be encouraged to try new things, to improve their personal performance levels each day and remove the fear of failure, which will encourage innovation. An few examples could be:
Review non-core costs. Considering the shift to online perhaps opportunities exist to review document storage costs and photocopier contract.
Improve interest rates on client monies. While the big 4 banks all pay very low rates there are a growing number of respectable banks who have a solid client money offering and can generate a much-needed income for the firms and/or their clients.
Examine borrowing practices. Remove as much debt from an traditional overdraft by structuring debt via other finance vehicles such as Asset Finance for VAT, Tax and PII funding.
The firm can also explore operational improvements which allows the re-allocation of administrative tasks in order to provide the greatest opportunity to earn and collect fees.
An example could be the finance function assuming control of billing and debt management, allowing the fee earner to concentrate on improving their respective utilisation levels.
Making New Year Resolutions ‘Stick’
The 3 survey sources mentioned earlier consistently report a high failure rate when it comes to setting behavioural targets, or resolutions. To offer any chance of success, it is crucial that activity levels are maintained. If this cannot be achieved internally then perhaps an external voice can challenge the business. This could be from an accountant, a non-executive director or perhaps a finance expert that has experience of strategies which provide quick results and can encourage sustainable behaviours.
A great way to challenge existing practices is to understand the cultural approach to finance.
The SRA, through the Code of Conduct for firms 2.4, has mandated that law firms should actively monitor and be able to evidence their approach to financial stability and viability.
The Financial Stability Scorecard developed by Gemstone Legal is the only resource of its kind which examines the cultural approach towards financial performance. A detailed report can be requested which outlines what the business does well and pinpoints actions which can be taken to provide an immediate improvement to policies and procedures which ultimately drives the long term sustainable performance of the business.
Many businesses and individuals will face financial difficulty in the months ahead and rather than let another well intended New Year resolution go to waste, positive action is the only catalyst for sustainable change and give the best chance of delivering the success desired during 2021 and beyond.
Paul McCuskey is Managing Director of Gemstone Legal which helps law firms to maximise income whilst reducing risk. Former UK Head of Professional Practices at Bank of Scotland and Lloyds Bank, Paul has worked with law firms of various sizes and complexity across the UK and Northern Ireland. Having seen banks shift away legal sector specialism, Paul set up Gemstone Legal to offer firms a trusted, independent approach to finance and risk management.